UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549









FORM
10-K









(Mark
one)




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





For
the fiscal year ended December 31, 2009





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)
                
                2100
      Forbes Street
                Unit
      8-10
                Whitby,
      Ontario, Canada
                (Address
      of Principal Executive Offices)
              
              86-0464104
                (I.R.S.
      Employer
                Identification
      No.)
                
                L1N
      9T3
                (Zip
      Code)




Registrant’s
Telephone Number, Including Area Code: 905-666-8676







Securities
registered pursuant to Section 12(b) of the Exchange Act:


None





Securities
registered pursuant to Section 12(g) of the Exchange Act:


Common
Stock, No Par Value


(Title
of Class)








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


Yes  ̈ No x





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act.


Yes  ̈ No x





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





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in the definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. Yes  ̈ No
x




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.  (Check one):     Yes x No  ̈




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




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




 ̈
Yes             x No




The
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter was approximately $2,427,602 (8,991,121 Shares at $0.27).




At March
31, 2010, the number of shares outstanding of the registrant’s common stock, no
par value (the only class of common stock), was 37,488,714.



















PART
      IItem 1.
                
                Business
                
                1Item 1A.
                
                Risk
      Factors
                
                13Item 1B.
                
                Unresolved
      Staff Comments
                
                18Item 2.
                
                Properties
                
                18Item 3.
                
                Legal
      Proceedings
                
                18Item 4.
                
                Removed
      and Reserved
                
                18PART
      IIItem 5.
                
                Market
      for the Registrant's Common Equity Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                
                19Item 6.
                
                Selected
      Financial Data
                
                19Item 7.
                
                Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
                
                19Item 7a.
                
                Quantitative
      and Qualitative Disclosures about Market Risk
                
                28Item 8.
                
                Financial
      Statements and Supplementary Data
                
                F-1 - F-31Item 9.
                
                Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                
                30Item 9a.
                
                Controls
      and Procedures
                
                30Item 9b.
                
                Other
      Information
                
                30PART
      IIIItem 10.
                
                Directors,
      Executive Officers and Corporate Governance
                
                30Item 11.
                
                Executive
      Compensation
                
                32Item 12.
                
                Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                
                33Item 13.
                
                Certain
      Relationships and Related Transactions, and Director
      Independence
                
                37Item 14.
                
                Principle
      Accountant Fees and Services
                
                37Item 15.
                
                Exhibits
      and Financial Statement Schedules
                
                38





Forward-Looking
Statements




Certain
statements within this Form 10-K constitute “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of
1995.  Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results,
performance or achievements of Creative Vistas, Inc. to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements.  These forward-looking statements are
based on our current expectations and are subject to a number of risks,
uncertainties and assumptions relating to our operations, financial condition
and results of operations, including, among others, rapid technological and
other changes in the market we serve, our numerous competitors and the few
barriers to entry for potential competitors, the seasonality and quarterly
variations we experience in our revenue, our uncertain revenue growth, our
ability to attract and retain qualified personnel, our ability to expand our
infrastructure and manage our growth, and our ability to identify, finance and
integrate acquisitions, among others.  If any of these risks or
uncertainties materializes, or if any of the underlying assumptions prove
incorrect, actual results may differ significantly from results expressed or
implied in any forward-looking statements made by us.  These and other
risks are detailed in this Annual Report on Form 10-K and in other documents
filed by us with the Securities and Exchange Commission.  Creative
Vistas, Inc. undertakes no obligation to update publicly any forward-looking
statements for any reason, even if new information becomes available or other
events occur in the future.




PART
I




Item
      1.
            Business




Corporate
Background and Overview




Creative
Vistas, Inc. was incorporated in the state of Arizona on July 18,
1983.  We are a leading provider of security-related technologies and
systems. We also provide the deployment of broadband services to the commercial
and residential market.  We primarily operate through our subsidiaries
AC Technical Systems Ltd. (“AC Technical Systems”) and Iview Digital Video
Solutions Inc. (“Iview DVSI”), to provide integrated electronic security-related
technologies and systems.  AC Technical Systems is responsible for all
of our revenues in the security sector for 2009.  It provides its
systems to various high profile clients including: government, school boards,
retail outlets, banks, and hospitals.  Iview DVSI is responsible for
providing video surveillance products and technologies to the
market.




On
December 31, 2005, we acquired Cancable Inc. (“Cancable”) through our wholly
owned Delaware subsidiary, Cancable Holding Corp.  Cancable is in the
business of providing the deployment and servicing of broadband technologies in
both residential and commercial markets.  Cancable has offices in
Ontario, Canada.  All related documents were disclosed in Form 8-K/A
filed on January 6, 2006.  In October 2007, we entered into an
agreement, through our wholly owned newly formed Ontario subsidiary, Cancable XL
Inc. (“Cancable XL”), to acquire all of the issued and outstanding shares of
capital stock and any other equity interests of XL Digital Services Inc. (“XL
Digital”), an Ontario corporation. All related documents were disclosed in Form
8K filed on October 17, 2007.  In October 2009, we incorporated OSS-IM
View Inc. which is responsible for providing BI software. The current
version of BI software manages data from over a million multi-faceted
transactions for large field-services customers. Wireless and web enabled, the
software provides automated intelligent decision-making for managing customer
transactions, vehicles, technicians, supply chains, HR-related functions and
other activities.




Today,
our operations are divided into two distinct operating segments: (a) security
and surveillance products and services, and (b) broadband deployment and
provisioning services.  Through AC Technical Systems we provide
integrated security solutions to our commercial customer
base.  Through Cancable, and XL Digital, we provide broadband
deployment and provisioning services to residential and commercial
markets.







The
current corporate structure is as follows:









Security
and Surveillance Products and Services




AC
Technical Systems is focused on the electronic security segment of the security
industry.  Through our technology integration team of engineers, we
integrate various security related products to provide single source solutions
to our growing customer base.  Our design, engineering and integration
facilities are located in Ontario, Canada.  We operate through our
Iview DVSI subsidiary to build out Digital Video Management Systems (DVMS) to
provide PC based video management systems to the surveillance
market.  Iview is a product company and sells to distributors and
integrators in North America.  Iview is in the early stages of
building a strong consistent sales and marketing team to begin contributing
revenues to us.


2




Industry
Overview




We
believe that the security industry is growing at a steady pace.  There
has been renewed focus on our industry since the events of September 11,
2001.  The growth is spurred by the continuous evolution of new
technologies and processes.  We believe that the industry is growing
for the following reasons:




·
            Increased
      global awareness due to the increased threats of
  terrorism;


·
            Older
      security devices such as the VCR have become obsolete and new technologies
      have provided much more efficient systems at a better
    price;


·
            Evolving
      digital technologies have started to replace antiquated analog
      technologies in the market space;


·
            Expansion
      of budgets due to increased awareness of the need for
      security;


·
            Increase
      in crime rates and shrinkage in the
industry;


·
            Integration
      of multiple devices has expanded the market for technically advanced
      integrators such as our firm; and


·
            Growing
      public concern about crime.


·
            Decreased
      cost of security technology.




The
security industry is highly fragmented with a large number of manufacturers,
dealers, distributors, integrators and service groups.  All of these
parties provide part of the entire solution to the
customer.  Customers prefer a one-stop shop that provides them with
the entire solution and also designs and customizes a solution that fits their
needs.  This solution may include custom design of hardware, software,
along with highly sophisticated integration work.  In most cases the
cost to the customer is higher when using a large number of parties as opposed
to one efficient integrator.  We believe that when many parties are
involved in providing a solution to the customer, many needs of the customer may
not be addressed.  The amount of time a customer has to devote to
build multiple relationships as opposed to one relationship is
substantial.  There are also tendencies for different parties to “pass
the blame” to the other party when it comes to technical and service issues with
the project.  As a result, the customer prefers dealing with one
source that can handle all issues and be accountable for an entire
project.  There are a limited number of companies besides us that are
capable of providing this entire integrated solution.  Providing such
a solution requires years of experience, infrastructure for performing all six
core functions that we provide, access to technologies and a significant
commitment to maintaining a satisfied customer.




A company
that is implementing a new security system or enhancing an old system usually
has to go through the following steps:




·
            Retain
      a consultant to appropriately outline its needs and design a system that
      satisfies those needs;


·
            Once
      the design is complete, a tender is released whereby a number of invited
      system integrators bid on the required
system;


·
            System
      integrators work with various suppliers of hardware and software to meet
      the system requirements.  They also engage these suppliers to
      complete subcomponents of the
system;


·
            When
      security systems have to be installed in multiple locations, the company
      may have to tender the system requirements to different system integrators
      from various regions; and


·
            The
      customer, based on price and qualifications of the system integrator, will
      award the project to one or more system
  integrators.




The
process described above can cause a number of issues for clients including
client frustrations with project delays, cost inefficiencies, incompatible
systems and lack of vendor accountability.  It also makes it very
difficult for the customer to make changes to the system.  In
addition, a customer looking to implement security systems in multiple locations
may have to hire multiple integrators and suppliers to integrate
systems.  This usually results in systems that are not consistent with
each other.  These systems may also not communicate efficiently with a
central system.  In addition, as security systems become more
technologically advanced, an experienced engineering team is required to
understand the needs of the customer and satisfy those needs by incorporating
the most efficient technologies available into the security
system.  This may also include some development of hardware and
software to customize and integrate the system.  Most system
integrators are not capable of development, as they do not have a research and
development department.  Also, the manufacturers of different
subsystems are usually not willing to provide custom solutions on a project
basis.  Customers are realizing the sophistication required in order
to provide a good security system and recognizing that their in-house personnel
lack the skills and time necessary to coordinate their security
projects.


3




Our
Strategy




We have
identified four key markets to target with our solution described
below.  These are 1) government, 2) education 3) healthcare and 4)
retail.  We offer a one-stop-shop that provides a fully integrated
technology based security system to meet the needs of the
customer.  We understand the needs of the customer and provide a
custom solution to meet their needs.  We expedite project completion,
reduce costs to the customer, reduce manpower requirements of the customer and
improve systems consistency in multiple locations.




We
provide the following services:




·
            Consulting,
      audit, review and planning;


·
            Engineering
      and design;


·
            Customization,
      software development and
interfacing;


·
            System
      integration, installation and project
  management;


·
            System
      training, technical support and maintenance;
and


·
            Ongoing
      maintenance, preventative maintenance and service and
      upgrades.




We
believe that the following key attributes provide us with a sustainable
competitive advantage including:




·
            Experience
      and expertise in the security
industry;


·
            In-house
      research and development
departments;


·
            Dedicated
      service team;


·
            Access
      to and experience in a variety of product
mix;


·
            Customized
      software and hardware products;


·
            Strong
      references; and


·
            Strong
      partnerships with suppliers and
integrators.




Our
strategy for growth and expansion is to:




·
            Expand
      our network of technology partners;


·
            Develop
      and maintain long-term relationships with
  clients;


·
            Open
      regional offices in key areas to expand revenue and
    service;


·
            Capitalize
      on our position as a leading provider of technologically advanced security
      systems; and


·
            Expand
      our marketing and sales program within our key vertical
      markets.




At the
beginning of each new client relationship, we designate an account manager as
the client service contact.  This individual is the point person for
communications between the client and us.  The account manager usually
has a number of years of experience in the industry and a good understanding of
technologies and solutions that we provide.  This person is also a
trained salesperson who is able to build a long-term relationship with the
customer.  The account manager works with our project department,
engineering department, marketing department, finance department and research
and development department to provide an effective solution for the
customer.  Once the customer has engaged us to provide a solution, the
engagement usually goes through one or more of the stages outlined
below:




Consulting,
audit, review and planning




We
identify the client’s objectives and security system requirements.  We
then audit and review the client’s existing system.  This audit of the
existing system evaluates inventory counts and the existing
infrastructure.  Then we provide an audit report to outline current
deficiencies and vulnerabilities.  At this point we design a system
alternative to meet the needs of the customer.  The alternative system
is prioritized based on the needs of the customer.  We also include an
efficient cost model to ensure that the customer understands the cost of the
system.  We provide a Return On Investment (ROI) model where
applicable.  We also provide a preliminary project implementation plan
that contains a graphical model of the client’s premises with exact outlines of
equipment locations.  Our comprehensive planning process helps the
customer to properly budget for its needs on a long-term basis.




4




Engineering
and design


The
engineering and design process involves preparation of detailed project
specifications and working drawings by a team of our design
engineers.  These drawings lay out the entire property and provide a
detailed map of all security equipment and the methodologies used to integrate
the system.  The specification and drawings also outline any needs for
custom software or hardware design services, systems designers and
computer-aided design system operators.  These specifications and
drawings detail areas of high sensitivity, the layout of the main control room,
and the placement of cameras, card readers, monitors, switches and other
equipment.




Once our
system design has been completed, we provide a complete list of components and
recommendations.  We highly recommend off-the-shelf non-proprietary
components in order to ensure that the customer is not tied into one
supplier.  When off-the-shelf components are not available or are not
compatible with each other, we design software or hardware to provide
compatibility.




Customization,
software development, interface




In many
cases, the customer’s needs may not be completely satisfied by the equipment
available in the market place.  The customer may request features or
equipment that are not readily available.  For example, a financial
institution may request us to take information from their transaction records
and an Automatic Teller Machine (ATM), and then integrate that information with
a Digital Video Recorder (DVR).  This would allow them to review video
of an individual who has processed a transaction on an ATM.  Normally
a financial institution requiring this information would have to go through
tapes of data in order to find it.  Such a bank would have to search
all the transactions that occurred during a period of time and then, based on
that information, go over tapes of video.  Sometimes the video may not
be available if the tapes are only held for a short period of
time.  Our firm’s integrated system makes this search process
instantaneous.  Our system allows a bank to search by a number of
criteria including time, date, transaction, number and withdrawal
amount.  A bank can also have video associated with such a search
instantly.




Many
times we provide an interface to bring multiple technologies
together.  In one project we integrated eleven different products into
one system, thus allowing for a completely integrated system.  This
integrated system also has a very user-friendly interface that avoids having to
deal with multiple monitors and Graphical User Interfaces (GUI).




System
integration, installation, project management:




Once we
determine that a project has passed through the consulting/audit,
design/engineering and customization/software interfacing stage (if required) we
can start the implementation of system.  During this stage, we provide
the following:




·
            Detailed
      schedule of integration


·
            List
      of components and labor assignments


·
            Officially
      assign the project to one of our project
  managers


·
            Production
      department starts procurement
schedules


·
            Construction
      draw date schedules


·
            Progress
      billings and schedule site visits for quality
  control


·
            Tests
      of final terminations and technology components in-house in order to avoid
      product failure on site


·
            Hardware/software
      and network integration


·
            Validation
      and testing


·
            Final
      sign off and pass over to service
department




During
this stage the project manager manages the project and the projects are updated
weekly to ensure that all components are working efficiently.  During
certain projects the project manager may opt to use subcontractors to provide
services that are not highly advanced technically.  These services may
include standard wiring and cabling.  The customer is updated on the
status of the project weekly.  These updates may include Gantt
charts.  During this stage, many customers see the need for additional
enhanced equipment, which increases the value of the contract to
us.




System
training, technical support, maintenance




When a
project has been completed through system integration, the customer is provided
with a complete training program.  We train the customer on how to use
the system and also provide them with manuals from manufacturers as well as
training guides put together by us.  Once the training is complete the
system will go on line and there is a transfer process to the service department
from the projects department.  Ongoing technical support and
maintenance are provided by our dedicated service team.


5




Ongoing
maintenance, preventative maintenance and service, upgrades:




This is
the final stage of our process and it is an ongoing stage.  We provide
various types of maintenance contracts, which vary depending on the level of
response required by the customer. We also provide a service plan suitable to
the customer.  If the customer does not require a service contract, we
provide them with service on an incident by incident basis.




The
entire six steps process continues for each customer.  Once a project
is complete, there are upgrades that are required.  Depending on the
value of the upgrades, they may initiate a new project.  During every
stage an account manager is updated on the process.  Account managers
have regular meetings with the customers after projects are complete in order to
help set budgets for the following years and also educate customers on new
products and technologies that may be available in the market.




Research
and Development




We have
our own in-house research and development programs which are supported by the
National Research Council of Canada.  We may receive grants and tax
credits for projects and product development if they qualify for the
program.  Our product development department develops new products and
also enhances existing products.  We have the capability to build
various forms of hardware and software modules.  Once a product is
designed, the underlying technologies are used on an ongoing basis to enhance
future projects and develop new products.  This is one of the
differentiating factors between our competitors and us.  Our research
and development expenses were approximately $590,000 in fiscal year 2009 and
$530,600 in fiscal year 2008.  Expenses include engineering salaries,
costs of development tools and equipment.  None of the expenses were
borne directly by customers.




Warranties
and Maintenance




We offer
maintenance and service on all our products, including parts and labor, which
range from one year to six years depending upon the type of product concerned
and the type of contract signed by the customers.  In addition, we
provide a one-year warranty on equipment and a 90 day warranty all installation
projects completed by us.  We receive the same warranty on equipment
from our other external suppliers.




On
non-warranty items, we perform repair services for our products sold at our main
office in Ontario, Canada or at customer locations.  For the years
ended December 31, 2009 and December 31, 2008, our revenue from service and
maintenance was $1,471,500 and $1,544,400 respectively.




Marketing




Our
marketing activities are conducted on both national and regional
levels.  We obtain engagements through direct negotiation with
clients, competitive bid processes, referrals and direct sales
calls.  Our marketing plan is derived with input from all our account
managers and senior management.  Our plan is to grow vertically within
targeted markets where we have a superior level of expertise.  Our
marketing is very target specific.  We market within our four key
markets.  We also find niche markets where our technologies can
provide effective solutions to the customer.  Some of our marketing
activities include:




·
            Trade
      Shows


·
            Mailers


·
            Direct
      sales calls


·
            Web
      promotions


·
            Seminars


·
            Collaborations
      with manufacturers


·
            Collaborations
      with consultants and architects




We also
collaborate with providers of complementary technologies and products who are
not competitive with us.  For example, there is a convergence of IT
services and the security industry.  We are evaluating the possibility
of partnering with an IT services provider in order to provide our existing and
potential customers with an expanded scope of services.  We are also
doing the same within the building automation industry as we see a convergence
of building automation technologies and services with the security
industry.




We are
evaluating several opportunities to expand our operations via joint ventures and
partnerships with regional and international companies that can provide us with
additional expertise and an expanded presence.  In addition we are
evaluating the possibility of acquiring similar businesses and expanding our
operations.


6




Customers




We
provide our products and services to customers in four
markets:




·
            Government


·
            Healthcare


·
            Education


·
            Retail






We also
provide our products and services to various other sectors including corporate
facilities, mining, entertainment and the automobile industry through direct
sales to end-users and through subcontracting agreements.




Backlog




Our
backlog consists of written purchase orders and contract, we have received for
product deliveries and engineering services that we expect to deliver or
complete within 12 months.  All of these orders and contracts are
subject to cancellation at any time.  As of December 31, 2009,
our backlog was approximately $2,000,000.




Competition




The
security industry is highly fragmented and competitive.  We compete
with a number of different companies regionally and nationally.  We
have various different types of competitors including consultants, integrators,
and engineering and design firms.  Our main competitors include
Siemens, ADT, Simplex, Intercon and Diebold.  Our competitors also
include equipment manufacturers and vendors that provide security
services.  Some of our competitors have greater name recognition and
financial resources than we do.  However, we believe that we have a
well-respected name and are known for our quality work and technical
expertise.  We may face future competition from potential new entrants
into the security industry and increased competition from existing competitors
that may attempt to develop the ability to offer the full range of services
offered by us.  We cannot assure that we will be able to compete
successfully in the future against existing or potential
competitors.




Employees




As of
December 31, 2009, Cancable has a staff of over 400 employees and A.C. Technical
Systems has a staff of 49 employees.




None of
our employees are covered by a collective bargaining agreement or represented by
a labor union.  We consider our relationship with our employees to be
satisfactory.




The
design and implementation of our equipment and the installation of our systems
require substantial technical capabilities in many different disciplines from
computer science to electronics with advanced hardware and software
development.  As a company, we encourage and provide training for new
and existing technical personnel.  In addition we conduct training
courses and also send our technical persons to various technical courses offered
by manufacturers of various products.  We have various incentive
programs for our employees to improve their skills within all
departments.  These include reimbursements for training fees and
raises based on skill sets.




Broadband
deployment and provisioning services




We
operate through our subsidiaries Cancable Inc., XL Digital Services Inc. and
Cancable, Inc. (together the “Cancable Group”), located in Canada and the United
States to provide and deploy broadband services. Cancable Inc. and XL Digital
Services Inc. were subsequent acquisitions. Cancable Group has re-branded its
name to Dependable HomeTech in 2007.


7





Cancable
Inc. is a growing Canadian based leader in providing and servicing broadband
technologies to both residential and commercial markets.  The Cancable
service offering, network deployment, IT integration, and support services
enable the cable television and telecommunications industries to deliver a high
quality broadband experience to their customers.  Cancable’s clients
rely on Cancable’s knowledge and expertise to rapidly deploy the latest
technologies to support advanced cable services, cable broadband Internet access
and DSL.  Services provisioned include new installations,
reconnections, disconnections, service upgrades and downgrades, inbound
technical call center sales and trouble resolution for cable Internet
subscribers, and network servicing for broadband video, data, and voice services
for residential, business, and commercial marketplaces.




Cancable
has a long history as a field services organization.  It has been
successful in developing long-term relationships with its clients and is highly
regarded in the industry for quality.  This is evidenced by its status
as the largest service provider to Rogers Cable Inc., Canada’s largest cable
company and the exclusive supplier to Cogeco Cable Inc. in the Windsor, Ontario
area.  Cancable’s central appeal to its customers is its ability to
deliver its quality services and at a cost which they cannot match
internally.




XL
Digital Services Inc. (“XL Digital”), incorporated in 2007, is a Canadian-based
company provisioning the deployment and servicing of broadband technologies in
the residential market for Canada’s largest cable television provider, Rogers
Cable. XL Digital, with over 70 employees, provides its deployment and
provisioning services for Rogers within two territories where the Company
currently did not have a presence. The acquisition enables the Company to
further expand its services into these two growing territories. XL Digital also
brings the Company a number of years of significant management experience within
the cable and telecommunications sector.




Senior
Management




Cancable
Group has a proven team with over 70 years of cable TV contracting/technical
deployment and support experience.




Ross Jepson, President and
CEO, joined Cancable in December, 2001 after many years of executive
management experience in the cable industry most notably as President of
Cablenet Canada, Managing Director of Videotron UK, Executive Vice President for
Cableworks Communications and Chief Operating Officer of IT Canada. Ross has
over 25 years of local, national and international management experience in
Operations and Business Development.





Paul Mease, Senior Vice President,
Field Services, originally joined the company in August 2005 and now has
overall leadership of the Canadian and US field operations. Paul has extensive
operational and contracting field services experience having held various senior
positions within several large multi trade construction companies including
Aecon Inc. and E.S. Fox. Ltd. He has spent almost his entire career within
various aspects of field services including operations, procurement, support,
fleet and asset management, acquisitions and strategic growth. Paul has both a
P. Eng and a MBA.




Cheryl Lewis, Vice-President,
Dependable HomeTech Services, leads the Operational and Business
Development for Dependable HomeTech's call centre division. Prior to joining
Cancable in 1997, Cheryl spent 10 years in the Hospitality industry, gaining a
wealth of knowledge in Sales and Customer Service. Throughout her career with
Dependable HomeTech she has been involved in the operations of our field
services team as well as Customer Service for both Ontario and US Operations.
She is currently also responsible for company growth initiatives.




Catherine Lewis, P. Eng., MBA, CMA,
Chief Financial Officer,joined Cancable in March 2009 and
brings over 20 years of accounting and finance experience.  She has held
senior finance roles in the IT, telecom and technology sectors
encompassing the full spectrum of service, product and
manufacturing. Companies included CompuCom/CCSI, Telus, AT&T Canada and
Nortel. Ms. Lewis is responsible for finance and accounting functions for
Cancable.




Cancable
believes that there is a large and growing market for its services and the
demand for its services are growing as:


8




·
            The
      increase in popularity of the Internet and in the complexity of Internet
      sites has increased demand for high-speed Internet access from both
      residential and commercial
consumers;




·
            Technological
      advances, including the shift from an analog to a digital network
      environment and the ability to leverage existing network infrastructure to
      deploy high-speed services such as IP networking technologies, have
      accelerated the availability of advanced services such as digital video
      and high-speed Internet access;




·
            Cable
      and telecommunications service providers have made significant investments
      to build and upgrade their wired and wireless networks, creating a
      substantial opportunity to deliver advanced services to commercial and
      residential consumers;




·
            End-users
      increasingly demand access to integrated video, voice and data services,
      advanced set top boxes, high-speed digital modems, telephone lines, voice
      mail, computer networks, video conferencing and other
      technologies.  Cancable’s clients must rapidly deploy these
      technologies in order to maximize their revenue per end-user, realize a
      return on their investments and maintain or gain competitive advantages;
      and




·
            The
      availability of multiple choices for end-users to receive advanced
      services has led broadband service providers to focus increasingly on
      end-user satisfaction to control turnover and to rely on technology
      enabling companies for some of their non-core activities, such as
      installation, integration, fulfillment, maintenance, warranty and support
      services.




Key
Client Relationships




Cancable
has four main customer relationships, Rogers Cable Inc., Time Warner
Entertainment, Cox Communications and Cogeco Cable.  Rogers Cable Inc.
is the most significant.




Rogers
Cable Inc.




Rogers
Cable Inc. is Cancable Group’s largest customer employing more than 250 of our
field technicians as of December 2009.  In addition to its in-house
capability, Rogers currently utilizes eight contractors to manage its cable TV
activity.  This number is down from 22 contractors three years
ago.  Over the past two years, as a result of the vendor consolidation
and its top rated performance, Cancable Group has emerged as Rogers’ primary
contractor in the Greater Toronto Area with more than 40% share of completed
work orders.




In
addition to installation and service work, Cancable has finalized a new three
year agreement that extends the types of services it will be performing. As
evidence of Rogers growing dependency on Cancable, Rogers has requested that
Cancable supplement its Tier 2 and Tier 3 customer service programs, something
that is presently handled only by Rogers personnel.  In this service,
a call is transferred from Rogers’ customer service department to DependableIT,
Cancable’s branded technical support center, after Rogers determines that it is
not directly a Rogers cable related problem.  DependableIT’s remote
diagnostic tools provide it with a complete situational review of the customer’s
site.  In these instances, the charge is billed to the customer’s
credit card before assistance is provided.  With the Tier 3 service, a
field service visit is required and a Cancable technician is dispatched to the
customer’s location with rates charged on an hourly basis for residential and
commercial customers.  Again, this service is presently provided by
Rogers personnel only.




The
Contract Field Technical Support Industry




Overview




In 2004,
the cable television industry in Canada served 9.3 million homes of which 2.3
million were subscribers to digital cable.  While direct to home
satellite service providers have penetrated the video market, cable operators
continue to maintain an overall 77% market share.




A
significant development for both cable and telecom companies has been the
acceptance of the internet as a mass medium for commerce and communications
involving both residential and commercial consumers.  A recent report
stated that, as of 2004, 44% of Canadian homes were connected to high-speed
Internet services.  Approximately 2.3 million homes connect via cable
while 1.9 million connect via telco providers.


9


At
present, Cancable’s management believes that there are approximately 25
providers of contract field technical support serving the Ontario cable
television market.  Management also believes that this number will be
markedly reduced in the near future as evidenced by the vendor consolidation
initiative recently completed by Rogers.  Management believes that its
cable television clients who operate in multiple geographic markets will prefer
to align themselves with larger technology enablers, like Cancable, who are able
to deploy consistent service on a wider scale and have the expertise and
resources to deploy and maintain increasingly complex technologies.




Accordingly,
management believes that its target market presents substantial growth
opportunities due to:




·
            the
      increasingly competitive landscape in the areas of video, internet and
      telecom delivery, which are requiring cable operators to increase their
      commitment to quality customer service and strict quality
      standards;




·
            a
      drive for cost reductions on the part of the cable operators, caused by
      price competition due to “bundling” strategies by them and their
      competitors;




·
            the
      increasing demand by residential and commercial consumers for advanced
      broadband services such as high-speed internet access, digital video and
      telephone;




·
            the
      need to satisfy the demand for emerging broadband communications
      technologies such as web-based video
  conferencing;




·
            virtual
      private networks, which are networks run over the internet that provide
      privacy to the network users;




·
            Voice-Over-IP
      (VOIP), which will allow simultaneous two-way voice communication with
      high-speed data transmission over broadband;
and




·
            the
      availability of multiple choices for consumers to receive these advanced
      services, which has led to intensifying competition for subscribers and an
      increased focus among BSPs on consumer satisfaction, and the need for BSPs
      to rapidly deploy technology and equipment capable of delivering advanced
      services to residential and commercial consumers to realize a return on
      the significant investments they have made to build and upgrade their
      networks.




Over the
next three years Cancable’s management expects to see its industry change
significantly for the following reasons:




Increasing
Technological Complexity




Each of
Cancable’s target market segments is experiencing rapid changes in
technology.  The convergence of previously separate technologies has
produced newer, more complex technologies, such as bundled video, voice and data
services.  Delivering these services requires more highly trained
technicians, cross-trained in several technologies, to provide installation,
integration, fulfillment, and long-term maintenance and support services than in
the past.  For example:




·
            Cable Internet
      access.  High-speed internet access requires that cable
      system operators provide initial installation and testing as well as
      on-going maintenance and support of new technologies, such as cable modems
      and network cards.




·
            VOIP. Cable operators
      are already in the process of utilizing their networks for the provision
      of local telephone.  This area represents a potentially
      significant source of incremental activity for
  Cancable.




·
            Convergence of video and
      telecom services.Increasingly, traditional telecom carriers are entering the field
      of entertainment and data delivery, either through strategic investments
      in alternate technologies (see Direct Broadcast Satellite below) or
      through the adaptation of the existing telecom
    infrastructure.




·
            Direct to home Satellite.Programming services require installation of a satellite receiving
      antenna or dish and a digital receiver at the consumer
      premises.  In order to facilitate high-speed internet access,
      additional coordination is required between the satellite technologies and
      the standard telephone line modem connections that handle outbound
      communications from the consumer.  Although certain DTH
      equipment may be installed by the consumer, there is a growing trend
      toward professional installation of satellite
  equipment.


10


·
            Premise networking.Premise networking requires installation, certification and
      maintenance of high-speed data networks, including LANs/WANs,
      client/server networks, and video, audio and security networks meeting
      stringent industry requirements.  Substantial resources must be
      committed to train and retain field technicians in the new
      technologies.  Cancable believes that these increasing knowledge
      and training requirements present a significant competitive advantage for
      larger, well-capitalized enabling companies, and provide additional
      motivation for BSPs to rely on independent technology enablers thereby
      avoiding costly investments in internal service and fulfillment
      infrastructures.




Increased
Reliance by BSPs on outsourcing




Technological
advances and deregulation in the cable, telecommunications, satellite wireless
and premise networking industries have provided residential and commercial
consumers with multiple choices for receiving advanced services.  The
escalating competition for end-users has increased competitive pressures on
BSPs, which is requiring them to focus more on consumer
satisfaction.  The providers' need to rapidly upgrade and expand
existing systems, as a result of increased competition and growing demand for
advanced services, should lead to a continued increase in the level of reliance
on independent technology enablers for non-core activities, such as
installation, integration, fulfillment, and long-term maintenance, warranty and
support services.  Management anticipates that BSPs will increase
their reliance on independent technology enablers like Cancable to the extent
that the enablers provide services that are of a higher quality and more cost
efficient than existing, in-house infrastructure, in the same way that providers
historically have relied on outside sources for other ancillary functions, such
as design and manufacture of consumer premise equipment.  Many
emerging BSPs, such as DSL and DTH providers, often enter new markets where they
have little or no local presence and limited resources to meet the growing
demand for their advanced video, voice and data services.  These
providers typically have no in-house service infrastructure.  Cancable
believes these BSPs will continue to rely on independent technology enablers to
meet their installation and maintenance needs.  Cancable believes
there will be an increased need for higher value-added services as the broadband
industry continues to evolve and recurring upgrades and value-added improvements
become more significant.  Historically, large corporations with
internal information technology departments have been primary users for such
applications.  However, the rapidly growing demand for such
applications from small to medium-sized businesses and residential end-users,
which do not have internal deployment and maintenance capabilities, presents
additional growth opportunities for independent technology enablers like
Cancable.




Emergence
of Preferred Providers of Technology Enabling Services




Cancable
believes that because of the increasing geographic scope of and complexity of
technology deployed by BSPs, there is a growing trend towards long-term,
strategic alliances with technology enabling companies, in contrast to the
historic, contractual project-by-project arrangements.  Cancable
believes that its industry is highly fragmented and characterized by smaller,
privately held companies that offer a limited range of industry-specific
services to a small number of clients in concentrated geographic
areas.  In Cancable’s experience, BSPs in its target markets who rely
on technology enabling companies prefer to align themselves with larger, better
capitalized companies that:




·
            have
      the expertise and resources to deploy and maintain increasingly complex
      technologies over large networks;




·
            consistently
      deliver high quality service;




·
            provide
      regional coverage and have the capacity to work on multiple projects
      simultaneously; and




·
            have
      the ability and willingness to invest in infrastructure to enhance the
      deployment and maintenance of the advanced technologies demanded by
      residential and commercial
customers.




Industry
Trends Specific to the Contract Field Technical Support Industry




·
            Competition at the client
      level.Some of
      Cancable’s customers are in a monopolistic industrial
      environment.  Today, these customers are faced with increasing
      competition which is forcing them to adapt the new
      reality.  Part of this adaptation includes taking an in-depth
      review of their internal cost structure to determine which services must
      be performed by employees and which should be contracted out, at lower
      cost.




·
            Consolidation at the client
      level.The cable
      television industry in particular has been undergoing a trend towards
      consolidation for many years.  This trend has resulted in
      changes in the manner in which services are contracted for and has changed
      the relationship between client and service
      provider.  Relationships today are driven less by personal
      contacts and more by professional qualifications.  Also
      important to industry relationships today are the service provider’s
      ability to provide a service level that is uniform across its work force
      and to integrate its management and reporting systems with those of the
      client.


11




·
            Trend towards contracting
      out.The above two drivers are causing cable television
      and telecommunications service providers to move increasingly towards
      contracting out services that are perceived to be non-core but are
      manageable through sophisticated systems and a high level of integration
      between their own internal systems and those of the support
      provider.  While not a current client of Cancable, Bell Canada
      is leading the trend in this area with almost all of its field service
      activities contracted out.  Cancable believes that its two
      largest clients, Rogers Cable and Cogeco Cable, contract out approximately
      two-thirds of their field installation and service call
      work.  Cancable expects that this percentage will continue to
      increase and that the outsourcing trend will spread to these clients’
      other field activities that are currently not
  outsourced.




·
            Consolidation among service
      providers.  As an adjunct to consolidation at the client
      level, larger clients want to increase efficiency by reducing the number
      of vendors in each area.  This trend tends to favor those
      service providers that are able to scale up to the demands of increased
      volumes and are able to meet the system integration requirements of the
      client.


12


ITEM 1A.
            RISK
      FACTORS




Described
below are the material risks that we face. Our business, operating results or
financial condition could be materially adversely affected by, and the trading
price of our common stock could decline due to, any of these risks.




Competitive
pressure from larger firms




The
security industry is highly competitive.  We compete with a number of
large international firms, which have more extensive resources than we do. In
addition, these competitors may have greater brand recognition, proprietary
technologies and superior purchasing power as well as other competitive
advantages.




Risks
associated with budget constraints and cut back of customer
spending:




We are
dependent on large institutional and commercial customers and their budgets. If
there are cut backs in budgets by its customers it will adversely impact our
revenues.




Risks
associated with possible delays of construction schedules




We have
contracted to provide security systems to a number of new
buildings.  Delays in construction of these buildings could
potentially delay revenues being realized.




Supplier
product failures




We do not
currently manufacture our own products and must purchase products from others.
It could adversely impact our relationships with our customers if there are
delays in receiving products from suppliers or if there are defects in these
products.




Contracts
with government agencies may not be renewed or funded




Contracts
with government agencies accounts for some of our revenues. Many of these
contracts are subject to annual review and renewal by the agencies and may be
terminated at any time or on short notice. Each government contract is only
valid if the agency appropriates enough funds for such contracts. Accordingly,
we might fail to derive any revenue from sales to government agencies under a
contract in any given future period. In addition, if government agencies fail to
renew or terminate any of these contracts, it would adversely affect our
business and results of operations.




We have a
small number of customers from which we receive a large portion of our sales.
Our experience has been that some of these substantial customers will be a
source of significant sales in the succeeding year and some will not.
Consequently, we are often required to replace one customer with one or more
other customers in order to generate the same amount of sales. There can be no
assurance that we will continue to be able to do so.




Key
personnel losses




Competition
for highly qualified technical personnel is intense and we may not be successful
in attracting and retaining the necessary personnel, which would limit the rate
at which we can develop products and generate sales. In particular, the
departure of any of our senior management members or other key personnel could
harm our business.




13




Intellectual
property protection risks


Our
intellectual property might not be protected.  No new intellectual
property has been acquired within the last three years.  Despite our
precautions, it may be possible for unauthorized third parties to copy our
products or obtain and use information that we regard as proprietary to create
products that compete against ours. If we fail to protect and preserve our
intellectual property, we may lose an important competitive advantage. In
addition, we may from time to time be served with claims from third parties
asserting that our products or technologies infringe their intellectual property
rights. If, as a result of any claims, we were precluded from using technologies
or intellectual property rights, licenses to the disputed third-party technology
or intellectual property rights might not be available on reasonable commercial
terms, or at all. We may initiate claims or litigation against third parties for
infringement of our proprietary rights or to establish the validity of our
proprietary rights. Litigation, either as plaintiff or defendant, could result
in significant expenses or divert the efforts of our technical and management
personnel from productive tasks, whether or not the litigation is resolved in
our favor. A successful claim against us, coupled with our failure to develop or
license a substitute technology, could cause our business, financial condition
and results of operations to be adversely affected.




We
may not be able to increase our bonding




Many of
our government contracts require that we obtain bonding.  We may not
be able to increase our bonding and, therefore, we may not be able to pursue
larger projects as a primary contractor.




Fluctuation
in quarterly results




Our
quarterly results have varied over the past few years and will likely continue
to do so. The results will vary based on the timing of the projects,
construction schedules and customer budgets. Such fluctuations may contribute to
volatility in the market price for our stock.




Lengthy
sales cycle




The sale
of our products and services frequently involves a significant commitment of
resources to evaluate and propose a project. The approval process for our
proposals usually involves multiple departments within our clients and may take
several months. Accordingly, depending on the length of recording and processing
time, a sale can take a prolonged period of time.




We
may not be able to successfully make acquisitions or form partnerships as a
means of fostering our growth




Our
growth strategy involves successfully acquiring companies that will add value to
our firm and also build partnerships with companies who can complement our core
competencies. We may not be successful in identifying or consummating
transactions with such companies.




Continued
need for additional financing




To
implement our growth plan, we may need additional financing. We will need
additional financing upon, but not limited to, any of the following
events:




·
            Changes
      in operating plans


·
            Lower
      than anticipated sales


·
            Increased
      costs of expansion


·
            Increase
      in competition relating to decrease in
price


·
            Increased
      operating costs


·
            Potential
      acquisitions




Additional
financing may not be available on commercially reasonable terms or may not be
available at all.




Cancable
Group, one of our major subsidiaries, relies on certain large clients for a
significant portion of our revenues




Cancable
Group currently derives a significant portion of its revenues from a limited
number of clients.  For the fiscal year ended December 31, 2009,
Rogers Cable TV Limited accounted for approximately 47.2% of Cancable’s
revenues.  The services required by any one client can be limited by a
number of factors, including industry consolidation, technological developments,
economic slowdown and internal budget constraints.  Cancable Group’s
clients are not obligated to purchase additional services and most of Cancable’s
contracts are cancelable on short notice.  As a result of these
factors, the volume of work performed for specific clients is likely to vary
from period to period and a major client in one period may not use Cancable’s
services to the same degree in a subsequent period.  A temporary or
permanent loss of any of Cancable’s key clients could seriously harm its
business.  If any cancelled contracts were not replaced with contracts
from other clients, Cancable’s revenues might decrease and its profitability
could be adversely affected.


14




Cancable
will be adversely affected by a decline in the growth of the cable and telecom
industries




The
broadband communications industry has experienced a high rate of
growth.  If the rate of growth slows, and broadband service providers
reduce their capital investments in upgrades or expansion of their systems,
Cancable’s clients may not require the same volume of services from Cancable and
it may not be able to execute its growth strategy.  In that case,
Cancable’s profitability and its prospects could be adversely
affected.




Our
clients may not rely on the Contract Field Technical Support services we
provide




Cancable’s
success is dependent on the continued reliance by BSPs on independent companies
like Cancable for performance of their installation, integration, fulfillment,
and long- term maintenance and support services.  If these providers
elect to perform these services themselves, Cancable’s revenues may decline and
its business could be harmed.




Consolidation
of broadband service providers could result in fewer and smaller customers for
us




The
cable, telecommunications, satellite and wireless industries could experience
significant consolidation activity.  In addition, the consolidation of
Cancable’s clients could have the effect of reducing the number of its current
or potential clients, which could result in Cancable’s dependence on a smaller
number of clients.




Cancable
may face reduced customer demand due to new technologies




Cancable’s
industry is subject to rapid changes in technology.  Existing
technologies for transmission of video, voice and data are subject to potential
displacement by various new technologies.  New technologies may be
developed that allow broadband service providers to deliver their services to
consumers without a significant upgrade of their existing
systems.  Furthermore, new technologies may be developed that enable
consumers to perform more easily their own installation and maintenance of the
equipment required for the delivery of these services at their premises.
Cancable will need to be able to enhance its current service offerings to keep
pace with technological developments and to address increasingly sophisticated
client needs.  Cancable may not be successful in developing and
marketing service offerings that respond to technological advances in a timely
manner, and its services may not adequately or competitively address the needs
of the changing marketplace.  If Cancable is not successful in
responding in a timely manner to technological changes, market conditions and
industry developments, it may lose current clients or be unable to obtain new
clients and its business, prospects, operating results and financial condition
could suffer.




Cancable
may not be able to compete on price with our competitors




Cancable’s
industry is fragmented and highly competitive.  Accordingly, it cannot
be assured of being able to maintain or enhance its competitive
position.  Historically, there have been relatively few barriers to
entry into the markets in which Cancable operates.  As a result, any
organization that has adequate financial resources and access to technical
expertise may become one of our competitors.  Competition in the
industry depends on a number of factors, including price.  Cancable’s
competitors may have lower cost structures and may, therefore, be able to
provide their services at lower rates than it can.  Cancable also
faces competition from the in-house service organizations of its existing or
prospective clients, which often employ personnel who perform some of the same
types of services as it does.  If Cancable is unable to maintain or
enhance its competitive position, its business, prospects, operating results and
financial condition may suffer materially.




Cancable
may face an inability to attract and retain qualified employees




Cancable’s
ability to provide high-quality services on a timely basis requires that it
employ an adequate number of field technicians.  Accordingly, its
ability to meet the demand for its services will be limited by Cancable’s
ability to attract, train and retain skilled personnel.  Cancable’s
industry is characterized by highly competitive labor markets and, like many of
its competitors, historically Cancable has experienced high rates of employee
turnover.  Furthermore, its labor expenses may increase as a result of
a shortage in the supply of skilled personnel and its efforts to improve its
employee retention, which could adversely impact its
profitability.  Cancable cannot be certain that it will be able to
improve its employee retention rates or maintain an adequate skilled labor force
necessary to operate efficiently and to support its growth
strategy.  Failure to do so could impair its ability to operate
efficiently and maintain its reputation for high quality
service.  This could also impair Cancable’s ability to retain current
clients and attract new clients that could cause its financial performance to
decline.


15




Mismatch
of Staffing Levels and Contract Requirements




Since
Cancable’s business is driven by large, and sometimes multi-year contracts,
Cancable forecasts its personnel needs for future projected
business.  If Cancable increases its staffing levels in anticipation
of a project that is subsequently delayed, reduced or terminated, it may
underutilize these additional personnel, which would increase its expenses and
could harm its business.




Cancable
relies on key senior employees and management




Cancable’s
success is substantially dependent upon the retention of, and the continued
performance by, its senior management and other key employees, including key
employees of companies that it may acquire in the future.  If any
member of Cancable’s senior management team becomes unable or unwilling to
participate in its business and operations and it is not able to replace them in
a timely manner, its business could suffer.  Cancable does not
maintain "key man" life insurance policies on any member of its senior
management or any of its key employees.




Cancable
is a growing business and may require additional financing which may not be
available to us




Cancable
may require additional financing, including access to a bank operating line and
lease financing for vehicles, to fully implement its business strategy in a
timely manner.  Cancable’s future requirements will depend on many
factors, including continued progress in its client development and expansion
programs.  There can be no assurance that additional funding will be
available or, if available, that it will be available on acceptable
terms.  If such funding is not available, Cancable may be forced to
reduce or eliminate expenditures for further development of its proposed new
initiatives and contemplated acquisitions.  There can be no assurance
that Cancable will be able raise additional capital if its capital resources are
exhausted.  Cancable’s ability to arrange such financing in the future
will depend in part upon prevailing capital market conditions as well as its
business performance.  Failure to obtain such financing could delay
implementation of Cancable’s strategy and could have a material adverse effect
on its ability to successfully develop its business.  Such financing,
if available, could result in dilution to existing shareholders.




We
have issued a substantial number of warrants and options and other convertible
securities, which may cause the trading price of our securities to decline and
may limit our ability to raise capital from other sources:




As of
December 31, 2009, there were 13,716,983 shares of common stock issuable upon
the exercise of warrants and 2,134,155 shares issuable upon the exercise of
options. Included in the balance were 2,005,000 shares related to the
Employee Stock Options (see Note 15 in the Financial Statements). Also, included
in the balance, 13,716,983 shares of common stock issuable upon the exercise of
warrants and 129,155 shares issuable upon the exercise of options were issued to
Laurus Master Fund, Ltd and its related entities, Erato Corporation, Valens
Offshore Fund and  Valens U.S. Fund, LLC and PSource Structured Debt
Limited (“Laurus”).  Additionally, there were 49 shares of common
stock of Cancable issuable upon the exercise of options and 20 shares of common
stock of Iview issuable upon the exercise of options to Laurus and its related
entities. While these securities are outstanding, the holders will have the
opportunity to profit from a rise in the price of our securities with a
resulting dilution (upon exercise or conversion) in the value of the interests
of our other security holders. Our ability to obtain additional financing during
the period these convertible securities are outstanding may be adversely
affected and their existence may have a negative effect on the price of our
securities. We may be obligated to issue additional shares in payment of accrued
interest on our term notes as a result of adjustments to the conversion or
exercise prices of our convertible securities. Additional shares of our common
stock may be issued if additional amounts are funded under our existing
financing arrangements with Laurus or if we obtain additional financings in the
future. The happening of certain events such as stock splits, reverse stock
splits, stock dividends or certain additional share issuances at prices below
the then effective exercise or conversion price would trigger an adjustment in
the exercise or conversion price (as applicable). The adjustment would be based
upon a weighted average formula in the case of below exercise or conversion
price issuances. The adjustment will depend on the number of shares issued and
the difference between the issuance price and the then effective exercise or
conversion price. Since no such transactions are currently contemplated, it is
not presently possible to quantify possible future adjustments. The holders of
these securities are likely to exercise them at a time when we would, in all
likelihood, be able to obtain any needed capital by a new offering of securities
on terms more favorable to us than those of the outstanding warrants and
options.


16




Because
our directors own approximately 76% of our outstanding common shares, they could
make and control corporate decisions that may be disadvantageous to minority
shareholders




Our
directors own approximately 76.0% of the outstanding common shares. Accordingly,
they will have a significant influence in determining the outcome of all
corporate transactions or other matters, including mergers, consolidations and
the sale of all or substantially all of our assets, and also the power to
prevent or cause a change in control. The interests of our directors may differ
from the interests of the other shareholders and thus result in corporate
decisions that are disadvantageous to other shareholders.




Exchange
rate fluctuations may have adverse effects on our revenues




A portion
of our revenues and expenses are denominated in Canadian dollars. As a result,
we will be exposed to currency exchange rate risk. Our reported earnings could
fluctuate materially as a result of foreign exchange rate
fluctuations.




Our
substantial debt could adversely affect our financial position




Our
substantial indebtedness could have important consequences to you. Our annual
debt service requirements related to payments of principal on our $16,651,128
principal amount of term notes are approximately $1,750,000, $12,401,128, and
$2,500,000 from 2010 to 2013. In addition, interest on the notes is payable on a
monthly basis. We also have a series of other notes payable totaling $1,500,000
as of December 31, 2009. The $1,500,000 promissory note included in other notes
payable, which were issued by Creative Vistas Acquisition to The Burns Trust and
The Navaratnam Trust in connection with the acquisition of AC Technical, have no
fixed term of repayment. The note payable was transferred to Malar Trust during
Fiscal Year 2006 with the same payment term.  The term notes are
secured by all of our assets.  Interest on term notes are settled in
cash. However, in the event we are unable to generate sufficient cash flow from
our operations, we may face difficulties in servicing our substantial debt load.
In such event, we could be forced to seek protection from our creditors, which
could cause the liquidation of the Company in order to repay the secured
debt.  In any liquidation of us, the holders of our debt (including
The Malar Trust) would be required to be paid in full before any payments could
be made to the holders of our common stock. In addition, our outstanding
indebtedness could limit our ability to obtain any additional
financing.




There
is no active trading market in our securities




Although,
our common stock is quoted on the NASD OTC Bulletin Board, there is no active
trading in the stock. A trading market may not develop and stockholders may not
be able to liquidate their investment without considerable delay. If a market
should develop, the price of our stock may be highly volatile.




Penny
Stock regulations apply to our securities:




Our
securities are subject to the “penny” stock regulation of Rule 15g-9 of the
Securities Exchange Act of 1934. Rule 15g-9 of the Exchange Act is commonly
referred to as the “penny stock” rule and imposes special sales practice
requirements upon broker-dealers who sell such securities to persons other than
established customers or accredited investors. A penny stock is any equity
security with a market price less than $5.00 per share, subject to certain
exceptions. Rule 3a51-1 of the Exchange Act provides that any equity security is
considered a penny stock unless that security is: registered and traded on a
national securities exchange and meets specified criteria set forth by the SEC;
authorized for quotation in the National Association of Securities Dealers’
Automated Quotation System; issued by a registered investment company; issued
with a price of five dollars or more; or issued by an issuer with net tangible
assets in excess of $2,000,000. This rule may affect the ability of
broker-dealers to sell our securities.


17


For
transactions covered by Rule 15g-9, a broker-dealer must furnish to all
investors in penny stocks a risk disclosure document, make a special suitability
determination of the purchaser, and receive the purchaser’s written agreement to
the transaction prior to the sale. In order to approve a person’s account for
transactions in penny stocks, the broker-dealer must (i) obtain information
concerning the person’s financial situation, investment experience, and
investment objectives; (ii) reasonably determine, based on that information that
transactions in penny stocks are suitable for the person and that the person has
sufficient knowledge and experience in financial matters to reasonably be
expected to evaluate the transactions in penny stocks; and (iii) deliver to the
person a written statement setting forth the basis on which the broker-dealer
made the determination of suitability stating that it is unlawful to effect a
transaction in a designated security subject to the provisions of Rule
15g-9(a)(2) unless the broker-dealer has received a written agreement from the
person prior to the transaction. Such written statement from the broker-dealer
must also set forth, in highlighted format immediately preceding the customer
signature line, that the broker-dealer is required to provide the person with
the written statement and the person should sign and return the written
statement to the broker-dealer only if it accurately reflects the person’s
financial situation, investment experience and investment
objectives.




Losing our status as a Canadian
Controlled Private Corporation could adversely affect our financial
position:




A
Canadian Controlled Private Corporation (“CCPC”) is a corporation that is not
controlled by a non-Canadian entity. If, in the future, more than 50% of the
voting shares of AC Technical are owned by a non-Canadian entity, such as by
Laurus exercising its rights under the Share Pledge Agreement, we would lose our
status as a CCPC. Unless a company is a CCPC, it is not eligible for certain
Canadian research and development tax credits. As a non-CCPC, the maximum
Canadian research and development tax credits are 20% (for both Federal and
Provincial Canadian taxes) of total eligible research and development
expenditures. AC Technical is presently entitled to claim the maximum credits
available to CCPCs of 41.5% (for both Federal and Provincial Canadian taxes) of
the total eligible expenditures. During Fiscal Year 2009, this extra 21.5%
totaled approximately $200,000.




Available
Information




We file
annual, quarterly and current reports, proxy statements and other information
with the U.S. Securities and Exchange Commission ("SEC"). Copies of this Annual
Report on Form 10-K and each of our other periodic and current reports, and
amendments to all such reports, that we file or furnish pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of
charge on our website (http://www.creativevistasinc.com/) as soon as reasonably
practicable after the material is electronically filed with, or furnished to,
the SEC. The information contained on our website is not incorporated by
reference into this Annual Report on Form 10-K and should not be considered part
of this Annual Report on Form 10-K.




In
addition, you may read and copy any document we file with the SEC at the SEC's
Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the Public
Reference Room. Our SEC filings are also available to the public at the SEC's
web site at http://www.sec.gov, which contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC.




ITEM 1B.
            UNRESOLVED
      STAFF COMMENTS




Not
applicable.




ITEM 2.
            PROPERTIES




Our
office is located at 2100 Forbes Street, Units 8-10, Whitby, Ontario, Canada L1N
9T3.  The premises, which were purchased in 2002, consist of
approximately 5,900 square feet on the ground floor and 2,200 square feet on the
second floor.  Additionally, we have another major office location at
2321 Fairview St. Burlington, Ontario L7R 2E3 which services the Cancable Group.
The premises, which were rented in 2003, consist of approximately 7,600 square
feet.  We believe that these offices are adequate for our present
purposes and planned expansion.  Furthermore, we believe these offices
are in good condition and adequately covered by insurance.




ITEM 3.
            LEGAL
      PROCEEDINGS




None.




ITEM 4.
            [Removed
      and Reserved]




18




PART
II




ITEM 5. MARKET
FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES




Our
common stock is quoted at the present time on the OTC Bulletin Board under the
symbol “CVAS.”  At December 31, 2009, the bid price was $0.07 per
share and the ask price was $0.09 per share.  The security is subject
to Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, commonly
referred to as the penny stock rule.  See “Risk Factors—Penny
Stock.”  The following table shows the range of bid prices per share
of common stock on the OTC Bulletin Board, as reported by Pink Sheets LLC, for
the periods indicated.  These quotations represent prices between
dealers, do not include retail mark-ups, mark-downs or commissions, and do not
necessarily represent actual transactions.




Quarter ended:
                  
                  Low Bid Price
                  
                  
                  High Bid PriceMarch
      31, 2008
                  
                  $
                  0.81
                  
                  
                  $
                  2.65June
      30, 2008
                  
                  $
                  0.80
                  
                  
                  $
                  2.00September
      30, 2008
                  
                  $
                  0.55
                  
                  
                  $
                  1.50December
      31, 2008
                  
                  $
                  0.13
                  
                  
                  $
                  1.00March
      31, 2009
                  
                  $
                  0.08
                  
                  
                  $
                  0.30June
      30, 2009
                  
                  $
                  0.08
                  
                  
                  $
                  0.16September
      30, 2009
                  
                  $
                  0.08
                  
                  
                  $
                  0.20December
      31, 2009
                  
                  $
                  0.06
                  
                  
                  $
                  0.18




Our
securities may not qualify for listing on Nasdaq or any other national
exchange.  Even if our securities do qualify for listing, we may not
be able to maintain the criteria necessary to ensure continued
listing.  Our failure to qualify our securities or to meet the
relevant maintenance criteria after such qualification may result in the
discontinuance of the inclusion of our securities on a national
exchange.  In such event, trading, if any, in our securities may then
continue in the non-Nasdaq, over-the-counter market so long as we continue to
file periodic reports with the SEC and there remain sufficient qualified market
makers in our securities.  As a result, a stockholder may find it more
difficult to dispose of, or to obtain accurate quotations as to the market value
of, our securities.




As of
March 17, 2010 there were 265 holders of our Common Stock.  We have
37,488,714 outstanding shares of Common Stock.




Our
agreements with Laurus prohibit us from declaring or paying any dividends on our
Common Stock.




For
information regarding securities authorized for issuance under equity
compensation plans (pursuant to Item 201(d) of Regulation S-K), please see the
information provided under Item 12 of this Form, Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters.




ITEM
      6.
            SELECTED
      FINANCIAL DATA




Not
applicable.




ITEM 7. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS




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




Overview
and Recent Developments




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


19




On
January 22, 2008 the Company entered into a letter agreement with Erato for
Erato to provide up to Twelve Million Dollars ($12,000,000) in financing to the
Company on such terms and conditions as the Company and Erato shall mutually
agree (the “Bridge Financing”). All proceeds from the Bridge Financing may only
be used by the Company for the purpose of financing a third party. The Company
does not currently have an agreement to provide financing to such third party.
Erato is currently an investor in such third party and, through its parent,
Laurus Master Fund Ltd., a current investor in the Company. In consideration of
the letter agreement, the Company issued to Erato a warrant to purchase up to
1,738,365 shares of common stock of the Company at an exercise price of $0.01
per share.




On
January 30, 2008, the Company entered into a Warrant Purchase Agreement with
Laurus Master Fund, Ltd., Erato Corporation, Valens U.S. Fund, LLC and Valens
Offshore SPV I, Ltd. (collectively, the “Sellers”) pursuant to which the Company
purchased and acquired from the Sellers, warrants to purchase 450,000 shares of
common stock at an exercise price of $0.01 per share of 180 Connect Inc., (the
“180 Connect Warrants”).




Also on
January 30, 2008, the Company entered into a non-binding letter of intent with
Valens U.S. Fund, LLC (the “Letter Agreement”) in which Valens U.S. Fund, LLC
confirmed its current intention to provide up to $4,000,000 in financing to a
subsidiary of the Company. The Letter Agreement is only an expression of the
present intentions of the parties and no binding legal obligation will exist
until the parties sign a definitive agreement.




The
aggregate purchase price paid by the Company in exchange for the 180 Connect
Warrants and the Letter Agreement was $1,580,790 paid by the Company by delivery
to the Sellers of common stock purchase warrants, exercisable in the aggregate
into up to 798,750 shares of common stock of the Company at an exercise price of
$0.01 per share. The purchase price was allocated by the Company as follows: (a)
$1,001,909 for the 180 Connect Warrants by delivery to the Sellers of warrants
to purchase 506,250 shares of common stock of the Company at an exercise price
of $0.01 per share and (b) $578,881 for the Letter Agreement warrants to
purchase 292,500 shares of common stock of the Company.





In July
2008, the Company sold all of its shares of 180 Connect Inc. for $1.80 per
share.  Total cash received for the transaction was $5,623,933. The
Company does not own any shares of 180 Connect Inc. as at December 31,
2009.




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




Results
of Operations




Comparison
of Year Ended December 31, 2009


to
Year Ended December 31, 2008




Revenue:  Sales
were $39,768,800 for the year ended December 31, 2009, compared to $48,470,000
in 2008, representing a decrease of 18.0%. The decrease in revenue was mainly
due to the decline in the service revenue of Cancable Segment to $32,380,000 for
Fiscal Year 2009 from $40,648,500 for Fiscal Year 2008.


20


(a)
Cancable Segment – This segment includes Cancable Inc., Cancable, Inc., XL
Digital and 2141306 Ontario Inc. (collectively, the “Cancable
Group”).  The principal activity is provisioning the deployment and
servicing of broadband technologies in both residential and commercial
markets.  The Cancable Group’s service offering, network deployment,
IT integration, and support services, enable the cable television and
telecommunications industries to deliver a high quality broadband experience to
their customers.  The total revenue from the Cancable segment was
$32,380,000 in 2009 as compared to $40,648,500 in 2008.The decline in revenue was
primarily due to the decrease in revenue generated from our customer Rogers
Cable Inc. The decline in revenue was offset by the continued growth of revenue
in the United States. Total revenue generated in the United States for the year
ended December 31, 2009 was $6,936,400 compared to $5,591,800 for the year ended
December 31, 2008. Rogers Cable Inc. is Cancable Group’s largest customer and
the revenue from this customer for Fiscal Year 2009 was $18,759,800 or 57.9% of
total Cancable revenue compared to $26,054,800 or 64.1% for Fiscal Year 2008.
The decrease in revenue was mainly due to the exchange rate fluctuations as well
as the weakened economy. (b) AC Technical segment - Total revenue of AC
Technical segment was $7,145,800 for the year ended December 31, 2009 compared
to $7,541,200 in 2008. The decline in revenue was mainly due to fluctuation of
the foreign exchange rate and tightened capital expenditures by our customers.
All revenue generated from AC Technical Segment was in Canadian
dollars.  Contract revenue was $5,812,700 for Fiscal Year 2009
compared to $6,209,600 for Fiscal Year 2008.  The service revenue was
$1,333,100 for the year ended December 31, 2009, compared to $1,331,600 in
2008.




Direct Expenses (excluding
depreciation):  Direct expenses were $29,913,900 or 75.2% of
revenues for the year ended December 31, 2009, compared to $38,776,000 or 80.0%
of revenues for same period in 2008. The decrease in direct expenses for the
year ended December 31, 2009 was mainly due to the decline in overall revenue in
2009.   (a)Cancable segment – Direct expenses of this segment
were $26,206,900 for the year ended December 31, 2009, compared to $34,714,100
in 2008. The direct expenses comprised principally of labor expenses
$20,256,900, vehicle expenses $1,998,700 and material cost
$1,850,300.  The direct expenses in 2008 were higher which was driven
predominantly by the initial training and set up cost of developing the business
in the United States.  (b) AC Technical segment – Direct expenses of
this segment were $3,618,000 in 2009, compared to $3,868,900 in 2008. The
material cost was $2,198,500 or 30.8% of the AC Technical revenue for the year
ended December 31, 2009 compared to $2,208,900 or 29.3% of revenues in the same
period of fiscal 2008. On the other hand, the labor and subcontractor cost
increased to $1,355,100 or 18.9% of AC Technical revenues for Fiscal Year 2009
and $1,598,900 or 21.2% of AC Technical revenues for fiscal 2008.  The
decrease in direct expenses was mainly due to the decline in
revenue.




Project cost: Project
cost was decreased to $894,400 or 2.2% of revenue for the year ended December
31, 2009, compared to $1,084,700 or 2.2% for the same period in 2008. Project
cost was mainly related to the AC Technical segment.  The balance
mainly includes the salaries and benefits of indirect staff amounting to
$589,800 in Fiscal Year 2009 compared to $654,100 for Fiscal Year
2008.  The decrease was mostly due to the decrease in the number of
indirect staff. Automobile and travel expenses decreased to $215,500 for Fiscal
Year 2009 compared to $265,300 for Fiscal Year 2008 due to less travel by our
staff this year.




Selling expense:
Selling expense was $905,600 or 2.3% of revenues for the year ended December 31,
2009 compared to $942,700 or 1.9% of revenues for the same period in 2008.
Selling expenses were mainly related to AC Technical segment.  As at
December 31, 2009, AC Technical segment has 4 salespersons, compared to 5
salespersons at December 31, 2008. Salaries and commission to salespersons for
Fiscal Year 2008 was $432,900 compared to $546,100 for Fiscal Year 2008.The decrease was mainly
due to the decrease in salesperson headcount. The advertising and promotion and
trade show expenses were $134,800 in Fiscal Year 2009 compared to $98,700 for
Fiscal Year 2008.




General and administrative
expenses: General and administrative expenses were $5,571,000 or 14.0% of
revenues for the year ended December 31, 2009 compared to $10,452,400 or 21.6%
for the same period in 2008. The balance for the Fiscal Year 2009 is mainly
comprised of $473,800 of professional fees related to preparation of the
quarterly reports and other corporate matters. In addition, investor relations
expenses amounted to $150,000 for Fiscal Year 2009 compared to $1,272,000 for
Fiscal Year 2008.  Included in the balance of 2008, there was
$1,048,200 relating to non-cash expenses. Total salaries and benefits to
administrative staff were $2,242,600 for Fiscal Year 2009 compared to $5,699,000
for Fiscal Year 2008. The year-over-year decrease in general and administration
expenses primarily reflected a focused cost reduction program across the
Company. The higher amount in 2008 was attributable to additional staff hired
for the expansion of new business development in the United
States.


21




Depreciation: Total
depreciation of property plant and equipment was $2,643,200 for the year ended
December 31, 2009 compared to $2,571,400 for the same period in
2008.  The increase in balance was primarily due to the capital
expenditures incurred in 2008 in the amount of $3,644,900.




Amortization of Intangible
Assets: Amortization of customer relationships and trade name was
$341,100 for the year ended December 31, 2009, compared to $751,800 in
2008.




Interest and other
Expenses:  Interest and net other expenses for the year ended
December 31, 2009 were $1,098,800 or 2.8% of revenues compared to net expenses
of $12,803,500 or 26.4% of revenues for the same period in  2008. The
balance for the current period is primarily comprised of the amortization of
deferred charges amounting to $163,000 compared to $234,800 for Fiscal Year
2008.  Additionally, net financing expenses increased to $2,382,800 or
6.0% of revenues in 2009 compared to $7,041,980 or 14.5% of revenues for Fiscal
Year 2008.  The interest due with respect to the Company’s credit
facility was $1,488,400 for the year ended December 31, 2009 compared to
$1,481,400 for the same period in 2008.  The increase in the balance
reflects the increase in outstanding balances of the term notes compared to the
same period of the prior year.  During 2008, the Company sold common
stock of 180 Connect Inc. for an aggregate of $5,623,900 and the realized loss
on the disposal of this investment was $822,900 and there was no such balance in
Fiscal Year 2009. In addition, the Company issued warrants related to proposed
financings valued at $3,723,600 which were charged to financing costs on 2008.
There was no such balance in the same period of fiscal 2009. Additionally, the
unrealized foreign currency translation gain was $1,447,100 in 2009, compared to
foreign currency translation loss of $1,641,300 for Fiscal Year 2008. The
balance was related to the foreign currency translation of term
notes.  During 2008, the Company also wrote off goodwill in the amount
of $3,062,400.




Income
taxes:  No income tax was paid for the year ended December 31,
2009, which was mainly due to the Company’s losses carried forward to offset all
income generated by the Company. All prior taxes have already been accounted for
in the income tax recoverable and therefore, there is no additional provision
for income taxes recoverable and deferred tax asset.




Net
Income/Loss:  Net loss for the year ended December 31, 2009 was
$1,599,200 compared to net loss of $18,912,500 for the same period in 2008. The
Company’s operating loss was $500,400 for the year ended December 31, 2009
compared to operating loss of $6,109,000 for the year ended December 31,
2008.  In 2008, the higher loss was primarily attributed to the
Company’s allocation of resources to grow the business in the United States and
increased costs.




Liquidity
and Capital Resources




Since our
inception, we have financed our operations through bank debt, loans and equity
from our principals, loans from third parties and funds generated by our
business. At December 31, 2009, we had $2,441,200 in cash. We believe that cash
from operations and our credit facilities with Laurus will continue to be
adequate to satisfy our ongoing working capital needs.  During Fiscal
Year 2010, 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 by operating activities amounted to
$98,400 for Fiscal Year 2009. The changes in operating assets and liabilities
resulted in net cash used of $855,800, which included a $67,600 decrease in
accounts receivable, a $150,700 decrease in inventory, a $170,200 decrease in
prepaid expenses, a $1,164,000 decrease in accounts payable, a $30,000 increase
in income taxes recoverable and a $50,300 decrease in deferred
revenue.




Comparative balance sheet as
at December 31, 2009 to December 31, 2008




Accounts
Receivable




Our
accounts receivable decreased to $4,292,100 as of December 31, 2009 from
$4,571,300 as of December 31, 2008.  Accounts receivable of Cancable
as at December 31, 2009 was $2,959,800 compared to $2,912,200 as at December 31,
2008.  The increase was attributable to the timing of payment by our
customers. Accounts receivable of the AC Technical segment was $1,088,800 as at
December 31, 2008 compared to $1,547,500 as of December 31, 2008.  The
decrease was mostly due to the timing of the payment by our
customers.


22




Inventory




Inventory
on hand on December 31, 2009 decreased to $789,000 compared to $829,300 as of
December 31, 2008. Inventory of the AC Technical segment was $440,225
compared to $421,700 as of December 31, 2008.  The increased level of
inventory of the AC Technical segment was associated with more purchases
required for the sales expected in the first quarter of
2010.  Inventory at the Cancable segment was decreased to $261,200 as
at December 31, 2009 from $319,600 as at December 31, 2008.  There was
no material fluctuation of the balances.




Accounts Payable and Accrued
Liabilities




Accounts
payable and accrued liabilities decreased to $4,555,300 compared to $5,800,000
as of December 31, 2008. The balance for the AC Technical segment was $1,146,300
as of December 31, 2009 compared to $1,274,900 as of December 31,
2008.  Accounts payable for Cancable Group was $3,029,000 as at
December 31, 2009 compared to $4,244,928 as at December 31, 2008.  The
decrease in the balance was mainly due to the decrease in purchases of material
in the last three months and the timing of payments to our
suppliers.




Deferred
Revenue




Deferred
revenue increased to $84,500 at December 31, 2009 compared to the balance of
$118,600 as at December 31, 2008. This increase was mainly due to the timing of
payments by our customers.  Deferred revenue primarily relates to
payments associated with the contracts where revenue is recognized on a
percentage of completion basis.




Incomes Taxes
Recoverable




The
income taxes recoverable were mainly due to the expected refund from losses
carried back to prior years.




Net Cash Provided by
Investing Activities.  Net cash received for investing
activities was $83,200 for the twelve months ended December 31, 2009, compared
to $2,867,800 received in investing activities for the twelve months ended
December 31, 2008. As a result of the sale of the 180 Connect Shares investment
in July 2008, the Company received cash in the amount of $5,623,900. The total
purchase of property and equipment of the Company was $131,100 for the twelve
months ending December 31, 2009 and $2,507,500 for the year ended December 31,
2008.




Net Cash Provided by (used
in)  Financing Activities.  Net cash used for
financing activities was $1,806,000 for Fiscal Year 2009 compared to net cash
provided by financing activities of $1,653.700 for Fiscal Year 2008. The current
balance represents the repayment of term notes and capital leases in the amount
of $1,921,200, compared to $2,662,300 in 2008.  The last year balance
also included net proceeds received from new banking facilities set up with a
Canadian financial institution in the amount of
$1,993,100.  Additionally, the Company received a term loan from LV
Administrative Services, Inc. in the amount of $2,500,000 with total financing
costs of $230,800 in 2008. Total net proceeds from this term loan were
$2,269,200.




Our
capital requirements have grown since our inception with the growth of our
operations and staffing. We expect our capital requirements to continue to
increase in the future as we seek to expand our operations. On September 30,
2004, we obtained funding through a series of agreements with
Laurus.  In 2006, through our wholly owned subsidiary, we acquired all
of the issued and outstanding shares of capital stock and any other equity
interests of Cancable.  Simultaneously, Cancable entered into a series
of agreements with Laurus whereby Cancable issued to Laurus a secured term note
(the “Cancable Note”) in the amount of $6,865,000.  We completed a
refinancing transaction with Laurus in February 2006; we issued to Laurus a
secured term note (the “Company Note”) in the amount of $8,250,000 and Iview DSI
issued to Laurus a secured term note (the “Iview Note”) in the amount of
$2,000,000. Simultaneously with the closing of this refinancing transaction, we
paid off the entire outstanding principal amount and all obligations due to
Laurus under the Secured Convertible Term Note dated September 30, 2004, the
Secured Convertible Minimum Borrowing Note dated September 30, 2004 and the
Secured Revolving Note dated September 30, 2004 (collectively, the “2004 Notes”)
and such 2004 Notes were subsequently cancelled.In September 2008, the
Company and  its subsidiary,Cancable Inc., entered
into a financing transaction whereby the Company issued to Valens Offshore SPV
II, Corp. (“Valens Offshore”) and Valens U.S. SPV I, LLC (“Valens U.S.”) secured
term notes in the amount of  $1,700,000 and $800,000, respectively
(collectively, the “Company Second Notes”). Valens Offshore and Valens U.S. are
entities related to Laurus.The Company also issued
to Valens Offshore and Valens U.S. warrants to purchase up to 1,333,333 and
627,451 shares of common stock, respectively, of the Company with an exercise
price of $0.01 per share. The loans are secured by all of the assets of the
Company and all its subsidiaries.


23




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




Recent
Accounting Pronouncements




Accounting
Standards Codification





In
June 2009, the FASB issued Statement of Financial Accounting Standards
(“SFAS”) No. 168, The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles  (the
“Codification”). This standard replaces SFAS No. 162, The Hierarchy of
Generally Accepted Accounting Principles, and establishes only two levels of
U.S. generally accepted accounting principles (“GAAP”), authoritative and
nonauthoritative. The FASB ASC has become the source of authoritative,
nongovernmental GAAP, except for rules and interpretive releases of the SEC,
which are sources of authoritative GAAP for SEC registrants. All other
nongrandfathered, non-SEC accounting literature not included in the Codification
will become nonauthoritative. This standard is effective for financial
statements for interim or annual reporting periods ending after
September 15, 2009. The adoption of the Codification changed the Company’s
references to GAAP accounting standards but did not impact the Company’s results
of operations, financial position or liquidity.





Participating
Securities Granted in Share-Based Transactions





Effective
January 1, 2009, the Company adopted a new accounting standard included in
ASC 260, Earnings Per Share (formerly FASB Staff Position (“FSP”) Emerging
Issues Task Force (“EITF”) 03-6-1, Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities).  The
new guidance clarifies that non-vested share-based payment awards that entitle
their holders to receive nonforfeitable dividends or dividend equivalents before
vesting should be considered participating securities and included in basic
earnings per share. The Company’s adoption of the new accounting standard did
not have a material effect on previously issued or current earnings per
share.





Business
Combinations and Noncontrolling Interests





Effective
January 1, 2009, the Company adopted a new accounting standard included in
ASC 805, Business Combinations (formerly SFAS No. 141(R), Business
Combinations).  The new standard applies to all transactions or other
events in which an entity obtains control of one or more businesses.
Additionally, the new standard requires the acquiring entity in a business
combination to recognize all (and only) the assets acquired and liabilities
assumed in the transaction; establishes the acquisition-date fair value as the
measurement date for all assets acquired and liabilities assumed; and requires
the acquirer to disclose additional information needed to evaluate and
understand the nature and financial effect of the business combination. The
Company’s adoption of the new accounting standard did not have a material effect
on the Company’s consolidated financial statements.




Effective
January 1, 2009, the Company adopted a new accounting standard included in
ASC 810, Consolidations (formerly SFAS 160, Noncontrolling Interests in
Consolidated Financial Statements).  The new accounting standard
establishes accounting and reporting standards for the noncontrolling interest
(or minority interests) in a subsidiary and for the deconsolidation of a
subsidiary by requiring all noncontrolling interests in subsidiaries be reported
in the same way, as equity in the consolidated financial statements. As such,
this guidance has eliminated the diversity in accounting for transactions
between an entity and noncontrolling interests by requiring they be treated as
equity transactions. The Company’s adoption of this new accounting standard did
not have a material effect on the Company’s consolidated financial
statements.




24




Fair
Value Measurement and Disclosure


Effective
January 1, 2009, the Company adopted a new accounting standard included in
ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) (formerly FASB FSP
No 157-2, Effective Date of FASB Statement No. 157), which delayed the
effective date for disclosing all non-financial assets and non-financial
liabilities, except for items that are recognized or disclosed at fair value on
a recurring basis (at least annually). This standard did not have a material
impact on the Company’s consolidated financial statements.




In
April 2009, the FASB issued new guidance for determining when a transaction
is not orderly and for estimating fair value when there has been a significant
decrease in the volume and level of activity for an asset or liability. The new
guidance, which is now part of ASC 820 (formerly FSP
157-4,  Determining Fair Value When the Volume and Level of Activity
for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly ), requires disclosure of the inputs and
valuation techniques used, as well as any changes in valuation techniques and
inputs used during the period, to measure fair value in interim and annual
periods. In addition, the presentation of the fair value hierarchy is required
to be presented by major security type as described in ASC 320, Investments —
Debt and Equity Securities . The provisions of the new standard were effective
for interim periods ending after June 15, 2009. The adoption of the new
standard on April 1, 2009 did not have a material on the Company’s
consolidated financial statements.





In
April 2009, the Company adopted a new accounting standard included in ASC
820, (formerly FSP 107-1 and Accounting Principles Board (“APB”) 28-1, Interim
Disclosures about Fair Value of Financial Instruments).  The new
standard requires disclosures of the fair value of financial instruments for
interim reporting periods of publicly traded companies in addition to the annual
disclosure required at year-end. The provisions of the new standard were
effective for the interim periods ending after June 15, 2009. The Company’s
adoption of this new accounting standard did not have a material effect on the
Company’s consolidated financial statements.





In
August 2009, the FASB issued new guidance relating to the accounting for
the fair value measurement of liabilities. The new guidance, which is now part
of ASC 820, provides clarification that in certain circumstances in which a
quoted price in an active market for the identical liability is not available, a
company is required to measure fair value using one or more of the following
valuation techniques: the quoted price of the identical liability when traded as
an asset, the quoted prices for similar liabilities or similar liabilities when
traded as assets, or another valuation technique that is consistent with the
principles of fair value measurements. The new guidance clarifies that a company
is not required to include an adjustment for restrictions that prevent the
transfer of the liability and if an adjustment is applied to the quoted price
used in a valuation technique, the result is a Level 2 or 3 fair value
measurement. The new guidance is effective for interim and annual periods
beginning after August 27, 2009. The Company’s adoption of the new guidance
did not have a material effect on the Company’s consolidated financial
statements.





Derivative
Instruments and Hedging Activities





Effective
January 1, 2009, the Company adopted a new accounting standard included in
ASC 815, Derivatives and Hedging (SFAS No. 161, Disclosures about
Derivative Instruments and Hedging Activities, an amendment of SFAS No.133). The
new accounting standard requires enhanced disclosures about an entity’s
derivative and hedging activities and is effective for fiscal years and interim
periods beginning after November 15, 2008. Since the new accounting
standard only required additional disclosure, the adoption did not impact the
Company’s consolidated financial statements.





Other-Than-Temporary
Impairments





In
April 2009, the FASB issued new guidance for the accounting for
other-than-temporary impairments. Under the new guidance, which is part of ASC
320, Investments — Debt and Equity Securities (formerly FSP 115-2 and 124-2,
Recognition and Presentation of Other-Than-Temporary Impairments), and
other-than-temporary impairment is recognized when an entity has the intent to
sell a debt security or when it is more likely than not that an entity will be
required to sell the debt security before its anticipated recovery in
value.  The new guidance does not amend existing recognition and
measurement guidance related to other-than-temporary impairments of equity
securities and is effective for interim and annual reporting periods ending
after June 15, 2009. The Company’s adoption of the new guidance did not
have a material effect on the Company’s consolidated financial
statements.


25




Subsequent
Events




In
May 2009, the FASB issued new guidance for subsequent events. The new
guidance, which is part of ASC 855, Subsequent Events  (formerly SFAS
No. 165,  Subsequent Events)  is intended to establish
general standards of accounting for and disclosure of events that occur after
the balance sheet date but before financial statements are issued or are
available to be issued. Specifically, this guidance sets forth the period after
the balance sheet date during which management of a reporting entity should
evaluate events or transactions that may occur for potential recognition or
disclosure in the financial statements, the circumstances under which an entity
should recognize events or transactions occurring after the balance sheet date
in its financial statements, and the disclosures that an entity should make
about events or transactions that occurred after the balance sheet date. The new
guidance is effective for fiscal years and interim periods ended after
June 15, 2009 and will be applied prospectively. The Company’s adoption of
the new guidance did not have a material effect on the Company’s consolidated
financial statements.





Accounting
Standards Not Yet Effective





Accounting
for the Transfers of Financial Assets





In
June 2009, the FASB issued new guidance relating to the accounting for
transfers of financial assets. The new guidance, which was issued as SFAS
No. 166, Accounting for Transfers of Financial Assets,  an
amendment to SFAS No.  140, was adopted into Codification in
December 2009 through the issuance of Accounting Standards Updated (“ASU”)
2009-16. The new standard eliminates the concept of a “qualifying
special-purpose entity,” changes the requirements for derecognizing financial
assets, and requires additional disclosures in order to enhance information
reported to users of financial statements by providing greater transparency
about transfers of financial assets, including securitization transactions, and
an entity’s continuing involvement in and exposure to the risks related to
transferred financial assets. The new guidance is effective for fiscal years
beginning after November 15, 2009. The Company will adopt the new guidance
in 2010 and is evaluating the impact it will have to the Company’s consolidated
financial statements.





Accounting
for Variable Interest Entities





In
June 2009, the FASB issued revised guidance on the accounting for variable
interest entities. The revised guidance, which was issued as SFAS No. 167,
Amending FASB Interpretation No. 46(R), was adopted into Codification in
December 2009 through the issuance of ASU 2009-17. The revised guidance
amends FASB Interpretation No. 46(R), Consolidation of Variable Interest
Entities, in determining whether an enterprise has a controlling financial
interest in a variable interest entity. This determination identifies the
primary beneficiary of a variable interest entity as the enterprise that has
both the power to direct the activities of a variable interest entity that most
significantly impacts the entity’s economic performance, and the obligation to
absorb losses or the right to receive benefits of the entity that could
potentially be significant to the variable interest entity. The revised guidance
requires ongoing reassessments of whether an enterprise is the primary
beneficiary and eliminates the quantitative approach previously required for
determining the primary beneficiary. The Company does not expect that the
provisions of the new guidance will have a material effect on its consolidated
financial statements.





Revenue
Recognition





In
October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue
Arrangements. The new standard changes the requirements for establishing
separate units of accounting in a multiple element arrangement and requires the
allocation of arrangement consideration to each deliverable based on the
relative selling price. The selling price for each deliverable is based on
vendor-specific objective evidence (“VSOE”) if available, third-party evidence
if VSOE is not available, or estimated selling price if neither VSOE or
third-party evidence is available. ASU 2009-13 is effective for revenue
arrangements entered into in fiscal years beginning on or after June 15,
2010. The Company does not expect that the provisions of the new guidance will
have a material effect on its consolidated financial statements.





There
were no other accounting standards and interpretations recently issued which are
expected to a have a material impact on the Company's financial position,
results of operations or cash flows.





Off
Balance Sheet Arrangements




None


26




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 our critical accounting estimates which are discussed
below.




Accounts
receivable allowances are determined using a combination of historical
experience, current information and management judgment. Actual collections may
differ from our estimates.




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 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, preventive maintenance and technical support fees for an initial
period. 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.




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% increase in inventory reserve would increase expenses by $0.1
million.




We review
the terms of convertible debt and equity instruments we issue to determine
whether there are embedded derivative instruments, including the embedded
conversion option, that are required to be bifurcated and accounted for
separately as a derivative financial instrument. Generally, where the ability to
physical or net-share settle the conversion option is deemed to be not within
our control, the embedded conversion option is required to be bifurcated and
accounted for as a derivative financial instrument liability.




In
connection with the sale of convertible debt and equity instruments, we may also
issue freestanding options or warrants. Additionally, we may issue options or
warrants to non-employees in connection with consulting or other services they
provide. Although the terms of the options and warrants may not provide for
net-cash settlement, in certain circumstances, physical or net-share settlement
is deemed to not be within the control of the company and, accordingly, we are
required to account for these freestanding options and warrants as derivative
financial instrument liabilities, rather than as equity.




Derivative
financial instruments are initially measured at their fair value. For derivative
financial instruments that are accounted for as liabilities, the derivative
instrument is initially recorded at its fair value and is then re-valued at each
reporting date, with changes in the fair value reported as charges or credits to
income. For option-based derivative financial instruments, we use the
Black-Scholes option pricing model to value the derivative instruments. Any
discount from the face value of the convertible debt instrument is amortized
over the life of the instrument through periodic charges to income, using the
effective interest method. The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as
equity, is re-assessed at the end of each reporting period. Derivative
instrument liabilities are classified in the balance sheet as current or
non-current based on whether or not net-cash settlement of the derivative
instrument is expected within 12 months of the balance sheet date.


27


Customer
relationships and trade name represents the acquisition cost of acquired
customer relationships and trade name of the business and are recorded at cost
less accumulated amortization.  Amortization for customer
relationships and trade name is provided on a straight-line basis over the
period of expected benefit of 5 and 3 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.




We
periodically perform impairment tests on each of our long-lived assets,
including goodwill and other intangible assets.  In doing so, we
evaluate the carrying value of each intangible asset with respect to several
factors, including historical revenue generated from each intangible asset,
application of the assets in our current business plan, and projected cash flow
to be derived from the asset.




For
issuance of equity instruments for services, we record all stock-based
compensation as an expense in the financial statements and that such cost be
measured at the grant date fair value of the award.  We record the
grant date fair value of stock-based compensation awards as an expense over the
vesting period of the related stock options.  In order to determine
the fair value of the stock options on the date of grant, we use the
Black-Scholes-Merton option-pricing model.  Inherent in this model are
assumptions related to expected stock-price volatility, option life, risk-free
interest rate and dividend yield.  Although the risk-free interest
rates and dividend yield are less subjective assumptions, typically based on
factual data derived from public sources, the expected stock-price volatility,
forfeiture rate and option life assumptions require a greater level of judgment
which make them critical accounting estimates. We use an expected stock-price
volatility assumption that is based on historical volatilities of our common
stock and we estimate the forfeiture rate and option life based on historical
data related to prior option grants.




Commitments




We have
entered into contracts for certain consulting services providing for monthly
payments and are required to repay the principal of our convertible notes and
promissory notes due to Laurus and other parties.  In addition, we
have also entered into operating leases for vehicles, computer and office
equipment. The total minimum annual payments for the next five years are as
follows:




Payment due by PeriodTotal
                  
                  
                  2010
                  
                  
                  2011
                  
                  
                  2012
                  
                  
                  2013
                  
                  
                  2014
                  
                  
                  ThereafterTerm  notes
                  
                  $
                  15,663,252
                  
                  
                  $
                  1,750,000
                  
                  
                  $
                  12,401,128
                  
                  
                  $
                  -
                  
                  
                  $
                  1,512,124
                  
                  
                  $
                  -
                  
                  
                  $
                  -Note
      payable to related parties
                  
                  
                  1,500,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,500,000Capital
      leases*
                  
                  
                  6,041,206
                  
                  
                  
                  2,038,994
                  
                  
                  
                  1,918,028
                  
                  
                  
                  2,065,782
                  
                  
                  
                  18,402
                  
                  
                  
                  -
                  
                  
                  
                  -Operating
      leases
                  
                  
                  1,655,299
                  
                  
                  
                  525,543
                  
                  
                  
                  419,947
                  
                  
                  
                  373,021
                  
                  
                  
                  242,275
                  
                  
                  
                  94,513
                  
                  
                  
                  -Commitments
      related to consulting agreements
                  
                  
                  1,610,713
                  
                  
                  
                  576,190
                  
                  
                  
                  576,190
                  
                  
                  
                  458,333
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -$
                  26,470,470
                  
                  
                  $
                  4,890,727
                  
                  
                  $
                  15,285,293
                  
                  
                  $
                  2,897,136
                  
                  
                  $
                  1,772,801
                  
                  
                  $
                  94,513
                  
                  
                  $
                  1,500,000




* The
balance represents monthly principal and interest payment.




ITEM 7A.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK




Not
applicable.




28


ITEM 8.
            FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA




INDEX
TO FINANCIAL STATEMENTS




Creative
Vistas, Inc.




Consolidated
Financial Statements




For
the years ended December 31, 2009 and 2008




Report
      of Independent Registered Public Accounting Firm
              F-1Balance
      Sheets
              F-2Statements
      of Operations and Other Comprehensive (Loss)
              F-3Statement
      of Stockholders’ (Deficiency)
              F-4Statements
      of Cash Flows
              F-5Notes
      to Financial Statements
              F-6







REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




Stockholders
and Board of Directors




Creative Vistas,
Inc.




We have
audited the accompanying consolidated balance sheets of Creative Vistas, Inc. as
of December 31, 2009 and 2008, and the related consolidated statements of
operations, and other comprehensive (loss), stockholders’ (deficiency) and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.




We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting.  Our audits included consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.




In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Creative Vistas, Inc. as of
December 31, 2009 and 2008, and the results of its operations and its cash
flows for the years then ended, in conformity with accounting principles
generally accepted in the United States of America.




The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern.  As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
and has working capital and stockholder deficiencies. These factors raise
substantial doubt about the Company’s ability to continue as a going concern.
Management’s plans in regard to this matter are also discussed in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.




Kingery
& Crouse PA


Certified
Public Accountants


Tampa,
Florida


March 31,
2010


F-1





Creative
      Vistas, Inc.Consolidated
      Balance SheetsDecember 31
                                  
                                  2009
                                  
                                  
                                  2008AssetsCurrent
      AssetsCash
      and bank balances
                                  
                                  $
                                  2,441,204
                                  
                                  
                                  $
                                  4,770,337Accounts
      receivable, net of allowance for doubtful accounts of $213,862
      (2008-$323,183)
                                  
                                  
                                  4,292,071
                                  
                                  
                                  
                                  4,571,327Income
      tax recoverable
                                  
                                  
                                  257,142
                                  
                                  
                                  
                                  188,525Inventory
                                  
                                  
                                  789,005
                                  
                                  
                                  
                                  829,318Prepaid
      expenses
                                  
                                  
                                  347,048
                                  
                                  
                                  
                                  289,638Due
      from related parties
                                  
                                  
                                  -
                                  
                                  
                                  
                                  2,094Total
      current assets
                                  
                                  
                                  8,126,470
                                  
                                  
                                  
                                  10,651,239Property
      and equipment, net of depreciation
                                  
                                  
                                  6,669,553
                                  
                                  
                                  
                                  9,214,623Deposits
                                  
                                  
                                  282,359
                                  
                                  
                                  
                                  460,376Deferred
      financing costs, net
                                  
                                  
                                  384,521
                                  
                                  
                                  
                                  483,331Intangible
      assets
                                  
                                  
                                  284,286
                                  
                                  
                                  
                                  850,136Deferred
      income taxes
                                  
                                  
                                  36,879
                                  
                                  
                                  
                                  35,343$
                                  15,784,068
                                  
                                  
                                  $
                                  21,695,048Liabilities
      and Stockholders’ (Deficiency)Current
      LiabilitiesBank
      indebtedness
                                  
                                  $
                                  1,960,057
                                  
                                  
                                  $
                                  1,581,912Accounts
      payable
                                  
                                  
                                  1,916,270
                                  
                                  
                                  
                                  2,611,951Accrued
      salaries and benefits
                                  
                                  
                                  1,223,357
                                  
                                  
                                  
                                  1,723,506Accrued
      commodity taxes
                                  
                                  
                                  194,258
                                  
                                  
                                  
                                  183,614Accrued
      liabilities
                                  
                                  
                                  1,221,435
                                  
                                  
                                  
                                  1,280,990Current
      portion of obligations under capital leases
                                  
                                  
                                  1,501,106
                                  
                                  
                                  
                                  2,125,312Deferred
      income
                                  
                                  
                                  84,502
                                  
                                  
                                  
                                  118,595Deferred
      income taxes
                                  
                                  
                                  25,858
                                  
                                  
                                  
                                  25,858Current
      portion of term notes
                                  
                                  
                                  1,750,000
                                  
                                  
                                  
                                  1,750,000Current
      portion of other notes payable
                                  
                                  
                                  -
                                  
                                  
                                  
                                  245,902Due
      to related parties
                                  
                                  
                                  -
                                  
                                  
                                  
                                  6,292Total
      current liabilities
                                  
                                  
                                  9,876,843
                                  
                                  
                                  
                                  11,653,932Term
      notes
                                  
                                  
                                  13,913,252
                                  
                                  
                                  
                                  14,062,290Notes
      payable to related parties
                                  
                                  
                                  1,500,000
                                  
                                  
                                  
                                  1,500,000Obligations
      under capital lease
                                  
                                  
                                  3,543,801
                                  
                                  
                                  
                                  4,554,240Due
      to related parties
                                  
                                  
                                  219,876
                                  
                                  
                                  
                                  189,23729,053,772
                                  
                                  
                                  
                                  31,959,699Stockholders'
      (deficiency)Share
      capitalAuthorized
      50,000,000 no par value preferred shares undesignated, none issued or
      outstanding and 100,000,000 no par value common shares, 37,488,714 at
      December 31, 2009, and 37,224,926 at December 31, 2008 shares, issued and
      outstandingCommon
      stock
                                  
                                  
                                  6,555,754
                                  
                                  
                                  
                                  6,488,137Additional
      paid-in capital
                                  
                                  
                                  14,158,942
                                  
                                  
                                  
                                  14,005,627Accumulated
      (deficit)
                                  
                                  
                                  (32,957,115
                                  )
                                  
                                  
                                  (31,357,923
                                  )Accumulated
      other comprehensive income (losses)
                                  
                                  
                                  (1,027,285
                                  )
                                  
                                  
                                  599,508(13,269,704
                                  )
                                  
                                  
                                  (10,264,651
                                  )$
                                  15,784,068
                                  
                                  
                                  $
                                  21,695,048





The
accompanying notes are an integral part of these financial
statements.


F-2




Creative
Vistas, Inc.


Consolidated
Statements of Operations and Comprehensive (Loss)


For the
years ended December 31


2009
                  
                  
                  2008Contract
      and service revenueContract
                  
                  $
                  5,812,671
                  
                  
                  $
                  6,209,601Service
                  
                  
                  33,943,128
                  
                  
                  
                  42,188,944Others
                  
                  
                  12,998
                  
                  
                  
                  71,49739,768,797
                  
                  
                  
                  48,470,042Direct
      Expenses (excluding depreciation)Contract
                  
                  
                  3,165,704
                  
                  
                  
                  4,061,916Service
                  
                  
                  26,748,201
                  
                  
                  
                  34,714,119Project
      expenses
                  
                  
                  894,400
                  
                  
                  
                  1,084,688Selling
      expenses
                  
                  
                  905,646
                  
                  
                  
                  942,688General
      and administrative expenses
                  
                  
                  5,571,034
                  
                  
                  
                  10,452,417Depreciation
      expense
                  
                  
                  2,643,119
                  
                  
                  
                  2,571,426Amortization
      of intangible assets
                  
                  
                  341,131
                  
                  
                  
                  751,75340,269,235
                  
                  
                  
                  54,579,007Loss
      from operations
                  
                  
                  (500,438
                  )
                  
                  
                  (6,108,965
                  )Interest
      expenses and other expenses (income)Net
      financing expenses
                  
                  
                  2,382,811
                  
                  
                  
                  7,041,978Goodwill
      impairment
                  
                  
                  -
                  
                  
                  
                  3,062,432Realized
      loss on disposal of available for sale securities
                  
                  
                  -
                  
                  
                  
                  822,916Amortization
      of deferred charges
                  
                  
                  162,997
                  
                  
                  
                  234,835Foreign
      currency translation (gain) loss
                  
                  
                  (1,447,054
                  )
                  
                  
                  1,641,3291,098,754
                  
                  
                  
                  12,803,490Loss
      before income taxes
                  
                  
                  (1,599,192
                  )
                  
                  
                  (18,912,455
                  )Income
      taxes
                  
                  
                  -
                  
                  
                  
                  -Net
      (loss)
                  
                  
                  (1,599,192
                  )
                  
                  
                  (18,912,455
                  )Other
      comprehensive gain (loss):Foreign
      currency translation adjustment
                  
                  
                  (1,626,793
                  )
                  
                  
                  1,424,660Comprehensive
      loss
                  
                  $
                  (3,225,985
                  )
                  
                  $
                  (17,487,795
                  )Basic
      weighted-average shares
                  
                  
                  37,440,870
                  
                  
                  
                  36,899,525Diluted
      weighted-average shares
                  
                  
                  37,440,870
                  
                  
                  
                  36,899,525Basic
      earnings (loss) per share
                  
                  $
                  (0.04
                  )
                  
                  $
                  (0.51
                  )Diluted
      earnings (loss) per share
                  
                  $
                  (0.04
                  )
                  
                  $
                  (0.51
                  )





The
accompanying notes are an integral part of these financial
statements.


F-3


Creative
Vistas, Inc.


Consolidated
Statement of Stockholders’ (Deficiency)




Shares
                                
                                
                                Amount
                                
                                
                                Additional
                                  paid-in
                                  capital
                                
                                
                                Accumulated
                                  (deficit)
                                
                                
                                Accumulated
                                  other
                                  comprehensive
                                  income (losses)
                                
                                
                                Total
                                  Stockholders’
                                  (deficiency)Balance, December 31, 2007
                                
                                
                                34,494,623
                                
                                
                                $
                                1,439,307
                                
                                
                                $
                                4,958,871
                                
                                
                                $
                                (12,445,468
                                )
                                
                                $
                                (825,152
                                )
                                
                                $
                                (6,872,442
                                )Stock-based
      compensation
                                
                                
                                532,583
                                
                                
                                
                                1,073,317
                                
                                
                                
                                45,054
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                1,118,371Stock
      issued for the exercise of the options or warrants
                                
                                
                                2,000
                                
                                
                                
                                1,260
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                1,260Value
      of stock options issued to employees
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                405,409
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                405,409Warrants
      issued to financial institution for financing and deferred principal
      payment
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                1,839,395
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                1,839,395Valuation
      of extension of warrants
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                560,736
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                560,736Stock
      and warrants issued for available for sale securities
                                
                                
                                2,195,720
                                
                                
                                
                                3,974,253
                                
                                
                                
                                6,196,162
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                10,170,415Net
      Loss
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (18,912,455
                                )
                                
                                
                                -
                                
                                
                                
                                (18,912,455
                                )Translation
      adjustment
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                1,424,660
                                
                                
                                
                                1,424,660Balance,
      December 31, 2008
                                
                                
                                37,224,926
                                
                                
                                
                                6,488,137
                                
                                
                                
                                14,005,627
                                
                                
                                
                                (31,357,923
                                )
                                
                                
                                599,508
                                
                                
                                
                                (10,264,651
                                )Stock-based
      compensation
                                
                                
                                263,788
                                
                                
                                
                                67,617
                                
                                
                                
                                (45,054
                                )
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                22,563Value
      of stock options issued to employees
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                10,524
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                10,524Warrants
      issued to financial institution for deferred principal
    payment
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                187,845
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                187,845Net
      loss
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (1,599,192
                                )
                                
                                
                                -
                                
                                
                                
                                (1,599,192
                                )Translation
      adjustment
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (1,626,793
                                )
                                
                                
                                (1,626,793
                                )Balance,
      December 31, 2009
                                
                                
                                37,488,714
                                
                                
                                $
                                6,555,754
                                
                                
                                $
                                14,158,942
                                
                                
                                $
                                (32,957,115
                                )
                                
                                $
                                (1,027,285
                                )
                                
                                $
                                (13,269,704
                                )




The
accompanying notes are an integral part of these financial
statements.


F-4




Creative
Vistas, Inc.


Consolidated
Statements of Cash Flows


For
      the year ended December 31,
                    
                    2009
                    
                    
                    2008Operating
      activitiesNet
      (loss)
                    
                    $
                    (1,599,192
                    )
                    
                    $
                    (18,912,455
                    )Adjustments
      to reconcile net (loss) to net cash provided by (used in) operating
      activitiesDepreciation
      of capital assets
                    
                    
                    2,643,119
                    
                    
                    
                    2,571,426Amortization
      of intangible assets
                    
                    
                    341,131
                    
                    
                    
                    751,753Amortization
      of deferred financing cost
                    
                    
                    162,997
                    
                    
                    
                    234,835Goodwill
      impairment
                    
                    
                    -
                    
                    
                    
                    3,062,432Loss
      on disposal of  available for sale securities
                    
                    
                    -
                    
                    
                    
                    822,916Gain
      on disposal of capital assets
                    
                    
                    80,552
                    
                    
                    
                    16,120Bad
      debt expenses
                    
                    
                    105,650
                    
                    
                    
                    47,165Foreign
      exchange
                    
                    
                    (1,197,750
                    )
                    
                    
                    1,883,166Stock-based
      compensation and interest expense
                    
                    
                    210,408
                    
                    
                    
                    5,837,750Amortization
      of employee stock option
                    
                    
                    10,524
                    
                    
                    
                    405,409Changes
      in non-cash working capital balancesAccounts
      receivable
                    
                    
                    67,632
                    
                    
                    
                    309,619Inventory
                    
                    
                    150,662
                    
                    
                    
                    60,826Prepaid
      expenses
                    
                    
                    170,219
                    
                    
                    
                    (527,119
                    )Accounts
      payable and other accrued liabilities
                    
                    
                    (1,164,001
                    )
                    
                    
                    1,050,912Deferred
      revenue
                    
                    
                    (50,320
                    )
                    
                    
                    53,011Deferred
      income taxes
                    
                    
                    (29,991
                    )
                    
                    
                    206,704Net
      cash provided by (used in) operating activities
                    
                    
                    (98,360
                    )
                    
                    
                    (2,125,530
                    )Investing
      activitiesPayment
      for acquisition
                    
                    
                    -
                    
                    
                    
                    (300,000
                    )Proceeds
      from sales of available for sales securities
                    
                    
                    -
                    
                    
                    
                    5,623,933Proceeds
      from sales of property and equipment
                    
                    
                    214,256
                    
                    
                    
                    51,359Purchase
      of property and equipment
                    
                    
                    (131,073
                    )
                    
                    
                    (2,507,469
                    )Net
      cash provided by (used in) investing activities
                    
                    
                    83,183
                    
                    
                    
                    2,867,823Financing
      activitiesProceeds
      from bank indebtedness
                    
                    
                    120,084
                    
                    
                    
                    1,993,076Proceeds
      from term loans (a)
                    
                    
                    -
                    
                    
                    
                    2,500,000Deferred
      financing costs (a)
                    
                    
                    -
                    
                    
                    
                    (230,776
                    )Due
      to related parties
                    
                    
                    (4,832
                    )
                    
                    
                    (385
                    )Proceeds
      from the exercise of options
                    
                    
                    -
                    
                    
                    
                    1,260Repayment
      of capital leases
                    
                    
                    (1,683,721
                    )
                    
                    
                    (1,317,468
                    )Restricted
      cash
                    
                    
                    -
                    
                    
                    
                    52,894Repayment
      of term loans
                    
                    
                    (237,500
                    )
                    
                    
                    (1,344,871
                    )Net
      cash provided by (used in) financing activities
                    
                    
                    (1,805,969
                    )
                    
                    
                    1,653,730Effect
      of foreign exchange rate changes on cash
                    
                    
                    (507,987
                    )
                    
                    
                    413,974Net
      change in cash and cash equivalents
                    
                    
                    (2,329,133
                    )
                    
                    
                    2,809,997Cash and cash
      equivalents, beginning of period
                    
                    
                    4,770,337
                    
                    
                    
                    1,960,340Cash and cash
      equivalents, end of period
                    
                    $
                    2,441,204
                    
                    
                    $
                    4,770,337Supplemental
      Cash Flow InformationCash
      paid for the interest
                    
                    $
                    2,194,966
                    
                    
                    $
                    2,129,451Cash
      paid for income taxes
                    
                    $
                    -
                    
                    
                    $
                    -Loan
      interest or penalties paid with warrant
                    
                    $
                    187,845
                    
                    
                    $
                    628,227Common
      stock issued for available for sale securities
                    
                    $
                    -
                    
                    
                    $
                    10,170,415Capital
      assets purchase through capital leases
                    
                    $
                    1,866,573
                    
                    
                    $
                    4,990,088


(a)
              In June 2008, the Company
      and  its subsidiary,Cancable Inc., entered into a
      financing transaction whereby the Company issued to Valens Offshore SPV
      II, Corp. (“Valens Offshore”) and Valens U.S. SPV I, LLC (“Valens U.S.”)
      secured term notes in the amount of $1,700,000 and $800,000, respectively
      (collectively, the “Company Second Notes”). Total professional fees for
      this transaction were
$230,776.




The
accompanying notes are an integral part of these financial
statements.


F-5




Creative
Vistas, Inc.


Notes
to Consolidated Financial Statements


For
the years ended December 31, 2009 and 2008


1.           Summary
of Accounting Policies




Basis
of presentation




The
accompanying financial statements as at and for the years ended December 31,
2009 and 2008, have been prepared by management in accordance with United States
generally accepted accounting principles (“GAAP”) applicable to the respective
periods.




The
consolidated balance sheets as at December 31, 2009 and 2008, and statements of
operations and cash flows for the years ended December 31, 2009 and 2008 include
the accounts of Creative Vistas, Inc. (“CVAS”), Creative Vistas Acquisition
Corp. (“AC Acquisition”), AC Technical Systems Ltd. (“AC Technical”), Cancable
Holding Corp. (“Cancable Holding”), Cancable Inc., Cancable, Inc., Cancable
XL Inc., XL Digital Services Inc. (“XL Digital”), 2141306 Ontario Inc., Iview
Holding Corp. (“Iview Holding”), Iview Digital Solutions Inc. (“Iview DSI”) and
OSSIM View Inc. (Collectively, the “Company”, or “we”, “us”, “our”). All
material inter-company accounts, transactions and profits have been
eliminated.




Reclassifications




Certain
amounts from the December 31, 2008 financial statements have been reclassified
to conform to the current year’s presentation.




Liquidity
and going concern




Our
consolidated financial statements were prepared using accounting principles
generally accepted in the United States of America applicable to a going
concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. We have incurred a loss of
$1,599,192 for the year ended December 31, 2009, and have an accumulated deficit
of $32,957,115, a stockholders’ deficit of $13,269,704 and a working capital
deficit of $1,750,373 at December 31, 2009.




We have
outstanding term loans aggregating $15,663,252, together with common stock
options and warrants, held by Laurus Master Fund, Ltd. (“Laurus”) and its
related entities. We do not currently have the ability to repay the notes in the
event of a demand by the holder. Furthermore, we granted a security interest to
Laurus and its related entities in substantially all of our assets and,
accordingly, in the event of any default under our agreements with Laurus and
its related entities, they could conceivably attempt to foreclose on our assets,
which could cause us to terminate our operations. As of December 31, 2009, there
were 13,716,983 shares of common stock issuable upon the exercise of warrants
and 129,155 shares issuable upon the exercise of options which were issued to
Laurus, Erato Corporation, Valens Offshore Fund, Valens U.S. Fund, LLC and
PSource Structured Debt Limited. Additionally, there were 49 shares of common
stock of Cancable Holding issuable upon the exercise of options and 20 shares of
common stock of Iview Holding issuable upon the exercise of options to Laurus
and its related entities.




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


F-6


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




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, 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.




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 recorded 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.




Advertising
costs




Advertising
costs are expensed as incurred.  Total advertising costs were
approximately $46,000 and $42,000 for the year ended December 31, 2009 and
2008.




Inventory




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




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:


F-7




Industrial
      condominium
              
              4%
      declining balance basisLeasehold
      improvements
              
              lesser
      of 5 years or the term of the lease straight-line basisOffice
      equipment
              
              20%
      declining balance basis or 3 years straight-line methodOffice
      equipment under capital leases
              
              3
      years straight-line methodFurniture
      and fixtures
              
              20%
      declining balance basis or 3 years straight-line methodFurniture
      and fixtures under capital leases
              
              5
      years straight-line methodComputer
      hardware and software
              
              30%
      declining balance basis or 3 years straight-line methodVehicles
              
              4
      years straight-line basisTools
      and equipment
              
              3
      years straight-line basis





Customer
Relationships and Trade Name




Customer
relationships and trade name represents the acquisition cost of acquired
customer relationships and trade name of Cancable and XL Digital are recorded at
cost less accumulated amortization.  Amortization for customer
relationships and trade name is provided on a straight-line basis over the
period of expected benefit of 5 and 3 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.
Amortization charged to operations aggregated $341,131 in 2009 and $751,753 in
2008.




Long-Lived
Assets




We
periodically perform impairment tests on each of our long-lived assets,
including goodwill and other intangible assets.  In doing so, we
evaluate the carrying value of each intangible asset with respect to several
factors, including historical revenue generated from each intangible asset,
application of the assets in our current business plan, and projected cash flow
to be derived from the asset.




The
determination of the fair value of certain acquired assets and liabilities is
subjective in nature and often involves the use of significant estimates and
assumptions. Determining the fair values and useful lives of intangible assets
especially requires the exercise of judgment. Where practicable, we will obtain
an independent valuation of intangible assets, and place reliance on such
valuation.  Then on an ongoing basis, we use the weighted-average
probability method outlined in ASC 360, Property, Plant, and
Equipment, to estimate the fair value. This method requires significant
management judgment to forecast the future operating results used in the
analysis. In addition, other significant estimates are required such as residual
growth rates and discount factors. The estimates we have used are consistent
with the plans and estimates that we use to manage our business, based on
available historical information and industry averages. The judgments made in
determining the estimated useful lives assigned to each class of assets acquired
can also significantly affect our net operating results.




According
to ASC 360, a long-lived asset should be tested for recoverability whenever
events or changes in circumstances indicate that its carrying amount may not be
recoverable. We follow the two-step process outlined in ASC 360 for determining
if an impairment charge should be taken: (1) the expected undiscounted cash
flows from a particular asset or asset group are compared with the carrying
value; if the expected undiscounted cash flows are greater than the carrying
value, no impairment is recognized, but if the expected undiscounted cash flows
are less than the carrying value, then (2) an impairment charge is taken for the
difference between the carrying value and the expected discounted cash
flows.  The assumptions used in developing expected cash flow
estimates are similar to those used in developing other information used by us
for budgeting and other forecasting purposes.  In instances where a
range of potential future cash flows is possible, we use a probability-weighted
approach to weigh the likelihood of those possible outcomes.  For
purposes of discounting cash flows, we use a discount rate equal to the yield on
a zero-coupon US Treasury instrument with a life equal to the expected life of
the intangible asset or asset group being tested.


F-8


Goodwill




Goodwill
is evaluated for potential impairment on an annual basis or whenever events or
circumstances indicate that impairment may have occurred. ASC 350, “Intangibles,
Goodwill and Other”,  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.
During 2008 the Company recorded an impairment charge of $3,062,432 related to
goodwill.




Deferred
Financing Costs




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




Issuance
of Equity Instruments for Services




ASC 718,
Stock Compensation
requires that all stock-based compensation be recognized as an expense in the
financial statements and that such cost be measured at the grant date fair value
of the award.




We record
the grant date fair value of stock-based compensation awards as an expense over
the vesting period of the related stock options.  In order to
determine the fair value of the stock options on the date of grant, we use the
Black-Scholes-Merton option-pricing model.  Inherent in this model are
assumptions related to expected stock-price volatility, option life, risk-free
interest rate and dividend yield.  Although the risk-free interest
rates and dividend yield are less subjective assumptions, typically based on
factual data derived from public sources, the expected stock-price volatility,
forfeiture rate and option life assumptions require a greater level of judgment
which make them critical accounting estimates.




We use an
expected stock-price volatility assumption that is based on historical
volatilities of our common stock and we estimate the forfeiture rate and option
life based on historical data related to prior option grants.




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
ASC 605 “Revenue Recognition” 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 hardware systems
installation and project management. Revenue from contracts where performance
extends beyond one or more accounting periods is recognized in accordance with
ASC 605 “Revenue Recognition and SEC Staff Accounting Bulletin 104, “Update of
Codification of Staff Accounting Bulletins” . 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 elements specified in the
contracts. The revenue is recognized when each element has been satisfied in
accordance ASC 605  and SEC Staff Accounting Bulletin 104, which are
the delivery of the equipment and completion of installation process. The fair
value of each element is based on the price charged when it is sold on a
standalone basis.




F-9




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. Generally, colleterial is not required.
      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 and regional
broadband and cable service. 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 other services is
recognized in the period in which the services are provided




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.




Earning
(loss) per share




Basic
earning (loss) per share (“EPS”) is computed using the weighted average number
of common shares outstanding during the period.  Diluted EPS 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 and conversion of debt using the treasury stock method. Adjustments
to earnings per share calculation include reversing interest related to the
convertible debts and changes in derivative instruments. During periods when
losses are incurred dilutive common shares are not considered in the computation
as their effect 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 term notes,
convertible notes and notes payable are also approximate 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.




We review
the terms of convertible debt and equity instruments we issue to determine
whether there are embedded derivative instruments, including the embedded
conversion option, that are required to be bifurcated and accounted for
separately as a derivative financial instrument. Generally, where the ability to
physical or net-share settle the conversion option is deemed to be not within
the control of the company, the embedded conversion option is required to be
bifurcated and accounted for as a derivative financial instrument
liability.


F-10




In
connection with the sale of convertible debt and equity instruments, we may also
issue freestanding options or warrants. Additionally, we may issue options or
warrants to non-employees in connection with consulting or other services they
provide. Although the terms of the options and warrants may not provide for
net-cash settlement, in certain circumstances, physical or net-share settlement
is deemed to not be within the control of the company and, accordingly, we are
required to account for these freestanding options and warrants as derivative
financial instrument liabilities, rather than as equity.




Derivative
financial instruments are initially measured at their fair value. For derivative
financial instruments that are accounted for as liabilities, the derivative
instrument is initially recorded at its fair value and is then re-valued at each
reporting date, with changes in the fair value reported as charges or credits to
income. For option-based derivative financial instruments, we use the
Black-Scholes option pricing model to value the derivative
instruments.




Any
discount from the face value of the convertible debt instrument resulting from
the allocation of part of the proceeds to embedded derivative instruments and/or
freestanding options or warrants is amortized over the life of the instrument
through periodic charges to income, using the effective interest
method.




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 generally
short payment terms. See above and Note 16.




Foreign
Currency Translation





The U.S.
dollar is the functional currency of our operations, except for our operations
located in Canada, which use the Canadian Dollar as their functional
currency.  Foreign currency transaction gains and losses are reflected
in income. Translation gains and losses arising from translating the financial
statements of the Canadian subsidiaries into U.S. dollars for reporting purposes
are included in “Accumulated other comprehensive income (loss).” Gains and
losses resulting from any inter company balances with different functional
currencies are recognized in the statement of operations.





Income
Taxes




We
account for income taxes under the provisions of ASC 740, Accounting for Income Taxes,
which requires recognition of deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in the
financial statements or tax returns.  Under this method, deferred tax
liabilities and assets are determined based on the difference between the
financial statement and tax basis of assets and liabilities using enacted tax
rates in effect for the year in which the difference is expected to
reverse.  Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some portion
or all of the deferred tax assets will not be realized.  We have
recorded a 100% valuation allowance as of December 31, 2009 and
2008.




Beginning
January 1, 2007, we adopted ASC 740-10-05 Accounting for Uncertainty in Income
Taxes. The Interpretation prescribes a recognition threshold and a
measurement attribute for the financial statement recognition and measurement of
tax positions taken or expected to be taken in a tax return. For those benefits
to be recognized, a tax position must be more-likely-than-not to be sustained
upon examination by taxing authorities. The amount recognized is measured as the
largest amount of benefit that is greater than 50 percent likely of being
realized upon ultimate settlement.




Comprehensive
Income




We report
comprehensive income in accordance with ASC 220, Comprehensive
Income.  This statement requires the disclosure of accumulated
other comprehensive income or loss (excluding net income or loss) as a separate
component of shareholders’ equity.


F-11


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




Adoption
of New Accounting Standards





Accounting
Standards Codification





In
June 2009, the FASB issued Statement of Financial Accounting Standards
(“SFAS”) No. 168, The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles  (the
“Codification”). This standard replaces SFAS No. 162, The Hierarchy of
Generally Accepted Accounting Principles, and establishes only two levels of
U.S. generally accepted accounting principles (“GAAP”), authoritative and
nonauthoritative. The FASB ASC has become the source of authoritative,
nongovernmental GAAP, except for rules and interpretive releases of the SEC,
which are sources of authoritative GAAP for SEC registrants. All other
nongrandfathered, non-SEC accounting literature not included in the Codification
will become nonauthoritative. This standard is effective for financial
statements for interim or annual reporting periods ending after
September 15, 2009. The adoption of the Codification changed the Company’s
references to GAAP accounting standards but did not impact the Company’s results
of operations, financial position or liquidity.





Participating
Securities Granted in Share-Based Transactions





Effective
January 1, 2009, the Company adopted a new accounting standard included in
ASC 260, Earnings Per Share (formerly FASB Staff Position (“FSP”) Emerging
Issues Task Force (“EITF”) 03-6-1, Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities).  The
new guidance clarifies that non-vested share-based payment awards that entitle
their holders to receive nonforfeitable dividends or dividend equivalents before
vesting should be considered participating securities and included in basic
earnings per share. The Company’s adoption of the new accounting standard did
not have a material effect on previously issued or current earnings per
share.





Business
Combinations and Noncontrolling Interests





Effective
January 1, 2009, the Company adopted a new accounting standard included in
ASC 805, Business Combinations (formerly SFAS No. 141(R), Business
Combinations).  The new standard applies to all transactions or other
events in which an entity obtains control of one or more businesses.
Additionally, the new standard requires the acquiring entity in a business
combination to recognize all (and only) the assets acquired and liabilities
assumed in the transaction; establishes the acquisition-date fair value as the
measurement date for all assets acquired and liabilities assumed; and requires
the acquirer to disclose additional information needed to evaluate and
understand the nature and financial effect of the business combination. The
Company’s adoption of the new accounting standard did not have a material effect
on the Company’s consolidated financial statements.




Effective
January 1, 2009, the Company adopted a new accounting standard included in
ASC 810, Consolidations (formerly SFAS 160, Noncontrolling Interests in
Consolidated Financial Statements).  The new accounting standard
establishes accounting and reporting standards for the noncontrolling interest
(or minority interests) in a subsidiary and for the deconsolidation of a
subsidiary by requiring all noncontrolling interests in subsidiaries be reported
in the same way, as equity in the consolidated financial statements. As such,
this guidance has eliminated the diversity in accounting for transactions
between an entity and noncontrolling interests by requiring they be treated as
equity transactions. The Company’s adoption of this new accounting standard did
not have a material effect on the Company’s consolidated financial
statements.




F-12


Fair
Value Measurement and Disclosure





Effective
January 1, 2009, the Company adopted a new accounting standard included in
ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) (formerly FASB FSP
No 157-2, Effective Date of FASB Statement No. 157), which delayed the
effective date for disclosing all non-financial assets and non-financial
liabilities, except for items that are recognized or disclosed at fair value on
a recurring basis (at least annually). This standard did not have a material
impact on the Company’s consolidated financial statements.





In
April 2009, the FASB issued new guidance for determining when a transaction
is not orderly and for estimating fair value when there has been a significant
decrease in the volume and level of activity for an asset or liability. The new
guidance, which is now part of ASC 820 (formerly FSP 157-4, Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly ),
requires disclosure of the inputs and valuation techniques used, as well as any
changes in valuation techniques and inputs used during the period, to measure
fair value in interim and annual periods. In addition, the presentation of the
fair value hierarchy is required to be presented by major security type as
described in ASC 320, Investments — Debt and Equity Securities . The provisions
of the new standard were effective for interim periods ending after
June 15, 2009. The adoption of the new standard on April 1, 2009 did
not have a material on the Company’s consolidated financial
statements.





In
April 2009, the Company adopted a new accounting standard included in ASC
820, (formerly FSP 107-1 and Accounting Principles Board (“APB”) 28-1, Interim
Disclosures about Fair Value of Financial Instruments).  The new
standard requires disclosures of the fair value of financial instruments for
interim reporting periods of publicly traded companies in addition to the annual
disclosure required at year-end. The provisions of the new standard were
effective for the interim periods ending after June 15, 2009. The Company’s
adoption of this new accounting standard did not have a material effect on the
Company’s consolidated financial statements.





In
August 2009, the FASB issued new guidance relating to the accounting for
the fair value measurement of liabilities. The new guidance, which is now part
of ASC 820, provides clarification that in certain circumstances in which a
quoted price in an active market for the identical liability is not available, a
company is required to measure fair value using one or more of the following
valuation techniques: the quoted price of the identical liability when traded as
an asset, the quoted prices for similar liabilities or similar liabilities when
traded as assets, or another valuation technique that is consistent with the
principles of fair value measurements. The new guidance clarifies that a company
is not required to include an adjustment for restrictions that prevent the
transfer of the liability and if an adjustment is applied to the quoted price
used in a valuation technique, the result is a Level 2 or 3 fair value
measurement. The new guidance is effective for interim and annual periods
beginning after August 27, 2009. The Company’s adoption of the new guidance
did not have a material effect on the Company’s consolidated financial
statements.





Derivative
Instruments and Hedging Activities





Effective
January 1, 2009, the Company adopted a new accounting standard included in
ASC 815, Derivatives and Hedging (SFAS No. 161, Disclosures about
Derivative Instruments and Hedging Activities, an amendment of SFAS No.133). The
new accounting standard requires enhanced disclosures about an entity’s
derivative and hedging activities and is effective for fiscal years and interim
periods beginning after November 15, 2008. Since the new accounting
standard only required additional disclosure, the adoption did not impact the
Company’s consolidated financial statements.





Other-Than-Temporary
Impairments





In
April 2009, the FASB issued new guidance for the accounting for
other-than-temporary impairments. Under the new guidance, which is part of ASC
320, Investments — Debt and Equity Securities (formerly FSP 115-2 and 124-2,
Recognition and Presentation of Other-Than-Temporary Impairments), and
other-than-temporary impairment is recognized when an entity has the intent to
sell a debt security or when it is more likely than not that an entity will be
required to sell the debt security before its anticipated recovery in
value.  The new guidance does not amend existing recognition and
measurement guidance related to other-than-temporary impairments of equity
securities and is effective for interim and annual reporting periods ending
after June 15, 2009. The Company’s adoption of the new guidance did not
have a material effect on the Company’s consolidated financial
statements.


F-13





Subsequent
Events





In
May 2009, the FASB issued new guidance for subsequent events. The new
guidance, which is part of ASC 855, Subsequent Events  (formerly SFAS
No. 165,  Subsequent Events)  is intended to establish
general standards of accounting for and disclosure of events that occur after
the balance sheet date but before financial statements are issued or are
available to be issued. Specifically, this guidance sets forth the period after
the balance sheet date during which management of a reporting entity should
evaluate events or transactions that may occur for potential recognition or
disclosure in the financial statements, the circumstances under which an entity
should recognize events or transactions occurring after the balance sheet date
in its financial statements, and the disclosures that an entity should make
about events or transactions that occurred after the balance sheet date. The new
guidance is effective for fiscal years and interim periods ended after
June 15, 2009 and will be applied prospectively. The Company’s adoption of
the new guidance did not have a material effect on the Company’s consolidated
financial statements.





Accounting
Standards Not Yet Effective





Accounting
for the Transfers of Financial Assets





In
June 2009, the FASB issued new guidance relating to the accounting for
transfers of financial assets. The new guidance, which was issued as SFAS
No. 166, Accounting for Transfers of Financial Assets,  an
amendment to SFAS No.  140, was adopted into Codification in
December 2009 through the issuance of Accounting Standards Updated (“ASU”)
2009-16. The new standard eliminates the concept of a “qualifying
special-purpose entity,” changes the requirements for derecognizing financial
assets, and requires additional disclosures in order to enhance information
reported to users of financial statements by providing greater transparency
about transfers of financial assets, including securitization transactions, and
an entity’s continuing involvement in and exposure to the risks related to
transferred financial assets. The new guidance is effective for fiscal years
beginning after November 15, 2009. The Company will adopt the new guidance
in 2010 and is evaluating the impact it will have to the Company’s consolidated
financial statements.





Accounting
for Variable Interest Entities





In
June 2009, the FASB issued revised guidance on the accounting for variable
interest entities. The revised guidance, which was issued as SFAS No. 167,
Amending FASB Interpretation No. 46(R), was adopted into Codification in
December 2009 through the issuance of ASU 2009-17. The revised guidance
amends FASB Interpretation No. 46(R), Consolidation of Variable Interest
Entities, in determining whether an enterprise has a controlling financial
interest in a variable interest entity. This determination identifies the
primary beneficiary of a variable interest entity as the enterprise that has
both the power to direct the activities of a variable interest entity that most
significantly impacts the entity’s economic performance, and the obligation to
absorb losses or the right to receive benefits of the entity that could
potentially be significant to the variable interest entity. The revised guidance
requires ongoing reassessments of whether an enterprise is the primary
beneficiary and eliminates the quantitative approach previously required for
determining the primary beneficiary. The Company does not expect that the
provisions of the new guidance will have a material effect on its consolidated
financial statements.





Revenue
Recognition





In
October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue
Arrangements. The new standard changes the requirements for establishing
separate units of accounting in a multiple element arrangement and requires the
allocation of arrangement consideration to each deliverable based on the
relative selling price. The selling price for each deliverable is based on
vendor-specific objective evidence (“VSOE”) if available, third-party evidence
if VSOE is not available, or estimated selling price if neither VSOE or
third-party evidence is available. ASU 2009-13 is effective for revenue
arrangements entered into in fiscal years beginning on or after June 15,
2010. The Company does not expect that the provisions of the new guidance will
have a material effect on its consolidated financial
statements.


F-14





There
were no other accounting standards and interpretations recently issued which are
expected to a have a material impact on the Company's financial position,
results of operations or cash flows.





2.
            Acquisitions




In
October 2007, the Company entered into an agreement, through our wholly owned
newly formed Ontario subsidiary, Cancable XL Inc. (“Cancable XL”), to acquire
all of the issued and outstanding shares of capital stock and any other equity
interests of XL Digital Services Inc. (“XL Digital”), an Ontario corporation.
The total consideration to be paid by Cancable XL for the shares of XL
Digital was to be an amount equal to the earnings before interest,
taxes, depreciation and amortization derived from the carrying on of its
business by XL Digital for the twelve month period after the completion of
the acquisition times 2.5. The consideration was to be paid in notes, warrants
to acquire stock of the Company and cash, with the total balance accrued as of
the purchase date of $249,500 due on January 5, 2009. A payment aggregating
$303,030 was paid in January, 2008. The Company has assessed the twelve month
results after the completion of the acquisition and is not required to make
additional payments.




3.
            Other
      Investments– Available For Sale
Securities




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





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




The above
investment, which is classified as available for sale securities, was sold in
July 2008 for an aggregate of $5,623,933.  The realized loss on the
disposal of this investment was $822,916 in 2008.





In
conjunction with this investment and pursuant to proposed financings of an
aggregate of $16,000,000, the Company also issued an aggregate of 2,030,865
warrants to purchase its common stock at $.01 per share which had a fair value
of $3,723,565. Because the proposed financings have no definitive terms and
there is no guarantee that the Company will receive any proceeds the fair value
of these options has been charged to financing expense during 2008.




4.
            Prepaid
      Expenses




The
balance consists of the following:


2009
                          
                          
                          2008Prepaid
      insurance
                          
                          $
                          228,293
                          
                          
                          $
                          9,426Prepaid
      rent
                          
                          
                          13,548
                          
                          
                          
                          33,628Prepaid
      leases
                          
                          
                          20,848
                          
                          
                          
                          26,319Prepaid
      salaries and benefits
                          
                          
                          -
                          
                          
                          
                          55,922Others
                          
                          
                          84,359
                          
                          
                          
                          164,343$
                          347,048
                          
                          
                          $
                          289,638




F-15




5.
            Related
      Party Transactions




2009
                                  
                                  
                                  2008Balances
      due from related parties are as follows:Balance
      due from a company controlled by the president, non-interest bearing and
      due on demand
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  2,094Balances
      due to related parties are as follows:Advances
      from the Chairman of the Company, non-interest bearing with no fixed terms
      of repayment. The loan is subordinated to the Laurus loans
                                  
                                  $
                                  61,777
                                  
                                  
                                  $
                                  53,169Subordinated
      loan - advances from the Chairman secured by a promissory note, a third
      ranking general security agreement, assignment of insurance policy, a
      second mortgage on the industrial condominium up to $269,955, personal
      guarantee of the president and his spouse up to $539,910 and a collateral
      second mortgage on the president's principal residence up to $77,130,
      bearing interest at 6% per annum, repayable in blended monthly payments of
      $10,155. The loan matured on February 14, 2005. However, the loan is
      subordinated to Laurus with no fixed terms of repayment and no interest
      will be charged from September 30, 2004. Total interest was
      $Nil.
                                  
                                  
                                  64,841
                                  
                                  
                                  
                                  55,806Loan
      payable to a company controlled by the president's spouse, non-interest
      bearing and due on demand
                                  
                                  
                                  -
                                  
                                  
                                  
                                  6,292Loan
      payable to the president of the Company, non-interest bearing with no
      fixed terms of repayment. The loan is subordinated to Laurus
      loans
                                  
                                  
                                  93,258
                                  
                                  
                                  
                                  80,262219,876
                                  
                                  
                                  
                                  195,529Less
      current portion
                                  
                                  
                                  -
                                  
                                  
                                  
                                  6,292$
                                  219,876
                                  
                                  
                                  $
                                  189,237Notes
      payable to related parties are as follows:Notes
      payable to the Malar Trust (the Chairman is one of the beneficiaries of
      the trust), bearing interest at 3% per annum with no fixed terms of
      repayment. The loan is subordinated to the Laurus loan. Total interest for
      the year was $51,673 (2008:  $50,151)
                                  
                                  $
                                  1,500,000
                                  
                                  
                                  $
                                  1,500,000




During
the year, $289,875 (2008 - $308,211) in consulting fees were paid to companies
controlled by the Chairman of the Board. In addition, $241,563 (2008 - $213,910)
in consulting fees was paid to a company controlled by the president’s
spouse.




F-16




6.
            Property
      and Equipment




2009
                          
                          
                          2008Accumulated
                          
                          
                          
                          
                          
                          AccumulatedCost
                          
                          
                          Depreciation
                          
                          
                          Cost
                          
                          
                          DepreciationLand
                          
                          $
                          94,529
                          
                          
                          
                          -
                          
                          
                          $
                          81,357
                          
                          
                          
                          -Industrial
      condominium
                          
                          
                          815,232
                          
                          
                          
                          213,046
                          
                          
                          
                          701,634
                          
                          
                          
                          162,186Leasehold
      improvements
                          
                          
                          470,594
                          
                          
                          
                          327,462
                          
                          
                          
                          405,772
                          
                          
                          
                          186,604Office
      equipment
                          
                          
                          464,410
                          
                          
                          
                          384,769
                          
                          
                          
                          382,605
                          
                          
                          
                          254,039Office
      equipment under capital leases
                          
                          
                          52,958
                          
                          
                          
                          48,958
                          
                          
                          
                          46,415
                          
                          
                          
                          40,415Furniture
      and fixtures
                          
                          
                          428,808
                          
                          
                          
                          298,626
                          
                          
                          
                          359,288
                          
                          
                          
                          171,070Furniture
      and fixtures under capital leases
                          
                          
                          21,251
                          
                          
                          
                          21,251
                          
                          
                          
                          18,289
                          
                          
                          
                          18,289Computer
      hardware and software
                          
                          
                          1,524,896
                          
                          
                          
                          1,126,391
                          
                          
                          
                          1,271,672
                          
                          
                          
                          710,083Computer
      hardware and software under capital leases
                          
                          
                          89,564
                          
                          
                          
                          89,564
                          
                          
                          
                          77,084
                          
                          
                          
                          77,084Vehicles
                          
                          
                          216,841
                          
                          
                          
                          168,374
                          
                          
                          
                          607,242
                          
                          
                          
                          457,651Vehicles
      under capital leases
                          
                          
                          6,989,051
                          
                          
                          
                          2,106,599
                          
                          
                          
                          9,526,118
                          
                          
                          
                          2,769,853Tools
      & equipment
                          
                          
                          1,412,879
                          
                          
                          
                          1,126,420
                          
                          
                          
                          1,407,600
                          
                          
                          
                          823,179$
                          12,581,013
                          
                          
                          
                          5,911,460
                          
                          
                          $
                          14,885,076
                          
                          
                          
                          5,670,453Net
      book value
                          
                          
                          
                          
                          
                          $
                          6,669,553
                          
                          
                          
                          
                          
                          
                          $
                          9,214,623




7.
            Intangible
      Assets




2009
                                            
                                            
                                            2008Cost
                                            
                                            
                                            Accumulated
                                              amortization
                                            
                                            
                                            Net book
                                              value
                                            
                                            
                                            Net book
                                              valueCustomer
      relationships
                                            
                                            $
                                            1,371,429
                                            
                                            
                                            $
                                            1,087,143
                                            
                                            
                                            $
                                            284,286
                                            
                                            
                                            $
                                            811,885Trade
      name
                                            
                                            
                                            1,257,143
                                            
                                            
                                            
                                            1,257,143
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            38,251$
                                            2,628,572
                                            
                                            
                                            $
                                            2,344,286
                                            
                                            
                                            $
                                            284,286
                                            
                                            
                                            $
                                            850,136




For the
year ended December 31, 2009, the amortization of intangible assets was $341,131
(2008 - $751,753). The amortizations for the next three years is as
follows:




Year
                        
                        Amount2010
                        
                        $
                        230,6492011
                        
                        
                        30,6492012
                        
                        
                        22,988$
                        284,286





8.
            Deferred
      Financing Costs, Net




Deferred
financing costs are associated with the Company’s term notes. For the year ended
December 31, 2009, the amortization of deferred financing cost was $162,997
(2008 - $234,835).




F-17




2009
                    
                    
                    2008Cost
                    
                    $
                    1,130,892
                    
                    
                    $
                    988,790Accumulated amortization
                    
                    
                    746,371
                    
                    
                    
                    505,459$
                    384,521
                    
                    
                    $
                    483,331




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





Year
                    
                    Amount2010
                    
                    $
                    170,1332011
                    
                    
                    146,7052012
                    
                    
                    45,1882013
                    
                    
                    22,495$
                    384,521




9.
            Bank
      Indebtedness




During
the period ended June 30, 2008, the Company established credit facilities with a
Canadian chartered bank to provide for borrowings by its subsidiaries, AC
Technical and Cancable Inc.  The credit facilities for AC Technical
and Cancable are $500,000 and $3,500,000 respectively. These loans bear
interest at the bank’s domestic prime rate plus 1.5% to 3.4% for Canadian dollar
amounts.  Interest is payable monthly. The facilities are secured by
an assignment of book debts, inventory, certain other assets and life insurance.
As at December 31, 2009, the interest rate of the Canadian dollar amount was
3.75% to 5.65% during 2009. At December 31, 2009, the borrowings outstanding
under both facilities were $1,690,057 and the average borrowing outstanding
during 2009 was.  The Company banking facility agreements contain
financial covenants pertaining to maintenance of the tangible net worth and debt
service coverage ratio. In the event of default, the bank could at its
discretion cancel the facilities and demand immediate repayment of all
outstanding amounts. Both credit facilities were expired and the Company is
currently negotiating the renewal of these banking facilities.




10.
            Term
      Notes




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




The
Cancable Note bears interest at the prime rate plus 1.75% with a minimum rate of
7%. Interest is calculated on the basis of a 360 day year.  The
minimum monthly payment on the term note is $81,726 commencing from October 1,
2006.  The Company is not obligated, except upon an event of default,
to pay more than 25% of the original principal amount prior to December 31,
2011.




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




F-18




The
options held by Laurus to acquire 49% of Cancable Holding and 20% of Iview
Holding are accounted for as noncontrolling interests.  Because the
options have not been exercised and Cancable Holding and Iview Holding have
incurred losses, no noncontrolling interests have been recognized at December
31, 2009.




The
Company Note bears interest at the prime rate plus 2% with a minimum rate of 7%.
Interest is calculated on the basis of a 360 day year.  The minimum
monthly payment on the term note is $137,500 commencing March 1, 2007 to
February 1, 2010, with a balance of $4,950,000 payable on the maturity date.
Through December 31, 2009, the Company has issued warrants to purchase up to
2,916,000 shares of common stock of the Company at prices from $0.08 to $2.84
per share to defer until maturity the principal repayments that were due from
March 1, 2007 to December 1, 2009.




The Iview
Note bears interest at the prime rate plus 2% with a minimum rate of 7%.
Interest is calculated on the basis of a 360 day year.  The minimum
monthly payment on the term note is $8,333 commencing March 1, 2007 to February
1, 2011, with the balance of  $1,600,000 payable on the maturity date.
The Company is not obligated, except upon an event of default, to pay more than
25% of the original principal amount prior to December 31, 2011.




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




Interest
on the term notes for the year ended December 31, 2009 was $1,488,439 (2008:
$1,481,421).




2009
                  
                  
                  2008Cancable
      Note interest at prime plus 1.75% (minimum of  7%), due December
      31, 2011
                  
                  $
                  5,148,754
                  
                  
                  $
                  5,200,243Company
      Note interest at prime plus 2% (minimum of  7%), due February
      13, 2011
                  
                  
                  7,287,500
                  
                  
                  
                  7,424,999Iview
      Note interest at prime plus 2% (minimum of 7%), due on February 13,
      2011
                  
                  
                  1,714,874
                  
                  
                  
                  1,814,873Company
      Second Notes. interest at 12%, due on June 24, 2013
                  
                  
                  2,500,000
                  
                  
                  
                  2,500,000Less:
      unamortized discount
                  
                  
                  (987,876
                  )
                  
                  
                  (1,127,825
                  )15,663,252
                  
                  
                  
                  15,812,290Less:
      current portion
                  
                  
                  1,750,000
                  
                  
                  
                  1,750,000$
                  13,913,252
                  
                  
                  $
                  14,062,290




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




Amount2010
                      
                      $
                      1,750,0002011
                      
                      
                      12,401,1282012
                      
                      
                      -2013
                      
                      
                      1,512,124$
                      15,663,252




F-19


11.
            Net
      Financing Expenses




2009
                  
                  
                  2008Capital
      leases
                  
                  $
                  654,854
                  
                  
                  $
                  597,897Interest
      on credit facility
                  
                  
                  1,488,439
                  
                  
                  
                  1,481,421Interest
      on  deferred principal repayment on term notes
      –warrants
                  
                  
                  187,845
                  
                  
                  
                  628,227Warrants
      issued for proposed new financing
                  
                  
                  -
                  
                  
                  
                  3,723,565Financing
      cost for the extension of warrants
                  
                  
                  -
                  
                  
                  
                  560,735Other
                  
                  
                  51,673
                  
                  
                  
                  50,133$
                  2,382,811
                  
                  
                  $
                  7,041,978




12.
            ObligationsUnder Capital
      Leases




2009
                          
                          
                          2008Obligation
      under capital lease – 10.9%, due June 2010, repayable $540 per vehicle
      principal and interest monthly, secured by 1 vehicle
                          
                          $
                          8,782
                          
                          
                          $
                          12,089Obligation
      under capital lease – 10.9%, due June 2010, repayable $540 per vehicle
      principal and interest monthly, secured by 6 vehicles
                          
                          
                          -
                          
                          
                          
                          67,450Obligation
      under capital lease – 12.4%, due August 2010, repayable $353 per vehicle
      principal and interest monthly, secured by 4 vehicles
                          
                          
                          10,817
                          
                          
                          
                          27,473Obligation
      under capital lease – 13.4%, due August 2010, repayable $353 per vehicle
      principal and interest monthly, secured by 4 vehicles
                          
                          
                          10,785
                          
                          
                          
                          21,814Obligation
      under capital lease – 13.31%, due August 2010, repayable $353 per vehicle
      principal and interest monthly, secured by 6 vehicles
                          
                          
                          16,178
                          
                          
                          
                          32,743Obligation
      under capital lease – 10.9%, due August 2010, repayable $544 per vehicle
      principal and interest monthly, secured by 1 vehicle
                          
                          
                          9,292
                          
                          
                          
                          12,534Obligation
      under capital lease – 10.9%, due August 2010, repayable $544 per vehicle
      principal and interest monthly, secured by 5 vehicles
                          
                          
                          -
                          
                          
                          
                          59,999Obligation
      under capital lease – 10.7%, due March 2011, repayable $483 per vehicle
      principal and interest monthly, secured by 1 vehicle
                          
                          
                          6,769
                          
                          
                          
                          9,984Obligation
      under capital lease – 10.7%, due March 2011, repayable $483 per vehicle
      principal and interest monthly, secured by 19 vehicles
                          
                          
                          -
                          
                          
                          
                          179,785Obligation
      under capital lease – 16.3%, due April 2011, repayable $574 principal and
      interest monthly, secured by certain office equipment
                          
                          
                          8,642
                          
                          
                          
                          11,820Obligation
      under capital lease – 16.2%, due April 2011, repayable $444 principal and
      interest monthly, secured by certain office equipment
                          
                          
                          4,689
                          
                          
                          
                          7,137Obligation
      under capital lease – 6.5%, due April 2011, repayable $519 per vehicle
      principal and interest monthly, secured by 10 vehicles
                          
                          
                          116,398
                          
                          
                          
                          145,978Obligation
      under capital lease – 8.5%, due April 2011, repayable $455 per vehicle
      principal and interest monthly, secured by 1 vehicle
                          
                          
                          10,371
                          
                          
                          
                          12,719Obligation
      under capital lease – 14%, due September 2011, repayable $370 per vehicle
      principal and interest monthly, secured by 21 vehicles
                          
                          
                          145,378
                          
                          
                          
                          184,742Obligation
      under capital lease – 7.7%, due July 2012, repayable $517 per vehicle
      principal and interest monthly, secured by
      2  vehicles
                          
                          
                          38,427
                          
                          
                          
                          40,952Obligation
      under capital lease – 7.9%, due March 2012, repayable $511 to $517 per
      vehicle principal and interest monthly, secured by
      20  vehicles
                          
                          
                          350,647
                          
                          
                          
                          381,744




F-20




Obligation
      under capital lease – 9.5%, due July 2012, repayable $404 per vehicle
      principal and interest monthly, secured by
      12  vehicles
                      
                      
                      168,172
                      
                      
                      
                      179,928Obligation
      under capital lease – 7.8%, due July 2012, repayable $517 per vehicle
      principal and interest monthly, secured by 6 vehicles
                      
                      
                      115,281
                      
                      
                      
                      122,856Obligation
      under capital lease – 9.4%, due October 2012, repayable $471 per vehicle
      principal and interest monthly, secured by 2 vehicles
                      
                      
                      34,205
                      
                      
                      
                      42,051Obligation
      under capital lease – 9.4%, due October 2012, repayable $471 per vehicle
      principal and interest monthly, secured by 18 vehicles
                      
                      
                      -
                      
                      
                      
                      378,460Obligation
      under capital lease – 15.6%, due January 2012, repayable $477 to $482 per
      vehicle principal and interest monthly, secured by 6
    vehicles
                      
                      
                      77,207
                      
                      
                      
                      98,625Obligation
      under capital lease – 15.7%, due February 2012, repayable $462 to $479 per
      vehicle principal and interest monthly, secured by 20
    vehicles
                      
                      
                      256,580
                      
                      
                      
                      325,062Obligation
      under capital lease – 15.7%, due February 2012, repayable $462 per vehicle
      principal and interest monthly, secured by 1 vehicle
                      
                      
                      -
                      
                      
                      
                      16,215Obligation
      under capital lease – 15.6%, due March 2012, repayable $463 to $482 per
      vehicle principal and interest monthly, secured by 15
    vehicles
                      
                      
                      196,677
                      
                      
                      
                      251,828Obligation
      under capital lease – 15.6%, due March 2012, repayable $463 to $477 per
      vehicle principal and interest monthly, secured by 10
    vehicles
                      
                      
                      -
                      
                      
                      
                      163,375Obligation
      under capital lease – 15.0%, due March 2012, repayable $493 per vehicle
      principal and interest monthly, secured by 6 vehicles
                      
                      
                      83,507
                      
                      
                      
                      123,059Obligation
      under capital lease – 15.6%, due April 2012, repayable $504 per vehicle
      principal and interest monthly, secured by 23 vehicles
                      
                      
                      331,743
                      
                      
                      
                      415,637Obligation
      under capital lease – 7.6% to 8.4%, due May 2012, repayable $372 to $433
      per vehicle principal and interest monthly, secured by 2
      vehicles
                      
                      
                      27,808
                      
                      
                      
                      35,013Obligation
      under capital lease – 15.8% to 15.9%, due May 2012, repayable $499 to $521
      per vehicle principal and interest monthly, secured by 8
      vehicles
                      
                      
                      119,210
                      
                      
                      
                      148,407Obligation
      under capital lease – 7.8%, due July 2012, repayable $517 per vehicle
      principal and interest monthly, secured by 7 vehicles
                      
                      
                      134,495
                      
                      
                      
                      132,924Obligation
      under capital lease – 7.8%, due July 2012, repayable $478 per vehicle
      principal and interest monthly, secured by 5 vehicles
                      
                      
                      -
                      
                      
                      
                      95,472Obligation
      under capital lease – 7.9% to 10.3%, due July 2012, repayable $407 to
      $422  per vehicle principal and interest monthly, secured by 7
      vehicles
                      
                      
                      96,246
                      
                      
                      
                      121,803Obligation
      under capital lease – 9.5% to 10.2%, due August 2012, repayable $455 to
      $468 per vehicle principal and interest monthly, secured by 4
      vehicles
                      
                      
                      65,680
                      
                      
                      
                      80,882Obligation
      under capital lease – 8.9% to 10.2%, due September 2012, repayable $437 to
      $468 per vehicle principal and interest monthly, secured by 31
      vehicles
                      
                      
                      500,744
                      
                      
                      
                      617,804Obligation
      under capital lease – 9.1% to 9.6%, due July 2012, repayable $405 per
      vehicle principal and interest monthly, secured by 17
    vehicles
                      
                      
                      233,205
                      
                      
                      
                      252,039Obligation
      under capital lease – 14.9%, due March 2010, repayable $344 per vehicle
      principal and interest monthly, secured by 17 vehicles
                      
                      
                      21,809
                      
                      
                      
                      106,457Obligation
      under capital lease – 32.3%, due January 2012, repayable $243 principal
      and interest monthly, secured by certain office equipment
                      
                      
                      4,282
                      
                      
                      
                      6,016Obligation
      under capital lease – 12.7%, due August 2013,  repayable $2,415
      principal and interest monthly, secured by certain office
      equipment
                      
                      
                      81,556
                      
                      
                      
                      84,573


F-21




Obligation
      under capital lease – 13.4%, due July  2012, repayable $359 per
      vehicle principal and interest monthly, secured by 81
    vehicles
                              
                              
                              1,033,455
                              
                              
                              
                              -Obligation
      under capital lease – 18.8%, due July  2012, repayable $308 per
      vehicle principal and interest monthly, secured by 37
    vehicles
                              
                              
                              312,064
                              
                              
                              
                              -Obligation
      under capital lease – 21.6%, due July 2012, repayable $296 per vehicle
      principal and interest monthly, secured by 57 vehicles
                              
                              
                              413,806
                              
                              
                              
                              -Obligation
      under capital lease – 8.2%, due May 2009, repayable $406 per vehicle
      principal and interest monthly, secured by 11 vehicles
                              
                              
                              -
                              
                              
                              
                              84,776Obligation
      under capital lease – 8.4%, due July 2009, repayable $403 per vehicle
      principal and interest monthly, secured by 10 vehicles
                              
                              
                              -
                              
                              
                              
                              76,828Obligation
      under capital lease – 8.2%, due August  2009, repayable $395 per
      vehicle principal and interest monthly, secured by 14
    vehicles
                              
                              
                              -
                              
                              
                              
                              111,734Obligation
      under capital lease – 8.3%, due September  2009, repayable $395
      per vehicle principal and interest monthly, secured by 22
      vehicles
                              
                              
                              -
                              
                              
                              
                              183,030Obligation
      under capital lease – 8.2%, due October  2009, repayable $395
      per vehicle principal and interest monthly, secured by 5
      vehicles
                              
                              
                              -
                              
                              
                              
                              43,287Obligation
      under capital lease – 19.3%, due March 2010, repayable $234 per vehicle
      principal and interest monthly, secured by 5 vehicles
                              
                              
                              -
                              
                              
                              
                              14,114Obligation
      under capital lease – 10.9%, due July 2010, repayable $464 per vehicle
      principal and interest monthly, secured by 20 vehicles
                              
                              
                              -
                              
                              
                              
                              234,579Obligation
      under capital lease – 8.9%, due November 2010, repayable $462 per vehicle
      principal and interest monthly, secured by 5 vehicles
                              
                              
                              -
                              
                              
                              
                              66,564Obligation
      under capital lease – 8.9%, due December 2010, repayable $467 per vehicle
      principal and interest monthly, secured by 7 vehicles
                              
                              
                              -
                              
                              
                              
                              97,212Obligation
      under capital lease – 9%, due February 2011, repayable $480 per vehicle
      principal and interest monthly, secured by 6 vehicles
                              
                              
                              -
                              
                              
                              
                              89,260Obligation
      under capital lease – 10.9%, due March 2011, repayable $416 per vehicle
      principal and interest monthly, secured by 20 vehicles
                              
                              
                              -
                              
                              
                              
                              189,907Obligation
      under capital lease – 7.5%, due April 2011, repayable $442 per vehicle
      principal and interest monthly, secured by 22 vehicles
                              
                              
                              -
                              
                              
                              
                              336,360Obligation
      under capital lease – 10.9%, due September 2010, repayable $469 per
      vehicle principal and interest monthly, secured by 7
    vehicles
                              
                              
                              -
                              
                              
                              
                              87,736Obligation
      under capital lease – 9.3%, due January 2011, repayable $467 per vehicle
      principal and interest monthly, secured by 4 vehicles
                              
                              
                              -
                              
                              
                              
                              56,7165,044,907
                              
                              
                              
                              6,679,552Less
      amount due within one year included in current liabilities
                              
                              
                              1,501,106
                              
                              
                              
                              2,125,312$
                              3,543,801
                              
                              
                              $
                              4,554,240




The
future minimum lease payments are as follows:




2010
                        
                        $
                        2,038,9942011
                        
                        
                        1,918,0282012
                        
                        
                        2,065,7822013
                        
                        
                        18,4026,041,206Less
      imputed interest
                        
                        
                        996,299$
                        5,044,907


F-22




Interest
expense for the year related to capital assets was $654,854 (2008 -
$597,897).




13.
            Incomes
      Taxes




The
Company's provision for (recovery of) income taxes is comprised as
follows:


2009
                                      
                                      
                                      2008U.S.
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      -CanadianCurrent
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Deferred
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -$
                                      -
                                      
                                      
                                      $
                                      -


Reconciliation
to statutory rates is as follows:


2009
                                  
                                  
                                  2008Income
      (loss) before income taxesIncome
      (loss) from U.S. sales
                                  
                                  $
                                  (1,927,193
                                  )
                                  
                                  $
                                  (15,205,419
                                  )Income
      (loss) from Canadian sales
                                  
                                  
                                  328,001
                                  
                                  
                                  
                                  (3,707,036
                                  )(1,599,192
                                  )
                                  
                                  
                                  (18,912,455
                                  )Statutory
      tax rates for U.S.
                                  
                                  
                                  41.00
                                  %
                                  
                                  
                                  41.00
                                  %Statutory
      tax rates for Canadian Federal
                                  
                                  
                                  33.00
                                  %
                                  
                                  
                                  36.12
                                  %




The
Company has unutilized taxable losses in the United States available for carry
forward to reduce net income of approximately $26,673,800 otherwise payable in
future years through 2029.  In addition, the Company has unutilized
taxable losses in the Canadian taxes available for carry forward to reduce net
income of approximately $3,837,200 otherwise payable in future years through
2029.




2009
                    
                    
                    
                    
                    
                    2008Expected
      income tax expense (recovery)
                    
                    $
                    (740,742
                    )
                    
                    
                    (46.3
                    )%
                    
                    $
                    (7,569,647
                    )
                    
                    
                    (38.5
                    )%Increase
      (decrease) in taxes resulting from:Valuation
      allowances
                    
                    
                    834,966
                    
                    
                    
                    52.2
                    %
                    
                    
                    5,933,020
                    
                    
                    
                    30.1
                    %Permanent
      differences
                    
                    
                    87,470
                    
                    
                    
                    5.5
                    %
                    
                    
                    1,677,803
                    
                    
                    
                    8.5
                    %Small
      business and other tax rate reductions
                    
                    
                    (181,694
                    )
                    
                    
                    (11.4
                    )%
                    
                    
                    (41,176
                    )
                    
                    
                    (0.1
                    )%Income
      tax expenses (recovery)
                    
                    $
                    -
                    
                    
                    
                    -
                    
                    
                    $
                    -
                    
                    
                    
                    -




The tax
effects of temporary differences that give rise to significant portions of the
deferred tax assets and deferred tax liabilities as of December 31, 2009 and
2008 are presented below:




2009
                    
                    
                    2008AssetsTax
      benefits on losses carried forward under U.S. tax rate
                    
                    
                    10,927,734
                    
                    
                    
                    9,510,415Tax
      benefits on losses carried forward under Canadian tax rate
                    
                    
                    1,266,264
                    
                    
                    
                    718,944Accounting
      depreciation in excess of tax depreciation
                    
                    
                    36,879
                    
                    
                    
                    35,343Other
                    
                    
                    -
                    
                    
                    
                    74612,230,877
                    
                    
                    
                    10,265,448Less:
      valuation allowance
                    
                    
                    (12,193,998
                    )
                    
                    
                    (10,229,359
                    )36,879
                    
                    
                    
                    36,089Less:
      current portion
                    
                    
                    -
                    
                    
                    
                    (746
                    )$
                    36,879
                    
                    
                    $
                    35,343LiabilitiesIncome
      tax depreciation in excess of accounting depreciation
                    
                    $
                    -
                    
                    
                    $
                    -Other
                    
                    
                    25,858
                    
                    
                    
                    26,60425,858
                    
                    
                    
                    26,604Less:
      current portion
                    
                    
                    (25,858
                    )
                    
                    
                    (26,604
                    )$
                    -
                    
                    
                    $
                    -





F-23




Net
      deferred income taxes2009
                    
                    
                    2008CurrentAssets
                    
                    $
                    -
                    
                    
                    $
                    746Liabilities
                    
                    
                    (25,858
                    )
                    
                    
                    (26,604
                    )$
                    (25,858
                    )
                    
                    $
                    (25,858
                    )Long-termAssets
                    
                    $
                    36,879
                    
                    
                    $
                    35,343Liabilities
                    
                    
                    -
                    
                    
                    
                    -$
                    36,879
                    
                    
                    $
                    35,343$
                    11,021
                    
                    
                    $
                    9,485




14.
            Warranty




As part
of the installation, the Company has provided its customers with
warranties.  The warranties generally extend ninety days labor and one
year on equipment from the date of project completion.  The provision
for warranty liabilities which is included in accrued expenses is as
follows:




2009
                  
                  
                  2008Balance,
      beginning of year
                  
                  $
                  32,787
                  
                  
                  $
                  40,404Expenses
      incurred
                  
                  
                  (32,000
                  )
                  
                  
                  (16,393
                  )Provision
      made
                  
                  
                  37,308
                  
                  
                  
                  8,776Balance,
      end of year
                  
                  $
                  38,095
                  
                  
                  $
                  32,787





15.
            Shareholders’
      (Deficit)




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




During
the year ended December 31, 2008, the Company entered into a consulting
agreement by issuing 222,414 common shares stock in consideration for investor
relations services rendered with a fair value of $448,200. Additionally, the
Company issued 2,000 common shares to an employee for the exercise of an
employee stock option for cash aggregating $1,260.




During
the year ended December 31, 2008, the Company entered into a
consulting agreement by issuing 300,000 common shares stock in consideration for
investor relations services rendered for 2008 with a fair value of $600,000.
Additionally, the Company issued 10,169 common shares for the payment of
outstanding legal fees in the amount of $25,117.





F-24





During
the year ended December 31, 2008, the Company agreed to issue 166,835 common
shares for legal fees with the fair value of $45,054. These shares were issued
in 2009.




During
the year ended December 31, 2009  the Company issued
236,788  common shares for legal fees with the fair market value of
$67,617 of which $45,054 was charged to operations in 2008.




Options




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




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




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




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




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




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




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




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





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




F-25





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




During
2009, the Company granted to employees options to purchase 500,000 shares of
common stock, at prices ranging from $0.12 to $1.26 per share; the options
expire in 2013.




At
December 31, 2009 options to purchase 2,005,000 shares of common stock were
outstanding.  These options vest ratably in annual installments, over
the four year period from the date of grant.  As of December 31, 2009,
there was $105,548 of total unrecognized compensation cost related to non-vested
share-based compensation arrangements granted under the Plan. That cost is
expected to be recognized over the four year vesting period. At December 31,
2009, 1,287,250 options were vested. The cost recognized for the twelve month
period ended December 31, 2009 was $10,524 (2008:$405,409) which was recorded as
general and administrative expenses.




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




2009Expected
      volatility
                        
                        
                        140
                        %Expected
      dividends
                        
                        
                        0
                        %Expected
      term (in years)
                        
                        
                        4.0Risk-free
      rate
                        
                        
                        1.35%
      - 1.82
                        %




A summary
of option activity under the Plan during the period ended December 31, 2009
is presented below:




Shares
                                  
                                  
                                  Weighted-Average
                                    Exercise
                                    Price
                                  
                                  
                                  Weighted-Average
                                    Remaining
                                    Contractual
                                    Term
                                  
                                  
                                  Intrinsic
                                    ValueOptionsOutstanding
      at December 31, 2007
                                  
                                  
                                  3,222,000
                                  
                                  
                                  $
                                  1.27
                                  
                                  
                                  
                                  4.75
                                  
                                  
                                  $
                                  1.57Granted
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Exercised
                                  
                                  
                                  (2,000
                                  )
                                  
                                  $
                                  0.63
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Forfeited
      or expired
                                  
                                  
                                  (281,000
                                  )
                                  
                                  $
                                  0.63
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Outstanding
      at December 31, 2008
                                  
                                  
                                  2,939,000
                                  
                                  
                                  $
                                  1.22
                                  
                                  
                                  
                                  4.75
                                  
                                  
                                  
                                  -Granted
                                  
                                  
                                  500,000
                                  
                                  
                                  $
                                  0.70
                                  
                                  
                                  
                                  4.23
                                  
                                  
                                  
                                  -Exercised
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Forfeited
      or expired
                                  
                                  
                                  (1,434,000
                                  )
                                  
                                  $
                                  2.07
                                  
                                  
                                  
                                  2.69
                                  
                                  
                                  
                                  -Outstanding
      at December 31, 2009
                                  
                                  
                                  2,005,000
                                  
                                  
                                  $
                                  0.65
                                  
                                  
                                  
                                  2.03
                                  
                                  
                                  
                                  -Exercisable
      at December 31, 2009
                                  
                                  
                                  1,287,250
                                  
                                  
                                  $
                                  0.64
                                  
                                  
                                  
                                  1.64
                                  
                                  
                                  
                                  -




The
following table summarizes information about Fixed price stock options at
December 31, 2009:
 
 Exercise
      Price
              
              
              Weighted
                Average
      Number
                Outstanding
              
              
              Weighted
                Average
                Contractual
      Life
              
              
              Weighted
                Average
                Exercise
      Price
              
              
              Number
                Exercisable
              
              
              Exercise
                Price$
              0.63
              
              
              
              1,895,000
              
              
              
              1.61
              
              
              $
              0.63
              
              
              
              1,234,750
              
              
              $
              0.63$
              0.90
              
              
              
              100,000
              
              
              
              2.17
              
              
              $
              0.90
              
              
              
              50,000
              
              
              $
              0.90$
              1.12
              
              
              
              10,000
              
              
              
              3.48
              
              
              $
              1.12
              
              
              
              2,500
              
              
              $
              1.122,005,000
              
              
              
              
              
              
              
              
              
              
              
              1,287,250


F-26





As of
December 31, 2009, the aggregate intrinsic value of all stock options
outstanding and expected to vest was $0.00 and the aggregate intrinsic value of
currently exercisable stock options was $0.00.  The intrinsic value of
each option share is the difference between the fair market value of the common
stock and the exercise price of such option share to the extent it is
“in-the-money”.  Aggregate intrinsic value represents the value that
would have been received by the holders of in-the-money options had they
exercised their options on the last trading day of the year and sold the
underlying shares at the closing stock price on such day.  The
intrinsic value calculation is based on the $0.08 closing stock price of the
Common Stock on December 31, 2009, the last trading day of
2009.  There were no in-the-money options outstanding and exercisable
as of December 31, 2009.




The total
intrinsic value of options exercised during the years ended December 31, 2009
and 2008, was approximately $0 and $0, respectively.  Intrinsic value
of exercised shares is the total value of such shares on the date of exercise
less the cash received from the option holder to exercise the
options.  The total cash proceeds received from the exercise of stock
options was approximately $0 and $1,260 for the years ended December 31,
2009 and 2008, respectively.




The total
fair value of options granted during the years ended December 31, 2009 and 2008
was approximately $120,153 and $0, respectively.




Warrants




The
Company uses the Black-Scholes option pricing model to value warrants issued to
non-employees, based on the market price of our common stock at the time the
warrants are issued. All outstanding warrants may be exercised by the holder at
any time.




During
the period ended March 31, 2008, in connection with financing and the
acquisition of available for sale securities, the Company issued warrants to
purchase 3,674,103 shares of common stock.  The fair value of the
warrants of $6,470,357 was measured using the Black-Scholes option pricing model
using the following assumptions: risk free interest rate of 2.18% to 4.44%,
expected dividend yield of 0%, volatility of 45%, exercise prices of $0.01 to
$2.84 and the life of warrants of 4 to 50 years.  During the period
ended June 30, 2008, in connection with financing arrangements, the Company
issued warrants to purchase 2,284,784 shares of common stock.  The
fair value of the warrants of $2,125,946 was measured using the Black-Scholes
option pricing model using the following assumptions: risk free interest rate of
4.19%, expected dividend yield of 0%, volatility of 120% to 125%, exercise
prices of $1.07 to $1.90 and the life of the warrants 4 to 10
years.




During
the year ended December 31, 2009, in connection with financing, the Company
issued warrants to purchase 1,188,000 shares of common stock.  The
fair market value of the warrants of $187,845 was measured using the
Black-Scholes option pricing model using the following assumptions: risk free
interest rate of 1.41% to 2.19%, expected dividend yield of 0%, volatility of
140%, exercise prices of $0.08 to $0.27 and the life of the warrants 4
years.




As of
December 31, 2009, we had the following common stocks warrants
outstanding:





F-27




Issue Date
                              
                              Expiry Date
                              
                              Number of
                                warrants
                              
                              Exercise Price
                                Per share
                              
                              Value-issue
                                date
                              
                              Issued for09-30-2004
                              
                              09-30-2016
                              
                              2,250,000
                              
                              $
                              1.15
                              
                              $
                              1,370,000
                              
                              Financing*03-31-2005
                              
                              03-31-2012
                              
                              100,000
                              
                              $
                              1.20
                              
                              $
                              60,291
                              
                              Financing04-30-2005
                              
                              04-30-2017
                              
                              100,000
                              
                              $
                              1.01
                              
                              $
                              44,309
                              
                              Financing*05-31-2005
                              
                              05-31-2012
                              
                              100,000
                              
                              $
                              1.01
                              
                              $
                              56,614
                              
                              Financing06-22-2005
                              
                              06-22-2017
                              
                              313,000
                              
                              $
                              1.00
                              
                              $
                              137,703
                              
                              Financing*06-30-2005
                              
                              06-30-2017
                              
                              100,000
                              
                              $
                              0.90
                              
                              $
                              50,431
                              
                              Financing*07-31-2005
                              
                              07-31-2012
                              
                              100,000
                              
                              $
                              1.05
                              
                              $
                              56,244
                              
                              Financing08-31-2005
                              
                              08-31-2012
                              
                              100,000
                              
                              $
                              1.05
                              
                              $
                              22,979
                              
                              Financing09-30-2005
                              
                              09-30-2012
                              
                              100,000
                              
                              $
                              0.80
                              
                              $
                              36,599
                              
                              Financing10-31-2005
                              
                              10-31-2012
                              
                              100,000
                              
                              $
                              0.80
                              
                              $
                              27,367
                              
                              Financing11-30-2005
                              
                              11-30-2012
                              
                              100,000
                              
                              $
                              0.80
                              
                              $
                              16,392
                              
                              Financing12-31-2005
                              
                              12-31-2012
                              
                              100,000
                              
                              $
                              0.80
                              
                              $
                              10,270
                              
                              Financing02-13-2006
                              
                              02-13-2016
                              
                              1,927,096
                              
                              $
                              0.01
                              
                              $
                              1,529,502
                              
                              Financing03-01-2007
                              
                              03-01-2016
                              
                              108,000
                              
                              $
                              0.90
                              
                              $
                              39,519
                              
                              Financing*04-01-2007
                              
                              04-01-2016
                              
                              108,000
                              
                              $
                              1.15
                              
                              $
                              50,529
                              
                              Financing*05-01-2007
                              
                              05-01-2011
                              
                              108,000
                              
                              $
                              1.25
                              
                              $
                              54,941
                              
                              Financing06-01-2007
                              
                              06-01-2011
                              
                              108,000
                              
                              $
                              2.28
                              
                              $
                              101,470
                              
                              Financing07-01-2007
                              
                              07-01-2011
                              
                              108,000
                              
                              $
                              2.10
                              
                              $
                              93,307
                              
                              Financing08-01-2007
                              
                              08-01-2011
                              
                              108,000
                              
                              $
                              2.55
                              
                              $
                              112,117
                              
                              Financing09-01-2007
                              
                              09-01-2011
                              
                              108,000
                              
                              $
                              2.73
                              
                              $
                              118,647
                              
                              Financing10-01-2007
                              
                              10-01-2011
                              
                              108,000
                              
                              $
                              2.43
                              
                              $
                              105,362
                              
                              Financing11-01-2007
                              
                              11-01-2011
                              
                              108,000
                              
                              $
                              2.60
                              
                              $
                              111,868
                              
                              Financing12-01-2007
                              
                              12-01-2011
                              
                              108,000
                              
                              $
                              2.55
                              
                              $
                              107,284
                              
                              Financing01-01-2008
                              
                              01-01-2012
                              
                              108,000
                              
                              $
                              2.84
                              
                              $
                              108,331
                              
                              Financing01-22-2008
                              
                              01-22-2058
                              
                              812,988
                              
                              $
                              0.01
                              
                              $
                              1,470,687
                              
                              Acquisition01-22-2008
                              
                              01-22-2058
                              
                              1,738,365
                              
                              $
                              0.01
                              
                              $
                              3,144,685
                              
                              Financing01-30-2008
                              
                              01-30-2058
                              
                              506,250
                              
                              $
                              0.01
                              
                              $
                              1,001,909
                              
                              Financing01-30-2008
                              
                              01-30-2058
                              
                              292,500
                              
                              $
                              0.01
                              
                              $
                              578,880
                              
                              Financing02-01-2008
                              
                              02-01-2012
                              
                              108,000
                              
                              $
                              2.09
                              
                              $
                              85,612
                              
                              Financing03-01-2008
                              
                              03-01-2012
                              
                              108,000
                              
                              $
                              2.04
                              
                              $
                              80,253
                              
                              Financing04-01-2008
                              
                              04-01-2012
                              
                              108,000
                              
                              $
                              1.09
                              
                              $
                              162,748
                              
                              Financing05-01-2008
                              
                              05-01-2012
                              
                              108,000
                              
                              $
                              1.19
                              
                              $
                              103,180
                              
                              Financing06-01-2008
                              
                              06-01-2012
                              
                              108,000
                              
                              $
                              1.02
                              
                              $
                              88,114
                              
                              Financing06-23-2008
                              
                              06-23-2018
                              
                              627,451
                              
                              $
                              0.01
                              
                              $
                              560,736
                              
                              Financing06-23-2008
                              
                              06-23-2018
                              
                              1,333,333
                              
                              $
                              0.01
                              
                              $
                              1,211,168
                              
                              Financing02-01-2009
                              
                              02-01-2013
                              
                              108,000
                              
                              $
                              0.25
                              
                              $
                              22,728
                              
                              Financing03-01-2009
                              
                              03-01-2013
                              
                              108,000
                              
                              $
                              0.19
                              
                              $
                              17,277
                              
                              Financing04-01-2009
                              
                              04-01-2013
                              
                              108,000
                              
                              $
                              0.18
                              
                              $
                              15,868
                              
                              Financing05-01-2009
                              
                              05-01-2013
                              
                              108,000
                              
                              $
                              0.16
                              
                              $
                              14,557
                              
                              Financing06-01-2009
                              
                              06-01-2013
                              
                              108,000
                              
                              $
                              0.27
                              
                              $
                              24,105
                              
                              Financing07-01-2009
                              
                              07-01-2013
                              
                              108,000
                              
                              $
                              0.27
                              
                              $
                              24,105
                              
                              Financing08-01-2009
                              
                              08-01-2013
                              
                              108,000
                              
                              $
                              0.25
                              
                              $
                              22,786
                              
                              Financing09-01-2009
                              
                              09-01-2013
                              
                              108,000
                              
                              $
                              0.16
                              
                              $
                              14,567
                              
                              Financing10-01-2009
                              
                              10-01-2013
                              
                              108,000
                              
                              $
                              0.12
                              
                              $
                              10,921
                              
                              Financing11-01-2009
                              
                              11-01-2013
                              
                              108,000
                              
                              $
                              0.15
                              
                              $
                              13,656
                              
                              Financing12-01-2009
                              
                              12-01-2013
                              
                              108,000
                              
                              $
                              0.08
                              
                              $
                              7,275
                              
                              Financing13,716,983




F-28




* In May
2008 the Company entered into an amendment to extend the expiry date of Stock
Purchase Warrants issued to Laurus. The expiry dates were extended from 2011 and
2012 to 2016 and 2017 respectively.  Increases in the value of the
warrants of $560,735 in the aggregate were recorded under net financing costs in
2008.




16.
            Major
      Customers




During
the year ended December 31, 2009, the Company derived 61.1% (2008 – 53.8%) of
its revenue from two customers. The accounts receivable from this customers
comprises 50.3% (2008: 26.4%) of the total trade receivable.




17.
            Segment
      Information




We
determine and disclose our segments in accordance with ASC 280
“Segment Reporting”, which uses a “management” approach for determining
segments. The management approach designates the internal organization that is
used by management for making operating decisions and assessing performance as
the source of the reportable segments. Our management reporting structure
provides for the following segments:




Cancable




Cancable
Inc. and its wholly owned subsidiaries XL Digital Services, Inc. and 2141306
Ontario Inc are Canadian based entities. Cancable, Inc. is a US cased entity
which is also the wholly owned subsidiary of Cancable Inc. (collectively,
“Cancable”). Cancable is in the business of providing deployment and servicing
of broadband technologies in both residential and commercial markets. The
Cancable service offering, network deployment, IT integration, and support
services, enable the cable television and telecommunications industries to
deliver a high quality broadband experience to their customers. Cancable’s
clients rely on Cancable’s knowledge and expertise to rapidly deploy the latest
technologies to support advanced cable services, cable broadband Internet access
and DSL. Services provisioned include new installations, reconnections,
disconnections, service upgrades and downgrades, inbound technical call center
sales and trouble resolution for cable Internet subscribers, and network
servicing for broadband video, data, and voice services for residential,
business, and commercial marketplaces.




AC
Technical




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




Iview
DSI




Iview
Digital Video Solutions Inc. (“Iview DSI”) and its wholly owned subsidiaries
OSSIM View Inc. are corporations incorporated under the laws of the Province of
Ontario, is a newly formed subsidiary incorporated in late 2005 to focus on
providing video surveillance products and technologies to the
market.





F-29




December 31,
                                                2009
                                              
                                              
                                              December 31,
                                                2008SALES:Cancable
                                              
                                              $
                                              32,380,035
                                              
                                              
                                              $
                                              40,648,542AC
      Technical
                                              
                                              
                                              7,145,760
                                              
                                              
                                              
                                              7,541,211Iview
                                              
                                              
                                              140,996
                                              
                                              
                                              
                                              231,433Creative
      Vistas, Inc.
                                              
                                              
                                              102,006
                                              
                                              
                                              
                                              48,856Consolidated
      Total
                                              
                                              $
                                              39,768,797
                                              
                                              
                                              $
                                              48,470,042DEPRECIATION
      AND AMORTIZATION:Cancable
                                              
                                              $
                                              2,569,724
                                              
                                              
                                              $
                                              2,510,294AC
      Technical
                                              
                                              
                                              37,002
                                              
                                              
                                              
                                              39,118Iview
                                              
                                              
                                              36,393
                                              
                                              
                                              
                                              22,014Consolidated
      Total
                                              
                                              $
                                              2,643,119
                                              
                                              
                                              $
                                              2,571,426INTEREST
      EXPENSE:Cancable
                                              
                                              $
                                              1,501,388
                                              
                                              
                                              $
                                              1,340,976Iview
                                              
                                              
                                              124,378
                                              
                                              
                                              
                                              138,622AC
      Acquisition
                                              
                                              
                                              51,673
                                              
                                              
                                              
                                              50,121Creative
      Vistas, Inc.
                                              
                                              
                                              705,372
                                              
                                              
                                              
                                              5,512,259Consolidated
      Total
                                              
                                              $
                                              2,382,811
                                              
                                              
                                              
                                              7,041,978NET
      INCOME (LOSS):Cancable
                                              
                                              $
                                              (1,473,085
                                              )
                                              
                                              $
                                              (6,860,559
                                              )AC
      Technical
                                              
                                              
                                              411,443
                                              
                                              
                                              
                                              557,665Iview
                                              
                                              
                                              (27,375
                                              )
                                              
                                              
                                              (489,778
                                              )AC
      Acquisition
                                              
                                              
                                              (51,676
                                              )
                                              
                                              
                                              (50,122
                                              )Corporate
      (1)
                                              
                                              
                                              (458,499
                                              )
                                              
                                              
                                              (12,069,661
                                              )Consolidated
      Total
                                              
                                              $
                                              (1,599,192
                                              )
                                              
                                              $
                                              (18,912,455
                                              )TOTAL
      ASSETSCancable
                                              
                                              $
                                              10,288,086
                                              
                                              
                                              $
                                              13,937,302AC
      Technical
                                              
                                              
                                              2,769,277
                                              
                                              
                                              
                                              2,868,364Iview
                                              
                                              
                                              918,761
                                              
                                              
                                              
                                              1,161,488Creative
      Vistas, Inc.
                                              
                                              
                                              1,807,944
                                              
                                              
                                              
                                              3,727,894Consolidated
      Total
                                              
                                              $
                                              15,784,068
                                              
                                              
                                              $
                                              21,695,048CAPITAL
      ASSETSCancable
                                              
                                              $
                                              5,841,698
                                              
                                              
                                              $
                                              8,456,111AC
      Technical
                                              
                                              
                                              767,117
                                              
                                              
                                              
                                              676,752Iview
                                              
                                              
                                              60,738
                                              
                                              
                                              
                                              81,760CONSOLIDATED
      TOTAL
                                              
                                              $
                                              6,669,553
                                              
                                              
                                              $
                                              9,214,623Capital
      ExpendituresCancable
                                              
                                              $
                                              1,973,482
                                              
                                              
                                              $
                                              7,359,954AC
      Technical
                                              
                                              
                                              19,759
                                              
                                              
                                              
                                              19,181Iview
                                              
                                              
                                              4,405
                                              
                                              
                                              
                                              118,422AC
      Acquisition
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Consolidated
      Total
                                              
                                              $
                                              1,997,646
                                              
                                              
                                              $
                                              7,497,557




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




Revenues
by geographic destination and product group were as follows:





December 31,
                  2009
                
                
                December 31,
                  2008Contract
                
                $
                5,812,671
                
                
                $
                6,209,601Service
                
                
                33,943,128
                
                
                
                42,188,944Others
                
                
                12,998
                
                
                
                71,497Total
      sales to external customers
                
                $
                39,768,796
                
                
                $
                48,470,042





F-30




Revenue
generated by the Company in Canada and the United States was $32,696,096 (2008:
$42,878,244) and $7,072,701 (2008: $5,591,798), respectively.




18.
            Commitments
      and Contingent Liabilities




The
Company has entered into contracts for certain consulting services providing for
monthly payments with the Companies controlled by the CEO and the president’s
spouse.  In addition, the Company has also entered into operating
leases for its premises, vehicles, computers and office equipment. The total
minimum annual payments for the next five years are as follows:


Total
                  
                  
                  2010
                  
                  
                  2011
                  
                  
                  2012
                  
                  
                  2013
                  
                  
                  2014Operating
      leases
                  
                  $
                  1,655,299
                  
                  
                  $
                  525,543
                  
                  
                  $
                  419,947
                  
                  
                  $
                  373,021
                  
                  
                  $
                  242,275
                  
                  
                  $
                  94,513Commitments
      related to consulting agreements
                  
                  
                  1,610,713
                  
                  
                  
                  576,190
                  
                  
                  
                  576,190
                  
                  
                  
                  458,333
                  
                  
                  
                  -
                  
                  
                  
                  -$
                  3,266,012
                  
                  
                  $
                  1,101,733
                  
                  
                  $
                  996,137
                  
                  
                  $
                  831,354
                  
                  
                  $
                  242,275
                  
                  
                  $
                  94,513




The
Company has a letter of credit to an insurance company for bonding facility in
the amount $1,000,000 with expiry date in October 2010.




19.
            Subsequent
      Events




Subsequent
to year end, the Company issued 324,000 warrants to Laurus to defer the monthly
principal repayment from January to March 2010. The warrants are exercisable at
$0.08 to $0.28 per share and have a four year term.




F-31




ITEM
9.           
     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE




None




ITEM
      9A.
            CONTROLS
      AND PROCEDURES




Evaluation of Disclosure Controls and
Procedures   We maintain disclosure controls and procedures
that are designed to ensure that information required to be disclosed in our
filings under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the SEC.  This information is accumulated to allow timely
decisions regarding required disclosure.  As of December 31, 2009, the
end of the period covered by this annual report on Form 10K, our management,
including our Chief Executive Officer and Chief Financial Officer, assessed the
effectiveness of our disclosure controls and procedures, as such terms are
defined under rules 13a-15(e) and 15d-15(e) promulgated under the
Securities Exchange Act of 1934, as amended. Based on this assessment, our
management concluded that our disclosure controls and procedures were effective
as of the end period covered by this annual report.




Management’s Annual Report on
Internal Control over Financial ReportingOur management is
responsible for establishing and maintaining adequate internal control over
financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange
Act of 1934, as amended).  Our management assessed the effectiveness
over internal control over financial reporting as of December 31,
2009.  In making this assessment, our management used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”) in Internal Control -
Integrated Frameworkissued in 1992, to evaluate the effectiveness of our
internal control over financial reporting.  Based upon that framework
management has determined that our internal control over financial reporting is
effective.




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




Changes in Internal Control Over
Financial Reporting   There has not been any change in our
internal control over financial reporting (as such term is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our fourth
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.




ITEM
      9B.
            OTHER
      INFORMATION




None




ITEM
      10.
            DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS AND CORPORATE
  GOVERNANCE




Directors and Executive
Officers




Name
                
                Age
                
                PositionSayan
      Navaratnam
                
                35
                
                Chairman
      of the Board, and DirectorDominic
      Burns
                
                50
                
                Chief
      Executive Officer, President and DirectorHeung
      Hung Lee
                
                41
                
                Chief
      Financial Officer, Secretary and Director





Sayan Navaratnam–Director
and Chairman of the Board: Mr. Navaratnam serves as our Chairman of the
Board and Director.  He has been a Director of our company since
2004.  He served as Chief Executive Officer of our company from 2004
until he resigned from the position on May 5, 2008, remaining Chairman and
Director.  Mr. Navaratnam joined AC Technical Systems in 2003 as Chief
Executive Officer.  He has eight years of experience in technology
development and integration specific to the security industry.  He
also has three years of experience in telecommunications with Bell
Canada.  From 1997 to 2000, he was the Chief Executive Officer of
Satellite Communications Inc., and its research arm Satellite Advanced
Technologies.  Mr. Navaratnam was responsible for coordinating and
financing research and development projects and played a key role in strategic
partnerships, mergers, and licensing technologies.  From 2000 to 2003,
Mr. Navaratnam was the Chief Operating Officer in ASPRO Technologies
Ltd..  Since March 1, 2009, Mr. Navaratnam has been a Senior Managing
Director of Laurus Capital Management, LLC and a Senior Managing Director of
Valens Capital Management, LLC, entities affiliated with our principal
lender.  Mr. Navaratnam currently serves on the board of a number of
privately-held companies including our subsidiaries, AC Technical Systems and
Iview Digital Video Solutions, and Cygnal Technologies, White Radio, and
Thinkpath. Mr. Navaratnam also serves on the board of Petroalgae Inc., a
public company.  Mr. Navaratnam graduated from the University of Toronto
with an Honors Double Specialist degree in economics and political
science.





29





Dominic Burns–Director,
President and Chief Executive Officer:  Mr. Burns is our CEO
and Director.  He founded AC Technical in 1991.  He
completed his Electrical Apprenticeship program at one of the premier firms in
Northern Ireland.  He graduated from Belfast College of Technology
with honors in City and Guilds Electrical Theory and Regulations.  Mr.
Burns also holds a diploma in radio and navigation systems.  He has an
extensive understanding of quality controls in the avionics industry and has
been a pioneer in transferring some of the high standards and controls set in
the avionics industry to the security integration market.  He has been
the President of AC Technical since its inception.  He has been
primarily responsible for expanding the firm's presence in
Canada.  Mr. Burns has also designed a number of internal technical
and marketing programs to expand AC Technical's sales and technical
capabilities.  Mr. Burns has over 20 years of experience in the
security integration industry.  Mr. Burns has been a director and
President of our company since September 30, 2004. He was appointed Chief
Executive Officer on May 5, 2008.




Heung Hung Lee–Director,
Chief Financial Officer and Secretary:Ms. Lee joined AC Technical in
July 2004 and she has more than 10 years experience in international public
accounting primarily with large international accounting firms.  She
has advanced knowledge in financial statements disclosure and audit issues and
has extensive international business experience in countries such as the United
States, Hong Kong SAR and the Peoples' Republic of China.  She was a
manager at BDO Dunwoody LLP from 1999 to 2004.  Ms. Lee holds a
Bachelor of Business degree from Monash University in Australia.  She
is a Chartered Accountant in Canada and qualified CPA in
Australia.  Ms. Lee has been the Chief Financial Officer of our
company since September 30, 2004.  Ms. Lee was appointed a director of
our company on November 1, 2008. Ms. Lee is responsible for review of financials
of subsidiaries and creating and implementing strong financial systems within
the group of companies.  Ms. Lee is also an important member in our
growth strategy as she is highly involved in creating a platform for growth
within Creative Vistas, Inc.




Board
of Directors and Officers




Each
director is elected until the next annual meeting of the registrant and until
his or her successor is duly elected and qualified.  Officers are
elected by, and serve at the discretion of, the board of directors. The board of
directors may also appoint additional directors up to the maximum number
permitted under our by-laws. A director so chosen or appointed will hold office
until the next annual meeting of stockholders.




Each
executive officer serves at the discretion of the board of directors and holds
office until his or her successor is elected or until his or her earlier
resignation or removal in accordance with our certificate of incorporation and
by-laws.




Committees
of the Board of Directors




We do not
have standing audit, nominating or compensation committees, or committees
performing similar functions. Our board of directors believes that it is not
necessary to have standing audit, nominating or compensation committees at this
time because the functions of such committees are adequately performed by our
board of directors.




Code
of Ethics




The
Company has adopted a code of ethics for officers and employees, which applies
to, among others, the Company’s principal executive officer, principal financial
officer, and controller, and which is known as the code of
ethics.   The Company has also adopted certain ethical
principles and policies for its directors, which are set forth in the code of ethics. The Company will
provide copies of the code of ethics without charge upon request made to
Creative Vistas, 2100 Forbes Street, Unit 8-10 Whitby, Ontario, Canada L1N 9T3
or by calling (905) 666-8676.





30




ITEM
      11.
            EXECUTIVE
      COMPENSATION




The
following summary compensation table set forth all compensation paid by us
during the three years ended December 31, 2009 for services rendered in all
capacities by the Chief Executive Officer and Chief Financial Officers of the
Company and the only other executive officer who received total salary and bonus
exceeding $100,000 in any of such years.




Annual CompensationName and Principal
                    Company/Subsidiary Position
                
                Year
                
                Salary ($)
                
                
                Other Annual
                    Compensation ($)
                
                
                Bonus ($)Sayan
      Navaratnam – Chairman
                
                2009
                
                
                289,875
                1
                
                
                –
                
                
                
                –2008
                
                
                308,211
                1
                
                
                –
                
                
                
                –2007
                
                
                166,495
                1
                
                
                –
                
                
                
                –Dominic
      Burns – Chief Executive Officer
                
                2009
                
                
                241,563
                2
                
                
                –
                
                
                
                –2008
                
                
                213,910
                2
                
                
                –
                
                
                
                –2007
                
                
                149,921
                2
                
                
                –
                
                
                
                –Heung
      Hung Lee – Chief Financial Officer
                
                2008
                
                
                126,700
                
                
                
                –
                
                
                
                –2007
                
                
                112,200
                
                
                
                –
                
                
                
                –2006
                
                
                88,500
                
                
                
                –
                
                
                
                –








1Balance
was payable to Nationwide Solutions Inc. for consulting fees.


2Balance
was payable to 1608913 Ontario Inc. for consulting fees.




Employment
Agreements




On June
1, 2004, AC Technical entered into a consulting agreement with 1608913 Ontario
Inc. and Dominic Burns. Pursuant to this agreement, 1608913 Ontario is to
provide the exclusive services of Mr. Burns to us for the following
compensation:




·
            From October 1, 2004 until
      December 31, 2004 compensation at the rate of $204,900
      (CAD$250,000);


·
            From January 1, 2005 until
      December 31, 2005 the sum of $225,400
  (CAD$275,000);


·
            From January 1, 2006 until
      December 31, 2006 the sum of $245,900
  (CAD$300,000);


·
            From January 1, 2007 until
      December 31, 2007 the sum of $266,400
  (CAD$325,000);


·
            From January 1, 2008 until
      December 31, 2008 the sum of $286,900 (CAD$350,000);
      and


·
            From January 1, 2009 until
      December 31, 2009 the sum of $307,400
  (CAD$375,000).




In
addition, 1608913 Ontario is entitled to a bonus payable upon our attaining the
annual gross revenue targets specified in the agreement for the calendar years
2004 through 2009. The bonus is 0.5% of the annual gross revenue targets for
2004 and 1% of the annual gross revenue target for 2005 through 2009. An
additional bonus of 2% will be paid for each additional increment of $409,800
(CAD$500,000) annual gross revenue beyond the revenue target in any given year.
Mr. Burns’ spouse is the only beneficial owner of 1608913 Ontario. There was no
bonus payment during the year.





On July
16, 2008, the Company entered into a Consulting Agreement (the “Consulting
Agreement”) with Nationwide Solutions Inc. (“Nationwide”) pursuant to which
Nationwide will provide general business consulting services including business
development, formalizing reports and negotiating or preparing sales agreements,
vendor agreements, business plans, budgets, business presentations, finance
agreements and equity agreements. The Consulting Agreement will terminate on
July 16, 2012 unless extended or earlier terminated pursuant to the terms of the
Consulting Agreement. The Registrant will pay to Nationwide an annual consulting
fee of CAD$325,000 for each calendar year during the term of the Consulting
Agreement. The chairman of the board of Nationwide, Sayan Navaratnam, is also
the chairman of the board of the Registrant.





31





On July
16, 2008, a subsidiary of the Company, AC Technical Systems Ltd., Nationwide and
Sayan Navaratnam entered into a Termination and Release Agreement (the
“Termination Agreement”) terminating the consulting agreement between AC
Technical Systems Ltd., Nationwide and Sayan Navaratnam dated January 1, 2004
(the “2004 Agreement”). Pursuant to the 2004 Agreement, Nationwide provided
business consulting services to AC Technical Systems Ltd. Pursuant to the
Termination Agreement, Nationwide waives the right to payment of any amounts
presently due or due in the future to Nationwide and AC Technical Ltd. agrees
that all requirements of the Consultant and Sayan Navaratnam under the 2004
Agreement are extinguished and terminated in full. The chairman of the board of
Nationwide, Sayan Navaratnam, is also the chairman of the board of the
Registrant. In connection with Sayan Navaratnam’s resignation as Chief Executive
Officer of the Registrant effective May 5, 2008 and because the 2004 Agreement
provided business consulting only to the Registrant’s subsidiary, AC Technical
Systems, Ltd., the Consulting Agreement described in the preceding paragraph was
necessary to provide such business consulting services to the Registrant and
replaces the 2004 Agreement. The 2004 Agreement is also terminated because the
consulting fee paid to Nationwide under the Consulting Agreement is reduced from
the fees required under the 2004 Agreement and pursuant to the terms of the
Termination Agreement all amounts due under the 2004 Agreement have been
waived.





1608913
Ontario Inc. and Nationwide Solutions Inc. were structured for the personal tax
benefit of Mr. Burns and Mr. Navaratnam, respectively. Under Canadian tax law,
there are potential income tax benefits to Mr. Burns and Mr. Navaratnam from
structuring their relationship to us as Consulting Agreements between us and
each of 1608913 Ontario Inc. and Nationwide Solutions Inc. instead of them being
employed directly by us. This structure does not have any effect on Creative
Vistas.





The
consulting services provided to us by Mr. Navaratnam and Mr. Burns relate to the
management of the Company including sales and marketing, project management,
technology development, finance, operations, mergers and acquisitions,
engineering design and other management services required by us.





We have a
standard employment contract with our employee that is reviewed on an annual
basis. Of the persons who currently are parties to this employment agreement,
only Ms. Lee currently falls under the category of executive staff. There are no
employment contracts with the CEO and the President. In each standard employment
contract, we have included the terms of employment, remuneration, fringe
benefits, vacation, confidentiality, non-solicitation and termination of
employment.





We have a
stock option plan which was adopted during the second quarter of
2006.




ITEM
      12.
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS




The
following table sets forth information with respect to the beneficial ownership
of our common stock as of December 31, 2009 of each executive officer, each
director, and each shareholder in addition to any shareholders known to be the
beneficial owner of 5% or more of our Common Stock and all officers and
directors as a group. As of December 31, 2009, Laurus Master Fund, Ltd.
beneficially owned 1,298,449 shares of our Common Stock. The securities owned by
Laurus Master Fund, Ltd. contain a provision that Laurus may not, subject to
certain exceptions, at any time beneficially own more than 4.99% of our
outstanding common stock. We and Laurus have agreed that, other than on 75 days’
notice or upon the occurrence of an event of default, this provision may not be
waived. Absent this limitation, Laurus and its related companies would
beneficially own 13,846,138 additional shares of our common stock, which is
comprised of 129,155 shares under the option and 13,716,983 shares under the
warrant.





32




Name and Address of Beneficial Owner
              
              Shares of Common
                  Stock Beneficially
                  Owned
              
              
              Percentage of Common
                  Stock Beneficially
                  OwnedSayan
      Navaratnam
                Toronto,
      Ontario
              
              
              21,410,986
              
              
              
              57.3
              %Dominic
      Burns
                Hampton,
      Ontario
              
              
              7,036,607
              
              
              
              18.8
              %Heung
      Hung Lee
                Markham,
      Ontario
              
              
              50,000
              
              
              
              0.1
              %All
      officers and directors as a group (3 persons)
              
              
              28,497,593
              
              
              
              76.2
              %




The
address of the above listed persons is c/o Creative Vistas, 2100 Forbes Street,
Unit 8-10 Whitby, Ontario, Canada L1N 9T3.




Securities Authorized For Issuance
Under Equity Compensation Plans
 The
following table sets forth certain information relating to our option plans as
of December 31, 2009:





Plan Category
                  
                  Nam of Plan
                  
                  Number of
                    Common
                    Shares to be
                    Issued upon
                    Exercise of
                    Outstanding
                    Options
                  
                  
                  Weighted-
                    Average
                    Exercise Price
                    of Outstanding
                    Options
                  
                  
                  Number of Securities Remaining
                    Available for Future Issuance
                    under Stock Option PlanOption
      Plans approved by our Shareholders
                  
                  Stock
      Option Plan
                  
                  
                  4,000,000
                  
                  
                  $
                  0.63
      to 2.73
                  
                  
                  
                  1,995,000Total
                  
                  
                  
                  
                  4,000,000
                  
                  
                  $
                  0.63
      to 2.73
                  
                  
                  
                  1,995,000





Share
Option and Other Compensation Plans
 Stock Option
Plan


Our Stock
Option plan (“the Plan”) was adopted by our Board and approved by our
shareholders on June 30, 2006. Our Stock Option Plan provides for the grant
of options to key employees of the Company, including officers or directors of
the Company, and to consultants and other individuals providing services to the
Company.
  Share Reserve.  A
total of 4,000,000 shares of common stock, no par value, of the Company
(the “Stock”) are authorized for issuance under the Stock Option plan as of
December 31, 2007. Shares of Stock used for purposes of the Plan may be either
authorized and unissued shares, or previously issued shares held in the treasury
of the Company, or both. Shares of Stock covered by options which have
terminated or expired prior to exercise shall be available for further options
hereunder. The maximum aggregate number of shares of Stock that may be issued
under the Plan under “incentive stock options” is 3,500,000 shares.


Administration of Awards.The
Plan shall be administered by the Board of Directors, or Compensation Committee
of the Board of Directors or a subcommittee of the Compensation Committee
appointed by the Compensation Committee, or by any other committee designated by
the Board of Directors to administer the Plan (the committee or subcommittee
administering the Plan is hereinafter referred to as the “Committee”). For
purposes of administration, the Committee, subject to the terms of the Plan,
shall have plenary authority to establish such rules and regulations, to make
such determinations and interpretations, and to take such other administrative
actions as it deems necessary or advisable. All determinations and
interpretations made by the Committee shall be final, conclusive and binding on
all persons, including all Optionees, any other holders of options and their
legal representatives and beneficiaries.
  33
  Options
may be granted to eligible individuals whether or not they hold or have held
options previously granted under the Plan or otherwise granted or assumed by the
Company. In selecting individuals for options, the Committee may take into
consideration any factors it may deem relevant, including its estimate of the
individual’s present and potential contributions to the success of the Company.
Service as an employee, director, officer or consultant of or to the Company
shall be considered employment for purposes of the Plan (and the period of such
service shall be considered the period of employment for purposes of Section
5(d) of this Plan); provided, however, that incentive stock options may be
granted under the Plan only to an individual who is an “employee” (as such term
is used in Section 422 of the Code) of the Company.


Stock options.The Committee
shall, in its discretion, prescribe the terms and conditions of the options to
be granted hereunder, which terms and conditions need not be the same in each
case, subject to the following:


(a)Option Price. The price
at which each share of Stock covered by an option granted under the Plan may be
purchased shall not be less than the Market Value (as defined in Section (c)
hereof) per share of Stock on the date of grant of the option. The date of the
grant of an option shall be the date specified by the Committee in its grant of
the option.


(b)Option Period.The period
for exercise of an option shall in no event be more than five years from the
date of grant. Options may, in the discretion of the Committee, be made
exercisable in installments during the option period. Any shares not purchased
on any applicable installment date may be purchased thereafter at any time
before the expiration of the option period.


(c)Exercise of Options.In
order to exercise an option, the Optionee shall deliver to the Company written
notice specifying the number of shares of Stock to be purchased, together with
cash or a certified or bank cashier’s check payable to the order of the Company
in the full amount of the purchase price therefore; provided that, for the
purpose of assisting an Optionee to exercise an option, the Company may make
loans to the Optionee or guarantee loans made by third parties to the Optionee,
on such terms and conditions as the Board of Directors may authorize. For
purposes of the Plan, the Market Value per share of Stock shall be the last sale
price on the date of reference, or, if no sale takes place on such date, the
average of the closing high bid and low asked prices, in either case on the
principal national securities exchange on which the Stock is listed or admitted
to trading, or if the Stock is not listed or admitted to trading on any national
securities exchange, the last sale price reported on the National Market System
of the National Association of Securities Dealers Automated Quotation System
(“NASDAQ”) on such date, or the last sale price reported on the NASDAQ SmallCap
Market on such date, or the average of the closing high bid and low asked prices
in the over-the-counter market on such date, whichever is applicable, or if
there are no such prices reported on NASDAQ or in the over-the-counter market on
such date, as furnished to the Committee by any New York Stock Exchange member
selected from time to time by the Committee for such purpose. If there is no bid
or asked price reported on any such date, the Market Value shall be determined
by the Committee in accordance with the regulations promulgated under Section
2031 of the Code, or by any other appropriate method selected by the Committee.
If the Optionee so requests, shares of Stock purchased upon exercise of an
option may be issued in the name of the Optionee or another person. An Optionee
shall have none of the rights of a stockholder until the shares of Stock are
issued to him.


(d) Effect of Termination of
Employment.An option may not be exercised after the Optionee has ceased
to be in the employ of the Company, except in the following
circumstances:


(i) If
the Optionee’s employment is terminated by action of the Company, or by reason
of disability or retirement under any retirement plan maintained by the Company,
the option may be exercised by the Optionee within three months after such
termination, but only as to any shares exercisable on the date the Optionee’s
employment so terminates;




(ii) In
the event of the death of the Optionee during the three month period after
termination of employment covered by (i) above, the person or persons to whom
his rights are transferred by will or the laws of descent and distribution shall
have a period of one year from the date of his death to exercise any options
which were exercisable by the Optionee at the time of his death;
and




(iii) In
the event of the death of the Optionee while employed, the option shall
thereupon become exercisable in full, and the person or persons to whom the
Optionee’s rights are transferred by will or the laws of descent and
distribution shall have a period of one year from the date of the Optionee’s
death to exercise such option. In no event shall any option be exercisable more
than five years from the date of grant thereof. Nothing in the Plan or in any
option granted pursuant to the Plan (in the absence of an express provision to
the contrary) shall confer on any individual any right to continue in the employ
of the Company or continue as a consultant or interfere in any way with the
right of the Company to terminate his employment or consulting arrangement at
any time.





34





(e) Limitation on Transferability of
Options. Except as provided in this Section (e), during the lifetime of
an Optionee, options held by such Optionee shall be exercisable only by him and
no option shall be transferable other than by will or the laws of descent and
distribution. The Committee may, in its discretion, provide that options held by
an Optionee, other than incentive stock options, may be transferred to or for
the benefit of a member of his immediate family. For purposes hereof, the term
“immediate family” shall mean an Optionee’s spouse and children (both natural
and adoptive), and the direct lineal descendants of his children.




(f) Adjustments for Change in Stock
Subject to Plan. In the event of a reorganization, recapitalization,
stock split, stock dividend, combination of shares, merger, consolidation,
rights offering, or any other change in the corporate structure or shares of the
Company, the Committee shall make such adjustments, if any, as it deems
appropriate in the number and kind of shares subject to the Plan, in the number
and kind of shares covered by outstanding options, or in the option price per
share, or both, and, in the case of a merger, consolidation or other transaction
pursuant to which the Company is not the surviving corporation or pursuant to
which the holders of outstanding Stock shall receive in exchange therefore
shares of capital stock of the surviving corporation or another corporation, the
Committee may require an Optionee to exchange options granted under the Plan for
options issued by the surviving corporation or such other
corporation.




(g )Treatment of Options Upon
Occurrence of Certain Events. The Committee may, in its discretion,
provide in the case of any option granted under the Plan that, in connection
with any merger or consolidation which results in the holders of the outstanding
voting securities of the Company (determined immediately prior to such merger or
consolidation) owning, directly or indirectly, less than a majority of the
outstanding voting securities of the surviving corporation (determined
immediately following such merger or consolidation), or any sale or transfer by
the Company of all or substantially all its assets or any tender offer or
exchange offer for or the acquisition, directly or indirectly, by any person or
group of all or a majority of the then outstanding voting securities of the
Company, such option shall terminate within a specified number of days after
notice to the Optionee thereunder, and each such Optionee shall receive, with
respect to each share of Stock subject to such option, an amount equal to the
excess, if any, of the Market Value of such shares immediately prior to such
merger, consolidation, sale, transfer or exchange over the exercise price per
share of such option; and that such amount shall be payable in cash, in one or
more kinds of property (including the property, if any, payable in the
transaction) or a combination thereof, as the Committee shall determine in its
sole discretion.




(h) Registration, Listing and
Qualification of Shares of Stock. Each option shall be subject to the
requirement that if at any time the Board of Directors shall determine that the
registration, listing or qualification of the shares of Stock covered thereby
upon any securities exchange or under any federal or state law, or the consent
or approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the granting of such option or the purchase
of shares of Stock thereunder, no such option may be exercised unless and until
such registration, listing, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Board of
Directors. The Company may require that any person exercising an option shall
make such representations and agreements and furnish such information as it
deems appropriate to assure compliance with the foregoing or any other
applicable legal requirement.




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




Additional Provisions Applicable to
Stock Option Plan. The Committee may, in its discretion, grant options
under the Plan to eligible employees which constitute “incentive stock options”
within the meaning of Section 422 of the Code; provided, however, that (a) the
aggregate Market Value of the Stock with respect to which incentive stock
options are exercisable for the first time by the Optionee during any calendar
year shall not exceed the limitation set forth in Section 422(d) of the Code;
and (b) notwithstanding anything to the contrary in Section 5, if the Optionee
owns on the date of grant securities possessing more than 10% of the total
combined voting power of all classes of securities of the Company or of any
parent or subsidiary of the Company, the price per share shall not be less than
110% of the Market Value per share on the date of grant and the period of
exercise shall not be longer than five years from the date of
grant.





35





Amendment and Termination. No
option shall be granted hereunder after June 30, 2011; provided, however, that
the Board of Directors may at any time prior to that date terminate the Plan.
The Board of Directors may at any time amend the Plan or any outstanding
options. No termination or amendment of the Plan may, without the consent of an
Optionee, adversely affect the rights of such Optionee under any option held by
such Optionee.




ITEM
      13.
            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE




On
September 29, 2004, pursuant to a Stock Purchase Agreement with The Burns Trust
(our president is one of the beneficiaries of the trust) and The Navaratnam
Trust (our CEO is one of the beneficiaries of the trust), as sellers, A.C.
Technical Systems Ltd. and A.C. Technical Acquisition Corp., as purchasers, 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. $1,800,000 has been paid to The Burns Trust and The Navaratnam
Trust through part of the funding from Laurus. At December 31, 2009, we have two
3% notes payable to Malar Trust Inc. (an entity of which our Chairman is a
beneficially of) which is due on demand.




Director
Independence: None of our directors are independent.




ITEM
      14.
              PRINCIPAL
      ACCOUNTANT FEES AND SERVICES




The
following table sets forth the aggregate fees paid for professional
services rendered to us for the years ended December 31, 2009 and 2008 by our
principal accounting firm, Stark Winter Schenkein & Co., LLP :


2009
                    
                    
                    2008Audit
      Fees (a)
                    
                    $
                    140,000
                    
                    
                    $
                    132,500Audit
      Related Fees (b)
                    
                    
                    -
                    
                    
                    
                    -Tax
      Fees (c)
                    
                    
                    25,000
                    
                    
                    
                    20,000All
      Other Fees (d)
                    
                    
                    -
                    
                    
                    
                    -Total
                    
                    $
                    165,000
                    
                    
                    $
                    152,500




(a)
              Audit
      Fees.        
      Fees
      for audit services billed in 2009 and 2008 consisted of the audit of our
      annual consolidated financial statements, reviews of our quarterly
      consolidated financial statements, statutory audits, consents and services
      that are normally provided in connection with statutory and regulatory
      filing or engagement. All fees were payable to Stark Winter Schenkein
      & Co., LLP for both fiscal years. It
      is estimated that Kingery & Crouse PA, our new principal accounting
      firm will invoice us approximately $90,000 related to the audit of our
      financial statements for the years ended December 31, 2009 and 2008, in
      2010, which amount is not included in the above
      table.




(b)
              Audit-Related
      Fees.       There
      are no material audit-related fees in 2009 and
  2008.




(c)
              Tax
      Fees.       Fees
      for tax services billed in 2009 and 2008 consisting of assistance with our
      federal, state, local and foreign jurisdiction income tax returns. We have
      additionally sought consultation and advice related to various taxes
      compliance planning projects. All tax fees were payable to MDS LLP.




(d)
              All Other
      Fees.      No
      material other fees were billed in 2009 and
  2008.




We do not
have an audit committee; however, our board of directors is required to provide
advance approval of any non-audit services, other than those of a de minimus
nature, to be performed by our auditors, provided that such services are not
otherwise prohibited by law. We do not have a formal pre-approval
policy.





36





All
      the fees for 2009 and 2008 were pre-approved by the board of directors
      prior to the auditors’ engagement for these
  services.




ITEM
      15.
            EXHIBITS
      AND FINANCIAL STATEMENT SCHEDULES




3.1*
              
              Articles
      of Incorporation, as amended to date, incorporated by reference to the
      Registrant’s Form 8-K/A filed February 2, 20053.2*
              
              By-laws
      of the Registrant incorporated by reference to the Registrant’s Form 10-SB
      filed May 10, 20004.1*
              
              Securities
      Purchase Agreement, dated February 13, 2006, by and among Laurus Master
      Fund, Ltd., Creative Vistas, Inc., Iview Holding Corp. and Iview Digital
      Video Solutions Inc. incorporated by reference to the Registrant’s Form
      8-K filed February 17, 2006.4.2*
              
              Secured
      Term Note, dated February 13, 2006, issued by Creative Vistas, Inc. to
      Laurus Master Fund, Ltd. incorporated by reference to the Registrant’s
      Form 8-K filed February 17, 2006.4.3*
              
              Secured
      Term Note, dated February 13, 2006, issued by Iview Digital Video
      Solutions Inc. to Laurus Master Fund, Ltd. incorporated by reference to
      the Registrant’s Form 8-K filed February 17, 2006.4.4*
              
              Option,
      dated February 13, 2006, issued by Iview Holding Corp. to Laurus Master
      Fund, Ltd. incorporated by reference to the Registrant’s Form 8-K filed
      February 17, 2006.4.5*
              
              Warrant,
      dated February 13, 2006, issued by Creative Vistas, Inc. to Laurus Master
      Fund, Ltd. incorporated by reference to the Registrant’s Form 8-K filed
      February 17, 2006.4.6*
              
              Amended
      and Restated Guaranty, dated February 13, 2006 by and among Creative
      Vistas, Inc., Cancable Inc., Cancable Holding Corp., Cancable, Inc., A.C.
      Technical Systems Ltd., Creative Vistas Acquisition Corp., Iview Holding
      Corp. and Iview Digital Video Solutions Inc. incorporated by reference to
      the Registrant’s Form 8-K filed February 17, 2006.4.7*
              
              Amended
      and Restated Guaranty, dated February 13, 2006 between Brent W. Swanick
      and Laurus Master Fund, Ltd. incorporated by reference to the Registrant’s
      Form 8-K filed February 17, 2006.4.8*
              
              Side
      Agreement, dated February 13, 2006 between Iview Digital Video Solutions,
      Inc., Iview Holding Corp., Creative Vistas Acquisition Corp. and Laurus
      Master Fund, Ltd incorporated by reference to the Registrant’s Form 8-K
      filed February 17, 2006.4.9*
              
              Joinder
      and Confirmation of Security Agreement, dated February 13, 2006 among
      Iview Holding Corp., Cancable Inc., Cancable Holding Corp., Cancable,
      Inc., A.C. Technical Systems Ltd., Creative Vistas Acquisition Corp.,
      Iview Digital Video Solutions Inc., and Creative Vistas, Inc. delivered to
      Laurus Master Fund, Ltd. incorporated by reference to the Registrant’s
      Form 8-K filed February 17, 2006.4.10*
              
              First
      Amendment to Securities Purchase Agreement, dated February 13, 2006, by
      and among Cancable Inc., Cancable Holding Corp.and Laurus Master
      Fund, Ltd. for the purpose of amending the terms of that certain
      Securities Purchase Agreement by and among Cancable Inc., Cancable Holding
      Corp. and Laurus, dated as of December 31, 2005 incorporated by reference
      to the Registrant’s Form 8-K filed February 17, 2006.4.11*
              
              Registration
      Rights Agreement, dated as of February 13, 2006, by and between Creative
      Vistas, Inc. and Laurus Master Fund, Ltd. incorporated by reference to the
      Registrant’s Form 8-K filed February 17, 2006.4.12*
              
              Securities
      Purchase Agreement, dated June 24, 2008, by and among LV Administrative
      Services, Inc., the purchasers from time to time a party thereto, Creative
      Vistas, Inc., and Cancable Inc. incorporated by reference to the
      Registrant's Form 8-K filed July 1, 20084.13*
              
              Secured
      Term Note, dated June 24, 2008, issued by Creative Vistas, Inc. and
      Cancable Inc. to Valens Offshore SPV II, Corp. incorporated by reference
      to the Registrant's Form 8-K filed July 1, 20084.14*
              
              Secured
      Term Note, dated June 24, 2008, issued by Creative Vistas, Inc. and
      Cancable Inc. to Valens U.S. SPV I, LLC incorporated by reference to the
      Registrant's Form 8-K filed July 1, 20084.15*
              
              Warrant,
      dated June 24, 2008, issued by Creative Vistas, Inc. to Valens U.S. SPV I,
      LLC incorporated by reference to the Registrant's Form 8-K filed July 1,
      20084.16*
              
              Warrant,
      dated June 24, 2008, issued by Creative Vistas, Inc. to Valens Offshore
      SPV II, Corp. incorporated by reference to the Registrant's Form 8-K filed
      July 1, 2008





37




4.17*
                
                Guaranty,
      dated June 24, 2008, by and among Creative Vistas, Inc., Cancable Inc.,
      A.C. Technical Systems Ltd., Creative Vistas Acquisition Corp., Cancable
      Holding Corp., Iview Holding Corp., Iview Digital Video Solutions Inc.,
      Cancable, Inc., 2141306 Ontario Inc., Cancable XL Inc., and XL Digital
      Services Inc. incorporated by reference to the Registrant's Form 8-K filed
      July 1, 20084.18*
                
                Master
      Security Agreement, dated June 24, 2008, by and among Creative Vistas,
      Inc., Cancable Inc., A.C. Technical Systems Ltd., Creative Vistas
      Acquisition Corp., Cancable Holding Corp., Iview Holding Corp., Iview
      Digital Video Solutions Inc., Cancable, Inc., 2141306 Ontario Inc.,
      Cancable XL Inc., and XL Digital Services Inc. incorporated by reference
      to the Registrant's Form 8-K filed July 1, 20084.19*
                
                Pledge
      Agreement, dated June 24, 2008, by and among LV Administrative Services,
      Inc., the purchasers from time to time a party thereto, Cancable Inc.,
      Creative Vistas, Inc., Cancable Holding Corp., Creative Vistas Acquisition
      Corp., Cancable XL Inc., Iview Holding Corp., and Brent Swanick
      incorporated by reference to the Registrant's Form 8-K filed July 1,
      20084.20*
                
                Guaranty,
      dated June 24, 2008, of Brent Swanick  incorporated by reference
      to the Registrant's Form 8-K filed July 1, 200810.1*
                
                Stock
      Option Plan, incorporated by reference to the Registrant’s Form S-8 filed
      October 6 200610.2+
                
                Rogers
      Cable Communications Inc. and Cancable Inc. for the provision of
      installation activities and service activities.10.3*
                
                Common
      Stock Purchase Warrant, dated January 22, 2008, issued by Creative Vistas,
      Inc. to Erato Corporation for the Right to Purchase 812,988 Shares of
      Common Stock of Creative Vistas, Inc. incorporated by reference to the
      Registrant’s Form 8-K filed February 28, 2008.10.4*
                
                Stock
      Purchase Agreement, dated January 22, 2008, between Creative Vistas, Inc.
      and Erato Corporation. incorporated by reference to the Registrant’s Form
      8-K filed February 28, 2008.10.5*
                
                Common
      Stock Purchase Warrant, dated January 22, 2008, issued by Creative Vistas,
      Inc. to Erato Corporation for the Right to Purchase 1,738,365 Shares of
      Common Stock of Creative Vistas, Inc. incorporated by reference to the
      Registrant’s Form 8-K filed February 28, 2008.10.6*
                
                Letter
      Agreement dated January 22. 2008 between Creative Vistas, Inc. and Erato
      Corporation.10.7*
                
                Warrant
      Purchase Agreement, dated January 30, 2008 between Creative Vistas, Inc.,
      Laurus Master Fund, Ltd., Erato Corporation, Valens U.S. Fund, LLC and
      Valens Offshore SPV I, Ltd. incorporated by reference to the Schedule 13 D
      filed by the Registrant with respect to 180 Connect Inc. dated February 1,
      2008.10.8*
                
                Amended
      and Restated Common Stock Purchase Warrant dated July 2, 2007 issued to
      Laurus Master Fund, Ltd. by 180 Connect Inc. incorporated by reference to
      the Schedule 13 D filed by the Registrant with respect to 180 Connect Inc.
      dated February 1, 2008.10.9*
                
                Common
      Stock Purchase Warrant, dated January 30, 2008, issued by Creative Vistas,
      Inc. to Erato Corporation for the Right to Purchase 2,350 Shares of Common
      Stock of Creative Vistas, Inc. incorporated by reference to the Schedule
      13 D filed by the Registrant with respect to 180 Connect Inc. dated
      February 1, 2008.10.10*
                
                Common
      Stock Purchase Warrant, dated January 30, 2008, issued by Creative Vistas,
      Inc. to Valens U.S. SPV I, LLC for the Right to Purchase 214,033 Shares of
      Common Stock of Creative Vistas, Inc. incorporated by reference to the
      Schedule 13 D filed by the Registrant with respect to 180 Connect Inc.
      dated February 1, 2008.10.11*
                
                Common
      Stock Purchase Warrant, dated January 30, 2008, issued by Creative Vistas,
      Inc. to Valens Offshore SPV I, Ltd. for the Right to Purchase 582,367
      Shares of Common Stock of Creative Vistas, Inc. incorporated by reference
      to the Schedule 13 D filed by the Registrant with respect to 180 Connect
      Inc. dated February 1, 2008.10.12*
                
                Non-binding
      Letter of Intent between Creative Vistas, Inc. and Valens U.S. Fund,
      LLC10.13*
                
                Letter
      of Intent dated February 13, 2008 incorporated by reference to the
      Schedule 13D Amendment filed by the Registrant with respect to 180 Connect
      Inc. dated February 19,
2008




38




10.14*
              
              Consulting
      Agreement, dated July 16, 2008, between Creative Vistas, Inc. and
      Nationwide Solutions Inc. incorporated by reference to the Registrant's
      Form 8-K filed July 18, 200810.15*
              
              Termination
      and Release Agreement, dated July 16, 2008, between AC Technical Systems
      Ltd., Nationwide Solutions Inc. and Sayan Navaratnam21.1+
              
              List
      of all subsidiaries31.1+
              
              Rule
      13a-14(a) Certification of the Principal Executive
  Officer31.2+
              
              Rule
      13a-14(a) Certification of the Principal Financial
  Officer32.1+
              
              Chief
      Executive Officer certification pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      200232.2+
              
              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









*
Previously filed and incorporated by reference




+ Filed
herewith





39





SIGNATURES




In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.




CREATIVE
      VISTAS, INC.By:
                /s/
      Dominic BurnsDominic
      Burns
                  Chief
      Executive Officer


40