UNITED
STATES SECURITIES AND


EXCHANGE
COMMISSION


Washington,
D.C. 20549





FORM
10-KSB





ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF


THE
SECURITIES EXCHANGE ACT OF 1934





For the
Fiscal Year Ended December 31, 2007


Commission
File No. 000-49907





Law
Enforcement Associates Corporation


(Name of
Small Business Issuer in Its Charter)






Nevada
            
            56-2267438(State
      of other jurisdiction of Incorporation
      or Organization)
            
            (Employer
      Identification Number)







2609
Discovery Dr Suite 125, Raleigh, North Carolina 27616


(Address
of principal executive offices) (Zip Code)





(919)
872-6210


(Issuer's
Telephone Number, Including Area Code)





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, $.001 Par Value Per Share





Check  whether  the
Issuer:  (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 [ ]





Check if
there is no  disclosure
of  delinquent  filers  pursuant to Item 405 of
Regulation S-B contained  herein,  and no
disclosure  will be contained,  to the best of
registrant's  knowledge,  in definitive proxy or
information  statements incorporated  by
reference  in Part III of this Form 10-KSB or any  amendment
to this Form 10-KSB. [ ]









Yes
[ ] No [X]





Our
revenues for our most recent fiscal year were $6,666,479.





The
aggregate  market value of the voting
and  non-voting  common equity held by non-affiliates of Law
Enforcement  Associates  Corporation computed by reference
to the price at which the common  equity was sold,  or the
average bid and asked price of such common equity,  as of a specified
date within the past 60 days was $11,344,271 as of April
23,  2008  based on the average bid and asked price of $0.44
per share as of that date.





There
were 25,782,433 shares of common stock, $.001 par value, outstanding as of April
23, 2008.


1




NOTE
CONCERNING FORWARD-LOOKING STATEMENTS





This
Report  contains  certain  forward-looking  statements,  including
the plans and  objectives of management for the
business,  operations,  and economic
performance  of  Law  Enforcement   Associates  Corp.  (the
"Company").   These forward-looking statements generally can be
identified by the context of the statement or the use of words such as the
Company or its management "believes,"
"anticipates,"  "intends,"  "expects,"  "plans" or
words of similar meaning. Similarly statements that describe the Company's
future operating performance, financial results, plans, objectives strategies or
goals are forward-looking statements.  Although management believes
that the assumptions underlying the forward-looking statements
are   reasonable,   these   assumptions   and
the forward-looking   statements   are subject to
various   factors,   risks and uncertainties, many
of which are beyond the control of the Company. Accordingly, actual results
could differ   materially from those contemplated
by  the
forward-looking  statements.  In  addition  to
the other  cautionary  statements relating to certain
forward-looking statements throughout this Report, attention  is
directed to "Business
--  Cautionary  Information  Regarding  Forward-Looking
Statements" below for discussion of some of the factors, risks and uncertainties
that could affect the outcome of future results  contemplated by
forward-looking statements.








2





PART
I





ITEM 1.
DESCRIPTION OF BUSINESS.





Law
Enforcement Associates Corporation was incorporated on May 14, 1998 under the
laws of the State of Nevada.  We manufacture and distribute
undercover  surveillance products including a complete  line
of
audio  surveillance  equipment  that  allows  law  enforcement
agencies  to  monitor  conversations.  In  addition,  we
have an  array of video
surveillance   products  ranging  from  disguised  miniature  cameras  to  video
transmission and recording  systems.  We offer our Birddog
Global Positioning Tracking System, which is a global positioning tracking
system. The Birddog Global Positioning Tracking System is a global positioning
system receiver combined with a cellular telephone that allows undercover
surveillance agents to monitor the movements of a vehicle.  The agent
will call the Birddog Tracking unit through a telephone and will be enabled to
track the target vehicle in real time or view the target vehicles movements over
a period of time.  The unit records longitude and latitude data points
that are transcribed via our computer software onto a mapping program for
viewing.  The Birddog Global Positioning Tracking System has been one
of our leading products.  Finally, we also sell the under vehicle
inspection system ("UVIS"), which also is one of our leading
products.  The UVIS is used to view the underside of vehicles entering
and exiting secure areas or facilities for explosive devices and other
contraband.
UVIS  provides  a  clear,  high  contrast  real-time  video  inspection  of  the
undercarriage of cars, vans and trucks.  Our products are used by
military, law enforcement, security and corrections personnel throughout the
world, as well as
governmental   agencies,   multinational   corporations   and   non-governmental
organizations.





On October 16, 2007, we completed the
acquisition of certain assets of Advanced Vehicle Systems, LLC (“AVS”), a
Florida Limited Liability Company. The assets were purchased pursuant to an
Asset Purchase Agreement and we purchased all of AVS’ designs, drawings, name
and intellectual property rights.  As a result of this acquisition,
the Company has expanded into the surveillance van business.





Our
products are marketed under brand names such as Audio Intelligence Devices
(AID), Birddog Global Positioning Tracking System, Under Vehicle
Inspection   System, and under a licensening agreement with Smith
and Wesson Corp, the SWIFT Under Vehicle Surveillance System.  We sell
our manufactured   products primarily to law enforcement agencies
through company employed sales people located throughout the United States and
at our home office in Raleigh, North Carolina as well as through our web site
located at www.leacorp.com.





We
believe there are significant  opportunities  to grow
our  manufacturing business through the acquisition and development of
new product lines, expansion into
new  territories  and  further  development  of
sales  to  specialized  law
enforcement,  government  and military  agencies.
In 2008 LEA will continue to leverage sales utilizing Smith &Wesson branded
products, introducing new core-line products, leverage strong distribution
network industry relationships with companies approaching LEA and through our
web based storefront. LEA also feels that we can further obtain our sales growth
through our stronger motivated sales team.




3




In
addition, we believe that consistent demand for our premium products will
continue because our products are critical to the safety and effectiveness of
our customers.





Industry
Overview/Market Opportunity
















We expect
the demand for our surveillance products to continue to grow. We plan to address
this growth by offering an array of additional security and surveillance risk
management products. We believe that the introduction of these new products will
increase both our sales and our customer base. In addition, the Company will
continue to sell other manufacturers security related products that the Company
feels will be complimentary to our existing product offering.





Our sales
force consists of 8 company employees
who are each responsible for a geographical area of the United States.
Management handles Federal Government and International sales.  The
Company feels that the new employee based sales force is more focused and will
be key in the planned offering of additional products that LEA will manufacture
and carry in 2008. The company also feels that this new sales force will be more
aggressive in entering new law enforcement markets.





Our new
sales force will continue to capitalize on the Company’s historical exposure to
law enforcement agencies. Our excellent relationships with law enforcement
agencies are a key element when introducing new products to market.




4





Expand
Distribution Network and Product Offerings.





In 2008,
we expect to continue to leverage our distribution network by expanding our
range of branded law enforcement equipment by investing in the development of
new products which compliment our existing ones. In the last quarter of 2007, we
furthered this goal with the acquisition of the AVS van division.





Law
Enforcement Associates Corporation also is the master and sole distributor of
the DV-Cop/CELL in North America. Product details and sales information are
available at: http://www.dv-cop.com.





We are
still in the process of developing a less lethal weapon (Stun Pistol) and have
completed proto types. We are
currently   negotiating   with   several   companies
to license the manufacture and sale of that weapon and to sell our
patents.  These negotiations are in the very preliminary stages and
there is no assurance that we will be successful in these negotiations. While we
have the proto type ready for production, we are proceeding with caution do to
the voluminous litigation that has arisen with other companies that manufacture
similar weapons.





We  manufacture  and  distribute  a  complete  line
of  audio  surveillance equipment including radio frequency
transmitters,  receivers,  and repeaters for use in
surveillance  and  intelligence  gathering  operations
by law enforcement agencies.  In addition, we have an array of video
surveillance products ranging from disguised miniature cameras to video
transmission and recording systems. We also manufacture and distribute the
Birddog Global Positioning tracking system and the Under Vehicle Inspection
System.  Each of our products may be manufactured to our clients'
specifications.  The following is a summary of the surveillance
products that we manufacture and sell:





GRAFFITI
CAM – The Graffiti Cam is a surveillance solution that covertly and proactively
notifies law enforcement of graffiti crimes in progress. When the video
recording unit is activated via graffiti-related motion, it sends real-time text
alerts of the event to designated mobile phones, as well as JPEG images of the
event to designated e-mail addresses, enabling law enforcement to dispatch
resources and catch taggers in the act. Video footage of the event can also be
used as evidence against offenders.





UVIS -
UVIS is an under vehicle inspection system, which we manufacture and sell. UVIS
is used to view the underside of vehicles entering and exiting secure areas or
facilities for explosives and contraband.  UVIS provides a
clear,  high
contrast  real-time  video  inspection of
the  undercarriage  of cars,  vans and
trucks  at  entry  points  in half the
time of the  standard  inspection  mirror search.
In a government field test performed by the U.S. military, the UVIS was compared
to standard inspection mirror searches.  The results of the government
field test  indicated that the UVIS, as compared to
standard  mirror  inspection searches, had a higher
percentage of target acquisitions,  which is the locating
and  preventing  of  explosives  and
other types of  contraband  from entering a protected
facility.




5












SYNTHESIZED
AUDIO INTELLIGENCE SYSTEM is a
comprehensive  bodywire,  which
includes  microphone,  transmitter and receiver that is
manufactured to military standards.  It allows for
the  transmitting  and  receiving  of
voice data for a distance depending on the watt level. Generally, one watt of
transmitting power equates to a range of one mile.  This
product  includes a FM receiver,  a rugged under panel
design,  a LCD battery  tester,  9-volt
battery  tester,  audio line output to a VCR and a voice
scrambler. The Synthesized Audio Intelligence System
allows  law  enforcement  agencies  to
engage  in  various  types
of  undercover operations  whereby
all  conversations  engaged in by
the  undercover  agent are transmitted and
recorded.





SYNTHESIZED  TACTICAL  INTELLIGENCE  SYSTEM  is  a  combined  receiver  and
transmitter  that has a compact  design,  which
enables it to be used for varied surveillance situations. This products allows
for the transmitting and receiving of voice  data  within a
one
mile  range.  This  product  comes  with
a built in recorder as well as weather and water resistant case.





GROUND
HOG
COVERT  UNATTENDED  VIDEO  SURVEILLANCE  SYSTEM
is  specifically designed for
unattended  covert  outdoor  surveillance  of
targets  ranging from marijuana fields and drug labs to suspected
larceny in a variety of fields.  TheGround Hog utilizes a
camouflaged  pinhole camera in
a  weatherproof  housing to view the targeted area. Images
from the camera are recorded on the system's VCR. The monitor station is also
camouflaged and housed in a weather  resistant steel case. The Ground
Hog also utilizes a standby mode whereby its infrared, wireless
motion  detector  automatically  switches  the
Ground Hog from standby to active
when  someone  walks  into
the  target  area.  The  Ground Hog also
comes with a wireless option.




6





LEA 6300
SERIES/AID  9400 SERIES - these include a variety of
repeaters.  A repeater is designed to work together with each of
our  transmitters to increase the distance that voice data may be
monitored.  Our standard  transmitter allows for monitoring
within a one mile range.  However, a transmitter that is combined with
a repeater will be able to monitor  voice data with a two mile
range.  With the designs  which
were  obtained  thru the purchase of some of AID's assets
the repeater systems will begin to be
totally  synthesized.  This synthesized design will enable
LEA/AID to reduce manufacturing time for its repeater products.  Our
repeaters come in various designs including the following:





Disguised
Car Battery Repeater


Weatherproof
Tactical Repeater


Briefcase
Repeater


Disguised
Book Bag Repeater


Gym
Bag Repeater


Disguised
AM/FM Radio Repeater


Miniature
Portable Repeater


Synthesized
Repeater





LEA 7000
SERIES /AID 9000 SERIES - these include a variety of  transmitters
and  accessories.  A  transmitter  is a
device  that is hidden on an  undercover
agent,  which allows the law enforcement  agency to monitor
the audio data. Each of these transmitters come with various features including
different designs and transmit  power
levels.  The  transmitters  are  available
in various  disguised
formats  which  enable  these  items  to
be  used  in  various  law  enforcement
operations.  With the designs  which
were  obtained thru the purchase of some of
AID's  assets  the  transmitter  will  begin
to be  totally  synthesized. This
synthesized  design will  enable  LEA/AID to
reduce  manufacturing  time for its transmitter products.
The designs that the transmitter are available in, include the
following:





Denim
Jacket Transmitter


Flat
Pack Transmitter


Baseball
Cap Transmitter


Wristwatch
Transmitter


Garage
Door Opener Transmitter


Tape
Measure Transmitter


Radar
Detector Transmitter


Cigarette
Transmitter


Strip
Outlet Transmitter


1-Watt
Transmitter


Disguised
Walkman Transmitter


Miniature
Transmitter


Semi-Functional
"Flex" Style Pager Transmitter


Functional
"Flex" Style Pager Transmitter


Bravo
Pager Transmitter


Nokia
or Motorola Cellular Telephone Battery Transmitter


Nokia
Digital Wireless Battery Transmitter


Board
Transmitter


Nokia
Digital Wireless Battery Transmitter


Digital
Scale transmitter


Motorola
/Nextel Battery transmitter




7





VIDEO
TRANSMISSION SYSTEMS - These transmissions systems provide both audio and video
surveillance capabilities. We have a variety of transmitters including a
disguised  sports cup
video  transmission  system,  jean jacket
video  system, radar  detector,  video tape box,
VCR, smoke  detector and clock radio.  Each of these items
includes a black and white and color camera, a video transmitter, an audio
transmitter and a directional antenna. The transmissions systems also come in a
transmitter/receiver combo.





VIDEO
SURVEILLANCE SYSTEMS - We offer video surveillance systems, which are concealed
in enclosures  resembling pole mounted  transformer and
utility boxes. These items come with a command control unit,  which
includes a display monitor, video  recorder/player  and
digital  proportional "joy stick"  pan/tilt/control, which
is enclosed in a single portable carrying case.





DISGUISED  ANTENNAS  which
are  compatible  with all of
our  receivers  and repeaters.  The antennas are
sold in various  disguises  including as a cellular antenna,
coat hanger, tissue box and cassette/CD box.





DIGITAL  PINHOLE  SURVEILLANCE  SYSTEM
- includes a Digital video recorder with pop-up monitor,  time/date
generator and black and white mount cameras that may be used for surveillance in
automobiles and hotel rooms.





DIGITAL  NOISE  FILTER  -
This  item  can be  used
to  cancel  up to 95% of background noise for greater
intelligibility of recordings.





DISGUISED  VIDEO/AUDIO
RECORDING SYSTEM - incorporates a complete video and
audio  recording  system housed in a
common  tote/gym  bag-style  carrying case.
Includes a Digital video cassette recorder, an integrated time/date generator, a
miniature  camera  with a wide angle lens and
highly  sensitive  condenser  type
microphone.  Book Bag  Disguised  System - this is
a  complete  video  and audio
recording  system  housed  and  disguised  in
a common  book  bag.  This  system
incorporates a video cassette recorder, an integrated time and date generator, a
miniature  black and white  camera  with wide
angle lens and a highly  sensitive condenser type
microphone.




8




Customers





The
primary end users of our products are federal, state and local law enforcement
agencies, state corrections facilities, U.S. and allied militaries, and select
private security personnel.  Furthermore, the UVIS, one of our leading
products, may be sold both within the United States and abroad.





We reach
these customers through a distribution strategy that utilizes approximately 8
sales representatives that are employed by the company who are responsible for
certain geographic areas of the United States, Federal Government sales and
International sales. Additionally the company uses direct mailings, catalogs and
trade shows as well as our web site on the Internet located at
www.lea-sales.com.





Marketing





We
market  and  distribute  our  products  directly  to
the  military,  law
enforcement   agencies,   security  and  corrections   personnel  through  sales
representatives  and through our web site  located
at  www.leacorp.com, direct mailings, catalogs and trade shows.
Management believes that direct sales to end users should allow us to more
efficiently and effectively meet customer needs by providing products which are
tailored for the customer's individual requirements at a more economical
price.





Product
Manufacturing and Raw Materials





All final
assembly of our products is completed at our facility  located in
Raleigh,  North  Carolina.  The  manufacturing  process  is
a basic  procedure whereby our manufacturing  employees
assemble each of the products utilizing the raw materials.  This
process includes a sub assembly procedure for general items and a final assembly
for each specific product. We currently employ 20 employees in the manufacturing
sector.





The raw
materials used in manufacturing  our products include various items
ranging  from  screws,  adhesive,  circuit  boards  and  enclosures,  which  are
available  from
a  multitude  of  suppliers  throughout  the
United  States.  We purchase these raw materials directly
from the manufacturers. We believe that we enjoy a
good  relationship  with
these  companies.  However, if necessary, we believe that we
could readily
find  replacement  manufacturers.  We are aware of
multiple  suppliers for these  materials and would
not  anticipate a significant impact if we were to lose any
suppliers.




9





Competition





Law
Enforcement Associates is the only U.S.owned manufacturer of Electronic
Surveillance Equipment. The market for our surveillance products is not highly
competitive.  The market for surveillance  products is
basically  comprised of one competitor with
each  of  us  having  an  equal  market  share.  Our
prime  competitor  is  DTC
Communications,  Inc. (a foreign owned company) No company in the
surveillance products market is dominant with  respect  to
any one  specific  area nor does
any  company  have more brand
recognition,  greater financial resources or any other advantage which
may allow them to compete more  effectively.  We believe we
compete by providing  superior
design,  engineering  and  production  expertise  in
our  line  of  surveillance
products.  The principal competitive factors for all of our products
are quality of engineering and design, reputation in the industry, production
capability and capacity, price and ability to meet delivery
schedules.  There are now several companies who manufacture and sell a
variation of the Under Vehicle Inspection System.  However, we feel
that we have a superior product which was designed in conjunction with the
United States Government.  We also compete with companies that sell
standard
inspection  search  mirrors,  which  are  used
in  searching  the  underside  of
vehicles.  Although  the mirrors are less costly than the
UVIS,  we believe that the UVIS is more effective in detecting
explosives and other contraband. LEA will carry these types of search items on
it website in the 2008.





We are in
the continuing   process of developing an Electrical Discharge
Weapon (“EDW”) weapon, and as a result, if we sell the EDW directly, we
anticipate coming into direct competition  with
Taser  International,  Inc.  ("Taser").  Taser
is the leading  manufacturer  and supplier  to
law  enforcement  agencies  of
less  lethal,  electrical  discharge
weapons.  While  Taser  is
the  leader  in the  industry  and
has  more  capital resources than we presently have, we
believe that our new weapon will be able to compete in the market with Taser as
we believe our weapon is better designed and has better features. There is no
assurance, however, that we will be successful in bringing the EDW weapon to
market or that if we do, that we will be able to successfully compete with
Taser. Due to the large number of law suits which have been filed with respect
to the use of EDW’s, the Company is exploring licensing its EDW and selling its
patents so as to limit any future exposure it may have with respect to
manufacturing and selling its EDW.


Patents
and Trademarks





Other
than the patents described above, we do not hold any other patents relating to
any of our other products or related technologies. We have trademark protection
for the name "LEA, AID, Audio Intelligence Devices and Blood Hound Global
Positioning Tracking System(TM)." AIDVision, AIDVison 911, and Birddog. Law
Enforcement Associates will continue to trademark all new product
offerings.




10





Governmental
Regulation





We
are subject to Commerce Department  and State
Department   licensing  requirements with respect to
the sale in foreign  countries of certain of
our  products.  However,  the
under  vehicle inspection  system is not restricted by the
U.S.  Department of Commerce and may be freely exported to non-
embargoed countries.  We have sold the UVIS outside of the
United  States and intend to continue doing so.





We
are also obligated to comply with a variety of federal,  state and
local regulations,  both  domestically  and
abroad,  governing  certain aspects of our operations and
the workplace including regulations relating to workplace safety, fair labor
standards, taxes, product safety and discrimination. Additionally, as
a  government  contractor,  we are subject to
rules,  regulation  and  approvals applicable to
government contractors.





We
are also  regulated by Commerce Department and the
U.S.  Department of Justice under the Omnibus Crime Control and Safe
Streets Act of 1968, as amended (the "Omnibus Act"), as a result of our sale
of  listening  and  surveillance  devices.  The  Omnibus  Act
prohibits the manufacture,  possession,  sale
and  advertisement of devices that that would be useful for the
purpose of the surreptitious  interception of wire, oral or
electronic  communications.  However, the Omnibus Act also
provides that it is not illegal for a party to manufacture,  sell or
advertise a surreptitious listening  device if that party is under
contract to  manufacture  and sell such device with the
United States, a state or a political  subdivision thereof which is
authorized to use such device.





Environmental
Matters





We are
subject to federal,  state, and local laws and regulations governing
the protection of the environment,  including those regulating
discharges to the air and
water,  the  management  of wastes,  and
the control of noise and odors. Like all companies, we are subject to
potentially significant fines or penalties if we fail to comply with
environmental requirements.  We do not expect material capital
expenditures for environmental controls in 2008.
However,  environmental requirements are complex, change
frequently,  and could become more stringent in the
future.





Accordingly,  we
cannot assure you that these  requirements will not change in a manner
that will require material capital or operating expenditures or will otherwise
have a material adverse effect on us in the future.





Employees





As
of March 20, 2008 we had a total of approximately 33 employees, of which
approximately 11 were employed within the sales and marketing area,
approximately 20 were employed in the manufacturing  area, and 2 were
administrative. None of our employees are  represented  by a
labor union.  We believe that our employee relations are
good.




11





ITEM 2.
DESCRIPTION OF PROPERTY.





On
February 1, 2002, which lease was amended on August 1, 2005, we entered into a
lease with Sirchie Finger Print Laboratories, Inc. (“Sirchie”). We leased
approximately 16,000 square feet of space for our Youngsville, North Carolina,
headquarters at approximately $14,000 per month. Subsequent to yearend, the
above lease has been terminated.





On
December 15, 2007, the Company entered into a lease with Zabarsky Investments
Ltd. L.P. We currently lease approximately 6,000 square feet of space for our
recently acquired van division at approximately $4,750 per month. The lease term
is 60 months.





Effective
March 2008, the Company moved its headquarters from the Youngsville facility and
entered into a lease with Zabarsky Investments Ltd. L.P. We currently lease
approximately 10,000 square feet of space for our new Raleigh, North Carolina
headquarters at approximately $7,900 per month. The lease term is 60 months.
Management believes the move from Youngsville to Raleigh was necessary in order
to accommodate the van division and for operational efficiencies.





ITEM 3.
LEGAL PROCEEDINGS





From  time  to  time,  we
may be
a  party  to  litigation  or  other  legal
proceedings  that we would  consider to be a part of the
ordinary  course of our business.  We
are  not  involved  currently  in  legal  proceedings  that  could
reasonably  be  expected  to have
a  material  adverse  effect on
our  business, prospects,  financial condition or results of
operations. We may become involved in material legal proceedings in the
future.





ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.





During
the Fourth Quarter of Fiscal 2007, we held our Annual Meeting and at that
meeting the current Board of Directors was re-elected and Baum & Company was
reaffirmed as our auditors.  Because we had the votes of the majority
of the shareholders, no solicitation of proxies was undertaken.








PART
II





ITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.




12





PRICE
RANGE OF COMMON EQUITY





Our
common stock is currently traded on the American Stock Exchange, under the
symbol "AID."




High
            
            
            Low2006
            
            $
            
            
            $First
      Quarter
            
            
            3.00
            
            
            
            1.51Second
      Quarter
            
            
            1.80
            
            
            
            0.73Third
      Quarter
            
            
            1.60
            
            
            
            0.80Fourth
      Quarter
            
            
            1.34
            
            
            
            0.802007First
      Quarter
            
            
            1.05
            
            
            
            0.77Second
      Quarter
            
            
            0.84
            
            
            
            0.50Third
    Quarter
            
            
            1.30
            
            
            
            0.55Fourth
      Quarter
            
            
            1.28
            
            
            
            0.50




The per
share  closing  sales price of the common stock as reported
by the American Stock Exchange on April 23, 2008, (the date of the last reported
sale) was $0.44.





ITEM 6.
MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS





The statements contained herein are not
purely historical  statements,  but
rather  include what we believe
are  forward-looking  statements.  These include
statements  about
our  expectations,  beliefs,  intentions or
strategies for the future, which are indicated by words or phrases such as
"anticipate,"  "expect,"
"intend,"  "plan,"  "will," "we believe,"  "the
company  believes",  "management believes" and similar words
or phrases. The forward-looking statements are based on our current expectations
and are subject to certain risks,  uncertainties and
assumptions,  including factors set forth in the following discussion
and in the discussions  under  "Business." Our actual
results could differ  materially from results  anticipated
in these  forward-looking  statements.  All
forward-looking statements included in this document are based on information
available to us on the date hereof, and we assume no obligation to update any
such  forward-looking statements.





Results
of  Operations  - Year
Ended  December  31, 2007  Compared to Year Ended December
31, 2006




13





Revenues





Revenues for the year ended December
31, 2007, were $6,666,479 as compared to $7,546,884 for the year ended December
31, 2006, which represents a decrease of $880,405 (13.2%). During 2007, the
Company made the decision to bring its sales staff “in-house” versus utilizing
independent outside sales people. As a result, more than half of the sales staff
were new hires in 2007. Based on 1st Quarter 2008 sales of approximately $2
million, management believes there will be no impact on 2008 revenue due to
sales staff turnover in 2007.





Reduced
funding to state and local law enforcement agencies due to increases in federal
funding for the war on terror continue to negatively affect revenues. Despite
the reduction in funding, during the 4th Quarter of 2007, the Company received
an additional order from the Federal Government for equipment and training in
the approximate amount of $655,000. This order will be recognized in the 1st
Quarter of 2008.





Costs of
Goods Sold





Cost of Goods Sold decreased by
$256,237 (5.5%) to $4,681,694 for 2007 as compared to $4,937,931 for 2006. As a
percentage of net sales, cost of goods sold increased by 4.8% to 70.2% of net
sales in 2007 compared to 65.4% of net sales in 2006. During the 4th Quarter,
the Company recognized charges of approximately $200,000 related to demo
equipment and raw materials inventory obsolescence. The Company also recognized
approximately $63,000 in warranty provision. During 2007, the Company increased
its warranty coverage from 2 to 3 years as part of a marketing effort.
Management does not foresee similar types of charges during 2008. Vendor costs
increased slightly due to the increasing costs for freight. The Company intends
to reflect future increases in vendor freight in its margin.





Gross
Margin





14




Gross margins for the year ended
December 31, 2007 decreased $624,168 as compared to 2006. As a percentage of net
sales, gross margin decreased to 29.8% in 2007 from 34.6% in 2006. The decline
in margin percentage was mainly attributable to significant increases in the
demo equipment and raw materials inventory reserves as well as increases in its
warranty provision discussed above.





Operating
Expenses





For the year ended December 31, 2007,
Operating Expenses, including services paid for with stock ($108,890) and
research and development ($227,595) were $3,634,132 as compared to $2,614,317 in
2006, an increase of $1,019,815 or 39.0%. As a percentage of net sales,
operating expenses represented 54.5% of net sales in 2007 compared to 34.6% of
net sales in 2006.The increase is attributable to an increase in accounting and
legal fees ($178,374), consulting fees ($116,652), nonrecurring expenses related
to the introduction of the Graffiti Cam ($127,326), and a non-cash impairment
charge ($268,290) related to our EDW patents. The Company spent approximately
$95,000 in order to defend itself in 2 lawsuits, which have since been resolved.
Approximately $35,000 in expenses were recognized in the valuation of certain
intangible assets. The Company entered into 2 consulting arrangements during the
year in order to market the Graffiti Cam as well as offering assistance during
the acquisition of certain assets from AVS. Research and development expenses
increased by $143,901 resulting from the introduction of the Graffiti Cam and
the write-off of certain patents-in-process in the amount of $80,079. As part of
the Graffiti Cam promotion, the Company provided several demo units to the
Denver Police Department during the 4th Quarter.





Net
Loss





Our
net loss for the year ended December 31, 2007 was $1,009,746 as compared to a
net loss of $3,047 for the year ended December 31, 2006, which represented a
decrease of $1,006,699. Our net loss per weighted average share was ($.04) for
the year ended 2007, as compared to a net loss of $.00 per weighted average
share for 2006.





Liquidity
and Capital Resources





At
December 31, 2007, the Company had working capital of $1,949,261 as compared
with $2,372,732 at December 31, 2006, a decrease of $423,471.





At the end of 2007 we had a cash
balance of $325,244.  We have a line of credit with Wachovia Bank in
the amount of $750,000.  As of December 31, 2007, we had an
outstanding balance of $200,000.





We
believe we will be able to finance our operations and any capital expenditures
we incur in 2008 with our cash on hand and cash flow.




15





If we
need to obtain capital, no assurance can be given that we will be able to obtain
this capital on acceptable terms, if at all. In such an event, this may have a
materially adverse effect on our business, operating results and financial
condition.  If the need  arises,  we
may  attempt  to obtain  funding through the use
of various types of short term funding, loans or working capital
financing  arrangements  from banks or
financial  institutions.  As we generally
obtain  all  of
our  funding  from  operations,  a  decrease  in  revenue  could
negatively  impact our short and long
term  liquidity.  A change in the current political
situation or a decrease in military spending could result in decreased sales of
our under vehicle inspection system. A decrease in sales in the under vehicle
inspection system could have a material impact on our revenue and net income and
would affect our long and short term liquidity.





Research
and Development





In fiscal 2007, we incurred expenses of
$227,595 on research and development. The majority of these funds were spent on
research and development related to the Graffiti Cam, Raptor, and Swift
products. Management also made the decision to write-off certain
patents-in-process in the amount of $80,079. We do not have any other current
plans to commence research and development activities. However, we will engage
in any research and development project that is feasible and can be accomplished
on an economical basis.





Inflation





We believe that the impact of inflation
on our operations since our inception has not been material.





ITEM 7.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.





The
response to this item is set forth at the end of this report.





ITEM 8.
CHANGES IN OR DISAGREEMENTS WITH ACCOUNTANTS





None.





ITEM
8A(T). CONTROLS AND PROCEDURES





Disclosure Controls and
Procedures








We carried out an
evaluation,  under the supervision and with the participation of our
management, including our Principal Executive Officer, our Audit Committee and
our acting Principal Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedure as of December 31, 2007, the
end of the annual period covered by this report.  The evaluation of
our disclosure controls and procedures included a review of the disclosure
controls’ and procedures’ objectives, design, implementation and the effect of
the controls and procedures on the information generated for use in this
report.  In the course of our evaluation, we sought to identify data
errors, control problems or acts of fraud and to confirm the appropriate
corrective actions, including process improvements were being
undertaken.





Based on the foregoing, our Principal
Executive Officer and Principal Financial Officer conservatively concluded that,
as of the end of the period covered by this report, our disclosure controls and
procedures were not as effective as they needed to be and
that   material weaknesses existed as of December 31,
2007.  A material weakness in internal control over financial
reporting is a significant deficiency, or combination of significant
deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented
or detected.  A significant deficiency is a control deficiency, or
combination of control deficiencies, that adversely affects a company’s ability
to initiate, authorize, record, process or report external financial data
reliably in accordance with generally accepted accounting principles, such that
there is more than a remote likelihood that a misstatement of the company’s
annual or interim financial statements that is more than inconsequential will
not be prevented or detected.




16





During
2007, we did not have an active audit committee nor did we have a separate
chief executive financial officer apart from our chief executive officer and we
also experienced turnover in our accounting positions which contributed to our
being late with making significant year end adjustments.  We
discovered that we needed to make year end adjustments for impairment of some of
our intangibles which were not made during the course of the year.  In
addition, we also discovered that we needed to make a number of year end journal
entries. Finally, we were unable to timely receive an opinion from an
independent outside firm to get the valuations we needed.





To
correct these weaknesses in 2008, we have hired a new controller who, at our
next Board of Directors meeting,   we expect to elevate to the
position of CFO, applicable accounting and finance processes were evaluated, and
appropriate process improvements have been implemented.  No change in
our internal control over financial reporting occurred during the fourth quarter
of fiscal 2007 that has materially affected, or its reasonably likely to
materially affect, our internal control over financial
reporting.  Management, in conjunction with the Audit Committee of the
Company’s Board of Directors, did take certain remedial actions as described
herein to adequately address and rectify the internal control deficiencies
identified above after December 31, 2007.  There has been no change in
our internal controls over financial reporting that has materially affected, or
is reasonably likely to materially affect, our internal controls over financial
reporting subsequent to the date of this report except as noted
above.




Management’s Annual Report
on Internal Control Over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting (as defined in Rules 13a-15(f) and 15d-5(f)
under the Securities Exchange Act of 1934).  Our management assessed
the effectiveness of our internal control over financial reporting as of
December 31, 2007.  In making this assessment, our management used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission in Internal Control-Integrated Framework.  Our management
has concluded that, as of December 31, 2007, our internal control over financial
reporting is effective based on these criteria.





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 independent 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.




17





Limitations of Disclosure
Controls and Procedures





Our
management  does not expect that our disclosure controls or internal
control over financial reporting will prevent all errors or all instances of
fraud.  A control system, no matter how well designed and operated,
can provide only reasonable, not absolute, assurance that the control system’s
objectives will be met.  Further, the design of a control system must
reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any,
within our Company have been detected.  These inherent limitations
include the realities that judgments in decision-making can be faulty and that
breakdowns can occur because of simple error or mistake.  Controls can
also be circumvented by the individual acts of some persons, by collusion of two
or more people, or by management override of the controls.  The design
of any system of controls is based in part upon certain assumptions about the
likelihood of future events, and any design may not succeed in achieving its
stated goals under all potential future conditions.  Over time,
controls may become inadequate because of changes in conditions or deterioration
in the degree of compliance with policies or procedures.  Because of
the inherent limitation of a cost-effective control system, misstatements due to
error or fraud may occur and not be detected.








Item 9.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT.








Our  executive  officers,  directors  and
key  employees and their ages and positions with us as of December 31,
2007, are as follows:




Name
            Age
            PositionPaul
      Feldman
            52
            Director,
      President, CEO, Interim CFOAnthony
      Rand
            68
            Director,
      Chairman of the BoardMartin
      Perry
            47
            DirectorGeneral
      James Lindsay
            75
            DirectorJoseph
      Jordan
            60
            Director




The following is a brief description of
each officer, director and control person:





Paul Feldman has served as our
President  and Treasurer  since August 2001.
Mr.  Feldman was appointed as a director in May 2003.  Mr.
Feldman has served as the President of Law
Enforcement  Associates,  Inc.  ("LEAI"),  our
wholly owned
subsidiary,  since  1993.  Mr.  Feldman  initially  joined  LEAI
as the  Eastern Regional  Sales Manager in
1989.  From 1989 to 1993,  Mr.  Feldman served as
the Vice President of Sales for LEAI. Mr. Feldman received a Bachelor of Science
from Duke University in 1978.




18





Anthony Rand has served as a director
of our company since May 2003.  Mr. Rand has been the Senate majority
leader for the North Carolina Senate since 1995. Senator Rand earned a B.A. in
Political Science from the University of North Carolina, Chapel Hill in 1961 and
a J.D. from the University of North Carolina Law School
1964.  Senator  Rand also is
a  consultant  to Sonorex  Inc. and the President
of Rand &Gregory, P.A- Senator Rand also serves on numerous Boards and
commissions  such as
the  Board  of  Directors  and  treasurer,  General  Alumni
Association of the University of North Carolina





Martin  Perry has served as a
director of our company  since May 2003.  Mr.
Perry   graduated  from  Brigham  Young   University   1985  with  a  degree  in
Communications  and played  basketball for the
Cougars.  From 1994 thru 2000 Mr. Perry was involved in Equipment
Distributors, Raleigh North Carolina which works exclusively with the law
enforcement community.





General  James
J.  Lindsay has served as a director  of
the  Company  since August
2004.  General  Lindsay  retired from the Armed
Services on July 1, 1990. Currently,  General Lindsay is president of
the Airborne and Special  Operations Museum Foundation, and a Senior
Observer with the Army's Battle Command Training
Program.  Additionally,  General  Lindsey is a
member of the United  States Army Ranger Hall of Fame and
Officer  Candidate  School Hall of Fame, US Army Science
Board and Special Operations  Advisory Group to the Secretary of
Defense. He was also the 1996 recipient of the Infantry's Doughboy Award, and
the 1998 recipient of the United States Special Operations Command Bull Simon
Award.





Joseph A. Jordan has served as director
since December 2004 as an additional member of the Board of Directors of the
Company.  Mr. Jordan received a B.S. in Accounting from
Villanova  University in 1969 and was the former managing
partner  Kopensky & Company, CPA's.  He is currently a
partner in the accounting firm of Jordan & Delaney LLP and is currently a
member of the American Institute of CPA's.





Directors serve until the next annual
meeting of stockholders or until their successors are elected and
qualified.  Officers serve at the discretion of the board of
directors. Non-employee directors are also entitled to reimbursement for
reasonable expenses incurred in attending any such meetings.





Audit
Committee





The Board of Directors has an Audit
Committee, which is comprised of Anthony Rand, Joseph Jordan, and James Lindsay.
The board of directors has examined the composition of the Audit Committee in
light of the listing standards of the American Stock Exchange and the
regulations under the Exchange Act applicable to audit committees. Based upon
this examination, the Board of Directors has determined that each of the Audit
Committee members is an “independent” director within the meaning of such
listing standards and the Exchange Act and the rules and regulations thereunder.
Mr. Jordan qualifies as an “audit committee financial expert” as that term is
defined in applicable regulations of the Securities and Exchange
Commission.  The Audit Committee did not conduct any meetings in 2007.
This failure was reported to the Company’s management and the Company’s
auditors. The Audit Committee members have been advised that this failure was a
violation of the Company’s Audit Committee Charter and the Corporate Governance
Rules of the American Stock Exchange.  In conjunction with the
Company’s auditors, the members of the Audit Committee have assured the Company
that they will hold regular meetings in 2008 in compliance with both the
Company’s Audit Committee Charter and the Corporate Governance Rules of the
American Stock Exchange. In fact, prior to this filing, the Audit Committee did
meet and discussed the Company’s financial statements with the Company’s
auditors and the Company’s management and was active in the review of this
10-KSB. After those discussions, the Audit Committee approved the financial
statements contained herein.




19





Compensation
Committee





On January 24,  2006,
the  Company  established  a  Compensation  committee.
Currently, Mr. Perry and General Lindsay are members of that
committee.





Code of
Ethics





The  Company  has  adopted  its
Code of
Ethics  and  Business  Conduct  for
Officers, Directors and Employees that applies to all of the officers, directors
and employees of the Company.





Section
16(a) Beneficial Ownership Reporting Compliance





Section
16(a) of the Exchange Act requires the Company's executive officers
and  directors  and persons who own more than 10% of
a  registered  class of the
Company's  equity  securities  to
file  reports of their  ownership  thereof and
changes in that ownership with the  Securities and
Exchange  Commission  ("SEC") and the
National  Association of
Securities  Dealers,  Inc. Executive  officers,
directors and greater than 10%  stockholders  are required
by SEC regulations to furnish the Company with copies of all such reports they
file.





Based  solely  upon
a review of Forms 3, 4 and 5, and  amendments  thereto,
furnished to the Company  during  fiscal year
2004,  the Company is not aware of
any  director,  officer  or  beneficial  owner
of more than ten  percent  of the Company's Common Stock
that, during fiscal year 2002, failed to file on a timely basis reports required
by Section 16(a) of the Securities Exchange Act of 1934.





Item 10.
EXECUTIVE COMPENSATION.





The following table summarizes all
compensation  paid by us with respect to the year
ended  December  31,  2007 paid by us to
our  President,  and all other executive  officers
whose total cash compensation  exceeded $100,000 in the year ended
December 31, 2007 (collectively, the "Named Executive Officers").





20





SUMMARY
COMPENSATION TABLE




Long
      Term CompensationSecuritiesName
      and
              
              
              Annual
      Compensation
              
              
              Restricted
              
              
              Underlying
              
              
              LTIP
      PayPrincipal
      Position
              Year
              
              Salary
              
              
              Bonus
              
              
              Other
              
              
              Stock
      Award
              
              
              Options/SAR’s
              
              
              Outs
              
              
              All
      OtherPaul
      Feldman
              2007
              
              $
              175,000President
              2006
              
              $
              136,684
              
              
              $
              -0-
              
              
              $
              2,000
              
              
              $
              -0-
              
              
              $
              -0-
              
              
              $
              -0-
              
              
              $
              -0-2005
              
              $
              134,940
              
              
              $
              -0-
              
              
              $
              -0-
              
              
              $
              172,500
              
              
              $
              -0-
              
              
              $
              -0-
              
              
              $
              -0-Martin
      Perry
              2007
              
              $
              131,256Sales
      Manager




Employment
and Other Agreements





We have not entered into
any  employment  agreements  with any of our
named  executive  officers  and  directors  nor  is  there  any  compensatory  plan  or
arrangement with any named executive officer.





Item 11.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.





The following  table sets
forth certain  information  as of March 31, 2008, with
respect to the number of shares of each class of voting
stock  beneficially owned by
(i)  those  persons  known to us to be
the  owners  of more  than  five percent
of any such class of our voting stock, (ii) each of our directors of and (iii)
all of our directors and executive  officers as a
group.  Unless otherwise indicated,  each of the listed
persons has sole voting and investment power with respect to the shares
beneficially


owned by
such shareholder.


Name
      and Address of
              
              Amount
      of
              
              
              Percentage
      ofBeneficial
      Owner
              
              Beneficial
              
              
              BeneficialOwnership
              
              
              OwnershipSirchiePaul Feldman (1)
      (3)*
              
              
              491,146
              
              
              
              1.905
              %Anthony Rand
      (1)*
              
              
              125,334
              
              
              
              0.486
              %Martin L. Perry
      (1)*
              
              
              111,000
              
              
              
              0.427
              %James J. Lindsay
      (1)
              
              
              52,975
              
              
              
              0.205
              %Joseph Jordan
      (1)
              
              
              1,000
              
              
              
              0.004
              %Raymond James
      Financial, Inc.(2)
              
              
              13,149,334
              
              
              
              51.001
              %All Directors &
      Executive Officers as a Group (5 persons)
              
              
              781,455
              
              
              
              3.031
              %


* c/o Law
Enforcement  Associates  Corporation,  2609
Discovery Dr, Suite 125, Raleigh,  North Carolina 27616





21




(1)           Director
of our company.





(2) The
shares are directly owned by Sirchie Acquisition Corp., of which Raymond James
Financial, Inc. owns 80%; the remaining 20% of Sirchie Acquisition Corp. is
owned by John H. Carrington.





(3)           Officer
of our company.





The  securities   "beneficially  owned"  by  a  person  are  determined  in
accordance with the definition of "beneficial  ownership" set forth in
the rules
and  regulations   promulgated  under  the  Securities  Exchange  Act  of  1934.  Beneficially  owned  securities
may include  securities  owned by and for, among others, the
spouse and/or minor children of an individual and any other relative who has the
same home as such individual. Beneficially owned securities may also
include  other  securities  as to which
the  individual  has or shares voting or
investment  power or which such  person has the right to
acquire  within 60 days pursuant to
the  conversion  of  convertible  equity,  exercise  of
options,  or
otherwise.  Beneficial  ownership  may  be  disclaimed  as  to  certain  of  the
securities.





The  foregoing  table is
based  upon  25,782,433  shares  of  common  stock
outstanding  as of March 31, 2008,  assuming no other
changes in the  beneficial ownership of the our
securities.





Item 12.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.





We entered into no related transactions
within the last two fiscal years.





Item 13.
EXHIBITS, LIST, AND REPORTS ON FORM 8-K.





(a)
The Exhibits required by Item 601 of Regulation S-B are as
follows:




2.1
            
            Agreement  for
      the  Exchange  of  Common  Stock
      by and  between  Academy Resources,  Inc.,  Sirchie  Finger  Print  Laboratories,  Inc.  and  LawEnforcement
      Associates, Inc.(1)2.2
            
            Agreement by and
      among  Academy  Resources,  Inc.  and
      Myofis  Internet, Inc.(1)3.1
            
            Certificate of
      Incorporation(1)3.2
            
            Certificate of
      Amendment to the Certificate of Incorporation(1)3.3
            
            By-laws(1)10.1
            
            Real Estate Lease
      entered  between  Sirchie  Finger
      Print  Laboratories, Inc.
      and Law Enforcement Associates Corp. dated February 1,
      2002.(2)21.1
            
            List of Subsidiaries
      of the Registrant(1)31.1
            
            Certification  of
      the  Principal  Executive  Officer of
      Law  Enforcement Associates
      Corporation Pursuant to Section 302 of the Sarbanes-Oxley
      Actof
      2002.32.1
            
            Certification  of
      the  Principal  Executive  Officer of
      Law  Enforcement Associates
      Corporation Pursuant to Section 906 of the Sarbanes-Oxley
      Actof
      2002.




22




(1)
Previously filed on the Company's Form 10-SB filed July 11, 2002.


(2)
Previously filed on the Company's Form 10-SB/A filed September 23,
2002.





(b)
Reports on Form 8-K:





None.





Item 14.
Principal Accountant Fees and Services.





Audit
Fees. The aggregate fees billed by our auditors, for professional s ervices
rendered for the audit of the Company's annual financial statements for the years
ended December 31, 2006 and 2007, and for the reviews of the financial statements
included in the Company's Quarterly Reports on Form 10-QSB during the fiscal
years were approximately $65,000 and $58,750 respectively.





Audit
Related Fees.  For the years ended December 31, 2007 and 2006, the Company  incurred  fees  to  auditors  of
$0  and  $0
for  audit  related  fees, respectively.





All
Other Fees.  No other fees were billed by our  auditors for
services rendered
to the Company.





The
Board of Directors has considered whether the provision of non-audit services
is compatible with maintaining the principal accountant's
independence.


23




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.




LAW ENFORCEMENT
      ASSOCIATES CORPORATIONBy:
              /s/ Paul
      FeldmanPaul
      Feldman, PresidentDated:
      April 28, 2008





In  accordance  with the
Exchange  Act, this report has been signed below by the
following  persons on behalf of the  registrant and in the
capacities and on the


dates
indicated.




Signature
              
              Title
              
              Date/s/
      Paul Feldman
              
              President,
      Director  and Principal Executive Officer
              
              April
      28, 2008Paul
      Feldman
              
              Chief
      Financial Officer/s/
      Martin L. Perry
              
              Director
              
              April
      28, 2008Martin
      Perry/s/
      James Lindsey
              
              Director
              
              April
      28, 2008James
      Lindsey/s/
      Anthony Rand
              
              Director
              
              April
      28, 2008Anthony
      Rand/s/ Joseph
      Jordan
              
              Director
              
              April
      28, 2008Joseph
      Jordan


24








BAUM & COMPANY,
P.A.


Certified
Public Accountants


1515
University Drive - Suite 226


Coral
Springs, Florida  33071








REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








To the
Board of Directors and Stockholders of


Law
Enforcement Associates Corporation








We have
audited the accompanying consolidated balance sheets of Law Enforcement
Associates Corporation as of December 31, 2007 and 2006 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years then ended.  These consolidated financial statements are the
responsibility of the Company's management.  Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.





We
conducted our audit in accordance with  the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  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 made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audit provides a reasonable basis
for our opinion.





In our
opinion, the financial statements present fairly  in all material
respects,  the financial position of  Law Enforcement
Associates Corporation as of December 31, 2007 and 2006 and the related
consolidated statements of operations, stockholders’ equity and cash flows for
the years then ended  in conformity with United States generally
accepted accounting principles.





We were
not engaged to examine management’s assertion about the effectiveness of Law
Enforcement Associates Corporation’s internal control over financial reporting
as of December 31, 2007 included in Item 8A (T) of the Company’s Annual Report
on Form 10-K for the Year Ended December 31, 2007 and accordingly, we do not
express an opinion thereon.





/s/ Baum
& Company, PA





Coral
Springs, Florida


April 18,
2008


F-1





LAW
ENFORCEMENT ASSOCIATES CORPORATION
 Consolidated
Balance Sheets
 December
31, 2007 and December 31, 2006
 
 2007
              
              
              2006AssetsCurrent
      assets:Cash
              
              $
              325,244
              
              
              $
              452,124Trade
      accounts receivable (net of allowance for doubtfulaccounts
      of $33,205 and $20,000 at December 31, 2007and
      2006, respectively)
              
              
              713,067
              
              
              
              984,996Inventories
              
              
              1,256,346
              
              
              
              1,241,558Refundable
      income taxes
              
              
              0
              
              
              
              62,264Prepaid
      expense
              
              
              19,083
              
              
              
              0Prepaid
      insurance
              
              
              19,104
              
              
              
              20,505Deferred
      tax asset-current
              
              
              769,338
              
              
              
              242,480Total
      current assets
              
              
              3,102,182
              
              
              
              3,003,927Property
      and equipment, net
              
              
              257,025
              
              
              
              309,185Other
      assets:Intangibles,
      net
              
              
              2,883,542
              
              
              
              2,520,753Deferred
      tax asset less current portion
              
              
              296,147
              
              
              
              193,747Deferred
      charges
              
              
              0
              
              
              
              413Total
      other assets
              
              
              3,179,689
              
              
              
              2,714,913Total
      assets
              
              $
              6,538,896
              
              
              $
              6,028,025
  The
accompanying notes are an integral part of the financial
statements.
 F-2
  LAW
ENFORCEMENT ASSOCIATES CORPORATION
 Consolidated
Balance Sheets (Continued)
 December
31, 2007 and December 31, 2006
   2007
              
              
              2006Liabilities
      and Stockholders' EquityCurrent
      liabilities:Current
      maturities of long-term debt
              
              $
              0
              
              
              $
              40,000Trade
      accounts payable
              
              
              593,515
              
              
              
              377,553Line
      of Credit
              
              
              200,000
              
              
              
              0Accrued
      expenses:Compensation
      and payroll taxes
              
              
              120,304
              
              
              
              104,344Profit
      sharing plan
              
              
              61,796
              
              
              
              36,185Warranty
      provision
              
              
              59,911
              
              
              
              25,000Professional
      fees
              
              
              92,862
              
              
              
              12,024Customer
      deposits
              
              
              24,533
              
              
              
              36,089Total
      current liabilities
              
              
              1,152,921
              
              
              
              631,195Total
      liabilities
              
              
              1,152,921
              
              
              
              631,195Common
      stock, subject to possible redemption
              
              
              1,338,170
              
              
              
              01,200,000
      shares, at redemption valueStockholders'
      equity:Common
      stock, $0.001 par value, 50,000,000 authorized,25,782,433
      issued and outstanding at December 31, 2007,25,252,433
      issued and outstanding at December 31, 2006
              
              
              25,782
              
              
              
              25,252Treasury
      stock at cost, 595 shares of common stock held bythe
      Company
              
              
              (625
              )
              
              
              (625
              ) )Paid
      in capital in excess of par
              
              
              4,995,595
              
              
              
              5,314,112Retained
      earnings/(accumulated deficit)
              
              
              (972,947
              )
              
              
              58,091Total
      stockholders' equity
              
              
              4,047,805
              
              
              
              5,396,830Total
      liabilities and stockholders' equity
              
              $
              6,538,896
              
              
              $
              6,028,025
   The
accompanying notes are an integral part of the financial
statements.
 F-3
  LAW
ENFORCEMENT ASSOCIATES CORPORATION
 Consolidated
Statement of Operations
 For the
Years Ended December 31, 2007 and 2006
 
 2007
              
              
              2006Net
      sales
              
              $
              6,666,479
              
              
              $
              7,546,884Cost
      of sales
              
              
              4,681,694
              
              
              
              4,937,931Gross
      profit
              
              
              1,984,785
              
              
              
              2,608,953Research
      and development
              
              
              227,595
              
              
              
              83,694Operating
      expenses
              
              
              3,406,537
              
              
              
              2,530,623Total
      operating expenses
              
              
              3,634,132
              
              
              
              2,614,317Net
      loss before other income (expense) and benefit provided byincome
      taxes
              
              
              (1,649,347
              )
              
              
              (5,364
              )Other
      income (expense):Interest
      income
              
              
              11,029
              
              
              
              7,917Interest
      (expense)
              
              
              (2,117
              )
              
              
              (8,042
              )Other
      income (expense), net
              
              
              1,431
              
              
              
              1,203Total
      other income (expense)
              
              
              10,343
              
              
              
              1,078Net
      loss before benefit provided by income taxes
              
              
              (1,639,004
              )
              
              
              (4,286
              )Benefit
      provided by income taxes
              
              
              629,258
              
              
              
              1,239Net
      loss
              
              $
              (1,009,746
              )
              
              $
              (3,047
              )Net
      loss per weighted average share, basic
              
              $
              (0.04
              )
              
              $
              (0.00
              )Weighted
      average number of shares
              
              
              25,423,365
              
              
              
              25,199,556
  The
accompanying notes are an integral part of the financial
statements.
  F-4
  
 LAW
ENFORCEMENT ASSOCIATES CORPORATION
 Consolidated
Statement of Stockholders' Equity
 December
31, 2007
 
 Paid
      in Capital
              
              
              Retained
      Earnings/ Capital
              
              
              TotalNumber
      of
              
              
              Common
              
              
              Treasury
              
              
              in
      Excess
              
              
              (accumulated
              
              
              Stockholders'Shares
              
              
              Stock
              
              
              Stock
              
              
              of
      Par
              
              
              deficit)
              
              
              EquityDecember
      31, 2005
              
              
              25,152,433
              
              
              
              25,152
              
              
              $
              -
              
              
              $
              5,240,812
              
              
              $
              61,138
              
              
              $
              5,327,102Common
      stock issued for services
              
              
              100,000
              
              
              
              100
              
              
              
              
              
              
              
              73,300
              
              
              
              
              
              
              
              73,400Common
      stock purchased
              
              
              -
              
              
              
              -
              
              
              
              (625
              )
              
              
              -
              
              
              
              
              
              
              
              (625
              )Net
      loss - year ended Dec. 31 2006
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (3,047
              )
              
              
              (3,047
              )December
      31, 2006
              
              
              25,252,433
              
              
              
              25,252
              
              
              
              (625
              )
              
              
              5,314,112
              
              
              
              58,091
              
              
              
              5,396,830Common
      stock issued for services
              
              
              130,000
              
              
              
              130
              
              
              
              -
              
              
              
              84,110
              
              
              
              -
              
              
              
              84,240Common
      stock issued for AVS
              
              
              375,000
              
              
              
              375
              
              
              
              -
              
              
              
              369,375
              
              
              
              -
              
              
              
              369,750assetsCommon
      stock issued to settle
              
              
              25,000
              
              
              
              25
              
              
              
              -
              
              
              
              24,625
              
              
              
              -
              
              
              
              24,650lawsuitCommon
      stock reclassified from redeemable common stock
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              
              (796,627
              )
              
              
              
              
              
              
              (796,627
              )Change
      in redemption value of
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              
              -
              
              
              
              (21,292
              )
              
              
              (21,292
              )redeemable
      common stockNet
      loss - year ended Dec. 31 2007
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,009,746
              )
              
              
              (1,009,746
              )December
      31, 2007
              
              
              25,782,433
              
              
              $
              25,782
              
              
              $
              (625
              )
              
              $
              4,995,595
              
              
              $
              (972,947
              )
              
              $
              4,047,805
 
 The
accompanying notes are an integral part of the financial
statements.
 
 F-5
 
 LAW
ENFORCEMENT ASSOCIATES CORPORATION
 Consolidated
Statement of Cash Flows
 Years
Ended December 31, 2007 and 2006
  2007
              
              
              2006Cash
      flows from operating activitiesNet
      loss
              
              $
              (1,009,746
              )
              
              $
              (3,047
              )Adjustments
      to reconcile net income (loss) to net cash providedby
      operations:Depreciation
      and amortization
              
              
              257,802
              
              
              
              224,071Impairment
      charge of EDW patents
              
              
              268,290
              
              
              
              -Write-off
      patents-in-process
              
              
              80,079
              
              
              
              -Change
      in allowance for doubtful accounts
              
              
              13,205
              
              
              
              (1,509
              )Change
      in inventory reserves
              
              
              199,864
              
              
              
              -Deferred
      taxes
              
              
              (629,258
              )
              
              
              (27,129
              )Common
      stock issued for services and lawsuit
              
              
              108,890
              
              
              
              73,400(Increase)
      decrease in assets:Trade
      accounts receivable
              
              
              258,724
              
              
              
              (331,641
              )Inventories
              
              
              (214,652
              )
              
              
              (149,101
              )Refundable
      income taxes
              
              
              62,264
              
              
              
              154,556Prepaid
      insurance and other assets
              
              
              (17,682
              )
              
              
              (7,000
              )Increase
      (decrease) in liabilities:Trade
      accounts payable
              
              
              215,962
              
              
              
              (6,481
              )Accrued
      expenses
              
              
              157,320
              
              
              
              (48,280
              )Customer
      deposits
              
              
              (11,556
              )
              
              
              32,249Net
      cash (used in) provided by operating activities
              
              
              (260,494
              )
              
              
              (89,912
              )Cash
      flows from investing activities:Payments
      for deferred charges
              
              
              413
              
              
              
              5,115Expenditures
      for patents
              
              
              -
              
              
              
              (9,743
              )Capital
      expenditures
              
              
              (26,799
              )
              
              
              (110,867
              )Net
      cash (used in) investing activities
              
              
              (26,386
              )
              
              
              (115,495
              )Cash
      flows financing activities:Borrowings
      under line of credit
              
              
              200,000
              
              
              
              250,000Repayments
      on line of credit
              
              
              -
              
              
              
              (250,000
              )Payments
      on long-term debt
              
              
              (40,000
              )
              
              
              (120,000
              )Common
      stock purchased by Company
              
              
              -
              
              
              
              (625
              )Net
      cash (used in) provided by financing activities
              
              
              160,000
              
              
              
              (120,625
              )Net
      increase (decrease) in cash
              
              
              (126,880
              )
              
              
              (326,032
              )Cash
      at beginning of the year
              
              
              452,124
              
              
              
              778,156Cash
      at end of the year
              
              $
              325,244
              
              
              $
              452,124Supplemental
      disclosure of cash flow information:Cash
      paid for interest expense
              
              $
              2,117
              
              
              $
              8,042Cash
      (refunded) for income taxes
              
              $
              -
              
              
              $
              (133,217
              )155,000
      shares of common stock issued for services and lawsuit
              
              $
              108,890
              
              
              $
              -
 
 The
accompanying notes are an integral part of the financial
statements.
  F-6


1.         SIGNIFICANT ACCOUNTING
POLICIES





Organization and
Operations





Law
Enforcement Associates Corporation (originally Academy Resources, Inc.) was
formed on December 3, 2001 when the Company acquired all the outstanding stock
of Law Enforcement Associates, Inc., a New Jersey company, incorporated in 1972,
doing business in North Carolina.





The
operations of the Company consist of manufacturing and providing surveillance
and intelligence gathering products and vehicle inspection equipment. Products
are used by law enforcement agencies, the military, security and correctional
organizations.





Principles of
Consolidation





The
consolidated financial statements include the accounts of Law Enforcement
Associates Corporation and its wholly-owned subsidiaries Law Enforcement
Associates, Inc. and Law Enforcement Associates Holding Company, Inc. All
intercompany transactions have been eliminated in consolidation. The
consolidated statements have been prepared on the accrual basis of accounting in
accordance with generally accepted accounting principles in the United States of
America. Management of the Company has determined that the Company’s operations
are comprised of one reportable segment as that term is defined in SFAS No.131.
Therefore, no separate segment disclosures have been included in the
accompanying notes to the consolidated financial statements.





Fair Value of Financial
Instruments





The
Company’s financial instruments include cash, accounts receivable and accounts
payable. Due to the short-term nature of these instruments, the fair value of
these instruments approximates their recorded value.





Trade Accounts
Receivable





Trade
accounts receivable are carried at their estimated collectible amount. Trade
credit is generally extended on a short-term basis; thus, trade receivables do
not bear interest. The Company reports trade accounts receivable net of an
allowance for doubtful accounts equal to the estimated losses to be incurred.
Estimated losses are based on actual collection experience and management’s
evaluation of the current status of existing trade receivables.





Inventories





Inventories
are stated at the lower of cost or market on the first-in, first-out basis.
Provisions are made to reduce potentially excess, obsolete or slow-moving
inventories to their net realizable value. Costs associated with shipping and
handling of inventory are included in inventory cost and charged to cost of
sales when inventory is shipped.




F-7


1.         SIGNIFICANT ACCOUNTING
POLICIES (Continued)





Inventories
(Continued)





Inventories
consist of the following at December 31, 2007 and 2006:




2007
              
              
              2006Raw
      Materials
              
              $
              625,247
              
              
              $
              494,237Work-in-process
              
              
              90,098
              
              
              
              219,274Finished
      goods
              
              
              541,001
              
              
              
              528,047$
              1,256,346
              
              
              $
              1,241,558




Revenue
Recognition





The
Company recognizes revenues when persuasive evidence of an arrangement exists,
delivery has occurred or services have been rendered, title has transferred, the
price is fixed and collection is reasonably assured. All of the Company’s sales
are final and customers do not have a right to return the product. Most
customers are charged shipping fees, which are recorded as a component of net
sales. Training revenue is recorded as the service is provided.





Product
Warranty





The
Company provides a provision for estimated warranty repairs. The accrued
warranty provision was $59,911 and $25,000 at December 31, 2007 and 2006,
respectively.





Income
Taxes





Deferred
income taxes are provided on a liability method whereby deferred tax assets are
recognized for deductible temporary differences and operating loss and tax
credit carry forwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. 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. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.





Net Income Per
Share





Basic
earnings per share is computed by dividing the Company’s consolidated net income
by the weighted-average number of shares of common stock and common stock
equivalents (primarily outstanding options and warrants). Common stock
equivalents represent the dilutive effect of the assumed exercise of the
outstanding stock options and warrants, using the treasury stock method. There
are no common stock equivalents for the Company at December 31,
2007.





F-8




1.         SIGNIFICANT ACCOUNTING
POLICIES (Continued)





Advertising





The
Company expenses the production costs of advertising as incurred, except for
direct-response advertising, which is capitalized and amortized over its
expected period of future benefits within the calendar year. During the years
ended December 31, 2007 and 2006, advertising costs were $82,312 and $107,400,
respectively. All advertising costs are included in operating expenses in the
accompanying consolidated statement of operations.





Research and
Development





The
Company expenses research and development costs as incurred. The Company
incurred product development expense of $227,595 and $83,694 for the years ended
December 31, 2007 and 2006, respectively.





Use of
Estimates





The
preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the consolidated financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.





2.         PROPERTY AND
EQUIPMENT





Property
and equipment are recorded at cost. Expenditures for major additions and
improvements are capitalized and minor replacements, maintenance, and repairs
are charged to expense as incurred. When property and equipment are retired or
otherwise disposed of, the cost and accumulated depreciation are removed from
the accounts and any resulting gain or loss is included in the results of
operations for the respective periods. Depreciation is computed over the
estimated useful lives of the related assets using the straight-line methods for
financial statement purposes.





The
following is a summary of property and equipment, at December 31, 2007 and
2006:




Useful Life
              
              2007
              
              
              2006Office
      furniture & equipment
              5
      to 7 years
              
              $
              107,623
              
              
              $
              97,447Leasehold
      improvements
              7
      years
              
              
              5,139
              
              
              
              5,138Vehicles
              3
      to 5 years
              
              
              101,129
              
              
              
              84,507Machinery
      & equipment
              5
      to 7 years
              
              
              459,032
              
              
              
              459,032672,922
              
              
              
              646,124Less
      accumulated depreciation
              
              
              
              415,898
              
              
              
              336,939$
              257,025
              
              
              $
              309,185




Depreciation
expense for the years ended December 31, 2007 and 2006 was $78,959 and $59,221,
respectively.





F-9




3.         INCOME
TAXES





In
accordance with SFAS 109, deferred income taxes and benefits are provided for
the results of operations of the Company. The tax effects of temporary
differences and carry-forwards that give rise to significant portion of deferred
tax assets and liabilities consist of the following at December 31, 2007 and
2006:


2007
              
              
              2006Deferred
      tax assets:Inventory
              
              $
              36,646
              
              
              $
              22,431Allowance
      for doubtful accounts
              
              
              12,273
              
              
              
              7,392Accrued
      wages
              
              
              1,416
              
              
              
              3,638Warranty
      provision
              
              
              22,144
              
              
              
              9,240Intangible
      assets
              
              
              386,680
              
              
              
              274,800Federal
      net operating loss of $1,861,028,Expiring
      beginning in 2026
              
              
              632,749
              
              
              
              171,654State
      net economic loss of $1,407,763,Expiring
      beginning in 2019
              
              
              64,110
              
              
              
              28,2481,156,018
              
              
              
              517,403Deferred
      tax (liabilities):Property
      and equipment
              
              
              (41,086
              )
              
              
              (45,530
              )Trade
      name (AID)
              
              
              (49,447
              )
              
              
              (35,646
              )(90,533
              )
              
              
              (81,176
              )Deferred
      tax asset (liability), net
              
              $
              1,065,485
              
              
              $
              436,227




On
January 15, 2008, Raymond James Financial, Inc. through its subsidiary, Sirchie
Acquisition Company, LLC, acquired 51% interest (13,149,334 shares) in Law
Enforcement Associates from Sirchie Finger Print Laboratories, Inc. and John
Carrington. Based on the change in ownership, the Company’s net operating loss
carry forward may be subject to certain limitations in any one
year.





Deferred
taxes have been classified on the consolidated balance sheet as
follows:




2007
              
              
              2006Current
      assets
              
              $
              769,338
              
              
              $
              242,480Non-current
      assets
              
              
              296,147
              
              
              
              193,747$
              1,065,485
              
              
              $
              436,227








F-10


3.         INCOME TAXES
(Continued)





At
December 31, 2007 and 2006, the Company had $0 and $62,264, respectively in
refundable income taxes related to loss carry-backs. The expense (benefit) of
income taxes consists of the following at December 31, 2007 and
2006:




2007
            
            
            2006Current:Federal
            
            $
            -
            
            
            $
            22,781State
            
            
            -
            
            
            
            3,108Deferred
            
            
            -
            
            
            
            25,889Total
            
            
            (629,258
            )
            
            
            40,237$
            (629,258
            )
            
            $
            66,126







A
reconciliation of the statutory federal income tax rate and effective rate is as
follows at December 31:







2007
            
            
            2006Statutory
      federal income tax rate
            
            
            34
            %
            
            
            34
            %State income
      tax – net of federal benefit
            
            
            3
            %
            
            
            3
            %Other
            
            
            4
            %
            
            
            (12
            )%Effective tax
      rate
            
            
            41
            %
            
            
            25
            %







4.         STOCKHOLDERS’ EQUITY
TRANSACTIONS





On May 3,
2007, the Company issued 130,000 shares of restricted common stock valued at
$84,240 to an entity for services.





On
October 16, 2007, the Company completed the acquisition of certain assets of
Advanced Vehicle Systems, LLC, a Florida Limited Liability Company (“AVS”).
The Company purchased all of AVS' designs, drawings, name and intellectual
property rights. The purchase price for the assets acquired was 375,000
shares of the Company’s restricted common stock plus the cost of the usable
inventory. In addition, the Company provided the seller a put option on
1,200,000 shares. This put option gives the seller the right to sell up to
1,200,000 shares back to the Company for $1.25 per share on August 1,
2009.  In addition, the Company issued an additional 25,000 shares of
its common stock to settle a lawsuit which the Wortley’s had filed against the
Company. Subsequently in January 2008, the Company purchased for cash
approximately $129,000 in usable inventory.








F-11














5.         LEASE
COMMITMENTS





Facility





The
Company leased its office and manufacturing facility from Sirchie Finger Print
Laboratories, Inc. (Sirchie).  Rent expense incurred under this lease
for the years ended December 31, 2007 and 2006 was $177,950 and $170,200,
respectively. Subsequent to yearend, the above lease has been
terminated.





On
December 15, 2007, the Company entered into a lease with Zabarsky Investments
Ltd. L.P. We currently lease approximately 6,000 square feet of space for our
recently acquired van division at approximately $4,750 per month. The lease term
is 60 months. Rent expense incurred under this lease for the year ended December
31, 2007 was $4,750.





Effective
March 2008, the Company moved its headquarters from the Youngsville facility and
entered into a lease with Zabarsky Investments Ltd. L.P. We currently lease
approximately 10,000 square feet of space for our new Raleigh, North Carolina
headquarters at approximately $7,900 per month. The lease term is 60
months.





The
following is a schedule by years of future minimum rental payments required
under operating leases that have initial or remaining noncancelable lease terms
in excess of one year as of December 31, 2007:




Year
      ending December 31:2008
            
            $
            144,0832009
            
            
            152,0002010
            
            
            152,0002011
            
            
            152,0002012
            
            
            147,250Later
      years
            
            
            7,917Total
      minimum payments required
            
            $
            755,250




6.         CONCENTRATION OF
RISK





The
Company places its cash in high credit quality financial institutions. During
2007 and 2006 the Company had on deposit funds in excess of the $100,000 Federal
Deposit Insurance Corporation (FDIC) insured limits. At December 31, 2007 and
2006, the Company had $317,468 and $421,121, respectively, on deposit in excess
of the FDIC insured limits.





For the
years ended December 31, 2007 and 2006, sales to one customer accounted for 10%
and 16% of total sales, respectively.







F-12









7.         INTANGIBLE
ASSETS





Patent
costs include the acquired costs of obtaining patents. Costs for patents are
capitalized and amortized over the estimated useful life of the patents, usually
15 years, using the straight-line method. In the event a patent is superseded,
the unamortized cost will be written off immediately. Trade names and
drawings/designs are tested at least annually for impairment under SFAS No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets”. The Company
has determined that no impairment exists on the trade name and drawings/designs
based on the undiscounted future cash flows generated by these
assets.





During
2007, the Company recognized a non-cash charge of $268,290 on our patents
related to the stun pistol. This decision was based upon an analysis of
recoverability and the fact that the patents have provided no income to date.
However, we are
currently   negotiating   with   several   companies
to license the manufacture and sale of that weapon and to sell our
patents.





Intangible
assets consist of the following at December 31, 2007 and 2006:




Estimated
      Life
              
              
              2007
              
              
              
              2006Patents
              15
      years
              
              $
              747,961
              
              
              $
              1,016,250Trade
      name
              25
      years
              
              
              1,400,000
              
              
              
              1,400,000Drawings/designs
              10
      years
              
              
              411,000
              
              
              
              411,000AVS
      Marketing List
              12
      years
              
              
              470,000
              
              
              
              0AVS
      Engineered Drawings
              15
      years
              
              
              230,000
              
              
              
              0AVS
      Trade Name
              15
      years
              
              
              190,000
              
              
              
              03,448,961
              
              
              
              2,907,329Less
      accumulated amortization
              
              
              
              565,419
              
              
              
              386,576Total
      intangibles, net
              
              $
              2,883,542
              
              
              $
              2,520,753





Amortization
expense for the years ended December 31, 2007 and 2006 was $178,843 and
$164,850, respectively. Estimated future amortization expense is as follows at
December 31, 2007:




Year
              
              Amount2008
              
              $
              232,0172009
              
              
              232,0172010
              
              
              232,0172011
              
              
              232,0172012
              
              
              232,017Future
      Years
              
              
              1,723,459$
              2,883,542








F-13









8.         LINE OF
CREDIT





The
Company has a $750,000 line of credit with a bank, which bears interest at LIBOR
(4.60% and 5.32% at December 31, 2007 and 2006, respectively) plus
3%.  Substantially all the assets of the Company are pledged to secure
the line. The line requires maintenance of a minimum net worth of $3.5 million
and matures in June 2008. At December 31, 2007 the Company had $200,000
outstanding on the line of credit. There were no borrowings under the line
during the year ended December 31, 2006. At December 31, 2007, the Company was
in compliance with all covenants.





9.         NOTE
PAYABLE





In
September 2004, the Company issued a $340,000 note payable as part of the AID
asset purchase. The note required 34 monthly payments of $10,000 and had a
deferred interest rate of 5%. The note balance as of December 31, 2006 was
$40,000 and was paid in full in 2007.





10.       PROFIT SHARING
PLAN





The
Company has a 401(k) Profit Sharing Plan (the “Plan”) to provide retirement
benefits for its eligible employees. Eligible employees may contribute up to the
maximum annual amount as set periodically by the Internal Revenue Service. The
Plan provides for a discretionary employer match of up to 6% of the employees’
compensation. Employer discretionary matches totaled $61,796 and $36,185 for the
years ended December 31, 2007 and 2006, respectively. Additionally, the Plan
provides for a discretionary profit sharing contribution. Such contributions to
the Plan are allocated among eligible participants in the proportion of their
salaries to the total salaries of all participants. The Company made no profit
sharing contributions for both the years ended December 31, 2007 and
2006.





11.       RELATED PARTY
TRANSACTIONS





For the
year ended December 31, 2007, the Company paid $343,568 to Sirchie for purchases
and received $2,045 from Sirchie for sales. At December 31, 2007, the Company
had $1,847 in accounts payable due to Sirchie. During 2007 the Company entered
into an agreement to pay consulting fees to a major stockholder of both Sirchie
and the Company. Such fees were $5,000 for the year ended December 31,
2007.





The
Company leased its office and manufacturing facility from Sirchie Finger Print
Laboratories, Inc.  Rent expense incurred under this lease for the
years ended December 31, 2007 and 2006 was $177,950 and $170,200,
respectively.










F-14







12.       ROYALTY
COMMITTMENTS





In August
2006, the Company obtained a license to use certain marks of a licensor in
connection with products that the Company sells. The agreement is set to expire
on April 30, 2010 and calls for royalties based on the number of products sold.
The agreement further specifies that the Company is obligated to pay the
licensor minimum guaranteed royalties as follows at December 31,
2007:




2008
              
              $
              60,9522009
              
              
              126,6672010
              
              
              50,000Total
              
              $
              237,619





Royalty
expense for the year ended December 31, 2007 was $26,612.





13.       REDEEMABLE COMMON
STOCK





On
October 16, 2007, the Company acquired certain assets of Advanced Vehicle
Systems, LLC, a Florida Limited Liability Company (“AVS”). The Company
purchased all of AVS' designs, drawings, name and intellectual
property rights. As part of the purchase price, the Company provided the
seller a put option on 1,200,000 shares. This put option gives the seller
the right to sell up to 1,200,000 shares back to the Company for $1.25 per
share on August 1, 2009.





The
Company accounts for redeemable common stock in accordance with Emerging Issue
Task Force D-98 “Classification and Measurement of Redeemable Securities.”
Securities that are redeemable for cash or other assets are classified outside
of permanent equity if they are redeemable at the option of the holder. The
Company accretes changes in the redemption value over the period from the date
of issuance using the interest method.





14.       CONSULTING
AGREEMENTS





On May 3,
2007, the Company entered into an agreement with an entity to act as the
placement agent and financial advisor to the Company. This entity will identify
prospective purchasers of debt and/or equity securities to be issued by the
Company and prospective companies to be purchased or acquired by the Company
either by debt and/or equity securities or by assets acquired by the Company.
Pursuant to the terms of the agreement, the entity will be compensated for
successful security placements and services rendered in connection with
acquisitions by the Company upon the closing of each sale of securities by the
Company. This entity shall act as the Company’s exclusive placement agent and
exclusive financial advisor for a period of 120 days beginning on the effective
date of the agreement. Thereafter, the entity shall act as the Company’s
non-exclusive placement agent and non-exclusive financial advisor until
terminated by either party upon 10 days notice to the other party.





Upon
execution of this agreement the Company issued 130,000 shares of restricted
common stock for the entity’s due diligence and advisory efforts (see Note 4).
Additionally, the Company shall pay this entity a monthly fee of $5,000 until
the agreement is terminated. For the twelve months ended December 31, 2007, the
Company incurred $40,000 in consulting fees.










F-15







In July
2007, the Company entered into an agreement with an entity to act as its public
relations firm in an effort to market the new Graffiti Cam. The term of the
agreement is for one year commencing on August 1, 2007. The Company will pay a
monthly fee of $20,000 plus out-of-pocket costs until the agreement is
terminated. The agreement can be terminated by either party with 90 days advance
notice to the other party. For the twelve months ended December 31, 2007, the
Company recognized $103,760 in consulting fees. Subsequent to year-end, this
agreement has been terminated.





15.       NEW ACCOUNTING
PRONOUNCEMENTS







In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements(“SFAS No. 157”), which defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles and expands
disclosures about fair value measurements. SFAS No. 157 is effective for
fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. The Company is currently assessing the impact the adoption
of SFAS No. 157 will have on its consolidated financial position and
results of operations.





In
June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income
Taxes: An Interpretation of FASB Statement No. 109(“FIN
No. 48”). This interpretation clarifies the accounting for uncertainty in
income taxes recognized in an entity’s financial statements in accordance with
SFAS No. 109. FIN No. 48 prescribes a recognition threshold and
measurement principles for the financial statement recognition and measurement
of tax positions taken or expected to be taken on a tax return. This
interpretation is effective for fiscal years beginning after December 15,
2006 and as such, the Company will adopt FIN No. 48 on January 1,
2007. The Company does not expect the adoption of FIN No. 48 to have a
material effect on its consolidated financial position and results of
operations.





In
February 2007, the FASB issued SFAS No., 159, The Fair Value Option for Financial
Assets and Financial Liabilities, including an amendment to FASB Statements No.
115(“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure
many financial instruments, and certain other items, at fair value that are not
currently required to be measured at fair value. SFAS No. 159 is effective as of
the beginning of an entity’s first fiscal year that begins after November 15,
2007; however early adoption is permitted. The Company is currently assessing
the impact the adoption of SFAS No. 159 will have on its consolidated financial
position and results of operations.





In
December 2007, the Financial Accounting Standards Board (“FASB”) issued FASB
Statements No.141 (revised 2007), “Business Combinations” (“FAS 141(R)”) and No.
160, “Noncontrolling Interests in Consolidated Financial Statements” (“FAS
160”). These standards aim to improve, simplify, and converge internationally
the accounting for business combinations and the reporting of noncontrolling
interests in consolidated financial statements. The provisions of FAS 141 (R)
and FAS 160 are effective for the fiscal year beginning after December 15, 2008.
We are currently evaluating the provisions of FAS 141(R) and FAS
160.





16.       SUBSEQUENT
EVENT







On
January 15, 2008, Raymond James Financial, Inc. through its subsidiary, Sirchie
Acquisition Company, LLC, acquired 51% interest (13,149,334 shares) in Law
Enforcement Associates from Sirchie Finger Print Laboratories, Inc. and John
Carrington.