**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, 2006
 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)
 100
                      Hunter Place, Youngsville, North
                      Carolina
                  27596(Address
                      of principal executive
                      offices)
                  (Zip
                      Code)
 
 (919)
          554-4700
 (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. [ ]
 
  
   
 Indicate
          by check mark whether the registrant is a shell company (as defined in
          Rule
          12b-2 of the Exchange Act)
 
 Yes
          [ ]
          No [X]
 
 Our
          revenues for our most recent fiscal year were $7,546,884.
 
 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
          $7,938,088 as of March 19, 2007 based on the average bid and asked price
          of
          $0.80 per share as of that date.
 
 There
          were 25,152,433 shares of common stock, $.001 par value, outstanding as
          of March
          20, 2007.
 
 
 
 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 Bloodhound
          Global Positioning Tracking System, which is a global positioning tracking
          system. The Bloodhound 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 Bloodhound 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 Bloodhound 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
          June
          3, 2004, we entered into two separate and distinct agreements to acquire
          assets.
          The first agreement was between us and Audio Intelligence Devices ("AID"),
          Inc.,
          a privately held manufacturer of electronic surveillance equipment to law
          enforcement and government agencies. Pursuant to that agreement, we purchased
          some of AID's inventory and equipment for a purchase price of $540,000,
          payable
          $200,000 in cash, and $340,000 payable over 34 months in increments of
          $10,000
          per month.
 
 In
          a separate
          transaction, we acquired surveillance equipment from a third party. The
          surveillance equipment will be integrated into our business. We paid the
          third
          party 2,400,000 shares of our restricted redeemable common stock in exchange
          for
          drawings and the trade name of "AID".
 
 On
          September 14, 2004, we closed on two separate and distinct agreements to
          acquire
          certain patents which relate to Less Lethal, Electrical Discharge Weapons
          ("EDW"). The first was agreement was between us and James F. McNulty, Jr.
          ,
          whereby in exchange for 750,000 shares of our restricted common stock,
          we
          acquired patents which relate to EDW and more specifically a method and
          apparatus for increasing the effectiveness of the electrical discharge
          for such
          weapons. The second agreement was with Yong S. Park whereby in exchange
          for
          750,000 shares of our restricted common stock, we will acquired certain
          patents
          which relate to EDW, including a guard propulsion system for a remote electrical
          discharge weapon. In addition, we agreed to issue James F. McNulty, Jr.,
          an
          additional 20,000 shares of our restricted common stock in exchange for
          molds
          which he had already developed which relate to EDW. To further the development
          of the EDW, we also entered into consulting agreements with James McNulty,
          Sr.,
          and John Chuddy, II whereby they agreed to assist us in the development
          and
          manufacturing design of the EDW.
 
 
 3
 
 Our
          products are marketed under brand names such as Audio Intelligence Devices(AID)
          Bloodhound 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 Youngsville, 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 2007 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.
 
 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
          participate in the law enforcement and global security products industries
          through the manufacture of surveillance and intelligence gathering security
          products marketed to military, law enforcement, security and corrections
          personnel. The two types of products that we sell can be defined as two
          separate
          business groups, which include the surveillance equipment group and the
          under
          vehicle inspection system ("UVIS") group. The first group or the surveillance
          equipment component is primarily marketed to law enforcement agencies for
          undercover police work. The second group or the UVIS component, which can
          be
          marketed to a variety of military, law enforcement, security and corrections
          personnel, is primarily marketed and sold to the U.S. federal government
          to
          secure its facilities such as military bases, government complexes and
          high
          visibility areas in order to prevent terrorist attacks. Increasingly, law
          enforcement agencies have recognized the need for our products and services
          to
          assist them in surveillance operations in order to protect their communities
          from the risks associated with terrorism, physical attacks, threats of
          violence,
          white-collar crime, fraud and other criminal operations or
          enterprises.
 
 4
 Growth
          Strategy
 
 The
          following elements define our growth strategy:
 
 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
          commence to sell other manufacturers security related products that the
          Company
          feels will be complimentary to our existing product offering.
 
 
 Our
          sales
          force consists of 15 company employees who are each responsible for a
          geographical area of the United States which also includes 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 2007. The company also
          feels
          that this new sales force and will be more aggressive in entering new law
          enforcement markets
 
 Our
          new
          sales force will continue capitalize on the companies historical exposure
          to Law
          Enforcement agencies. Our excellent relationships with law enforcement
          agencies
          is a key element when introducing new products to market.
 
 Expand
          Distribution Network and Product Offerings.
 
 We
          will
          continue to leverage our distribution network by expanding our range of
          branded
          law enforcement equipment by investing in the development of new and enhanced
          products which complement our existing products. This will continue to
          be the
          trend in 2007. LEA has several law enforcement specific products that will
          be
          introduced in the second quarter of 2007. We also believe that as a result
          of
          our acquisition of the AID name, logo and designs that it continues to
          further
          broadened our product line and enabled us to strengthen our relationship
          with
          law enforcement agencies and other end users.
 
 We
          are
          still in the process of developing a less lethal weapon (Stun Pistol) and
          have
          completed proto types of it. We are currently negotiating with several
          companies
          to license the manufacture and sale of that weapon. 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.
 
 5
 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 Bloodhound Global Positioning tracking system
          and
          the Under Vehicle Inspection System. Each of our products may be manufactured
          to
          each of our clients' specifications. The following is a summary of the
          surveillance products that we manufacture and sell:
 
 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.
 
 LEA
          BLOODHOUND GLOBAL POSITIONING TRACKING SYSTEM(TM) utilizes global positioning
          system technology in order to provide surveillance operatives the ability
          to
          conduct discrete vehicle tracking and monitoring. The global positioning
          system
          is integrated with a cellular telephone and records longitude and latitude
          data
          points anywhere in the United States. A surveillance operative, after affixing
          the Bloodhound to a vehicle, can contact the Bloodhound Global Positioning
          System through any telephone and track its movements in real time or download
          the data points at predetermined intervals. The Bloodhound Global Positioning
          readings are saved along with time and date, which can then be superimposed
          onto
          mapping software, which may be utilized by a standard computer. The software
          will provide a "track" of where and when a target vehicle has been. The
          Bloodhound Global Positioning is limited in that anagent will not be able
          to
          track a target vehicle when the vehicle is outside of cell phone coverage.
          However, all data is saved and can be retrieved once the target vehicle
          re-enters cell phone coverage. This device can be mounted covertly on a
          target
          vehicle, and measures a compact size of 3"x4" x1.5".
 
 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.
 
 6
 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.
 
 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
   7
 
 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
  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.
 8
  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.
 
 Customers
 
 The
          primary end users of our products are federal, state and local law enforcement
          agencies, local police departments, state corrections facilities, U.S.
          and
          allied militaries, highway patrols, sheriffs' departments 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
          eleven 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.
 
 9
 Product
          Manufacturing and Raw Materials
 
 All
          final
          assembly of our products is completed at our facility located in Youngsville,
          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.
 
 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 manufacturer 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 2007.
 
 
 We
          are in
          the continuing process of developing a EDW weapon, and as a result, if
          we sell
          the EDW directly,we anticipate that we will come 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 sell 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 Bloodhound Global
          Positioning Tracking System(TM)." Law Enforcement Associates will continue
          to
          trademark all new product offering.
 
 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
 
 10
 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 2002. 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
          27, 2007, we have a total of approximately 35 employees, of which approximately
          15 were employed within the sales and marketing area and approximately
          20 were
          employed in the manufacturing area. None of our employees are represented
          by a
          labor union. We believe that our employee relations are
 good.
 
 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 currently
          lease approximately 16,000 square feet of space for our Youngsville, North
          Carolina, headquarters at approximately $14,183 per month. The lease is
          automatically renewable for periods of one-year unless either of the parties
          provides a written notice of termination no later than 120 days prior to
          the end
          of the term or renewal term. If our current lease is terminated or not
          renewed
          we believe we will be able to lease similar premises at comparable prices.
          Sirchie owns approximately 33.1% of our common stock. Mr. Carrington, a
          majority
          shareholder, serves as the President, Chief Executive Officer and a director
          of
          Sirchie and also owns 69.1% of its outstanding shares of
          commonstock.
 
 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.
 
 No
          matter
          was submitted to a vote of security holders during the fourth quarter of
          the
          current fiscal year through the solicitation of proxies or
          otherwise.
 
 11
 PART
          II
 
 ITEM
          5.
          MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
          MATTERS.
 
 PRICE
          RANGE OF COMMON EQUITY
 
 Our
          common
          stock is currently traded on the American Stock Exchange (the "OTCBB"),
          under
          the symbol "AID." Our stock commenced trading on the American Stock Exchange
          on
          July 15, 2005. Prior to that, the Company's common stock was traded under
          the
          symbol LENF on the Over-The-Counter-Bulletin-Board. The following table
          sets
          forth, for the fiscal quarter indicated, the high and low closing price
          per
          shares for the common stock as reported by either the American Stock Exchange
          or
          the Over-The-Counter-Bulletin-Board.
   2005
                  
                  $
                  
                  $First
                      Quarter
                  
                  12.70
                  
                  3.60Second
                      Quarter
                  
                  4.55
                  
                  2.00Third
                      Quarter
                  
                  5.15
                  
                  1.68Fourth
                      Quarter
                  
                  3.25
                  
                  1.512006First
                      Quarter
                  
                  3.00
                  
                  1.51Second
                      Quarter
                  
                  1.80
                  
                  0.73Third
                      Quarter
                  
                  1.60
                  
                  0.80Fourth
                      Quarter
                  
                  1.34
                  
                  0.80
 The
          per
          share closing sales price of the common stock as reported by the American
          Stock
          Exchange on March 26, 2007, (the date of the last reported sale) was
          $0.77.
 
 12
 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, 2006 Compared to Year Ended December
          30, 2005
 
 Revenues
 
 Revenues
          for the year ended December 31, 2006, were $7,546,884 as compared to $8,157,390
          for the year ended December 31, 2005, which represents a decrease of $610,506
          (7.5%). The reason for the decrease in revenues was due to reduced funding
          to
          state and local law enforcement agencies due to the increased Federal funding
          for the war on terror. Despite this, in 2006, we received an additional
          order
          from the Federal Government for Equipment and training in the approximate
          amount
          of $638,000. While we received this order in 2006, and the equipment in
          the
          order was completed it was not recorded in our 2006 revenues because we
          were
          waiting for government scheduling of that training. That scheduling has
          now
          occurred and will be recorded in our first quarter revenues of 2007. Thus
          we
          believe our decrease in revenues was more attributable to the timing issues
          and
          we believe our 2007 sales will reflect an increase over our 2006 sales
          due to
          our increase sales and marketing plans.
 
 Costs
          of
          Goods Sold
 
 Cost
          of
          Goods Sold decreased by $229,602 (4.4%) to $4,937,931 for 2006 as compared
          to
          $5,167,533 for 2005. As a percentage of net sales, cost of goods sold increased
          by 2.1% to 65.4% of net sales in 2006 compared to 63.4% of net sales in
          2005.
 
 
 13
 Gross
            Margin
 Gross
          margins
          for the year ended December 31, 2006 decreased $380,904, or 12.7%, as compared
          to 2005. As a percentage of net sales, gross margin declined to 34.6% in
          2006
          from 36.7% in 2005. The decline in margin percentage was mainly attributable
          to
          increased purchase costs from our vendors.
 
 Operating
          Expenses
 
  For
          the
          year ended December 31, 2006, Operating Expenses, including services and
          compensation paid for with stock ($73,400) and research and development
          ($83,694) were $2,614,317 as compared to $3,381,440 in 2005, a decrease
          of
          $767,123(22.7%) . The decrease is mainly attributable to the decrease of
          $424,190 paid for services and compensation paid with stock and research
          and
          development. All other operating expenses exclusive of the above stock
          compensation and research and development totaled $2,457,223, a decrease
          of
          $342.933 or 12.2% less than the $2,800,156 incurred in 2005. Based on net
          revenue percentages these other operating expenses were 32.6% of net sales
          in
          2006 compared to 34.3% of net sales in 2005. We attribute this to the
          elimination of our outside sales representatives which changed the compensation
          to our sales representative to a base salary as opposed to commissions.
          We
          believe that the continued implementation of this plan will continue to
          reduce
          the commissions paid by us and increase our sales in 2007.
  Net
          Loss
 
 Our
          net
          loss for the year ended December 31, 2006 was $3,047 as compared to a net
          loss
          of $281,608 for the year ended December 31, 2005, which represented a decrease
          in our loss of $278,559. Our net loss per weighted average share was $.00
          for
          the year ended 2006, as compared to a net loss of $.01 per weighted average
          share for 2005. In 2007 we are continuing in our policy to reduce selling
          expenses with our new sales staff and commission structure and also will
          focus
          on any possible reductions in fixed and variable costs in both cost of
          goods
          sold and operating expenses. With these policies in effect for an entire
          year,
          we anticipate, but cannot guarantee, that we will have an overall profit
          for the
          year.
 
 
 Liquidity
          and Capital Resources
 
 At
          December 31, 2006, we had working capital of $2,372,858 as compared with
          $2,232,622 at December 31, 2005, an increase of $140,236.
 
 At
          the
          end of 2006 we had a cash balance of $452,124. We have a line of credit
          with
          Wachovia Bank in the amount of $750,000. We have no encumbrance on that
          line.
 
 During
          fiscal 2006, we paid down and eliminated our long term debt. As such, we
          can now
          have additional funds available for our capital needs and operations. We
          believe
          we will be able to finance our operations and any capital expenditures
          we incur
          in 2007 with our cash on hand and cash flow.
 
 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
          effect our long and short term liquidity.
 
 
 14
 
 Research
          and Development
 
 In
          fiscal
          2066, we spent $83,694 on research and development. The majority of these
          funds
          were spent on continued research and development of our Lethal, Electrical
          Discharge Weapons (“EDW”). We expect to continue to expend funds on the research
          and development on our EDW. 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.
 
 FUTURE
          EVENTS
 
 The
          Company believes that it will experience revenue growth in 2007. We will
          continue to market our current diverse product line and are also in the
          process
          of developing additional products which we intend to introduce in the market
          place in 2007. A major concern for the Company is which direction we will
          take
          with respect to our EDW. Our prototype is ready and we can commence
          manufacturing and marketing the EDW in the second quarter of 2007. We have
          been
          restrained from taking this action due to the overwhelming volume of litigation
          over the use of EDW’s which has sprung up over the last two years. As a result
          of this litigation, we are studying other alternatives on how best to proceed
          with this. In addition to direct manufacturing and selling our EDW, we
          are
          exploring the possibility of licensing the product and also the possibility
          of
          selling our patents. As of this date, no decision has been made on which
          direction the Company will take with respect to its EDW.
 
 In
          2006,
          we entered entered into a licensing agreement with Smith & Wesson which
          trades on NASDAQ under the symbol SWHC. To date, we believe the program
          with
          S&W has been a success and we are looking to expand that relationship in
          2007.
 
 
 15
 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.
          CONTROLS AND PROCEDURES
 
 Under
          the
          supervision and with participation of the Company's management, including
          its
          principal Executive Officer and principal former Financial Officer, the
          Company
          in 2006 conducted an evaluation that the effectiveness of its disclosures
          in
          controls and procedures as defined in 13(a)-15(e) and 15(d)-15(e) under
          the
          Securities Exchange Act of 1934 as Amended as of the end of the period
          covered
          by this report. Based on this evaluation and implementing the procedures
          and
          controls the Company's principal Executive Officer and former Principal
          Financial Officer, concluded as of the evaluation date that the Company's
          disclosure controls and procedures were not effective for the entire period
          covered by certain reports in 2005. After the quarter ending December 31,
          2005,
          there were improvements in the Company's internal control of financial
          reporting
          that had a material effect on the Company's internal control over finance
          reporting.
 
  
 16
 
 Evaluation
          of disclosure controls and procedures
  After
          the
          quarter ended December 31, 2005, we carried out an evaluation of the
          effectiveness of the design and operation of its disclosure controls and
          procedures pursuant to Exchange Act Rule 13a-14. This evaluation was done
          under
          the supervision and with the participation of our Principal Executive Officer
          and former Principal Financial Officer. Based upon the evaluation noted
          above,
          we have now concluded that our current disclosure controls and current
          procedures are effective As required by Exchange Act Rule 13a-15(b), we
          carried
          out an evaluation, under the supervision and with the participation of
          Paul
          Feldman, our Chief Executive **** Officer
          and interim Chief Financial Officer, of the effectiveness of the design
          and
          operation of our disclosure controls and procedures as of December 31,
          2006.
 
 The
          purpose of disclosure controls is to ensure that information required to
          be
          disclosed in our reports filed with the SEC is recorded, processed, summarized
          and reported within the time periods specified in the SEC’s rules and forms.
          Disclosure controls are also designed with the objective of ensuring that
          such
          information is accumulated and communicated to our management, including
          Paul
          Feldman, to allow timely decisions regarding required disclosure. The purpose
          of
          internal controls is to provide reasonable assurance that our transactions
          are
          properly authorized, our assets are safeguarded against unauthorized or
          improper
          use and our transactions are properly recorded and reported to permit the
          preparation of our financial statements in conformity with generally accepted
          accounting principles.
  Our
          management does not expect that our disclosure controls or our internal
          controls
          will prevent all errors and all fraud. A control system, no matter how
          well
          conceived and operated, can provide only reasonable rather than absolute
          assurance that the objectives of the control system are met. The design
          of a
          control system must also reflect the fact that there are resource constraints,
          with the benefits of controls 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 the company have been detected. These inherent limitations
          include
          the realities that judgments in decision-making can be faulty and that
          simple
          errors or mistakes can occur. 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 control. The design of any system of controls
          also is
          based in part upon certain assumptions about the likelihood of future events,
          and there can be no assurance that any design will succeed in achieving
          its
          stated goals under all potential future conditions; over time, controls
          may
          become inadequate because of changes in conditions, or the degree of compliance
          with the policies or procedures may deteriorate. Because of the inherent
          limitations in a cost-effective control system, misstatements due to error
          or
          fraud may occur and not be detected.
 
 17
 Our
          internal controls are evaluated on an ongoing basis by personnel in our
          organization. The overall goals of these various evaluation activities
          are to
          monitor our disclosure and internal controls and to make modifications
          as
          necessary, as disclosure and internal controls are intended to be dynamic
          systems that change (including improvements and corrections) as conditions
          warrant. Part of this evaluation is to determine whether there were any
          significant deficiencies or material weaknesses in our internal controls,
          or
          whether we had identified any acts of fraud involving personnel who have
          a
          significant role in our internal controls. Significant deficiencies are
          control
          issues that could have a significant adverse effect on the ability to record,
          process, summarize and report financial data in the financial statements.
          Material weaknesses are particularly serious conditions where the internal
          control does not reduce to a relatively low level the risk that misstatements
          caused by error or fraud may occur in amounts that would be material in
          relation
          to the financial statements and not be detected within a timely period
          by
          employees in the normal course of performing their assigned functions.
 
 Based
          upon this evaluation, our Chief Executive Officer and Interim Chief Financial
          Officer concluded that, subject to the limitations noted above, both our
          disclosure controls and procedures and our internal controls and procedures
          are
          effective in timely alerting them to material information required to be
          included in our periodic SEC filings and that information required to be
          disclosed by us in these periodic filings is recorded, processed, summarized
          and
          reported within the time periods specified in the SEC’s rules and forms and that
          our internal controls are effective to provide reasonable assurance that
          our
          financial statements are fairly presented in conformity with generally
          accepted
          accounting principles.
 
 There
          have been no changes in our internal controls over financial reporting
          that
          occurred during our last fiscal quarter that have materially affected,
          or are
          reasonably likely to materially affect, our internal control over financial
          reporting
 
 ITEM
          8A
 
 None.
 
 
 18
 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, 2006, are as follows:
  Name
                  
                  Age
                  
                  PositionPaul
                      Feldman
                  
                  50
                  
                  Director,
                      President, CEO, CFOAnthony
                      Rand
                  
                  67
                  
                  DirectorMartin
                      Perry
                  
                  46
                  
                  DirectorGeneral
                      James Lindsay
                  
                  74
                  
                  DirectorJoseph
                      Jordan
                  
                  59
                  
                  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.
  John
          H.
          Carrington resigned as a director of the Company as of April 14, 2005 but,
          still
          remains the Company's majority shareholder. Mr. Carrington is the President,
          Chief Executive Officer, director and 69.1% shareholder of Sirchie Finger
          Print
          Laboratories, Inc., which owns approximately 41.8% of our company. Senator
          Carrington has served as a member of the North Carolina State Senate from
          1995
          to 2005. Mr. Carrington earned a degree in forensic sciences from the American
          Institute of Applied Sciences in 1960 as well as a mechanical engineering
          degree
          from Pennsylvania Military College (Widener College) in 1962. Mr. Carrington
          also served in the U.S. Army, 3rd Airborne Training School, 1 st Special
          Troops Brigade from 1953 to 1955. Mr. Carrington is a member of the
          International Association of Police Chiefs, the International Association
          of
          Identification and the International Narcotics Officers Association. In
          December
          2005, Mr. Carrington plead guilty to a violation of Title 50, United States
          Code, Sections 1702 and 1705(b). He had been charged with exporting crime
          control equipment to the People's Republic of China without required
          authorization from the Secretary of Commerce between September 2000 and
          March
          20oky04. Mr. Carrington was ordered to pay a $850,000 fine and he also
          gave up
          his exporting privileges for five years. It must be noted, however, that
          the
          items exported are now permitted to be exported to China without any prior
          authorization. Since
          his
          resignation from the Board of Directors, Mr. Carrington had not been active
          in
          the management of the Company.
 
 19
 Anthony
          Rand has served as a director of our company since May 2003. Mr. Rand is
          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. on our as an additional
          member of the Board of Directors of the Company. Mr. Jordan received a
          B.S. in
          Accounting from Villanova University 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. In addition, the Company adopted a formal Audit Committee Charter.
 
 20
 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. The board of directors does not have any committees. 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
          and
          Joseph Jordan 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
 
 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.
 
 21
 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, 2006 paid by us to our President, and all other executive
          officers whose total cash compensation exceeded $100,000 in the year ended
          December 31, 2006 (collectively, the "Named Executive Officers").
  SUMMARY
          COMPENSATION TABLE
  Annual
                    Compensation
                
                
                
                Long-Term
                    CompensationName
                    and Principal Position
                
                
                Year
                
                
                Salary
                  $
                
                
                Bonus
                  $
                
                
                Other
                  $
                
                
                Restricted
                    Stock Award $
                
                
                Securities
                    Underlying Options/SAR's $
                
                
                LTIP
                    Pay Outs
                  $
                
                
                All
                    Other $Paul
                    Feldman
                
                
                2006
                
                $
                136,684
                
                $
                -0-
                
                $
                2,000
                
                $
                -0-
                
                $
                -0-
                
                $
                -0-
                
                $
                -0-President
                
                
                2005
                
                $
                134,940
                
                $
                -0-
                
                $
                -0-
                
                $
                172,500
                
                $
                -0-
                
                $
                -0-
                
                $
                -0-2004
                
                $
                127,794
                
                $
                -0-
                
                $
                -0-
                
                $
                400,000
                
                $
                -0-
                
                $
                -0-
                
                $
                -0-
 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 15, 2007, 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 Beneficial Owner
                  
                  Amount
                      of Beneficial Ownership
                  
                  Percentage
                      ofBeneficial
                      OwnershipJohn
                      H. Carrington (2)*
                  
                  14,448,368
                  
                  57.443%Paul
                      Feldman (1) (3)*
                  
                  491,146
                  
                  1.953%Anthony
                      Rand (1)*
                  
                  125,334
                  
                  0.498%Martin
                      L. Perry (1)*
                  
                  111,000
                  
                  0.441%James
                      J. Lindsay (1)
                  
                  52,975
                  
                  0.211%Joseph
                      Jordan (1)
                  
                  1,000
                  
                  0.004%All
                      Directors & Executive Officers
                  
                  781,455
                  
                  3.107%as
                      a Group (5 persons)
   *
          c/o Law
          Enforcement Associates Corporation, 100 Hunter Place, Youngsville, North
          Carolina 27596
 
 (1)  Director
          of our company.
 
 (2)  Includes
          8,333,333 shares owned by Sirchie Finger Print Laboratories, Inc. ("Sirchie")
          a company controlled by Mr. Carrington who serves as the President, yupChief
          Executive Officer and a director and who also owns 69.1% of its outstanding
          shares of common stock.
 
 (3)
          Officer of our company.
 
  22





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 25,152,433 shares of common stock outstanding as of April
      12, 2006, 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.


31.2
            Certification
                of the Principal Accounting 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.  32.2
            Certification of the Principal Accounting
              Officer of Law EnforcementAssociates
              Corporation Pursuant to Section 906 of the Sarbanes-Oxley Actof
              2002.


99.1
            Code
                of Ethics and Business Conduct of Officers, Directors and Employees
of
                Law Enforcement Associates Corporation
                (3)





(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.


(3)
      Previously filed on the Company's Form 10-KSB filed March 31, 2003.






23





(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 services
      rendered for the audit of the Company's annual financial statements for the
      years
      ended December 31, 2005 and 2004, and for the reviews of the
      financial


statements
      included in the Company's Quarterly Reports on Form 10-QSB during the fiscal
      years were $43,750 and $31,600 respectively.





Audit
      Related
      Fees. For the years ended December 31, 2006 and 2005, 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.





24




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 CORPORATIONDate: March
              30, 2007
            By:
            /s/ Paul
              FeldmanPaul
              FeldmanPresident











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
              
              Paul
                Feldman
            President, Director and
              Principal
                Executive Officer
              Chief
                Financial Officer
            March 30, 2007/s/Martin L. Perry
              Martin
                Perry
            Director
            March 30, 2007/s/ James Lindsey
              James Lindsey
            Director
            March 30, 2007/s/ Anthony Rand
              Anthony
                Rand
            Director
            March 30, 2007/s/ Joseph Jordan
              Joseph
                Jordan
            Director
            March
              30, 2007







25




**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, 2006 and 2005 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,
        2006 and 2005 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.
 
 
 /s/
        Baum
& Company, PA
 
 Coral
        Springs, Florida
 March
        23
        , 2007










F-1


LAW
          ENFORCEMENT ASSOCIATES CORPORATION
 Consolidated
        Balance Sheets
 December
        31, 2006 and December 31, 2005


2006
              
              2005AssetsCurrent
                  assets:Cash
              
              $
              452,124
              
              $
              778,156Trade
                  accounts receivable (net of allowance for doubtfulaccounts
                  of $20,000 and $21,509 at December 31, 2006and
                  2005, respectively)
              
              
              984,996
              
              
              651,846Inventories
              
              
              1,241,558
              
              
              1,092,457Refundable
                  income taxes
              
              
              62,264
              
              
              216,820Prepaid
                  insurance
              
              
              20,505
              
              
              13,505Deferred
                  tax asset-current
              
              
              242,480
              
              
              213,546Total
                  current assets
              
              
              3,003,927
              
              
              2,966,330Property
                  and equipment, net
              
              
              309,185
              
              
              257,539Other
                  assets:Intangibles,
                  net
              
              
              2,520,753
              
              
              2,675,860Deferred
                  tax asset less current portion
              
              
              193,747
              
              
              195,552Deferred
                  charges
              
              
              413
              
              
              5,528Total
                  other assets
              
              
              2,714,913
              
              
              2,876,940Total
                  assets
              
              $
              6,028,025
              
              $
              6,100,809






The
        accompanying notes are an integral part of the financial
        statements.
   F-2






LAW
          ENFORCEMENT ASSOCIATES CORPORATION
 Consolidated
        Statement of Operations
 For
        the
        Years Ended December 31, 2006 and 2005






2006
              
              2005Liabilities
                  and Stockholders' EquityCurrent
                  liabilities:Current
                  maturities of long-term debt
              
              $
              40,000
              
              $
              120,000Trade
                  accounts payable
              
              
              377,553
              
              
              384,034Accrued
                  expenses:Compensation
                  and payroll taxes
              
              
              104,344
              
              
              151,056Profit
                  sharing plan
              
              
              36,185
              
              
              34,777Warranty
                  provision
              
              
              25,000
              
              
              40,000Professional
                  fees
              
              
              12,024
              
              
              -Customer
                  deposits
              
              
              36,089
              
              
              3,840Total
                  current liabilities
              
              
              631,195
              
              
              733,707Long-term
                  debt, excluding current maturities
              
              
              -
              
              
              40,000Total
                  liabilities
              
              
              631,195
              
              
              773,707Stockholders'
                  equity:Common
                  stock, $0.001 par value, 50,000,000 authorized,25,252,433
                  issued and outstanding at December 31, 2006,25,152,433
                  issued and outstanding at December 31, 2005
              
              
              25,252
              
              
              25,152Treasury
                  stock at cost, 595 shares of common stock held bythe
                  Company
              
              
              (625
              )
              
              -Paid
                  in capital in excess of par
              
              
              5,314,112
              
              
              5,240,812Retained
                  earnings
              
              
              58,091
              
              
              61,138Total
                  stockholders' equity
              
              
              5,396,830
              
              
              5,327,102Total
                  liabilities and stockholders' equity
              
              $
              6,028,025
              
              $
              6,100,809






The
        accompanying notes are an integral part of the financial
        statements.
   F-3






2006
              
              2005Net
                  sales
              
              $
              7,546,884
              
              $
              8,157,390Cost
                  of sales
              
              
              4,937,931
              
              
              5,167,533Gross
                profit
              
              
              2,608,953
              
              
              2,989,857Research
                  and development
              
              
              83,694
              
              
              182,224Operating
                  expenses
              
              
              2,530,623
              
              
              3,199,216Total
                  operating expenses
              
              
              2,614,317
              
              
              3,381,440Net
                  loss before other income (expense) and benefit provided byincome
                  taxes
              
              
              (5,364
              )
              
              (391,583
              )Other
                  income (expense):Gain
                  (loss) on disposal of property and equipment
              
              
              -
              
              
              (4,257
              )Interest
                  income
              
              
              7,917
              
              
              -Interest
                  (expense)
              
              
              (8,042
              )
              
              (15,014
              )Other
                  income (expense), net
              
              
              1,203
              
              
              (5,044
              )Total
                  other income (expense)
              
              
              1,078
              
              
              (24,315
              )Net
                  loss before benefit provided by income taxes
              
              
              (4,286
              )
              
              (415,898
              )Benefit
                  provided by income taxes
              
              
              (1,239
              )
              
              (134,290
              )Net
                  loss
              
              $
              (3,047
              )
              $
              (281,608
              )Net
                  loss per weighted average share, basic
              
              $
              (0.00
              )
              $
              (0.01
              )Weighted
                  average number of shares
              
              
              25,199,556
              
              
              25,127,037






The
        accompanying notes are an integral part of the financial
        statements.
   F-4




LAW
          ENFORCEMENT ASSOCIATES CORPORATION
 Consolidated
        Statement of Stockholders' Equity


Paid
                  in Capital
              
              
              
              TotalNumber
                  of
              
              Common
              
              Treasury
              
              in
                  Excess
              
              Retained
              
              Stockholders'Shares
              
              Stock
              
              Stock
              
              of
                  Par
              
              Earnings
              
              EquityDecember
                  31, 2004
              
              
              22,625,433
              
              $
              22,625
              
              $
              -
              
              $
              2,120,866
              
              $
              342,746
              
              $
              2,486,237Common
                  stock issued for services
              
              
              117,000
              
              
              117
              
              
              
              
              
              398,944
              
              
              
              
              
              399,061Common
                  stock issued for patents
              
              
              10,000
              
              
              10
              
              
              
              
              
              26,623
              
              
              
              
              
              26,633Common
                  stock reclassified from
              
              
              2,400,000
              
              
              2,400
              
              
              
              
              
              2,694,379
              
              
              
              
              
              2,696,779redeemable
                  common stockNet
                  loss - year ended Dec. 31 2005
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (281,608
              )
              
              (281,608
              )December
                  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
              
              $
              5,396,830






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, 2006 and 2005


2006
              
              2005Cash
                  flows from operating activitiesNet
                loss
              
              $
              (3,047
              )
              $
              (281,608
              )Adjustments
                  to reconcile net income (loss) to net cash providedby
                  operations:Depreciation
                  and amortization
              
              
              224,071
              
              
              230,511Change
                  in allowance for doubtful accounts
              
              
              (1,509
              )
              
              -Loss
                  on disposal of property and equipment
              
              
              -
              
              
              23,284Deferred
                  taxes
              
              
              (27,129
              )
              
              (54,594
              )Common
                  stock issued for services
              
              
              73,400
              
              
              399,060(Increase)
                  decrease in assets:Trade
                  accounts receivable
              
              
              (331,641
              )
              
              432,546Inventories
              
              
              (149,101
              )
              
              (249,693
              )Refundable
                  income taxes
              
              
              154,556
              
              
              62,570Prepaid
                  insurance and other assets
              
              
              (7,000
              )
              
              (7,295
              )Increase
                  (decrease) in liabilities:Trade
                  accounts payable
              
              
              (6,481
              )
              
              45,961Accrued
                  expenses
              
              
              (48,280
              )
              
              (8,045
              )Customer
                  deposits
              
              
              32,249
              
              
              (91,808
              )Net
                  cash (used in) provided by operating activities
              
              
              (89,912
              )
              
              500,889Cash
                  flows from investing activities:Payments
                  for deferred charges
              
              
              5,115
              
              
              10,706Expenditures
                  for patents
              
              
              (9,743
              )
              
              (43,703
              )Capital
                  expenditures
              
              
              (110,867
              )
              
              (5,852
              )Net
                  cash used in investing activities
              
              
              (115,495
              )
              
              (38,849
              )Cash
                  flows financing activities:Borrowings
                  under line of credit
              
              
              250,000
              
              
              -Repayments
                  on line of credit
              
              
              (250,000
              )
              
              -Payments
                  on long-term debt
              
              
              (120,000
              )
              
              (120,000
              )Payments
                  on capital leases
              
              
              -
              
              
              (2,251
              )Common
                  stock purchased by Company
              
              
              (625
              )
              
              -Net
                  cash used in financing activities
              
              
              (120,625
              )
              
              (122,251
              )Net
                  increase (decrease) in cash
              
              
              (326,032
              )
              
              339,789Cash
                  at beginning of the year
              
              
              778,156
              
              
              438,367Cash
                  at end of the year
              
              $
              452,124
              
              $
              778,156Supplemental
                  disclosure of cash flow information:Cash
                  paid for interest expense
              
              $
              8,042
              
              $
              15,014Cash
                  (refunded) for income taxes
              
              $
              (133,217
              )
              $
              (116,928
              )Patents
                  purchased with issuance of common stock
              
              $
              -
              
              $
              26,633






The
        accompanying notes are an integral part of the financial
        statements.
    F-6




LAW
        ENFORCEMENT ASSOCIATES CORPORATION
 Notes
        to
        Consolidated Financial Statements
 December
        31, 2006 and 2005







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





LAW
        ENFORCEMENT ASSOCIATES CORPORATION
 Notes
        to
        Consolidated Financial Statements
 December
        31, 2006 and 2005





1.  SIGNIFICANT
      ACCOUNTING POLICIES (Continued)





Inventories (Continued)





Inventories
      consist of the following at December 31, 2006 and 2005:




2006
              
              2005Raw
                  Materials
              
              494,237
              
              536,197Work-in-process
              
              219,274
              
              52,957Finished
                  goods
              
              528,047
              
              503,303$
              1,241,558
              
              $
              1,092,457







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 $25,000 and $40,000 at December 31, 2006 and 2005,
      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. The
      calculation of fully diluted earnings per share assumes the dilutive effect of
      the exercise of outstanding options and warrants at either the beginning of
      the
      respective period presented or the date of issuance, whichever is later. There
      are no common stock equivalents for the Company at December 31, 2006. No
      preferred stock has been issued during the year ended December 31, 2006.





F-8






LAW
        ENFORCEMENT ASSOCIATES CORPORATION
 Notes
        to
        Consolidated Financial Statements
 December
        31, 2006 and 2005


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, 2006 and 2005, advertising costs were $107,400 and $180,648,
      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 $83,694 and $182,224 for the years
      ended
      December 31, 2006 and 2005, 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.





Reclassification





Certain
      reclassifications have been made to the 2005 consolidated financial statements
      in order to conform to the 2006 presentation with no effect on previously
      reported net loss, retained earnings or stockholders’ equity.


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 accelerated and
      straight-line methods for financial statement purposes.











F-9




LAW
        ENFORCEMENT ASSOCIATES CORPORATION
 Notes
        to
        Consolidated Financial Statements
 December
        31, 2006 and 2005


2.  PROPERTY
      AND EQUIPMENT (Continued)





The
      following is a summary of property and equipment, at December 31, 2006 and
      2005:




Useful
                  Life
              
              
              2006
              
              
              2005Office
                  furniture & equipment
              
              
              5
                  to 7 years
              
              $
              97,447
              
              $
              55,087Leasehold
                  improvements
              
              
              7
                  years
              
              
              5,138
              
              
              5,138Vehicles
              
              
              3
                  to 5 years
              
              
              84,507
              
              
              16,000Machinery
                  & equipment
              
              
              5
                  to 7 years
              
              
              459,032
              
              
              459,032646,124
              
              
              535,257Less
                  accumulated depreciation
              
              
              
              
              
              336,939
              
              
              277,718$
              309,185
              
              $
              257,539






Depreciation
      expense for the years ended December 31, 2006 and 2005 was $59,221 and $65,427,
      respectively.





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, 2006 and
      2005:




Deferred
                  tax assets:
              
              
              2006
              
              
              2005Inventory
              
              $
              22,431
              
              $
              23,513Allowance
                  for doubtful accounts
              
              
              7,392
              
              
              8,292Accrued
                  wages
              
              
              3,638
              
              
              42,580Warranty
                  provision
              
              
              9,240
              
              
              15,420Intangible
                  assets
              
              
              274,800
              
              
              311,505Federal
                  net operating loss of $504,804,Expiring
                  beginning in 2026
              
              
              171,654
              
              
              116,103State
                  net economic loss of $620,286,Expiring
                  beginning in 2019
              
              
              28,248
              
              
              7,637517,403
              
              
              525,050Deferred
                  tax (liabilities):Property
                  and equipment
              
              
              (45,530
              )
              
              (93,165
              )Trade
                  name (AID)
              
              
              (35,646
              )
              
              (22,787
              )(81,176
              )
              
              (115,952
              )Deferred
                  tax asset (liability), net
              
              $
              436,227
              
              $
              409,098





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




2006
              
              
              2005Current
                  assets
              
              $
              242,480
              
              $
              213,546Non-current
                  assets
              
              
              193,747
              
              
              195,552$
              436,227
              
              $
              409,098










F-10




LAW
        ENFORCEMENT ASSOCIATES CORPORATION
 Notes
        to
        Consolidated Financial Statements
 December
        31, 2006 and 2005





3.  INCOME
      TAXES (Continued)





At
      December 31, 2006 the Company had $62,264 in refundable income taxes related
      to
      loss carry-backs. At December 31, 2005 the Company had $216,820 in refundable
      income taxes related to loss carry-backs and 2004 taxable loss per the original
      tax return. The expense (benefit) of income taxes consists of the following
      at
      December 31, 2006 and 2005:




2006
              
              
              2005Current:Federal
              
              $
              25,890
              
              $
              $(79,696
              )State
              
              
              -
              
              
              -25,890
              
              
              (79,696
              )Deferred
              
              
              (27,129
              )
              
              (54,594
              )Total
              
              
              (1,239
              )
              
              (134,290
              )





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




2006
              
              
              2005Statutory
                federal income tax
                rate
              
              
              34
              %
              
              34
              %State
                  income tax - net of federal benefit
              
              
              4
              %
              
              4
              %Other
              
              
              (9)
              %
              
              (6
              )%Effective
                  tax rate
              
              
              29
              %
              
              32
              %











4.  STOCKHOLDERS’
      EQUITY TRANSACTIONS





On
      July
      13, 2006, the Company issued 100,000 shares of restricted common stock to
      individuals for services valued at $73,400.





On
      July
      28, 2006, the Company repurchased 595 shares of its own stock for $625. These
      shares are being held by the Company at December 31, 2006.





5.  LEASE
      COMMITMENTS





Facility





The
      Company leases its office and manufacturing facility from Sirchie Finger Print
      Laboratories, Inc. (Sirchie). Sirchie is affiliated with the Company by common
      ownership by a major stockholder. The lease runs from January 1 through December
      31 and automatically renews annually for a period of one year unless written
      termination notice is given 120 days before the renewal date. Rent expense
      incurred under this lease for the years ended December 31, 2006 and 2005 was
      $170,200 and $164,250, respectively.








F-11





LAW
          ENFORCEMENT ASSOCIATES CORPORATION
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006 and 2005





5.  LEASE
      COMMITMENTS (Continued)





Equipment





The
      Company previously had capitalized lease liabilities which were paid in full
      in
      August 2005.





6.  CONCENTRATION
      OF RISK





The
      Company places its cash in high credit quality financial institutions. During
      2006 and 2005 the Company had on deposit funds in excess of the $100,000 Federal
      Deposit Insurance Corporation (FDIC) insured limits. At December 31, 2006 and
      2005, the Company had $421,121 and $777,153, respectively, on deposit in excess
      of the FDIC insured limits.





At
      December 31, 2005 trade receivables from three customers represented 24% of
      total trade receivables. For the years ended December 31, 2006 and 2005, sales
      to one customer accounted for 16% and14% of total sales,
      respectively.





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. The cost of patents-in-process are
      not
      amortized until issuance. 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. Intangible assets
      consist of the following at December 31, 2006 and 2005:




Estimated
                  Life
              
              
              2006
              
              
              2005Patents
              
              
              15
                  years
              
              $
              1,016,250
              
              $
              1,016,250Patents-in-process
              
              
              15
                  years
              
              
              80,079
              
              
              70,336Trade
                  name
              
              
              25
                  years
              
              
              1,400,000
              
              
              1,400,000Drawings/designs
              
              
              10
                  years
              
              
              411,000
              
              
              411,0002,907,329
              
              
              2,897,586Less
                  accumulated amortization
              
              
              
              
              
              386,576
              
              
              221,726Total
                intangibles, net
              
              
              
              
              $
              2,520,753
              
              $
              2,675,860






F-12





LAW
          ENFORCEMENT ASSOCIATES CORPORATION
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006 and 2005


7.  INTANGIBLE
      ASSETS (Continued)





Amortization
      expense for the years ended December 31, 2006 and 2005 was $164,850 and
      $165,084, respectively. Estimated future amortization expense is as follows
      at
      December 31, 2006:


2007
              
              
              
              
              $
              $170,0892008
              
              
              
              
              
              170,0892009
              
              
              
              
              
              170,0892010
              
              
              
              
              
              170,0892011
              
              
              
              
              
              170,089Future
                  Years
              
              
              
              
              
              1,670,308$
              2,520,753








8.  LINE
      OF CREDIT





The
      Company has a $750,000 line of credit with a bank, which bears interest at
      LIBOR
      (5.32% and 4.39% at December 31, 2006 and 2005, 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 2007. At December 31, 2006 and 2005 there were no outstanding borrowings
      on
      the line of credit.





9.  NOTE
      PAYABLE





In
      September 2004, the Company issued a $340,000 note payable as part of the AID
      asset purchase. The note requires 34 monthly payments of $10,000 and had a
      deferred interest rate of 5%. The note balance as of December 31, 2006 is
      $40,000 and is due 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 $36,185 and $34,777 for
      the
      years ended December 31, 2006 and 2005, 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 tot al
      salaries of all participants. The Company made no profit sharing contributions
      for both the years ended December 31, 2006 and 2005.





11.  RELATED
      PARTY TRANSACTIONS





For
      the
      year ended December 31, 2006, the Company paid $161,037 to Sirchie for purchases
      and received $1,879 from Sirchie for sales. At December 31, 2006, the Company
      had $409 in trade accounts receivable due from Sirchie and $4,120 in accounts
      payable due to Sirchie. During 2006 the Company entered into an agreement to
      pay
      consulting fees to a major stockholder of both Sirchie and the Company. Such
      fees were $1,000 for the year ended December 31, 2006.




F-13





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,
      2006:


2007
              
              
              
              
              $
              22,8572008
              
              
              
              
              
              60,9522009
              
              
              
              
              
              126,6672010
              
              
              
              
              
              50,000Total
              
              
              
              
              
              260,476







Royalty
      expense for the year ended December 31, 2006 was $9,524.





13.  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.







F-14