UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
DC 20549





FORM
10-KSB





(Mark
One)





[X]           ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
fiscal year ended January 31, 2008.





[  ]           TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT





For the
transition period from _____________ to _____________





Commission
file number: 0-50046





KMA
GLOBAL SOLUTIONS INTERNATIONAL, INC.


----------------------------------------


(Name of
small business issuer as specified in its charter)





NEVADA
                (State
      or other jurisdiction of
                incorporation
      or organization)
              98-0486947
                (I.R.S.
      Employer
                Identification
      No.)5570A
      KENNEDY ROAD
                MISSISSAUGA
      ONTARIO, CANADA L4Z2A9
                (Address
      of principal executive offices, zip code)Issuer’s
      telephone number:  (905) 568-5220Securities
      registered under Section 12(b) of the Exchange Act:Title
      of each class
                
                None.
              Name
      of the exchange on which registered
                
                None.




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




Common Stock, $0.001 par
value per share


(Title of
Class)




Check
whether the Issuer is not required to file reports pursuant to Section 13 or
15(d) of the Exchange Act.   ̈





Check
whether the Issuer:  (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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. þ Yes   ̈ No














Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, 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  þ No





State
Issuer's revenues for its most recent fiscal year: $4,877,606.





State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and asked prices of such common equity, as of a
specified date within the past 60 days: $3,646,772 as of May 15,
2008.





State the
number of shares outstanding of each of the Issuer's classes of common equity,
as of the latest practicable date: 67,333,319 shares of common stock as of May
15, 2008.





DOCUMENTS INCORPORATED BY
REFERENCENone.




Transitional
Small Business Disclosure format (check one):   ̈ Yes  þ No










































TABLE
OF CONTENTS




Page No.


PART
      IITEM
      1.
            DESCRIPTION
      OF
      BUSINESS..................................................................................................................................................................................................................
            1ITEM
      2.
            DESCRIPTION
      OF
      PROPERTY.................................................................................................................................................................................................................
            15ITEM
      3.
            LEGAL
      PROCEEDINGS..............................................................................................................................................................................................................................
            15ITEM
      4.
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY
      HOLDERS.............................................................................................................................................
            15PART
      IIITEM
      5.
            MARKET
      FOR COMMON EQUITY, AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
      ISSUER PURCHASES OF EQUITY
      SECURITIES................................................................................................................................................................................................................................................
            16ITEM
      6.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION..........................................................................................................................
            19ITEM
      7.
            FINANCIAL
      STATEMENTS....................................................................................................................................................................................................................
            26ITEM
      8.
            CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE.....................................................
            27ITEM
      8A.
            CONTROLS
      AND
      PROCEDURES............................................................................................................................................................................................................
            27ITEM
      8(B).
            OTHER
      INFORMATION...........................................................................................................................................................................................................................
            28PART
      IIIITEM
      9.
            DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE;
      COMPLIANCE WITH
              SECTION
      16(A) OF THE EXCHANGE
      ACT..........................................................................................................................................................................................
            29ITEM
      10.
            EXECUTIVE
      COMPENSATION...............................................................................................................................................................................................................
            31ITEM
      11.
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS..........................
            33ITEM
      12.
            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE.....................................................................................
            33ITEM
      13.
            EXHIBITS.....................................................................................................................................................................................................................................................
            34ITEM
      14.
            PRINCIPAL
      ACCOUNTANT FEES AND
      SERVICES............................................................................................................................................................................
            35SIGNATURES
      AND POWER OF
      ATTORNEY....................................................................................................................................................................................................................................
            36






















CAUTIONARY
STATEMENT REGARDING


FORWARD-LOOKING
STATEMENTS





Unless
otherwise indicated or the context otherwise requires, all references to the
“Company,” “we,” “us” or “our” and similar terms refer to KMA Global Solutions
International, Inc. and its subsidiaries.





The
information contained in this report on Form 10-KSB and in other public
statements by the Company and Company officers or directors includes or may
contain certain “forward-looking statements” within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. All statements other than statements of
historical facts included or incorporated by reference in this report,
including, without limitation, statements regarding our future financial
position, business strategy, budgets, projected revenues, projected costs and
plans and objective of management for future operations, are forward-looking
statements. Forward-looking statements generally can be identified by the use of
forward-looking terminology such as “may,” “will,” “expect,” “intend,”
“project,” “estimate,” “anticipate,” or “believe” or the negative thereof or any
variation thereon or similar terminology.





Such
forward-looking statements are made based on management's beliefs, as well as
assumptions made by, and information currently available to, management pursuant
to the “safe-harbor” provisions of the Private Securities Litigation Reform Act
of 1995. Although we believe that the expectations reflected in such
forward-looking statements are reasonable, we can give no assurance that such
expectations will prove to have been correct. Such statements are not guarantees
of future performance or events and are subject to known and unknown risks and
uncertainties that could cause the Company's actual results, events or financial
positions to differ materially from those included within the forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date made. All subsequent
written and oral forward-looking statements attributable to us, or persons
acting on our behalf, are expressly qualified in their entirety by these
cautionary statements. Except as required by law, we undertake no obligation to
disclose any revision to these forward-looking statements to reflect events or
circumstances after the date made, changes in internal estimates or
expectations, or the occurrence of unanticipated events.







PART
I




Item
1.    DESCRIPTIONOF
BUSINESS.




History





KMA
Global Solutions International, Inc. (www.kmaglobalsolutions.com) is a
corporation formed on March 9, 2006 under the laws of the State of Nevada. As
described below, we entered into a merger transaction with Espo's, a non-SEC
reporting corporation formed under the laws of the State of New York on
September 7, 2001, and we were the surviving corporation. Espo's
operated, since its inception, as a retail provider of sporting goods and
athletic apparel, with a focus on aquatic sports products. The Company and its
founders and shareholders had no relationship with Espo's and its founders prior
to the merger. Shares of common stock of Espo's were quoted on the Pink Sheets
of the National Quotation Bureau under the symbol “EPOL.” The Pink Sheets is a
quotation service, not a formal exchange, and does not have quotation standards.
An unaffiliated third-party introduced us to Espo's in order to enable us to
achieve a merger with an entity that had shares of stock which were traded on
the U.S. public securities markets, thereby offering the Company the opportunity
to raise capital through the U.S. public securities markets.




Prior to
and in anticipation of the merger transaction described below, a Stock Purchase
Agreement, effective as of March 7, 2006 (the “March 7th Agreement”), was
entered into between Espo's, Jeffrey R. Esposito and Kenneth C. Dollmann, each a
holder of Espo's common stock, and 2095511 Ontario Limited, an Ontario, Canada
corporation. Mr. Esposito and Mr. Dollmann, respectively sold 4,065,427 and
160,000 shares Espo's common stock to the following entities identified in the
March 7th
Agreement: Brant Fellowship Holdings, Inc.; Candas Enterprises Corp.; Carrick
Mortgage Holdings, Inc.; Culross Forwarding Limited; Greenock Export Holdings
AG; Bedford Place Investments Ltd.; Brican Holdings Limited (collectively, the
“Entities”). None of the Entities is a related person or affiliate of Espo's,
Mr. Esposito, Mr. Dollmann, 2095511 Ontario Limited, or the Company, and none
became a beneficial owner of greater than five percent of the Company's issued
and outstanding Common Stock as result of the merger transaction and subsequent
events described below.






1






It was
the consensus of the Entities that, due to the logistics involved in
coordinating their purchases of Espo's common stock and to process the
documentation and secure the prompt execution of the March 7th
Agreement, it would be most efficient to rely on a single, special purpose
company as a vehicle to close the transaction on their behalf. At the request of
the Entities, 2095511 Ontario Limited, a limited corporation formed by Jeffrey
D. Reid, the President of the Company, served as agent for the Entities to
facilitate the closing of the March 7th
Agreement.




The
Entities' respective purchases of common stock that were held by Messrs.
Esposito and Dollman, totaled 4,225,427 out of the 4,920,250 issued and
outstanding shares of Espo's common stock. Mr. Esposito continued to hold 8,823
restricted shares of Espo's common stock. The Entities acquired their shares of
Espo’s common stock in exchange for an aggregate payment of $209,830 and their
respective promises to provide, from time to time, advice to Espo's and its
successors with respect to corporate and financial strategies and restructuring
proposals, investor relations and shareholder communications services, and
recommendations of potential funding sources, investment groups and strategic
partners. Concurrent with the stock purchase transaction, and prior to the
merger described below, Espo's transferred its assets and liabilities to other
entities that were unaffiliated with the Company.




On March
8, 2006, to facilitate the merger transaction described below, Espo's issued
2,014,400 shares of common stock to bring its total issued and outstanding
amount of common stock to 6,934,650. In connection with the overall capital
restructuring transactions of Espo's and the Company, and in accordance with
their representations and in consideration of the promises and conditions under
the March 7th Agreement, the Entities had their 4,225,427 shares of Espo's
common stock retired to treasury and cancelled. This left 2,709,223 shares of
Espo's common stock issued and outstanding. In a separate set of transactions
and as consideration for introducing the Company and Espo’s, the Entities
acquired 686,000 shares of Espo's common stock from various Espo’s
holders.




On March
10, 2006, we entered into an Agreement and Plan of Reincorporation - Merger with
Espo's, whereby Espo's was merged with and into the Company, and in which the
Company, a Nevada corporation, became the surviving entity (the
“Merger”).




In
effecting the Merger, each of the 2,709,223 issued and outstanding shares of
Espo's common stock, was converted into one share of our Common Stock, and
Espo's ceased to exist. The Company’s Common Stock currently is quoted on the
OTC Bulletin Board under the symbol “KMAG.”




On March
15, 2006, we entered into an acquisition agreement (the “Acquisition Agreement”)
with KMA Global Solutions Inc., a corporation formed in April 1996 under the
laws of the Province of Ontario, Canada (“KMA (Canada)”). KMA (Canada) is a
provider of diversified electronic article surveillance (“EAS”) solutions for
retail security applications in a variety of consumer industries, including
apparel, multimedia, sporting goods, grocery and over-the-counter
pharmaceuticals, and offers technology-driven integrated supply chain solutions
to secure goods for retailers and consumer-product distributors worldwide. On
March 1, 2006, the issued and outstanding common shares of KMA (Canada) were
subject to a reverse stock split at a ratio of five (5) shares to one (1),
reducing the number of its common shares outstanding from 10,072,000 to
2,014,400.










2






Pursuant
to the terms of the Acquisition Agreement, the Company acquired a majority of
the outstanding shares of the capital stock of KMA (Canada) in exchange for
2,014,400 shares of our Common Stock. Pursuant to the Acquisition Agreement, we
purchased the remaining 314,400 shares of KMA (Canada) common shares from the
minority shareholders of KMA (Canada) in exchange for an equal number of shares
of our Common Stock.




In
connection with the Acquisition Agreement, we formed KMA Global Solutions, LLC.,
a limited liability company formed under the laws of the State of Nevada (“KMA
LLC”), with the Company as its single member. KMA LLC is a special purpose
entity with the sole purpose of facilitating Canadian income tax efficiencies
for existing shareholders of KMA (Canada). In connection with its formation,
1,700,000 shares of the Company's Common Stock were issued to KMA LLC in
exchange for 100% of its membership interests.




Contemporaneously
with the issuance of 1,700,000 shares of Common Stock to KMA LLC, we entered
into an Exchange and Support Agreement dated March 14, 2006 (the “Exchange
Agreement”), by and among the Company, KMA LLC, KMA Acquisition Exchangeco,
Inc., an Ontario corporation (“Exchangeco”), and certain shareholders of KMA
(Canada) subject to Canadian taxation. These KMA (Canada) shareholders elected
to receive securities (“Exchangeable Shares”) issued by Exchangeco (each a
“Holder”) in order to defer income recognition for Canadian tax purposes. The
Exchange Agreement provides that the Company and KMA LLC grant each Holder the
right to require the Company or KMA LLC to purchase from any of such Holder all
or any part of the Exchangeable Shares held by such Holder, in consideration for
some or all of the Company's 1,700,000 shares of Common Stock held by KMA LLC.
KMA LLC is a wholly-owned subsidiary of the Company. Exchangeco is related to
the Company only in that it has a contractual arrangement with KMA LLC to
exchange the shares KMA LLC currently owns of the Company. Jeffrey D. Reid is an
officer and director of Exchangeco. Mr. Reid indirectly owns 1,520,000 common
shares of the Company, he is an indirect control person of KMA LLC by virtue of
his control position in the Company, and he is an officer and a director of
Exchangeco, which is related to the Company only in that it has a contractual
arrangement with KMA LLC to exchange the shares of the Company that KMA LLC
currently owns.




On March
17, 2006, the Company effected a stock split in the form of a share dividend.
This was accomplished by the issuance of seventeen shares of Common Stock for
each share of issued and outstanding Common Stock on a pro rata basis and
without consideration to the Company's stockholders. To provide consistent
disclosure, the amounts of shares discussed hereafter will reflect the
post-split amounts, unless specified otherwise. The 8,823 escrowed shares held
by Jeffrey R. Esposito became 149,991 shares of Common Stock. The 686,000 shares
held by the Entities became 11,662,000 shares of Common Stock on a post-split
basis. The 314,400 shares of Common Stock held by the KMA (Canada) shareholders
became 5,344,800 shares on a post-split basis. Under the terms of the agreement
between the KMA (Canada) shareholders and the Company, these 5,344,800 shares of
Common Stock were retired to treasury and cancelled and the KMA (Canada)
shareholders received 1,179,000 post-split shares of Common Stock.













3


Current
Corporate Structure





Our
current structure is set forth in the following diagram and its accompanying
notes as follows. We have three affiliated companies: KMA LLC, of which we are
the single member, KMA Global Solutions (Hong Kong) Ltd. and KMA (Canada), our
Ontario, Canada operating company affiliate.

















(1)
            21,760,000
      shares of the Company's Common Stock are held by KMA LLC for the
      purpose of facilitating Canadian income tax efficiencies for existing
      shareholders of KMA (Canada) through the arrangement with
      Exchangeco.(2)
            314,400
      shares of the Company's Common Stock were exchanged for an equal number of
      shares of KMA (Canada) common stock. Exchangeco holds the balance of KMA
      (Canada) common shares.(3)
            Jeff
      Reid, as sole shareholder of Exchangeco, has the right to require the
      Company or KMA LLC to purchase some or all his Exchangeable Shares for
      some or all of the Company's 21,760,000 shares of Common Stock held by KMA
      LLC.




Strategic
Corporate Structure





We intend
to operate as a holding company in a structure that includes several
wholly-owned operating subsidiaries located in strategic manufacturing,
packaging and distribution markets worldwide. Strategic expansion plans include
the relocation of our headquarters from Mississauga, Ontario, Canada to the
United States through the formation of KMA Global Solutions Inc. (US) as a
wholly-owned subsidiary of the Company. KMA Global Solutions Inc. (Barbados) is
intended to be established under the laws of Barbados as a wholly-owned
subsidiary of KMA (Canada) with the purpose of overseeing the Company's
operations outside of the United States and Canada and to hold all of the issued
and outstanding shares of KMA Global Solutions (Hong Kong) Limited (Hong Kong),
a manufacturing entity formed under the laws of Hong Kong. We also intend to
form additional overseas subsidiaries as our business grows.















4


Electronic
Article Surveillance (EAS) Industry





Electronic
Article Surveillance (EAS) is a technology used primarily to prevent shoplifting
from retail establishments by alerting the retailer to the unauthorized removal
of merchandise. Special tags (like the products that KMA sells) are affixed to
the product or to its packaging.  At point of sale, the special tag is
deactivated or “turned off.”  At the exits of stores, detection
equipment sounds an alarm to alert staff when an active tag is
detected.  The theory is that a properly purchased item will have a special
tag that is deactivated or “turned off,” while the tag on a shoplifted
product will still be active or “live.”




Using an
EAS system enables the retailer to display and allow customer access to popular
items. Products can be examined and handled, rather than kept in locked cases or
behind the sales counter. The two leading technologies comprising most EAS
systems in use throughout the world are Acousto-Magnetic (“AM”) and Radio
Frequency (“RF”). Each has specific benefits and disadvantages. Although similar
in operation, these two EAS systems operate on different principles and are not
compatible with one another.




Industry
sources estimate that the value of goods that are taken without being paid for,
known as “shrink,” is an approximate $108 billion per year problem (including
the cost of prevention) for the global retail industry. Shrink is caused
primarily by shoplifting and employee theft. EAS solutions are designed to act
as a deterrent to control the problem of merchandise theft.




EAS
system components typically include:




1)
            Labels
      or Hard Tags - electronic sensors attached to
  merchandise;


2)
            Deactivators
      or Detachers - used at the point of sale to electronically deactivate
      labels and detach reusable hard tags as items are purchased;
      and


3)
            Detectors
      - that create a detection area at exits or other sensitive
      locations.





As a
provider of EAS solutions, including security source tagging for a variety of
retail industries, our products are designed to consolidate discrete RF and AM
technology requirements to improve efficiency, reduce costs, and provide
value-added solutions for customers across many geographic markets in a variety
of industries, including but not limited to apparel, food, over-the-counter
pharmaceuticals, health and beauty aids, and sporting goods.




Our EAS
solutions are comprised of a proprietary line of custom tags and labels, which
contain sensors designed to provide a comprehensive, single-source solution for
protection against retail merchandise theft. Our tags and labels are specialized
for a variety of applications including, adhesive labels for use on product
packaging or tags designed to be sewn directly onto retail apparel. The
Company's proprietary, low cost solutions serve to reduce consumer and employee
theft, prevent inventory shrink, and enable retailers to capitalize on consumer
buying patterns and habits by openly displaying high-margin and high-cost items
typically subjected to a high level of shoplifting and employee theft. We offer
a wide variety of EAS solutions to meet the varied requirements of retail
configurations for multiple market segments worldwide.




In
addition, the Company is an authorized distributor of Sensormatic sensors in raw
form. These sensors are the basic component of one type of EAS tag or label.
Retail stores are responsible for outfitting their own premises with an EAS
system, including sensor detection and deactivation equipment that corresponds
to their EAS technology of choice, either RF of AM technology. The Company also
sells equipment necessary to deactivate the EAS tags to manufacturers,
suppliers, wholesalers and distributors that need to deactivate either the AM
sensor or the RF sensor before shipping product tagged with DualTags to a
particular retailer only using one of the two technologies in its stores. Sales
of deactivation equipment represent a small fraction of the Company's revenues.
The Company does not sell the equipment necessary to establish an EAS system to
retailers.








5






RF
systems are widely used by retailers around the world. A RF label, is
essentially a miniature, disposable electronic circuit and antenna, which is
attached to a product. The device responds to a specific frequency emitted by a
transmitter antenna located at the entry/exit point. The response from the label
is then picked up by an adjacent receiver antenna. This will trigger an alarm
when it matches specific criteria. Operating frequencies for RF systems
generally range from 2 to 10 MHz.




The
newer, AM systems have the ability to protect wide exits. AM systems use a
transmitter to create a surveillance area where tags and labels are detected.
The transmitter sends a pulsating acousto-magnetic frequency signal (of about 58
kHz) which energizes a tag in the surveillance zone. When the pulse ends, the
tag responds, emitting a single frequency signal like a tuning fork that is
detected by a receiver. A microcomputer checks the tag signal detected by the
receiver to ensure it is at the right frequency and time-synchronizes the
receiver to the transmitter, at the proper level and at the correct repetition
rate. If all these criteria are properly met, the alarm is
triggered.




Our
patented DualTagTM
contains the key elements of both RF and AM technologies, which enables retail
suppliers to apply both technologies to the packaging or product simultaneously,
in a single pass through the production line. This single pass application
reduces the cost that would otherwise be incurred to attach each technology
separately. Further, having both technologies attached to each item eliminates
the need for manufacturers, wholesalers and distributors to carry multiple
inventories that differ only by EAS technology, and eliminates the risk of
improperly shipping goods with RF tags to retailers requiring AM tags and vice
versa.




Retailers
and manufacturers have become increasingly focused on protecting assets that
move through the retail supply chain. Radio Frequency Identification tags
(commonly referred to as “RFID”) can be used to track inventory from
manufacturer to retailer (and ultimately to the consumer and through the waste
processing stream), as well as for tracking products within a given retail
location. To address this market opportunity, we have received patents
incorporating RFID into our current solutions in anticipation of the retail
market’s eventual transition to item-level use of RFID. We intend to continue to
build infrastructure, add key personnel, develop proprietary label and tag
manufacturing equipment, and open branch offices in strategic locations
throughout the world, in order to prepare for and take advantage of the
opportunity to be a major source for both EAS and RFID solutions
worldwide.







Principal
Products





Our EAS
solutions are comprised of sensor tags and labels designed to provide a
comprehensive, single-source solution for protection against retail merchandise
theft. The Company's proprietary, low cost solutions, serve to reduce consumer
and employee theft, prevent inventory shrink, and enable retailers to capitalize
on consumer buying patterns and habits by openly displaying high-margin and
high-cost items typically subjected to a high level of shoplifting and employee
theft. We offer a wide variety of EAS solutions to meet the varied requirements
of retail configurations for multiple market segments worldwide.




The
following information describes our product lines, with their respective
characteristics and uses:




Source
Tagging Solutions - As its name implies, source tagging is the embedding of EAS
security labels at either the point of manufacture or packaging to allow
delivery of floor or display ready merchandise to the retail store. Under a
source tagging program, tags are integrated into automated production processes
and applied in primary packaging or within or on the product itself either under
branding labels or prominently displayed.








6




o
            DualTagTM
      - combines both AM and RF technologies in a high speed single-pass label.
      A single-pass label is a label that enables multiple EAS technologies to
      be applied or attached to an item at the same time in order that an item
      does not have to be processed more than once in order to affix the
      appropriate EAS technology. High speed application is the process of
      attaching one tag or label per item at a very rapid pace, usually in an
      automated production environment. We offer several configurations of
      DualTagTM to suit a variety of requirements. The ability to affix or insert
      tags and labels quickly enables manufacturers, suppliers and distributors
      to deliver items tagged with EAS labels on a “just in time” basis and at a
      lower cost per unit than if the labels had to be applied manually or by
      multiple runs through the application equipment.o
            Triple
      TagTM - combines both AM and RF technologies, in addition to RFID
      technology, in a single-pass label. As a technology that incorporates the
      use of electromagnetic or electrostatic coupling in the radio frequency
      portion of the electromagnetic spectrum to uniquely identify an object,
      animal, or person, RFID is coming into increasing use as an alternative to
      the Universal Product Code (also referred to as “UPC” or “bar code”) as a
      means of providing unique product identification, without the need for
      direct contact or line-of-sight
scanning.




Sew-On
Source Tagging Solutions - we provide manufacturers of soft-goods with an
affordable and effective EAS solution. Tested and certified by ADT Sensormatic
Systems Inc. (“Sensormatic TM”), for AM systems, and Checkpoint Systems,
Inc., for RF systems, within retailer guidelines and located on the particular
garment as approved, directed or specified by the retailers, our soft-goods
source tagging solutions include:




o
            Original
      NEXTagTM- our original design and, we believe, the most popular sew-on tag
      in the industry. Available in a variety of colors, we consider it to be
      the best value for most garment and home fashion
applications.o
            NEXTagTM
      Slimline - Tyvek® (an E. I. du Pont de Nemours and Company fabric) tag
      manufactured to a narrower width than the original design of the NEXTagTM;
      designed for intimate apparel, this product is appropriate for any
      application where size is a constraint.o
            NEXTagTM
      Jean - for the denim industry for tacking or stapling directly under the
      vendor tag that includes size, style number, bar code, retailer's variable
      data known as a “joker” tag (joker tags are usually sewn into a garment in
      the waist band, inside seam or bottom of a sleeve of a garment). The
      NEXTagTM Jean is “denim blue” in color and about twice the size of our
      original NEXTagTM.o
            NEXTagTM
      Woven - a premium EAS label of high quality woven fabric. This premium
      quality label is well suited for decoration with logos, slogans and other
      graphics required to enhance merchandising
  appeal.







Drop-in
Source Tagging Solutions - this is an EAS tagging solution that is not affixed
to the item or the packaging, but rather dropped “loosely” inside the product
packaging or hidden in compartments, such as garment pockets or battery
compartments in items requiring batteries such as digital cameras. This solution
is an affordable, labor-saving hard goods EAS solution. Tested and certified by
SensormaticTM and approved and specified by major retailers as a source tagging
solution; includes:




o
            Original
      NEXTagTM- as described aboveo
            NEXTagTM
      SlimlineTyvek® - as described above





7


Attachable
Source Tagging Solutions -




o
            Wrap
      Tags - triple-reinforced vinyl tags are designed for easy application and
      deliver maximum tear resistance; can be custom sized; applications include
      electrical cords, footwear, fishing rods, plumbing and other hard good
      items;o
            Luggage
      Tag - tear resistant vinyl tag designed for “swift-attached” applications;
      ando
            Logo
      Tag - printed paper hang tag that is plastic laminated, to significantly
      improve tear resistance; applications include branded apparel, children
      and infant apparel, footwear and
sunglasses.





Adhesive
Source Tagging Solutions -




o
            Meat
      Tag - specialized adhesive in a microwave-safe SensormaticTM label or in a
      moisture-proof, microwave safe RF version for packaged meat or frozen food
      applications; ando
            Foamback Tag - able to maintain sensor function in metallic
      applications; flexibility of a foam backing also enables effective
      placement on concave or convex
surfaces.




Custom
Source Tagging Solutions - customized products designed to address unique source
tagging requirements, such as limited size or space, concave surfaces or
microwave environments.




SensormaticTM Label
Distributor - the Company is also an authorized distributor of SensormaticTM EAS
labels. The Sensormatic EAS label is an AM label and can be found
inside some of our products such as our DualTagTM. We also act as a distributor
of Sensormatic'sTM EAS
labels in the non-installed or “raw” form so that our customers can affix the
label directly onto their products before sending them to the retailer.
Manufacturers, suppliers and distributors buy the raw SensormaticTM sensor from
us and affix them to the inside of their packaging using our labels, thus making
the merchandise source tagging compliant for the retail customer.




Principal
Markets





We market
our products to retailers that have a need to protect their merchandise from
theft. Many of our customers include apparel manufacturers located in South and
East Asia, the Middle East, as well as Central and South America.  We
also often deal with manufacturer’s agents.  Li & Fung, for
example, is one of the largest apparel buying agencies located in Hong Kong, and
are vendors to international retailers who have EAS systems installed throughout
their stores in various countries throughout the world. Our current principal
geographic markets include the United States, Canada, Mexico, Italy, Israel,
Hong Kong, China, Vietnam, Thailand, Malaysia, Taiwan, South Korea, the
Philippines, India, Indonesia, Pakistan, Sri Lanka, Turkey, Dubai, Peru,
Guatemala, Costa Rica, and Brazil.




To
initiate a source tagging program, the retailer will typically have EAS systems
installed in most but not necessarily all of the stores that handle the targeted
merchandise. This allows the merchandise to be accepted at the individual store
and be ready for sale immediately. If a particular store does not have an EAS
system in place, KMA has developed a bulk deactivation device which permits
deactivation of case sized lots of source tagged merchandise at the distribution
point prior to shipment to the unequipped retail store.




Suppliers
to retailers become our primary customer once a particular retailer has approved
or indicated a preference for the use of one or more of our solutions. In some
cases, we enjoy exclusivity as our patents ensure that we are the only supplier
of certain EAS solutions. We sell the actual approved solutions to the vendors
to retailers in the particular country where the product is manufactured. The
term “EAS source-tagging” is used where tags are applied at the source of
manufacture. Source-tagging refers to the attachment of EAS tags at the source
of production of the retail item where it is least expensive to do
so.








8




We market
EAS products primarily to retailers in the hard goods market (supermarkets, drug
stores, mass merchandisers, and music/electronics), soft goods market (fashion
and athletic apparel, sports merchandise), and other consumer product
manufacturers through our source-tagging program.




Business
Strategy





RFID Integrated
Solutions




RFID
technology (Radio Frequency Identification) incorporates a tag containing a
microchip and antenna and is capable of storing a limited amount of unique
information, usually used to identity the contents of a case or pallet to which
it is affixed.  Through the use of a specific reader antenna and
specialized software, a RFID tag will release the information contained within
its “memory” when requested to do so, usually when passing a particular control
point such as a loading dock door. RFID has become popular within the supply
chain and logistics operations of many industries, including retail, as it
provides a more efficient and accurate means of both storing and collecting
information about the inventory or assets in a given environment or in transit
between facilities.  While currently most commonly used to identify
larger amounts of product such as a case lot, pallet or container, it is widely
anticipated to transition into use as a unique identifier on individual
products.




We
anticipate that the use of RFID technology will see significant growth over the
next five to ten years. As the technology continues to improve and the per-unit
cost of tags continues to decrease, RFID will begin to play a much larger role
in supply chain management. In response to the demand of industry groups to
introduce a RFID integrated tag to the retail supply chain, we have made the
strategic decision to expand our EAS products to incorporate RFID
technology.




RFID
usage recently received a significant push when the United States Department of
Defense and Wal-Mart Stores, Inc. separately issued mandates requiring their
largest suppliers to use Electronic Product Code open standard RFID tagging on
pallets, cases, containers and parts, by January 2005. Each of these enormous
organizations see significant benefits in the ability to uniquely identify
products in their inventory, manage and track that inventory, realize lower
costs and increase supply chain efficiencies. Through their vast buying power,
each of these two very different organizations has a major influence on their
respective suppliers.




According
to Analyst Perspectives’, the worldwide market for  RFID in
manufacturing will jump from $208.8 million in 2006 to $319.5 million by 2011.
During this period, the technology is expected to appear in many industries with
significant impact on the efficiency of business processes. Another RFID
industry research and consulting firm, IDTechEx, forecasts the overall RFID
market to reach $5.29 Billion during 2008, an estimated growth of more than 7%
over the total achieved in 2007.




Our
ongoing strategy is to participate in the expanding RFID market as a core vendor
to the pool of suppliers that sell to a particular retailer or chain of
retailers (the so-called “vendor population”). KMA (Canada) currently delivers
EAS solutions to this market and will develop RFID solutions that are specific
to the needs of each vendor.




Presently,
we have the ability to add RFID technology to our current DualTagTM product lines
creating a Triple TagTM, which
will enable high-volume, single-pass application of RFID-integrated EAS tags at
the unit level. The Triple TagTM can
employ both AM and/or RF technologies in addition to RFID technology which may
then be applied to packaging simultaneously in a single production run rather
than in separate, duplicate runs. We have the opportunity to evolve with the
marketplace to become a leader in RFID tagging by leveraging existing retail
relationships and knowledge of EAS technologies to assist retailers and
manufacturers in the emerging RFID market. At the present time, the Company does
not earn revenues from sales of RFID as the current high price of RFID tags
makes use of the technology prohibitive for our customers. Further, we do not
offer any discrete RFID technology to our customers. However, upon further
development of this application of RFID resulting in a lower price per unit, we
may incorporate this technology in our product line. If that does happen, we
anticipate that we will source RFID tags from one of a number of high quality,
low cost producers as and when our customers require. While we currently have
the ability to add RFID technology by adding an RFID tag to our DualTagTM, our
expertise at this time is not specifically in the manufacture of RFID tags. As
part of our long term planning, we may consider the acquisition of an RFID
integrator if demand for Triple TagsTM
reaches such critical mass that it becomes cost effective to do so. There is no
guarantee that we will seek to acquire a manufacturer of RFID tags or that a
company will be available for purchase at a reasonable price, should we decide
to attempt to do so.








9






Our
business strategy focuses on providing comprehensive, single-source solutions in
the prevention of retail merchandise theft. We believe that new RFID integrated
solutions and expanded product offerings will provide significant opportunities
to enhance the value of legacy products while expanding the product base in
existing customer accounts. We intend to maintain our leadership position in the
soft goods markets, expand our market share in certain key hard goods markets,
and maximize our position in under-penetrated markets with customized solutions.
We also intend to capitalize on our existing base of large global retailers to
further promote source tagging opportunities.




To
achieve these objectives, we plan to work to continually enhance and expand our
technologies and products, and provide superior service to our customers. We are
focused on providing our customers with a wide variety of EAS solutions
characterized by superior quality, on time delivery, exceptional value, and
enhanced merchandising opportunities for the retailer.




To
improve profitability, we have initiated strategic expansion of our operations
globally to further improve operating margins, shareholder value, and customer
focus. Our development plans will include improvement of sales productivity and
we intend to analyze and, where necessary, reconfigure our manufacturing and
supply chain to better position ourselves in the market.




Marketing
Strategy




We
primarily promote our products to retailers by offering what we believe is the
lowest cost loss prevention solution, on-time delivery, and acting as a single
point of contact for our client's EAS needs. In emphasizing source-tagging
benefits as a cost and labor-efficient means of integrating EAS into the retail
environment, we assist retailers in promoting source-tagging with
vendors.




Our
ongoing strategies to increase acceptance of source-tagging include partnering
with major retail suppliers, worldwide. We offer customized EAS tag solutions to
address needs of recognized branding and loss prevention, and continue to expand
product applications to accommodate the needs of the packaging industry.
Implementation using efficient high-speed production and high-volume capacity
supports our reputation with retail suppliers for reliable on-time delivery and
superior service.




We intend
to continue this marketing strategy, expanding market opportunities to
manufacturers and distributors. One of our objectives is to launch industry-wide
programs to secure new retail accounts and expand existing accounts with
innovative and customized products that will increase penetration with
integrated value-added solutions. We plan to promote source-tagging around the
world with extensive integration and automation using new EAS and RFID support
capabilities.




10


Distribution





During
the past fiscal year, we opened a new facility in Hong Kong, which serves not
only as a warehousing and distribution point for our Asian customers, but is now
the principal manufacturing point for KMA’s sew-in solution for the world
market.  Our Hong Kong facility also houses our Asian sales and
customer service teams providing local and regional customers direct access to
KMA and a timely response to their needs. To improve our sales efficiency,
future expansion plans include offices and distribution and/or manufacturing
centers in Europe, India and Mexico, which will enable the Company to further
reduce shipping costs and build on its strong reputation for guaranteed, on-time
delivery.




Our
expansion plan is structured to seize on the obvious advantages associated with
being located close to our ultimate customer and, where possible, reducing costs
associated with manufacturing, freight as well as taxes and duties.




In Hong
Kong, we are able to import to and export from China tax-free, based on Hong
Kong's status as a Special Administrative Region of China. When manufacturing in
Hong Kong and then importing to China, there are reduced and/or duty-free import
of our finished products. We manufacture and warehouse our products in Hong Kong
and ship to China with an import tax paid by our customer which reflects a
dramatic reduction from the 17% duty charged to our customers when we shipped
them Canadian made product. We can also reduce our overall freight cost as well
as reduce some of our current overhead in inventory by manufacturing and
delivering “just in time.”




Mexico is
a major manufacturing center to North American retailers. We continue to
consider setting up a subsidiary in either Mexico or another Central American
location to be closer to our customer source. This once again will give us
preferential duty rates into these growing supplier markets.




With
respect to the United States, our plan is to produce our DualTagTM products
closer to our customer base and reduce the costs associated with operating in
Canada. Currently, labor rates, real estate expenses and taxes are lower in the
U.S. as compared to Canada. Our long term plan is to move our head offices to
the United States to take advantage of these cost efficiencies and to be closer
to the head offices of large North American retailers. At the present time,
steps leading to relocation are underway, and are expected to be completed
during the coming fiscal year.




Research
and Development





Since the
inception of our operating subsidiary, KMA (Canada), we have dedicated
significant time and effort to the development of innovative products and
production equipment to meet the needs of an evolving market. These R&D
activities focus on the improvement of process performance, continued broadening
of the product lines, cost reductions of the current product lines, and
expansion of the markets and applications for our products. No R&D costs are
borne directly by our customers. Our future growth in revenues will be
dependent, in part, on the products and technologies that result from these
R&D efforts.




In
response to retail industry demand for a universal tagging solution compatible
with both AM and RF technologies, we developed the DualTagTM. In the past,
retailers would purchase EAS tags that were compatible with the type of EAS
deactivators that were in place at the point of purchase and the system of EAS
readers in place at entrances and exits. Manufacturers, wholesalers and
distributors were required to keep duplicate inventories of their products for
delivery to retailers having either AM or RF technology installed in their
stores. The DualTagTM eliminates the need for duplicate supply chain inventories
and is the only available EAS solution combining both leading EAS technologies
in a high speed, single pass application.




We
continue to review our product portfolio and rationalize our production
facilities and global supply chain, anticipating opportunities for greater
efficiency and cost reduction. Future development and expansion of our product
lines is expected with improved high-speed production processes, customized tags
and selection, and EAS-RFID integration.








11




Competition





Factors
that we consider in evaluating our competition include (i) production capacity,
(ii) delivery time, and (iii) proprietary patented and patent pending processes
and products. Although we have no significant or direct competition in the EAS
market, largely as a result of our proprietary designs along with patents issued
or pending, other providers may offer security solutions carrying exclusively RF
or AM technology in the form of an adhesive or a hard security tag. Our
principal competitor in the retail and apparel manufacturing industries is Paxar
Corporation, which was recently acquired by Avery-Dennison, which provides
merchandising systems including woven labels and tags used to identify brand
apparel or printed labels with bar codes.




Within
the emerging RFID market, there are many companies seeking a niche in which they
hope to meet the expected needs of one or more markets that they anticipate will
merge in the future.  Sentry Technology Corporation, I.D. Systems,
Inc. and Zebra Technologies Corporation to name just a few, use RFID technology
to provide systems for in store surveillance, asset management and monitoring,
inventory control and distribution management, and related software. These
companies are not considered to be direct competition however, they do offer
solutions related to security.




Sentry
Technology Corporation engages in the design, sale, installation and servicing
of radio frequency and electro-magnetic EAS systems, and closed circuit
television solutions (CCTV) in the United States and Canada. Its EAS systems are
used for radio frequency and ranger detection, as well as electromagnetic
detection. The company also distributes EAS systems and provides access control
readers, controllers, and software for card holders, as well as wireless
electronic data collection system for library management, warehousing, parcel
tracking, inventory control and asset protection.




Zebra
Technologies Corporation engages in the design, manufacture, and support of a
range of direct thermal and thermal-transfer label and receipt printers, RFID
printer/encoders, dye sublimation card printers, and digital photo
printers.




ID
Systems Inc. provides wireless solutions for corporate asset management. It
designs, develops and produces wireless monitoring and tracking products
utilizing a radio-frequency-based system. Its Wireless Asset Net fleet
management system provides wireless vehicle access control to restrict access of
equipment to trained and authorized personnel; electronic vehicle inspection
checklists; early detection of emerging vehicle safety issues; and impact
sensing to assign responsibility for accidents, as well as automate and enforce
preventative maintenance.




We
address our competition by seeking to offer a more diverse range of EAS tagging
solutions than our competitors, with a variety of low-cost EAS tags and labels,
as well as customizable tags for complex non-standard product packaging. We
protect our patents and licensing arrangements to forestall infringement. As a
result, we seek to maintain a competitive advantage by marketing our products
primarily on the basis of our versatility, exceptional affordability, and strong
reputation among our customers for reliable, on-time delivery and ease of
integration into operations with source tagging.




Manufacturing,
Raw Materials, and Inventory





KMA
(Canada) and KMA Global Solutions (Hong Kong) Ltd. our current operating
subsidiaries, drive the design and development of products and processes
involving our customers, manufacturing and marketing. We purchase raw materials
and components from suppliers and complete the production process at our
facilities in Ontario, Canada and in Hong Kong. KMA relies primarily on EAS
sensor suppliers such as Checkpoint Systems, Inc. for the RF component and
ADT-Sensormatic Electronics. for the AM component. We utilize sophisticated
real-time inventory management and logistics to keep inventories to a
minimum.










12




Our
manufacturing strategy for EAS products is to rely primarily on in-house
capability and to vertically integrate manufacturing operations to the extent
that is economically beneficial. Vertical integration refers to the case when
two firms, one of which supplies a product to the other, merge into a single
firm. Our existing in-house capability, together with the likelihood of future
vertical integration, will provide significant control over costs, quality,
and responsiveness to market demand which we believe results in a distinct
competitive advantage.




Dependence on Customers





We are a
preferred supplier of EAS solutions to customers around the world in a variety
of industries involved in retail merchandising businesses. “Preferred supplier”
is an industry term meaning that retailers indicate a preference as to their
suppliers and the company from which the supplier sources its EAS tagging
solution. Our status as a “preferred supplier” is, however, informal as it has
not been set forth in any binding agreement. In general, customers are free to
choose to source EAS tags from other than a preferred EAS tagging
supplier.




We do not
have a standardized customer contract - each agreement is negotiated on a
case-by-case basis. Most of our customer agreements have a term of twelve
months, are generally nonexclusive agreements, and are typically subject to
termination by either party upon a given notification period (generally thirty
days). The payment terms are generally thirty-days net.




Our
customers include suppliers to retail apparel and sporting goods stores, some of
the largest producers of electronic games supplied to multimedia retailers, the
largest retail food chains in both the US and Canada, the largest
“do-it-yourself” hardware and garden center chains, and major suppliers of
nutriceutical and over-the-counter (OTC) pharmaceuticals.  Apparel
market customers have primarily been the largest discount retailers in North
America and private label and designer retailers that use source-tagging on a
portion or segment of their apparel line. We are dealing with major private
label retailers with a focus on programs protecting a substantial percentage of
their goods with source-tagging.




The
Company continues to promote its solutions to retailers who need to reduce their
losses due to shrinkage. In most instances, our typical customer is the supplier
to the retailer and/or its associated packager or manufacturer. No one client of
the Company contributes more than 5% of the company's revenues. It is difficult
to predict the future importance of any one or more of our customers. With that
in mind, we continually seek to build a customer base that is sufficiently
diverse so that our business is not materially dependent on any one or few
customers. Our customer base, especially in the apparel industry, typically
establishes large private-label manufacturing programs for which we are
frequently named as an “approved supplier” of EAS source tagging solutions. This
private label manufacturing trend is generating the need for us to position
distribution and/or manufacturing facilities in strategic countries to
facilitate the supply of our products to the manufacturers at the lowest
possible cost and meet demand for prompt delivery schedules.




The
DualTagTMwas originally concentrated in the multimedia marketplace. This market
is experiencing some reduction at retail due to the trend of making purchases
via the Internet; however, we have found that the OTC drug and food supplement
market has a need to use our technology as well as the potential future need for
our proposed new Triple TagTM that
includes RFID. This market demand stems from the major retailers in this segment
having installed a roughly even split of both RF and AM technologies. We are
promoting our solutions to the brand owners and their related packaging
companies.




We also
promote DualTagTM directly to packagers and brand owners that have made a
commitment to the retail market to provide source-tagged merchandise, but due to
the split in technology use, find it necessary to apply two labels to most or
all of their production.  DualTagTM achieves the same level of
compliance more efficiently and can be applied more quickly, therefore providing
operational savings to this sector.










13




Other
solutions, such as our Grocery Label, began via direct sales and in-store
applications; therefore, we had direct sales efforts with the individual store
manager to promote the use of our solution. This has evolved as our solution
became a commodity and is now sold via the retailer's distribution
company.  Our Grocery Label or GSL has spawned an offshoot product
that is similar in design and can be applied by the retailer directly to
packaged goods.  Currently, our General Merchandise Label or GML is
being used on a variety of goods that include home décor, bedding, fragrances
and other packaged goods, as well as shoes in a variety of retail
formats.




Technology:
Intellectual Property





As of May 1, 2008, KMA (Canada) owned or was the assignee of
active patents issued by the U.S. Patent and Trademark Office (as well as
corresponding foreign patents granted in Germany, Spain, France, Italy,
Netherlands, United Kingdom and Mexico). These patents relate to a sew-on
security label, which anticipates and incorporates RFID technology, and
improvements and the manufacturing process thereof. KMA (Canada) also has
recently been granted a patent from the US Patent and Trademark Office,
concerning our DualTagTM product. Corresponding foreign patent applications in
Mexico, Germany, Spain, France, Italy, Netherlands, United Kingdom and Canada
relating to the dual technology EAS label and high speed process, which
anticipates and incorporates RFID technology, and improvements thereof continue
in process. Despite achieving the recent milestone with the USPTO, there can be
no assurance that further patents will be issued to KMA (Canada) on any of its
pending applications.




The
majority of our revenues are derived from products or technologies which are
patented,; however, there can be no assurance that a competitor could not
develop products comparable to those of the Company. Although, the patent
protection of our technologies is an important aspect of our business and future
growth opportunities, the Company's distinct competitive advantage is based on
our extensive manufacturing experience and know-how of current and developing
EAS technology.




Government
Regulation; Need for Government Approvals





The
Company's products are compliant with all applicable FCC and DOC regulations in
the United States and Canada governing radio frequencies, signal strengths, and
conform to environmental regulations in all territories in which they operate.
Our products are also compliant with applicable requirements published by ETSI
in Europe. We carry the International Organization for Standardization (ISO) for
ISO 9001:2000 certification and, at present, no government approvals for our
products are required.




Costs
and Effects of Compliance with Environmental Laws




There are
no material costs or effects of compliance under any applicable environmental
laws in the jurisdictions in which we operate.




Employees





As of May
15 2008, Jeffrey D. Reid, William Randal Fisher, Normand Nowlan, Laura Wilkes
and Scott Dixon are the only employees of the Company, and KMA (Canada) and KMA
Global Solutions (Hong Kong) Ltd. combined had sixteen full-time
personnel.




Seven of
the latter individuals are full-time employees located in Mississauga, Ontario,
Canada, and the remaining nine are full-time employees located in Hong
Kong.




Upon our
establishment of U.S.-based operations and the relocation of our headquarters to
the United States, the Company anticipates hiring additional employees in a
variety of roles, as the business expands.








14




Canadian
Jurisdictional Issues





The
Company's operating subsidiary, KMA (Canada), is currently located in
Mississauga, Ontario, Canada. Many of the Company's key executive officers and
majority shareholders are citizens of and reside in Canada, and, as a result, it
may not be possible for U.S. or other non-Canadian purchasers to effect service
of process within the United States upon KMA (Canada) or such persons. All or a
substantial portion of our assets and such persons may be located within Canada
and, as a result, it may not be possible to satisfy a judgment against the
issuer or such persons in Canada based upon the civil liability provisions of
the U.S. federal securities laws or to enforce a judgment obtained in Canadian
courts against KMA (Canada) or persons in Canada based upon the civil liability
provisions of the U.S. federal securities laws. The ability of the Company's
non-Canadian investors to effect service of process within the United States on
KMA (Canada) or an officer or shareholder of KMA (Canada) located in Canada may
also be limited.







Item
2.    DESCRIPTION OF PROPERTY.





The
Company presently leases as its executive office, on premises of approximately
11,530 square feet, located at 5570 Kennedy Road, Mississauga, Ontario, Canada.
The three-year lease term, commenced November 1, 2005, and expires October 31,
2008 at an approximate rent of $8,500 per month. The Company is given a right of
renewal under the lease for an additional two years under the same terms and
conditions (except for rights of renewal and the existing rental rate, which
shall be renegotiated in accordance with contemporary market rates). The
facility in Mississauga has adequate insurance coverage. On March 15, 2007, the
Company leased a 5467 square foot facility in Hong Kong for manufacturing.
Monthly rent is approximately $6,800 per month and on May 1, 2007, the Company
also leased a three-bedroom apartment in Hong Kong as a less expensive
alternative to frequent hotel stays for visiting management.  Monthly
rent is approximately $3,462.  The current lease term for this
property expires on April 30, 2009.





Item
3.    LEGAL PROCEEDINGS.





The
Company is unaware of any pending legal proceedings against it or any of its
directors, officers, affiliates or beneficial owners of more than five percent
(5%) of any class of voting securities.





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





The
Company’s 2007 Annual Meeting of Stockholders (the “Annual Meeting”) was held on
December 5, 2007.  Represented at the Annual Meeting, either in person
or by proxy, were 38,022,756 voting shares. The following actions were taken by
a vote of the Company’s stockholders at the Annual Meeting:




Messrs.
Jeffrey D. Reid, Daniel K. Foster, and Michael McBride were elected to serve as
members of the Company’s Board of Directors each receiving 37,974,161votes in
favor of election, and 48,595 votes against.




The
appointment of McGovern, Hurley, Cunningham, LLP to serve as the Company’s
independent auditors for its fiscal year ending January 31, 2008 was ratified;
38,022,756 votes were cast for the ratification; 0 votes were cast against the
ratification; and there were 0 abstentions. There were no broker
non-votes.




15


PART
II




Item
5.    MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERSAND
SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.





Our
Common Stock is quoted for trading on the Over The Counter Bulletin Board. Prior
to the Company's merger with Espo's, Espo's common stock traded under the symbol
“EPOL”. Effective on March 27, 2006, the symbol was changed to
“KMAG.”




The
following tables set forth the quarterly high and low daily bids for our Common
Stock as reported by Over the Counter Bulletin Board for the shares of Common
Stock issued by the Company beginning with the quarter ended April 30, 2006.
Historical information with respect to Espo's common stock prices is not
relevant as to the Company's stock price due to the substantial change to the
business of the Company post-merger. The bids reflect inter-dealer prices
without adjustments for retail mark-ups, mark-downs or commissions and may not
represent actual transactions. It should be noted that the prices listed for the
Common Stock may not be a reliable indicator of their value due to the fact that
the Pink Sheets have no listing standards and the volume of sales for shares of
Common Stock has been inconsistent since they commenced trading.




High
            
            LowQuarter
      ended January 31, 2008
            $
            0.40
            
            $
            0.08Quarter
      ended October 31, 2007
            $
            0.52
            
            $
            0.30Quarter
      ended July 31, 2007
            $
            1.36
            
            $
            0.52Quarter
      ended April 30, 2007
            $
            1.05
            
            $
            0.29Quarter
      ended January 31, 2007
            $
            0.55
            
            $
            0.11Quarter
      ended October 31, 2006
            $
            3.05
            
            $
            0.10Quarter
      ended July 31, 2006
            $
            4.53
            
            $
            3.00Quarter
      ended April 30, 2006
            $
            5.00
            
            $
            3.75





Our stock
price at the close of the market on May 15, 2008, was $0.08.





Holders





As of May
15, 2008, there were 18 holders of record of Common Stock, of which certain
holders of record are entities that hold on behalf of beneficial owners. No
shares of Preferred Stock are issued or outstanding.




Dividends





No cash
dividends have been declared on our Common Stock. The declaration of dividends,
if any, will be contingent upon our revenues and earnings, if any, capital
requirements and financial conditions. The payment of cash dividends, if any,
will be within the discretion of our Board of Directors. We presently intend to
retain all earnings, if any, for use in our business operations.












16


Securities
Authorized for Issuance Under Equity Compensation Plans




The
following table sets forth information as of May 15, 2008 concerning securities
that are authorized under the Company’s equity compensation plans.




Plan
      Category
            (a)
                Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights
            (b)
                Weighted-average
      exercise price of outstanding options, warrants and
      rights
            (c
      )
                Number
      of securities remaining available for future issuance under equity
      compensation plans (excluding securities reflected in column
      (a))Equity
      compensation plans approved by security holders
            0
            $0
            0Equity
      compensation plans not approved by security holders
            0
            $0
            1,500,000Total
            0
            $0
            1,500,000







Recent
Sales of Unregistered Securities




Espo's
had sold securities from time to time in private placements since its inception
pursuant to the exemptions for nonpublic offerings under Section 4(2) of the
Securities Act.




The
Company had issued securities in connection with its merger with Espo's and for
various services rendered and to be rendered pursuant to the exemption for
non-public offerings under Section 4(2) of the Securities Act, as described
below. Neither the Company nor any person acting on its behalf offered or sold
the securities by means of any form of general solicitation or general
advertising. No underwriter or placement agent was engaged in these
transactions.




1)
            After
      its formation, the Company entered into an Agreement and Plan of
      Reincorporation Merger as of March 10, 2006, with Espo's. Pursuant to the
      merger, in which the Company was the surviving entity, the Company issued
      4,920,250 shares of Common Stock. The consideration for the Company's
      shares was an equal number of Espo's shares of common stock, of which
      4,225,427 shares of Common Stock were cancelled, leaving a balance of
      694,823 shares of Common Stock. The Company relied upon Section 4(2) of
      1933 Act, which provides an exemption from the registration provisions of
      section 5 of the 1933 Act for “transactions by an issuer not involving any
      public offering.” The exchange of securities was made without advertising
      (or any other form of “general solicitation”) to a limited number of
      sophisticated persons, with full access to the information that would be
      included in a registration statement or other offering document. Each
      purchaser, either alone or with their purchaser representatives and
      professional advisors, was determined by the Company, based on their prior
      securities experience, to have such knowledge and experience in financial
      and business matters that they are capable of evaluating the merits and
      risks of the prospective investment.




2)
            On
      March 15, 2006, the Company entered into the Acquisition Agreement to
      acquire KMA (Canada) pursuant to which the Company issued 314,400 shares
      of its common stock to the shareholders of KMA (Canada) in exchange for an
      equal amount of KMA (Canada) common stock. The Company relied upon Section
      4(2) of the 1933 Act. The exchange of securities was made without
      advertising (or any other form of “general solicitation”) to a limited
      number of sophisticated persons, with full access to the information that
      would be included in a registration statement or other offering document.
      Each purchaser, either alone or with their purchaser representatives, had
      such knowledge and experience in financial and business matters that they
      are capable of evaluating the merits and risks of the prospective
      investment. The consideration for the Company’s shares was an equal number
      of shares of KMA (Canada) common
stock.


















17








3)
            In
      connection with the March 15th
      Acquisition Agreement, the Company formed KMA LLC as a special purpose
      entity with the Company as its single member and the holder of all of KMA
      LLC's outstanding interests. The Company issued 1,700,000 shares of its
      common stock to KMA LLC. The Company relied upon Section 4(2) of the 1933
      Act. The exchange of securities was made without advertising (or any other
      form of “general solicitation”) to a limited number of sophisticated
      persons, with full access to the information that would be included in a
      registration statement or other offering document. Each purchaser, either
      alone or with their purchaser representatives, had such knowledge and
      experience in financial and business matters that they are capable of
      evaluating the merits and risks of the prospective investment. The
      consideration for the issuance of the Company's shares was not cash, but
      an equal number of shares of KMA (Canada) common stock. The transaction
      was undertaken to facilitate the deferral of income recognition for
      Canadian tax purposes for the shareholders of
  Exchangeco.




4)
            In
      order to enhance the liquidity of the Company's common stock, the Company
      effected a share dividend or “stock split” on March 17, 2006. This event
      was accomplished by the issuance of seventeen shares of Company common
      stock for each share of issued and outstanding Company common stock on a
      pro rata basis and without consideration to the Company's stockholders. As
      per an agreement between the KMA (Canada) shareholders and the Company,
      5,344,800 shares of the Company's common stock were retired to treasury
      and cancelled and the KMA (Canada) shareholders received 1,179,000
      post-split shares of Company common stock. As a result of these
      transactions, the total issued and outstanding shares of the Company’s
      common stock as of April 30, 2006 were 41,890,991. The forward stock split
      was exempt from registration with the Commission pursuant to Securities
      Act Section 3(a)(9).




In the
following transactions, the Company relied upon Section 4(2) of 1933 Act, which
provides an exemption from the registration provisions of section 5 of the 1933
Act for “transactions by an issuer not involving any public
offering”:





1)
            On
      June 16, 2006, the Company issued 25,000 shares of our common stock with a
      deemed value of Cdn $0.50 per share to ZA Consulting Inc. in exchange for
      investor relation services provided by a consulting company for
      KMA.




2)
            On
      October 20, 2006, the Company  issued 150,000 shares of our
      common stock with a deemed value of USD $0.19 per share to Xnergy, LLC in
      exchange for consulting services.




3)
            On
      November 18, the Company issued 71,429 shares of our common stock with a
      deemed value of USD $0.14 per share to Xnergy, LLC in exchange for
      business and financial advisor
services.




4)
            On
      December 12, 2006, the Company issued 360,000 shares of our common stock
      with a deemed value of USD $0.12 per share to Jeffrey Zeldin in exchange
      for consulting services.




5)
            On
      December 12, 2006, the Company issued 300,000 shares of our common stock
      with a deemed value of USD $0.12 per share to Stuart Vandersluis in
      exchange for technical consulting
services.




6)
            On
      December 13, 2006 the Company issued 59,701 shares of our common stock
      with a deemed value of USD $0.1675 per share to Xnergy, LLC in exchange
      for business and financial advisor
services.




7)
            On
      January 11, 2007, the Company issued 57,471 shares of our common stock
      with a deemed value of USD $0.174 per share to Xnergy, LLC in exchange for
      business and financial advisor
services.




8)
            On
      January 19, 2007, the Company issued 1,000,000 shares of our common stock
      with a deemed value of USD $0.20 per share Corbitt Rockwell in exchange
      for consulting services.




9)
            On
      February 12, 2007, the Company issued 18,727 shares of our common stock
      with a deemed value of $0.534 per share to Xnergy, LLC in exchange for
      business and financial advisor
services.










18




In
addition, on January 31, 2007, the Company sold 10,000,000 shares of our common
stock for a purchase price of  $1,000,000 ($0.10 per share), payable
$500,000 on January 31, 2007 and $500,000 within thirty days after the
effectiveness of this registration statement.  The purchasers of the
shares also received warrants to acquire an additional 10,000,000 shares of our
common stock at an exercise price of $0.20 per share.  Incendia
Management Group Inc., as agent for the investors, received a fee of 10% of
1,000,000 shares of our common stock and warrants to acquire 1,000,000 shares of
our common stock at an exercise price of $0.20 per share.  In
connection with the sales, each of the Selling Stockholders represented and
warranted to the Company that the Selling Stockholder: (1) is an “accredited
investor” as that term is defined in Rule 501(a)(3) of Regulation D; and (2) is
not a U.S. Person as defined in Rule 402 of Regulation S.  As
such, the sales of the shares of our common stock were exempt from registration
under the 1933 Act pursuant to Regulation S.





On
September 21, 2007, KMA International agreed to issue 8,000,000 shares of common
stock at $0.25 per share in connection with a private offering. The purchase
price of the shares is $2,000,000 which will be paid as follows: (i) $200,000
shall be due upon the filing of the registration statement; (ii)  a
payment of $600,000 shall be due 60 days after the effective date of the
registration statement; (iii) an additional payment of $600,000 shall be due 90
days after the effective date of the registration statement; and (iv) a final
payment is due 120 days after the effective date of the registration statement.
As of January 31,2008, the company received $200,000 and recorded $1,800,000 as
a subscription receivable.  The purchasers of the shares also will
receive warrants to acquire an additional 8,000,000 shares of common stock at an
exercise price of $0.30 per share for a period of 2 years.  The agent
for the investors received a fee of 1,400,000 shares of common stock at $0.43
per share and warrants to acquire 1,400,000 of common stock at an exercise price
of $0.30 per share for a period of 2 years.  Please see Item 8B for
more information regarding this transaction.





Item
6.    MANAGEMENT’S DISCUSSION AND ANALYSIS





The
following Management's Discussion and Analysis is intended to help the reader
understand our results of operations and financial condition. Management's
Discussion and Analysis is provided as a supplement to, and should be read in
conjunction with, our financial statements and the accompanying notes thereto.
The revenue and operating income (loss) amounts in this Management's Discussion
and Analysis are presented in accordance with United States generally accepted
accounting principles.





OVERVIEW





KMA
Global Solutions International, Inc., through our operating subsidiaries, KMA
Global Solutions Inc. (“KMA (Canada)”), a corporation formed in April 1996 under
the laws of the Province of Ontario, andKMA Global
Solutions (Hong Kong) Ltd., is an innovator and internationally recognized
leader in the Electronic Article Surveillance (“EAS”) market. We serve a diverse
and geographically dispersed customer base consisting predominantly of retailer
suppliers, branded apparel, multimedia,  pharmaceutical companies and
contract manufacturers, providing low cost and customized solutions to protect
against retail merchandise theft.  The retail industry generally
refers to these losses as “inventory shrinkage” or “shrink”.  On
average, shrink represents nearly 2% of a retailer's revenue and can often be
much more.  According to “The Global Retail Theft Barometer”,
worldwide retail losses due to shrinkage are a problem estimated to exceed $108
Billion USD, including the cost of prevention. The Company has developed a suite
of proprietary EAS products to address the specific needs of a changing
marketplace, using patented processes to manufacture its tags at high speeds and
deliver its products on a just in time basis. Our EAS solutions are designed to
fit the needs of major suppliers to multinational retailers in the apparel,
multimedia, sporting goods, food and over-the-counter (OTC) pharmaceutical and
health supplement industries.












19






The
Company is engaged in the supply of EAS solutions (including the Company's
NEXTagTM and DualTagTM, GSL and GML products), focusing on providing generic and
customized solutions in the apparel, multi media, sporting goods, food and
pharmaceutical industries. We will grow by concentrating on executing a strategy
as a global operating company, while maintaining a continued focus on providing
customers with innovative products and solutions, outstanding service,
consistent quality, on-time delivery and competitively priced products. Together
with continuing investments in new product development, state-of-the-art
manufacturing equipment, and innovative sales and marketing initiatives,
management believes the Company is well-positioned to compete successfully as a
provider of EAS tagging solutions to the retail apparel, multimedia and
pharmaceutical industries, worldwide. The capital needed to fund our growth has
been generated to date through investment by the founding shareholders and
through reinvestment of profits and private placements of
securities.





The
Company was formed on March 9, 2006 under the laws of the State of Nevada, and
is organized as a holding company structure, with KMA (Canada), KMA Global
Solutions, LLC (“KMA LLC”), a Nevada limited liability company, and KMA Global
Solutions (Hong Kong) as wholly-owned subsidiaries. On March 10, 2006, we
entered into a merger agreement with Espo's Ltd. (“Espo's”), a corporation
incorporated under the laws of the State of New York on September 7, 2001, in
which the Company was the surviving corporation. Pursuant to the merger, the
Company issued 1,700,000 shares of its common stock to KMA LLC.





On March
15, 2006, we entered into an acquisition agreement with KMA (Canada) whereby we
purchased from the remaining shareholders of KMA (Canada) an aggregate amount of
314,400 common shares in exchange for 1,179,000 common shares of KMA
International. Through these series of transactions, the Company acquired,
directly or indirectly, 100% of the issued and outstanding shares of KMA
(Canada).





Part of
the Company's expansion plan included relocating part of our existing
manufacturing capacity from our Canadian operation to the new facility in Hong
Kong, a step completed during the course of the past year.  Future
expansion plans may include adding further manufacturing capacity in India and
Mexico, and expanding our sales operation to include Europe and Asia, as well as
relocating our headquarters from Ontario, Canada to a strategically located US
city.





The use
of EAS systems in the retail environment continues to generate significant cost
savings for retailers. Our management believes that the extremely competitive
retail environment, and the Company's low cost solutions relative to other EAS
suppliers, places us in a favorable position for the future. The addition of new
high-speed high volume equipment late in the year has proven successful in
driving costs of production lower and may enable the Company to capture a larger
share of the EAS market. With the completion of the implementation of new
production equipment, we plan to open production facilities in high-demand
locations, thus shortening supply lines on raw materials, and reducing operating
costs through efficiencies, and shipping costs for finished goods. We anticipate
increased demand for our products in international as well as North American
markets. Management's ongoing strategy includes implementing process
improvements to reduce costs in all of our manufacturing facilities,
re-deploying assets to balance production capacity with customer demand, and
seeking to expand our production in new and emerging markets to minimize labor
costs and maximize operating performance efficiencies.













20


RESULTS
OF OPERATIONS





Sales





The
Company's sales decreased $1,753,278 or 26.4% to $4,877,606, for the twelve
months ended January 31, 2008, compared to $6,630,884 for the twelve months
ending January 31, 2007.  There was significant weakness in the order
rate from the apparel EAS label market, particularly in the fourth quarter,
which seemed to reflect the weakness in the retail market in
general.  A significant number of orders were cancelled or postponed,
again in the fourth quarter, as retailers made adjustments to their product
orders in an effort to manage their inventory levels, all of which directly
impacted our own incoming order rate.  In addition, there was a
continued drop in demand for the DualTagTM in the DVD product segment as the
decline affecting that retail segment continued.  Growth in orders for
the DualTagTM from other sectors such as OTC and Electronic Accessories showed a
good deal of positive movement late in the year, however not nearly enough to
offset the impact of other sectors.   We do expect the growth in
these latter sectors to carry into the next period.





Domestic
sales, principally comprising revenues generated in and for North America
amounted to $2,285,548, a 39% decrease over the previous year, largely due to
the shift of apparel based sales to our Hong Kong
subsidiary.  Offshore sales, which for the most part consist of those
generated from our Asian offices, consisted of $2,592,058, representing a 9.7%
decrease from a year earlier, reflecting a loss of continuity between ending our
agency agreement with our former representative, and the functional startup of
our Hong Kong facility as an operating entity.





The bulk
of apparel products sold through retail around the world are now produced in
Asia.  Historically, KMA produced its sewn-in apparel protection
products at our factory in Canada, and shipped it overseas.  Our Asian
interests were represented by a Hong Kong based agency.





After a
great deal of study, coupled with growing challenges with our Hong Kong agent,
we made a pivotal strategic decision concerning this important market and
ultimately decided that KMA needed to represent its own interests in the Asian
market in order to improve our competitive position, shorten our supply lines,
establish a direct relationship with our customers, and ultimately position our
business to grow in concert with the market potential in the years to
come.  We opened KMA (Hong Kong) in May 2007, initially as a
warehousing and distribution facility, and then over the remainder of the year,
began to hire and train our own production, sales and customer service staff,
while at the same time, ending our long-term arrangement with our Hong Kong
based agent.





As our
Hong Kong facility is now fully operational, we believe that we are better
positioned to respond to the apparel sector of retail as it finds its new
footing, and we can now move forward with larger and more diverse programs that
we anticipate will deliver increased sales revenue during our new fiscal
year.  We are well along with establishing direct relationships with
the thousands of apparel manufacturers located throughout Asia and have begun to
supply many of those that participate in EAS programs, both large and
small.





Sales of
KMA’s patented NEXTagTMsew-in
EAS label declined by 37% to $2,312,837 in the year ended January 31, 2008 as
compared to $3,695,245 in the year ended January 31, 2007, as a result of the
softening of the apparel market during our fourth quarter of the
year.





KMA’s
DualTagTM business is based in supplying the only patented, dual-technology,
self-adhesive label in the industry, containing the base elements of the two
most popular EAS technologies in use today.  By providing both
technologies on a single label, KMA enables manufacturers and their packagers to
tag their entire production with one DualTagTM, permitting them to maintain a
single inventory of each product, regardless of what EAS technology is in use at
the store to which the product unit is eventually shipped.  Without
DualTagTM, manufacturers traditionally find it necessary to maintain multiple
inventories based on whichever label technology was applied to a particular
package, in order to comply with their retail customers’ requirements. During
the past year we also responded to a market need by diversifying our DualTagTM
line by introducing a non-adhesive, insertable cardstock version of the DualTagTM
which can be placed inside of a product package either with other literature or
the product itself.  We have also completed the necessary advance
planning that will allow the incorporation of RFID into the DualTagTM product as
specialty retailers begin to incorporate item-level RFID into their operations
and begin to demand its inclusion in their suppliers products.










21





During
fiscal 2008, our DualTagTM business achieved both encouraging gains as
breakthroughs were realized in new areas such as the nutriceutical and
pharmaceutical over-the-counter (OTC) markets, but also sustained some difficult
setbacks as cost-cutting measures put in place by customers in the weakening DVD
and Electronic games sector had an impact on KMA’s product sales into that
segment.  The loss of this significant channel resulted in an overall
drop in DualTagTM sales versus the previous year, with revenues in the year
ending January 31, 2008 of $1,814,038, versus $1,924,717 in the same period
ending January 31, 2007, as the newly opened segments were not mature enough to
offset the sudden and unexpected loss represented by what had been our largest
DualTag market.





The
balance of our DualTagTM business (net of multi media) showed encouraging growth,
a trend that we expect to continue as new markets come on line.  We
feel that this is ongoing evidence of the viability of the DualTag as a growth
engine, bolstering confidence that it will continue to help to propel KMA’s
future.





Gross
Profit





Gross
profit was $1,205,887 or 24.7% of sales for the year ending January 31, 2008,
compared with $1,288,305 or 19.4% for the year ending January 31,
2007.  Although slightly lower in absolute dollars as a result of the
softer sales results, this area clearly showed a dramatic improvement as a
percentage of sales and provides evidence of the successful progress of our
ongoing cost reduction program.





Management
is committed to an ongoing strategy that focuses on continually improving
profits through process and purchasing improvements to reduce costs in
manufacturing and by locating manufacturing sites closer to our customer base to
eliminate freight costs.





Selling,
General and Administrative (SG&A) Expenses





SG&A
expenses were $3,062,286 in the year ending January 31, 2008, compared with
$2,385,405 for the previous year, which ended January 31,
2007.  SG&A expenses, expressed as a percent of sales, were 62.7%
compared to 36% for the twelve months ended January 31, 2007.





The
increase in the ratio of SG&A expenses to sales is primarily due to: (i)
reduction in sales revenue; (ii) increase in wages and benefits; (iii)
accounting, audit, legal, and consulting fees associated with SEC filing
requirements; and (iv) occupancy costs and other expenses associated with
establishing our new Hong Kong facility. These higher expenses were offset to
some degree through lower Marketing and Promotion expense.





Operating
Income (Loss)





Operating
loss before taxes was $1,856,399 or 38.1% for the year ended January 31, 2008,
compared with an operating loss before taxes of $1,097,100 or 16.5% the previous
year, which ended January 31, 2007.






















22




Taxes
on Income





The
Company experienced an operating loss for the year and therefore recognized a
future tax benefit of $592,122 which has been offset by a valuation allowance of
$592,122 for the twelve months ended January 31, 2008 versus a future tax
benefit of $360,697 in the year ending January 31, 2007.  The
effective income tax rates of the future tax provisions for the twelve months
ended January 31, 2008 was 31.9. For the same period in 2007, the effective rate
was 32.9%.  The statutory income tax rate going forward for the
Company, with all of its operating activities taxed in Canada, is approximately
36% as a result of applicable combined federal and provincial tax
rates.





Liquidity
and Capital Resources





The table
below represents summary cash flow information for the twelve months ended
January 31, 2008 indicated:





Twelve Months ended January
    31,2008
            
            
            2007Net
      cash from operating activities
            
            
            (1,171,841
            )
            
            
            (622,804
            )Net
      cash from investing activities
            
            
            (509,056
            ))
            
            
            (35,102
            )Net
      cash from financing activities
            
            
            1,940,414
            
            
            
            526,221Effect
      of currency translation adjustments
            
            
            (209,078
            )
            
            
            27,668Total
      change in cash and cash equivalents
            
            
            50,439
            
            
            
            (104,017
            )





Overview.
The Company had, for the twelve months ended January 31, 2008, current
liabilities of $1,222,155 and current assets of $579,092. Management believes
that the Company will generate sufficient cash from its operating activities for
the foreseeable future, supplemented by an anticipated infusion of capital, to
fund its working capital needs, strengthen its balance sheet and support its
growth strategy of expanding its geographic distribution and product offerings.
The infusion of capital is expected to come from the sale of treasury stock
and/or newly issued shares of common stock to investors in the public capital
markets.





Operating
Activities. Cash flow from operating activities for the twelve months
ended January 31, 2008 resulted in a negative cash flow of $1,171,841, as
compared to the twelve-month period ended January 31, 2007, which saw a negative
cash flow of $622,804.  In the twelve months ended January 31, 2008,
the net loss, as adjusted for amortization, shares issued for services provided
and future income taxes, resulted in a negative cash flow of $1,704,170 and with
changes in non-cash working capital of $532,329 our cash flows from operating
activities decreased by $1,171,841. During the twelve months ended January 31,
2007, the net income, as adjusted for amortization and future income taxes,
resulted in a negative cash flow of $855,348, together with changes in non-cash
working capital of $232,544, resulted in a negative cash flow from operating
activities of $622,804. The variances in cash flow from operations between
twelve months ended January 31, 2008 and January 31, 2007 are primarily the
result of changes in income/loss before taxes, accounts receivable, prepaid
expense and accounts payable. Accounts Receivable for the company decreased
$239,800 through the twelve months period ended January 31, 2008 as compared to
an increase of $223,134 for the twelve months ended January 31, 2007. This
difference is a result of timing of sales. Accounts payable and accrued
liabilities for the Company decreased by $79,334 through the twelve months
period ended January 31, 2008 as compared to Accounts payable and accrued
liabilities increase of $268,700 in the twelve months ended January 31, 2007.
This decrease in accounts payable is due primarily to non-recurring costs in the
prior year. Our prepaid expenses decreased by $47,774 for the twelve months
ended January 31, 2007 and we experienced a $265,029 decrease for the twelve
months ended January 31, 2008. The difference between the years is primarily the
result of prepaid consulting fees at the end of January 31, 2007 were fully
expensed by January 31, 2008.














23






Financing
Activities. The Company's cash flow from financing activities for the
twelve months ended January 31, 2008 amounted to $1,940,414, primarily as a
result of an issuance of capital stock in the amount of $700,000, and the
exercise of warrants resulting in a further increase of $1,270,000, .By
comparison, in the twelve months ended January 31, 2007 the Company experienced
an increase as a result of the issuance of capital stock in the amount of
$487,485 and an increase in advances from shareholders of $90,202, resulting in
a net cash flow from financing activities of $526,221.





Investing
Activities. In the twelve months ended January 31, 2008 the Company
experienced a decrease in cash flow from investing activities of $509,056. This
was due to an increase in purchase of equipment and patents $308,853 along with
deposits on equipment and patents of $200,203. By comparison in the twelve
months ended January 31, 2007, the Company experienced an decrease in cash flow
from investing activities of $35,102, in large part due to an increase on the
purchase of equipment and patents that amounted to $259,247 and an decrease in
deposits on equipment and patents which amounted to $173,084.





Off-Balance Sheet
Arrangements. The Company has no material transactions, arrangements,
obligations (including contingent obligations), or other relationships with
unconsolidated entities or other persons that have or are reasonably likely to
have a material current or future impact on its financial condition, changes in
financial condition, results of operations, liquidity, capital expenditures,
capital resources, or significant components of revenues or
expenses.





Market
Risk. In the normal course of its business, the Company is exposed to
foreign currency exchange rate and interest rate risks that could impact its
results of operations.





We sell
our products worldwide, and a substantial portion of our net sales, cost of
sales and operating expenses are denominated in foreign currencies. This exposes
the Company to risks associated with changes in foreign currency exchange rates
that can adversely impact revenues, net income and cash flow. In addition, the
Company is potentially subject to concentrations of credit risk, principally in
accounts receivable. The Company performs ongoing credit evaluations of its
customers and generally does not require collateral. Our major customers are
retailers, branded apparel companies and contract manufacturers that have
historically paid their balances with the Company.





There
were no significant changes in the Company's exposure to market risk in the past
three years.





CRITICAL
ACCOUNTING POLICIES AND ESTIMATES





Management
has identified the following policies and estimates as critical to the Company's
business operations and the understanding of the Company's results of
operations. Note that the preparation of this Form 10-KSB requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
Company's financial statements, and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those estimates,
and the differences could be material.





DESCRIPTION
OF THE BUSINESS AND GOING CONCERN





KMA
Global Solutions International, Inc. (“KMA International” or the “Company”) is
engaged in the supply of Electronic Article Surveillance (“EAS”) solutions,
focusing on providing customized solutions in the apparel, multi media, sporting
goods, food and pharmaceutical industries














24





The
Company’s consolidated financial statements are presented on a going concern
basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. For the year ended January 31,
2008, the Company had a net loss of $1,856,399 as compared to a net loss of
$736,403 for the year ended January 31, 2007.




The
Company’s ability to continue as a going concern is contingent upon its ability
to secure additional debt or equity financing, grow sales of its products and
achieve profitable operations.  Management’s plan is to secure
additional funds through future debt or equity financings.  Such
financings may not be available or may not be available on reasonable terms to
the Company.  The issuance of additional equity securities by the
Company could result in a significant dilution in the equity interests of the
current stockholders. Obtaining commercial loans, assuming those loans would be
available, will increase the liabilities and future cash
commitments.





The
Company has devoted substantially all of its efforts to establishing its current
business. Management developed its business model, business plans and strategic
marketing plans that included: organization of the Company and divisions;
identification of the Company’s sales channels and associated supply chain;
development of marketing strategic plans and sales execution strategies;
preparation of a financial plan, risk and capital structure planning models,
developing cash flow forecasts and an operating budget; identifying markets to
raise additional equity capital and debt financing; and, recruiting and hiring,
management and industry specialists.




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





Basis
of Consolidation





These
consolidated financial statements include the accounts of the Company, which is
incorporated in the United States, and its wholly owned subsidiaries, KMA Global
Solutions Inc., which is incorporated in Canada under the Ontario Business
Corporations Act and KMA Global Solutions (Hong Kong) Ltd., which is
incorporated in Hong Kong.





Revenue
Recognition





SAB No.
104 requires that four basic criteria be met before revenue can be recognized:
(1) persuasive evidence of an arrangement exists; (2) delivery has occurred or
services have been rendered; (3) the fee is fixed or determinable; and (4)
collectibility is reasonably assured. Should changes in conditions cause
management to determine that these criteria are not met for certain future
transactions, revenue recognized for a reporting period could be adversely
affected.





Sales
Returns and Allowances





Management
must make estimates of potential future product returns, billing adjustments and
allowances related to current period product revenues. In establishing a
provision for sales returns and allowances, management relies principally on the
Company's history of product return rates which is regularly analyzed.
Management also considers: (1) current economic trends; (2) changes in customer
demand for the Company's products; and (3) acceptance of the Company's products
in the marketplace when evaluating the adequacy of the Company's provision for
sales returns and allowances. Historically, the Company has not experienced a
significant change in its product return rates resulting from these factors. For the
twelve months ended January 31, 2008 and 2007, the provision for sales returns
and allowances accounted for as a reduction to gross sales was not
material.














25





Allowance
for Doubtful Accounts





Management
makes judgments, based on its established aging policy, historical experience
and future expectations, as to the ability to collect the Company's accounts
receivable. An allowance for doubtful accounts has been established. The
allowance for doubtful accounts is used to reduce gross trade receivables to
their estimated net realizable value. When evaluating the adequacy of the
allowance for doubtful accounts, management analyzes customer-specific
allowances, amounts based upon an aging schedule, historical bad debt
experience, customer concentrations, customer creditworthiness and current
trends. The Company's accounts receivable at January 31, 2008 was $84,045, net
of an allowance of $0.





Inventories





Inventories
are stated at the lower of cost or market value, and are categorized as raw
materials, work-in-process or finished goods. The value of inventories
determined using the first-in, first-out method at January 31, 2008 was $111,683
for finished goods and $191,251 for raw materials.





On an
ongoing basis, we evaluate the composition of its inventories and the adequacy
of our allowance for slow-turning and obsolete products. The market value of
aged inventory is determined based on historical sales trends, current market
conditions, changes in customer demand, acceptance of the Company's products,
and current sales activities for this type of inventory.





Goodwill





The
Company did not attribute any value to goodwill as at January 31,
2008.





Accounting
for Income Taxes





As part
of the process of preparing the consolidated financial statements, management is
required to estimate the income taxes in each jurisdiction in which the Company
operates. This process involves estimating the actual current tax liabilities,
together with assessing temporary differences resulting from the different
treatment of items for tax and accounting purposes. These differences result in
deferred tax assets and liabilities, which are included in the consolidated
balance sheet. Management must then assess the likelihood that the deferred tax
assets will be recovered and, to the extent that management believes that
recovery is not more than likely, the Company establishes a valuation allowance.
If a valuation allowance is established or increased during any period, the
Company records this amount as an expense within the tax provision in the
consolidated statement of income. Significant management judgment is required in
determining the Company's provision for income taxes, deferred tax assets and
liabilities, and any valuation allowance recognized against net deferred tax
assets. Valuation allowances are based on management's estimates of the taxable
income in the jurisdictions in which the Company operates and the period over
which the deferred tax assets will be recoverable.





Item
7.    FINANCIAL STATEMENTS.





The
report of our independent auditor and our financial statements are included in
pages F-1 through F-20.





















26





Item
8.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ONACCOUNTING AND FINANCIAL DISCLOSURE.





None.





Item
8A.    CONTROLS AND PROCEDURES





Management’s
Evaluation of Disclosure Controls and Procedures





Our
management has evaluated the effectiveness of our disclosure controls and
procedures in ensuring that the information required to be disclosed in our
filings under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms, including ensuring that such information
is accumulated and communicated to our management as appropriate to allow timely
decisions regarding required disclosure. Based on such evaluation, our principal
executive and financial officers have concluded that such disclosure controls
and procedures were effective as of January 31, 2008, (the end of the period
covered by this Annual Report on Form 10-KSB).  It should be noted
that any system of controls, however well designed and operated, can provide
only reasonable, and not absolute, assurance that the objectives of the system
are met.  In addition, the design of any control system is based in
part upon certain assumptions about the likelihood of future
events.  Because of these and other inherent limitations of control
systems, there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions, regardless of how
remote.





Management’s
Annual Report on Internal Control Over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13(a)-15(f) and 15d-15(f)
under the Securities Exchange Act.  Our internal control over
financial reporting is designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles (GAAP).  Our internal control over financial reporting
includes those policies and procedures that:





(1)
pertain to the maintenance of records that in reasonable detail accurately and
fairly reflect transactions involving our assets;





(2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with U.S. GAAP, and
that our receipts and expenditures are being made only in accordance with the
authorization of our management, and





(3)
provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have a
material effect on the financial statements.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.





Management
assessed the effectiveness of our internal control over financial reporting as
of January 31, 2008.  In making this assessment, management used the
framework set forth in the reporting entitled Internal Control- Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission, or COSO.  The COSO framework summarizes each of
the components of a company’s internal control system, including (i) the control
environment, (ii) risk assessment, (iii) control activities, (iv) information
and communication, and (v) monitoring.










27






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





Changes
in Internal Control Over Financial Reporting





During
the three months ended January 31, 2008, there were no changes in our internal
control over financial reporting that materially affected, or that are
reasonably likely to materially affect, our internal control over financial
reporting.





Item
8B.    OTHER INFORMATION.





As
previously disclosed, on September 21, 2007, KMA International issued 8,000,000
shares of common stock at $0.25 per share in connection with a private offering
(the “Transaction”). The purchase price of the shares is $2,000,000, which was
to be paid as follows: (i) $200,000 upon the filing of the registration
statement; (ii) a payment of $600,000 within 60 days after the effective date of
the registration statement; (iii) an additional payment of $600,000 within 90
days after the effective date of the registration statement; and (iv) a final
payment within 120 days after the effective date of the registration statement.
As of January 31, 2008, the Company received $200,000 and recorded $1,800,000 as
a subscription receivable.  In addition to the shares of common stock,
the purchasers of the shares received warrants to acquire an additional
8,000,000 shares of common stock at an exercise price of $0.30 per share for a
period of 2 years.  The agent for the investors received a fee of
1,400,000 shares of common stock at $0.43 per share and warrants to acquire
1,400,000 of common stock at an exercise price of $0.30 per share for a period
of 2 years. Deferred share issue costs of $50,000 were charged to additional
paid-in capital on this transaction.





On March
21, 2008, the Company and the purchasers involved in the Transaction entered
into the Settlement Agreement and Mutual Release (the “Agreement”), which
rescinded the Transaction.  As a result, the purchasers returned the
shares of common stock and warrant certificates acquired in the
Transaction.  In order to repay the proceeds received in connection
with the Transaction, the Company issued a promissory note to the purchasers in
an amount of $200,000, which accrues interest at six percent per annum (the
“Note”).  All summaries and descriptions of the Agreement and Note set
forth above are qualified in their entirety by the documents themselves, which
are filed as Exhibit 10.13 to this Report on Form 10-KSB.




































28


PART
III




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




Executive
Officers and Directors





Our
executive officers and directors are as follows:




Name
            
            Age
            
            Position
            
            Period
      of Service as a DirectorJeffrey
      D. Reid
            
            49
            
            Chief
      Executive Officer, President and
              Chairman
      of the Board of Directors
            
            March
      2006 to PresentWilliam
      R. Fisher RandaFisher
            
            48
            
            Secretary/Treasurer
            
            N/ALaura
      Wilkes
            
            49
            
            President,
      KMA Global Solutions (Hong
              Kong)Kong)
      Ltd.
            
            N/ANormand
      Nowlan
            
            52
            
            Vice
      President of Operations for KMA (Canada)
            
            N/AScott
      Dixon
            
            51
            
            President
      KMA (Canada)
            
            N/AMichael
      McBride
            
            52
            
            Director
            
            March
      2006 to PresentDaniel
      K. Foster
            
            56
            
            Director
            
            October
      2007 to Present





The
business experience during the past five years of each of the persons presently
listed above as an Officer or Director of the Company is as
follows:




Jeffrey D. Reid, has been the
Chief Executive Officer of KMA (Canada) since its inception in 1996. Mr. Reid
became President, Chief Executive Officer and Chairman of the Board of the
Company in March 2006. Mr. Reid has over 20 years of experience in manufacturing
in China and North America, and marketing and sales in the North American and
European markets. Prior to joining KMA (Canada), he owned and operated Lux
Trading Company Limited prior to which he was General Manager of Avon
Sportswear. Mr. Reid holds a Bachelor of Commerce from the University of
Windsor, Ontario.




William Randal Fisher,
Secretary and Treasurer for the Company since March 2006, brings extensive
knowledge and experience in retail manufacturing and packaging, including
expertise in customer order management, shipping and computer related interface.
Prior to joining the Company, Mr. Fisher managed a team of nearly 400 people as
the Packaging, Warehouse & Distribution Manager for Panasonic Disc Services
Corporation. Operating in the DVD & Game Entertainment area, Mr. Fisher was
responsible for implementation of ISO 9002/1401 certification as well as
integration of WMS & RF technology into supply chain processes.




Laura Wilkes, President, KMA
Global Solutions (Hong Kong) Ltd., is responsible for leadership of the
Company’s operations and sales team in Hong Kong and the distributor network in
Asia, including strategic planning, business development, and ongoing
improvement of operations. Mrs. Wilkes has over 25 years of varied operational
experience to the company, and previously served as a Plant Controller with
Kellogg Canada.




Normand Nowlan, Vice President
of Operations, joined the Company’s executive team as Vice President, Operations
in May of 2006.  Normand comes directly to the Company from the
Canadian discount icon, SAAN Stores Ltd, where he gained more than 30 years of
retail experience, much of it spent in the executive ranks leading such
functional departments as Operations and Business Development.  His
experience and broad knowledge of the retail landscape throughout North America
will prove invaluable to the Company as we execute our strategic plans for
growth.




Scott Dixon, has been the
President of KMA (Canada) since May of 2007.  He previously served as
Vice President of Business Development after joining the Company in April of
2006. He has a history of leading subsidiary operations of multinational
corporations into new markets and brings to the Company more than 25 years of
EAS expertise specializing in retail loss prevention and source-tagging to
prevent theft and inventory loss.  From 2004 until 2005, he was Vice
President and General Manager of Novar Controls Ltd., where he led the launch of
a new division: Novar Integrated Security Services.  Novar Controls
was subsequently acquired by Honeywell.  Prior to his term at Novar,
Mr. Dixon was Vice President and General Manager of ADT Security Services Canada
Ltd., following the acquisition of Sensormatic Canada by Tyco Fire and Security,
the continuation of a role that began in 1990 as President & Managing
Director of Sensormatic Canada Inc.














29






Michael McBride was elected
Director of the Company in March 2006. Mr. McBride is a member in good standing
of the Law Society of Upper Canada and has practiced in the area of general
corporate and real estate law as a partner in the law firm McBride Wallace
Laurent & Cord LLP since 1982.




Daniel K. Foster was appointed
a director of the Company on October 24, 2007. Mr. Foster is a chartered
accountant with over 30 years experience in public accounting, industry and
investment management.  For the past five years Mr. Foster has been
the Investment Manager for a Canadian pension fund located in Toronto,
Ontario.  Mr. Foster holds a Bachelor of Commerce from the University
of Toronto and is a member in good standing of the Institute of Chartered
Accountants of Ontario and the Pension Investment Association of
Canada.




Except as
noted above, no director, officer or affiliate of the Company has, within the
past five years, filed any bankruptcy petition, been convicted in or been the
subject of any pending criminal proceedings, or subject to any order, judgment,
or decree involving the violation of any state or federal securities
laws.




Currently,
there is no arrangement, agreement or understanding between management and
non-management stockholders under which non-management stockholders may directly
or indirectly participate in or influence the management of the affairs of the
Company. Present management openly accepts and appreciates any input or
suggestions from stockholders. However, the Board is elected by the stockholders
who have the ultimate say, by virtue of their voting rights, in who represents
them on the Board. There are no agreements or understandings for any officer or
Director to resign at the request of another person and none of the current
offers or Directors are acting on behalf of, or will act at the direction of any
other person.




Audit
Committee




The
Company currently does not have any standing committees.  The entire Board of Directors
acts as the Company’s audit committee. The audit committee does not have a
charter. Additionally, we do not have an audit committee financial expert
serving on our audit committee.  Based upon current NASDAQ Marketplace
Rules, which the Company voluntarily applies, Mr. Foster qualifies as an “audit
committee financial expert” for purposes of SEC rules, adopted pursuant to the
Sarbanes-Oxley Act of 2002.





Section
16(a) Beneficial Owner Reporting Compliance





Section 16(a)
of the Securities Exchange Act of 1934 requires that our directors and executive
officers and the beneficial owners of more than 10% of the Company’s registered
equity securities (the reporting persons) file with the Securities and Exchange
Commission (SEC) initial reports of, and subsequent reports of changes in, their
beneficial ownership of the Company’s equity securities. The reporting persons
are required to furnish us with copies of all such Section 16(a) reports.
Based solely on our review of the copies of such Section 16(a) reports and
written representations from certain reporting persons furnished to us, none of
our reporting persons have complied with their Section 16(a) filing
requirements due to the fact that none of the required parties filed their
respective Form 3 during fiscal year 2008.  The Company is undertaking
to get a Form 3 for each party filed as soon as possible.




Code
of Ethics




The
Company has a Code of Ethics that applies to all Company employees, including
its Chief Executive Officer, as well as members of the Board of
Directors.  The Code of Ethics was filed as Exhibit 14 to the
Company’s 10-KSB filed with Securities and Exchange Commission on May 1,
2007.  The Company will post any changes to the Code of Ethics on its
website.










30





Director
Nominations




The Board
of Directors will consider all potential candidates for nomination by the Board
of Directors for election as directors who are recommended by the Company’s
stockholders, directors, officers, and employees. All director recommendations
should be sent to the Board of Directors, c/o William Randal Fisher, KMA
Global Solutions International, Inc., 5570A Kennedy Road Mississauga, Ontario,
Canada L4Z2A9. The Board of Directors will screen all potential director
candidates, regardless of the source of their recommendation. The Board of
Director’s review will be based on the written materials provided with respect
to a potential director candidate. The Board of Director will evaluate and
determine whether a potential candidate meets our qualifications and posses
qualities and skills commensurate with the role of director and whether
requesting additional information or an interview is
appropriate.





Item
10.    EXECUTIVE COMPENSATION.





Compensation
of Directors





Directors
serve without compensation and there are no standard or other arrangements for
their compensation.




Employment
Agreements of Executive Officers





Jeffrey
D. Reid entered into an employment agreement as Chief Executive Officer
reporting to the Board of Directors of the Company as of March 9, 2006. Mr.
Reid's contract is a renewable three year contract and provides for annual
remuneration of $200,000, exclusive of bonuses, benefits and other compensation.
Mr. Reid will be entitled to earn up to 100,000 options per year subject to
meeting certain objectives and milestones to be determined once a company stock
option plan has been established. The milestones required for Mr. Reid to
receive cash bonuses revolve around Company top-line revenue targets. Mr. Reid
will be entitled to a $50,000 cash bonus if sales of $25 million are achieved in
any year, a $100,000 cash bonus if sales of $40 Million are achieved in any
year, and $150,000 cash bonus if sales of $65 Million are achieved in any year.
Benefits specifically refer to a package which includes medical and life
insurance. Other compensation refers to the use of a Company vehicle as well as
stock options if applicable. Mr. Reid has entered into a non-competition
agreement and non-solicitation agreement which extend for a period of one year
following the termination of his employment with the Company. Mr. Reid is
subject to termination provisions commensurate with his position which includes
a severance of not less than two years' salary upon termination of his
employment with the company.  Mr. Reid's contract does not contemplate
“change in control” benefits. For the 2008 fiscal year, Mr. Reid agreed to
reduce his salary to $150,000 and for the first quarter of fiscal 2009 Mr. Reid
waived his salary. Mr. Reid is currently renegotiating the terms of his
employment to an incentive based plan, which will be reflective of the
operational success of the Company.




Laura
Wilkes entered into an employment agreement as the Chief Operating Officer of
KMA Canada as of August 1, 2005.  Ms. Wilkes contract provides for
annual remuneration of $150,000, exclusive of bonuses, benefits and other
compensation, which includes a car allowance.  Ms. Wilkes has entered
into a non-competition agreement and non-solicitation agreement which extend for
a period of two years following the termination of her employment with the
Company. Ms. Wilkes is subject to termination provisions commensurate with her
position which includes a severance of not less than one year’s salary upon
termination of her employment with the company.  Ms. Wilkes contract
does not contemplate “change in control” benefits. For the first quarter of
fiscal 2009, Ms. Wilkes waived her salary. Ms. Wilkes is currently renegotiating
the terms of her employment to an incentive based plan, which will be reflective
of the operational success of the Company.










31






Normand
Nowlan entered into an employment agreement as the Vice President of Operations
and General Manager of KMA Canada as of May 29, 2006. While Vice President of
Operations and General Manager, Mr. Nowlan's contract provides for annual
remuneration of $200,000, exclusive of bonuses, benefits and other compensation,
which includes the use of a Company vehicle. Mr. Nowlan will be entitled to earn
up to 100,000 options per year subject to meeting certain objectives and
milestones to be determined once a company stock option plan has been
established. Mr. Nowlan has entered into a non-competition agreement and
non-solicitation agreement which extend for a period of two years and one year,
respectively, following the termination of his employment with the
Company.  Mr. Nolan resigned his position in August 2007 and gave the
Company five months notice, which ended January 31, 2008.  Since that
time Mr. Nowlan is providing services to the Company under a consulting
contract.




Messrs.
Fisher and Dixon are employed at will and have not entered into an employment
agreement with the Company.




Other
than described above, there are no other employment contracts, compensatory
plans or arrangements, including payments to be received from the Company with
respect to any Director or executive officer, that would result in payments to
such person because of his or her resignation, retirement or other termination
of employment with the Company, or its subsidiaries, any change in control, or a
change in the person's responsibilities following a change in control of the
Company.




There are
no agreements or understandings for any Director or executive officer to resign
at the request of another person. None of our Directors or executive officers
acts or will act on behalf of or at the direction of any other
person.




On July
2, 2007, the Board of Directors approved the KMA Global Solutions International,
Inc. 2007 Stock Incentive Plan (the “Plan”).  The Plan provides for
various types of equity awards that may be made to employees, directors, and
consultants.  As of May 15, 2008, we have not issued or granted any
equity awards under the Plan.




The
following Summary Compensation Table presents, for the applicable period,
certain information regarding the compensation arrangements with respect to the
Company’s Named Executive Officers.




SUMMARY
      COMPENSATION TABLEName
      and Principal Position
            Fiscal
      Years
            Salary
            Bonus
            Stock
      Awards
            Option
      Awards
            Non-Equity
              Incentive
      Plan
              Compensation
            Nonqualified
      Deferred Compensation Earnings
            All
      Other
              Compensation
            TotalJeffrey
      D. Reid, Chief Executive Officer and President (principal executive
      officer)
            2008
              2007
            207,586
              105,811
            --------
            --------
            --------
            --------
            --------
            10,477
      (1)
              9,415
      (1)
            218,063
              115,226Laura
      Wilkes, President of KMA Global Solutions (Hong Kong) Ltd.
            2008
              2007
            175,998
              105,811
            --------
            --------
            --------
            --------
            --------
            6,148
      (2)
              8,459
      (2)
            182,146
              114,270Normand
      Nolan, Vice President of Operations for KMA (Canada)
            2008
              2007
            199,243
              96,993
            --------
            --------
            --------
            --------
            --------
            19,243
      (1)
              10,009
      (1)
            218,486
              107,002Scott
      Dixon, President of KMA (Canada)
            2008
              2007
            114,149
              107,465
            --------
            --------
            --------
            --------
            --------
            43,833
            157,982
              107,465


(1)
            This
      amount is comprised of a leased automobile and insurance
      payments.


(2)
            This
      amount is comprised of an automobile
allowance.










32




Item
11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ANDMANAGEMENT AND RELATED STOCKHOLDER MATTERS






Security
Ownership of Certain Beneficial Owners and Management.





The table
below shows the amount of our common stock beneficially owned by (a) each
stockholder known to our management to be the beneficial owner of more than 5%
of the outstanding shares of our common stock, (b) each of our directors
and named executive officers and (c) all current directors and executive
officers as a group. Unless otherwise stated, the address for each person and
entity in the table is 5570A Kennedy Road, Mississauga, Ontario, Canada
L4Z2A9.





Beneficial
ownership is determined in accordance with the rules of the SEC and includes
voting or investment power with respect to the shares. To our knowledge, except
under applicable community property laws or as otherwise indicated, the persons
named in the table have sole voting and sole investment control with regard to
all shares beneficially owned. The percentage of outstanding shares beneficially
owned by each person is calculated based on the 67,333,319 outstanding shares of
the Company’s common stock as of May 15, 2008, plus the shares that such person
has the right to acquire as of May 15, 2008 or within 60 days thereafter
upon the exercise of conversion rights and options, but excludes shares of
common stock underlying options held by other persons. We are presenting
ownership information as of May 15, 2008.




Name of Beneficial
      Owner
            
            Number
      of Shares
              Beneficially
      Owned
            
            Percentage
      of
              Shares
      (%)Jeffrey
      D. Reid
            
            21,760,000(1)
            
            32.3%Laura
      Wilkes
            
            0
            
            0Normand
      Nowlan
            
            0
            
            0Scott
      Dixon
            
            8,000
            
            0.01%Michael
      McBride
            
            92,500(2)
            
            0.14%Daniel
      K. Foster
            
            25,000
            
            0.04%All
      directors and named executive officers as a group (6
      individuals)
            
            21,885,500
      - jointly
            
            32.49%KMA
      Global Solutions, LLC
            
            21,760,000
            
            32.3%





(1) Jeffrey
      D. Reid, as the sole shareholder of KMA LLC, is the beneficial owner of
      21,760,000 Exchangeable Shares, which pursuant to the Exchange Agreement
      between the
              Company and KMA
      LLC, are exchangeable into 21,760,000 shares of the Company.(2)
      Includes 55,000 shares held by Kim McBride, Mr. Michael McBride's
      spouse.






Item
12.    CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS,ANDDIRECTOR INDEPENDENCE




Certain
Relationships and Related Transactions




None.




Director
Independence




As the
Company’s securities are quoted on NASDAQ OTCBB, the Company applies the NASDAQ
Marketplace Rules regarding the definition of “independence” for the members of
the Board of Directors. Under the NASDAQ Marketplace Rules, directors Daniel K.
Foster and Michael McBride qualify as “independent.”












33





Item
13.                      EXHIBITS




Exhibit
      No.
            Exhibit Description3.1
            Certificate
      of Incorporation of KMA Global Solutions International, Inc. filed March
      9, 2006,which was filed with the Company's Amendment No. 1 to Form 10-SB
      with the Securities and Exchange Commission on April 18, 2006 and is
      incorporated herein.3.2
            Amended
      and Restated Certificate of Incorporation of KMA Global Solutions
      International, Inc. filed March 27, 2006,which was filed with the
      Company's Amendment No. 1 to Form 10-SB with the Securities and Exchange
      Commission on April 18, 2006 and is incorporated
herein.3.3
            By-Laws
      of KMA Global Solutions International, Inc.,which was filed with the
      Company's Amendment No. 1 to Form 10-SB with the Securities and Exchange
      Commission on April 18, 2006 and is incorporated
herein.10.1
            Agreement
      and Plan of Reincorporation and Merger dated as of March 10, 2006 between
      Espo's, Ltd., and KMA Global Solutions International, Inc.,which was filed
      with the Company's Amendment No. 1 to Form 10-SB with the Securities and
      Exchange Commission on April 18, 2006 and is incorporated
      herein.10.2
            Stock
      Purchase Agreement as of March 7, 2006, by and between Jeffrey R.
      Esposito, Kenneth C. Dollmann, certain shareholders of Espo's, Ltd.,
      Jeffrey R. Esposito being designated under as their representative,
      Espo's, Ltd., and 2095511 Ontario Limited., as representative of and agent
      under a power of attorney for the certain transferees of Espo's, Ltd.
      Common Stock, which was filed with the Company's Amendment No. 1 to Form
      10-SB with the Securities and Exchange Commission on April 18, 2006 and is
      incorporated herein.10.3
            Acquisition
      Agreement dated as of March 15, 2006 by, between and among KMA Global
      Solutions International, Inc., KMA Global Solutions, Inc., and 2095511
      Ontario Limited., as representative of and agent under a power of attorney
      for certain stockholders of KMA Global Solutions, Inc., which was filed
      with the Company's Amendment No. 1 to Form 10-SB with the Securities and
      Exchange Commission on April 18, 2006 and is incorporated
      herein.10.4
            Operating
      Agreement of March 9, 2006, by and among  KMA Global Solutions,
      LLC and KMA Global Solutions International, Inc., which was filed with the
      Company's Amendment No. 1 to Form 10-SB with the Securities and Exchange
      Commission on April 18, 2006 and is incorporated
herein.10.5
            Exchange
      and Support Agreement dated March 14, 2006 among KMA Global Solutions
      International, Inc., KMA Global Solutions, LLC, KMA Acquisition Exchangeco
      Inc., and certain registered holders from time to time of Exchangeable
      Shares issued by KMA Acquisition Exchangeco Inc, which was filed with the
      Company's Amendment No. 1 to Form 10-SB with the Securities and Exchange
      Commission on April 18, 2006 and is incorporated
  herein..10.6^
            Employment
      Agreement between Jeffrey D. Reid and KMA Global Solutions International,
      Inc., which was filed with the Company's Amendment No. 1 to Form 10-SB
      with the Securities and Exchange Commission on April 18, 2006 and is
      incorporated herein.10.7
            Offer
      to Lease between KMA Global Solutions, Inc. and Civic Investments Ltd.
      Dated October 6, 2005 for 5570A Kennedy Road, Mississauga, Ontario, which
      was filed with the Company's Amendment No. 1 to Form 10-SB with the
      Securities and Exchange Commission on April 18, 2006 and is incorporated
      herein.10.8
            Equipment
      Lease (Contract No. 20491) dated March 18, 2005 between KMA Global
      Solutions, Inc. and Capital Underwriters Inc., which was filed with the
      Company's Amendment No. 1 to Form 10-SB with the Securities and Exchange
      Commission on April 18, 2006 and is incorporated
herein.10.9
            Securities
      Purchase Agreement, dated January 31, 2007, by and between KMA Global
      Solutions, Inc. and the selling stockholders, which was filed with the
      Company's Registration Statement on Form SB-2 with the Securities and
      Exchange Commission on March 12, 2007 and is incorporated
      herein.10.10
            Registration
      Rights Agreement dated January 31, 2007, by and between KMA Global
      Solutions, Inc. and the selling stockholders, which was filed with the
      Company's Registration Statement on Form SB-2 with the Securities and
      Exchange Commission on March 12, 2007 and is incorporated
      herein.












34






10.11
            Securities
      Purchase Agreement, dated September 21, 2007, by and between KMA Global
      Solutions, Inc. and the selling stockholders, which was filed with the
      Company's Registration Statement on Form SB-2 with the Securities and
      Exchange Commission on November 7, 2007 and is incorporated
      herein.10.12
            Registration
      Rights Agreement dated September 21, 2007, by and between KMA Global
      Solutions, Inc. and the selling stockholders, which was filed with the
      Company's Registration Statement on Form SB-2 with the Securities and
      Exchange Commission on November 7, 2007 and is incorporated
      herein.10.13#
            Settlement
      Agreement and Mutual Release, dated March 21, 2008, by and among KMA
      Global Solutions International, Inc., Incendia Management Group, Inc. and
      certain purchasers14
            Code
      of Ethics, which was filed with the Company's Form 10KSB with the
      Securities and Exchange Commission on May 1, 2007 and is incorporated
      herein.21#
            Subsidiaries
      of the registrant24#
            Power
      of Attorney (included on signature page)31#
            Certifications
      of Chief Executive Officer and Chief Financial Officer under Exchange Act
      Rule 13a-14(a)32
            Certifications
      of Chief Executive Officer and Chief Financial Officer under 18 U.S.C.
      1350.#
            Filed
      herewith.^
            Management
      Contract or Compensatory Plan







Item
14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES




The
following table sets forth the aggregate fees billed to us by McGovern, Hurley,
Cunningham, LLP in connection with various audit and other services provided to
us throughout fiscal years 2008 and 2007:




Service
            
            2008 Aggregate Fees Billed
    ($)
            
            
            2007 Aggregate Fees Billed
    ($)Audit
      Fees
            
            
            44,000
            
            
            
            45,000Audit-Related
      Fees
            
            
            42,000
            
            
            
            46,500Tax
      Fees
            
            
            5,000
            
            
            
            2,500All
      Other Fees
            
            
            6,000Total
            
            $
            97,000
            
            
            $
            93,000





“Audit
Fees” include fees associated with the annual audits and our quarterly reviews.
“Audit-Related Fees” include fees associated with assurance and related services
related to the performance of the audit.  “Tax Fees” include fees
associated with tax compliance, tax advice, and tax planning.





The Board
of Directors pre-approves all audit and permissible non-audit services provided
by our independent auditors. Where feasible, the Board considers and, when
appropriate, pre-approves services at regularly scheduled meetings after
disclosure by management and the auditors of the nature of the proposed
services, the estimated fees (when available), and their opinions that the
services will not impair the auditors’ independence. The Board has authorized
its Chairman (or any committee member in the Chairman’s absence) to pre-approve
(when appropriate) audit and permissible non-audit services when pre-approval is
necessary prior to the next committee meeting, and such person must report to
the Board at its next meeting with respect to all services so pre-approved by
him or her.













35


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.







KMA
GLOBAL SOLUTIONS INTERNATIONAL, INC.








June
      4, 2008
            By:/s/
      Jeffrey D. Reid


Name:
Jeffrey
D.
Reid


Title:
Chief
Executive Officer and President


(Principal
Executive Officer and Principal Financial Officer)








We, the
undersigned directors and officers of the Registrant, hereby severally
constitute Jeffrey D. Reid and Laura Wilkes, and each of them singly, our true
and lawful attorneys with full power to them and each of them to sign for us,
and in our names in the capacities indicated below, any and all amendments to
this Annual Report on Form 10-KSB filed with the Securities and Exchange
Commission.




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





SIGNATURE
            
            TITLE
            
            DATE/s/Jeffrey
      D. Reid
            
            Chief
      Executive Officer,
            
            June
      4, 2008Jeffrey
      D. Reid
            
            President
      and Chairman of the
              Board
      of Directors/s/Michael
      McBride
            
            Director
            
            June
      4, 2008Michael
      McBride/s/Daniel
      K. Foster
            
            Director
            
            June
      4, 2008Daniel
      K. Foster
























36


EXHIBIT
INDEX





Exhibit
      No.
            Exhibit
      Description10.13
            Settlement
      Agreement and Mutual Release, dated March 21, 2008, by and among KMA
      Global Solutions International, Inc., Incendia Management Group, Inc. and
      certain purchasers21
            Subsidiaries
      of the registrant24
            Power
      of Attorney (included on signature page)31
            Certifications
      of Chief Executive Officer and Chief Financial Officer under Exchange Act
      Rule 13a-14(a)32
            Certifications
      of Chief Executive Officer and Chief Financial Officer under 18 U.S.C.
      1350.

























































37





























KMA
GLOBAL SOLUTIONS INTERNATIONAL, INC.





CONSOLIDATED
FINANCIAL STATEMENTS





FOR
THE YEARS ENDED JANUARY 31, 2008 AND 2007








(expressed
in U.S. dollars)
























































































KMA
GLOBAL SOLUTIONS INTERNATIONAL, INC.





CONSOLIDATED
FINANCIAL STATEMENTS





FOR
THE YEARS ENDED JANUARY 31, 2008 AND 2007








(expressed
in U.S. dollars)








INDEX
            PAGEReport
      of Independent Registered Public Accounting Firm
            F-1Consolidated
      Balance Sheets
            F-2
      – F-3Consolidated
      Statements of Income and Deficit
            F-4Consolidated
      Statements of Cash Flows
            F-5Notes
      to the Consolidated Financial Statements
            F-6
      – F-19






































39







Page
F-1








REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the
Shareholders of


KMA
Global Solutions International, Inc.





We have
audited the accompanying consolidated balance sheets of KMA Global Solutions
International, Inc. (the “Company”) as at January 31, 2008 and 2007 and the
consolidated statements of income and deficit and cash flows for each of the
years in the three-year period ended January 31, 2008.  These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the 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 audits provide a reasonable basis
for our opinion.





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of KMA Global Solutions
International, Inc. as at January 31, 2008 and 2007 and the consolidated results
of its operations and its cash flows for each of the years in the three-year
period ended January 31, 2008, in conformity with generally accepted accounting
principles in the United States of America.





The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern.  As discussed in Note 1
to the consolidated financial statements, the Company’s operating losses and
negative working capital raise doubt about its ability to continue as a going
concern.  Note 1 also describes management’s plans to address these
financial matters.  The consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.





McGOVERN,
HURLEY, CUNNINGHAM, LLP




/s/ McGovern,
Hurley, Cunningham, LLP




Chartered
Accountants


Licensed Public
Accountants






TORONTO,
Canada


May 12,
2008


















KMA
GLOBAL SOLUTIONS INTERNATIONAL, INC.                  Page F-2


CONSOLIDATED
BALANCE SHEETS


AS AT
JANUARY 31,


(expressed
in U.S. dollars)




2008
              $
            
            
            
            2007
              $ASSETSCURRENTCash
            
            
            73,149
            
            
            
            22,710Accounts
    receivable
            
            
            84,045
            
            
            
            287,701Inventories (Note
      3)
            
            
            302,934
            
            
            
            303,117Prepaid
expenses
            
            
            118,964
            
            
            
            340,210TOTAL
      CURRENT ASSETS
            
            
            579,092
            
            
            
            953,738DEPOSITS
      ON EQUIPMENT AND PATENTS
            
            
            278,707
            
            
            
            57,342EQUIPMENT AND PATENTS(Note 4)
            
            
            925,241
            
            
            
            641,178FUTURE INCOME TAXES
      (Note 5)
            
            
            393,925
            
            
            
            335,958DEFERRED COSTS (Note
      8(b))
            
            
            -
            
            
            
            212,4042,176,965
            
            
            
            2,200,620








APPROVED
ON BEHALF OF THE BOARD:




__________________________,
Director




,
Director







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


KMA
GLOBAL SOLUTIONS INTERNATIONAL, INC.                  Page F-3


CONSOLIDATED
BALANCE SHEETS


AS AT
JANUARY 31,


(expressed
in U.S. dollars)




2008
              $
            
            
            
            2007
              $LIABILITIESCURRENTAccounts payable and accrued
      liabilities
            
            
            1,161,791
            
            
            
            1,062,297Unearned
revenue
            
            
            60,364
            
            
            
            -Current portion of capital
      lease obligation (Note 6)
            
            
            -
            
            
            
            55,804TOTAL
      CURRENT LIABILITIES
            
            
            1,222,155
            
            
            
            1,118,101ADVANCES FROM SHAREHOLDER (Note
      7)
            
            
            136,498
            
            
            
            87,053CAPITAL LEASE OBLIGATION(Note 6)
            
            
            -
            
            
            
            2071,358,653
            
            
            
            1,205,361SHAREHOLDERS'
      EQUITYCAPITAL
      STOCK(Note 8)Preferred stock, $0.001 par
      value, 25,000,000 shares
              authorized and none issued and
      outstandingCommon stock, $0.001 par value,
      175,000,000 shares
              authorized
      and 75,333,319 (2007 - 42,065,991)shares
              issued
      and outstanding
            
            
            75,333
            
            
            
            42,066ADDITIONAL PAID-IN CAPITAL(Note 8)
            
            
            4,845,029
            
            
            
            729,098SUBSCRIPTIONS RECEIVABLE(Note 8)
            
            
            (2,730,000
            )
            
            
            -SHARES TO BE ISSUED(Note 8)
            
            
            -
            
            
            
            826,485ACCUMULATED OTHER COMPREHENSIVE
      INCOME (Note 8)
            
            
            (11,230
            )
            
            
            51,031WARRANTS(Note
      9)
            
            
            1,149,000
            
            
            
            -(DEFICIT)(Note
      8)
            
            
            (2,509,820
            )
            
            
            (653,421
            )818,312
            
            
            
            995,2592,176,965
            
            
            
            2,200,620







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


KMA
GLOBAL SOLUTIONS INTERNATIONAL, INC.                  Page F-4


CONSOLIDATED
STATEMENTS OF INCOME AND DEFICIT


FOR THE
YEARS ENDED JANUARY 31,


(expressed
in U.S. dollars)




2008
              $
            
            
            
            2007
              $
            
            
            
            2006
              $SALES
            
            
            4,877,606
            
            
            
            6,630,884
            
            
            
            6,503,864COST
      OF SALESInventories, beginning of
      year
            
            
            303,117
            
            
            
            452,055
            
            
            
            616,157Purchases
            
            
            3,671,536
            
            
            
            5,193,641
            
            
            
            4,924,6063,974,653
            
            
            
            5,645,696
            
            
            
            5,540,763Less:  Inventories,
      end of year
            
            
            302,934
            
            
            
            303,117
            
            
            
            452,0553,671,719
            
            
            
            5,342,579
            
            
            
            5,088,708GROSS
      MARGIN
            
            
            1,205,887
            
            
            
            1,288,305
            
            
            
            1,415,156SELLING,
      GENERAL AND ADMINISTRATIVE
              EXPENSES
            
            
            3,062,286
            
            
            
            2,385,405
            
            
            
            1,305,298(Loss)
      income before income taxes
            
            
            (1,856,399
            )
            
            
            (1,097,100
            )
            
            
            109,858Income
      taxes – future (Note 6)
            
            
            -
            
            
            
            (360,697
            )
            
            
            14,676NET
      (LOSS) INCOME FOR THE YEAR
            
            
            (1,856,399
            )
            
            
            (736,403
            )
            
            
            95,182(DEFICIT) RETAINED EARNINGS,beginning of
              year (Note 8)
            
            
            (653,421
            )
            
            
            2,982
            
            
            
            (12,200
            )(DEFICIT) RETAINED EARNINGS,end of
              year (Note 8)
            
            
            (2,509,820
            )
            
            
            (653,421
            )
            
            
            82,982(LOSS)
      INCOME PER SHAREBasic
            
            
            (0.03
            )
            
            
            (0.02
            )
            
            
            0.003Diluted
            
            
            (0.03
            )
            
            
            (0.02
            )
            
            
            0.003Weighted
      average number of common shares
            
            
            61,989,487
            
            
            
            40,423,345
            
            
            
            32,136,800








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






KMA
GLOBAL SOLUTIONS INTERNATIONAL, INC.                  Page F-5


CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR THE
YEARS ENDED JANUARY 31,


(expressed
in U.S. dollars)




2008
              $
            
            
            
            2007
              $
            
            
            
            2006
              $CASH
      FLOWS FROM OPERATING ACTIVITIESNet (loss) income for the
      year
            
            
            (1,856,399
            )
            
            
            (736,403
            )
            
            
            95,182Adjustments
for:Amortization
            
            
            145,729
            
            
            
            95,089
            
            
            
            74,472Shares issued for services
      provided
            
            
            6,500
            
            
            
            146,663
            
            
            
            -Future income
    taxes
            
            
            -
            
            
            
            (360,697
            )
            
            
            14,676(1,704,170
            )
            
            
            (855,348
            )
            
            
            184,330Changes
      in non-cash working capital:Decrease (increase) in accounts
      receivable
            
            
            239,800
            
            
            
            (223,134
            )
            
            
            58,131Decrease in
      inventories
            
            
            49,687
            
            
            
            139,204
            
            
            
            207,251Decrease (Increase) in prepaid
      expenses
            
            
            265,029
            
            
            
            47,774
            
            
            
            (17,220
            )(Decrease) increase in accounts
      payable and
              accrued
      liabilities
            
            
            (79,334
            )
            
            
            268,700
            
            
            
            (328,819
            )Increase in unearned
      revenue
            
            
            57,147
            
            
            
            -
            
            
            
            -532,329
            
            
            
            232,544
            
            
            
            (80,657
            )Cash
      flows from operating activities
            
            
            (1,171,841
            )
            
            
            (622,804
            )
            
            
            103,673CASH
      FLOWS FROM FINANCING ACTIVITIESIssuance of capital
      stock
            
            
            700,000
            
            
            
            487,485
            
            
            
            -Exercise of
      warrants
            
            
            1,270,000
            
            
            
            -
            
            
            
            -(Decrease) in capital lease
      obligation
            
            
            (62,176
            )
            
            
            (51,466
            )
            
            
            (54,583
            )Increase (decrease) in advances
      from shareholder
            
            
            32,590
            
            
            
            90,202
            
            
            
            (4,335
            )Cash
      flows from financing activities
            
            
            1,940,414
            
            
            
            526,221
            
            
            
            (58,918
            )CASH
      FLOWS FROM INVESTING ACTIVITIESIncrease in promissory note
      payable
            
            
            -
            
            
            
            -
            
            
            
            265,325Decrease in advances to
      shareholder
            
            
            -
            
            
            
            51,061
            
            
            
            (48,105
            )Purchase of equipment and
      patents
            
            
            (308,853
            )
            
            
            (259,247
            )
            
            
            (60,202
            )Deposits on equipment and
      patents
            
            
            (200,203
            )
            
            
            173,084
            
            
            
            (82,025
            )Cash
      flows from investing activities
            
            
            (509,056
            )
            
            
            (35,102
            )
            
            
            74,993EFFECT
      OF EXCHANGE RATE CHANGES ON CASH
            
            
            (209,078
            )
            
            
            27,668
            
            
            
            (34,906
            )Increase
      (decrease) in cash
            
            
            50,439
            
            
            
            (104,017
            )
            
            
            84,842Cash,
      beginning of year
            
            
            22,710
            
            
            
            126,727
            
            
            
            41,855Cash,
      end of year
            
            
            73,149
            
            
            
            22,710
            
            
            
            126,727SUPPLEMENTAL
      INFORMATION:Interest
      paid
            
            
            11,088
            
            
            
            16,319
            
            
            
            24,959Equipment
      acquired by capital lease
            
            
            -
            
            
            
            -
            
            
            
            166,985Shares
      issued as deferred costs
            
            
            -
            
            
            
            217,391
            
            
            
            -Issuance
      of common stock- subscriptions receivable
            
            
            2,730,000
            
            
            
            -
            
            
            
            -











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




KMA
GLOBAL SOLUTIONS INTERNATIONAL, INC.                  Page F-6
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 JANUARY
31, 2008 and 2007
 (expressed
in U.S. dollars)
  
  1.         DESCRIPTION
OF THE BUSINESS AND GOING CONCERN





KMA
Global Solutions International, Inc. (“KMA International” or the “Company”) is
engaged in the supply of Electronic Article Surveillance (“EAS”) solutions,
focusing on providing customized solutions in the apparel, multi media, sporting
goods, food and pharmaceutical industries.





The
Company’s consolidated financial statements are presented on a going concern
basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. For the year ended January 31,
2008, the Company had a net loss of $1,856,399 (2007
-  $736,403).  Certain conditions noted below raise doubt
about the Company’s ability to continue as a going concern.




The
Company’s ability to continue as a going concern is contingent upon its ability
to secure additional debt or equity financing, grow sales of its products and
achieve profitable operations.  Management’s plan is to secure
additional funds through future debt or equity financings.  Such
financings may not be available or may not be available on reasonable terms to
the Company.  The issuance of additional equity securities by the
Company could result in a significant dilution in the equity interests of the
current stockholders. Obtaining commercial loans, assuming those loans would be
available, will increase the liabilities and future cash
commitments.





The
Company has devoted substantially all of its efforts to establishing its current
business. Management developed its business model, business plans and strategic
marketing plans that included: organization of the Company and divisions;
identification of the Company’s sales channels and associated supply chain;
development of marketing strategic plans and sales execution strategies;
preparation of a financial plan, risk and capital structure planning models,
developing cash flow forecasts and an operating budget; identifying markets to
raise additional equity capital and debt financing; and, recruiting and hiring,
management and industry specialists.




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








2.         SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES





Basis
of Presentation


The
financial statements have been prepared by management in accordance with
generally accepted accounting principles in the United States (“U.S.
GAAP”).  The basis of application of accounting principles is
consistent with that of the previous year.  Outlined below are those
policies considered particularly significant.





Basis
of Consolidation


These
consolidated financial statements include the accounts of the Company, which is
incorporated in the United States, and its wholly owned subsidiaries, KMA Global
Solutions Inc., which is incorporated in Canada under the Ontario Business
Corporations Act and KMA Global Solutions (Hong Kong) Ltd., which is
incorporated in Hong Kong.


Continued...




KMA
GLOBAL SOLUTIONS INTERNATIONAL, INC.                  Page F-7


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


JANUARY
31, 2008 and 2007


(expressed
in U.S. dollars)









2.        
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
  Cash
and Cash Equivalents


Cash and
cash equivalents consist of cash and short-term investments with original
maturities at time of purchase of less than 90 days that are readily convertible
to known amounts of cash and that are subject to an insignificant risk of a
material change in value.





Inventories


Inventories
are valued at the lower of cost and net realizable value, with cost being
determined substantially on the first-in, first-out basis.





Equipment and Amortization


Equipment
is stated at acquisition cost.  Amortization is provided over the
assets' estimated useful lives on a straight-line basis over the following
periods:




Equipment
              5
      to 10 yearsComputer
      equipment
              2
      yearsOffice
      furniture
              5
      to 10 yearsEquipment under
      capital lease
              10
yearsLeasehold
      improvements
              2
      to 3 years






Patents


Patents
are stated at acquisition cost.  Amortization is provided on a
straight-line basis over the term of each patent.  Intangible assets
are reviewed for valuation on an annual basis.  When events and
circumstances indicate that carrying amounts may not be recoverable, a writedown
to fair value is charged to operations in the period that such a determination
is made.





Impairment
of Long-lived Assets


The
Company recognizes an impairment loss on long-lived assets when their carrying
value exceeds the total expected undiscounted cash flows from their use or
disposition.  The Company’s long-lived assets are tested for
impairment when an event or change in circumstances indicates that their
carrying value may not be recoverable.





Research
and Development Costs


All
research and development costs, including costs of developing new products,
changing existing products and production costs are expensed when
incurred.  Investment tax credits earned on research and development
activities are recorded as a reduction in the related expenses when there is
reasonable assurance that the costs qualify and that collection is reasonably
assured.







Continued...






KMA
GLOBAL SOLUTIONS INTERNATIONAL, INC.                  Page F-8
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 JANUARY
31, 2008 and 2007
 (expressed
in U.S. dollars)
 
  2.         SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES(Continued)





Leases


Leases
have been classified as either capital or operating.  A lease which
transfers substantially all of the benefits and risks incidental to the
ownership of property is accounted for as if it were an acquisition of an asset
and the incurrence of an obligation at the inception of the
lease.  All other leases are accounted for as operating leases wherein
rental payments are charged to operations as incurred.  Assets
recorded under capital leases are amortized on a diminishing balance basis over
their estimated useful lives.





Income
Taxes


The
Company uses the liability method to account for income taxes.  Future
income taxes reflect the net tax effects of temporary differences between the
carrying amount of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes and are measured using tax rates
substantially enacted at the balance sheet date.  The effect of
changes in income tax rates on future income tax assets and liabilities is
recognized in income in the period that the change becomes substantially
enacted.  When the future realization of income taxes does not meet
the test of being more likely than not to occur, a valuation allowance in the
amount of the potential future benefit is taken and no asset is
recognized.





Revenue
Recognition


Revenue
on products sold is recognized when all significant risks and rewards of
ownership have passed to the customer which generally occurs at the time of
shipment and collectibility is reasonably assured.





Advertising
Costs


Advertising
costs are expensed as incurred.





Earnings
per Share


Basic
earnings per share is based on the weighted average number of common shares
outstanding for the year.  Diluted earnings per share is computed in
accordance with the treasury stock method and based on the weighted average
number of common shares and potentially dilutive securities.  As at
January 31, 2008 and 2007, there were 9,400,000 potentially dilutive securities
outstanding.





















Continued...




KMA
GLOBAL SOLUTIONS INTERNATIONAL, INC.                  Page F-9
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 JANUARY
31, 2008 and 2007
 (expressed
in U.S. dollars)
 
  2.        
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


Accounting Estimates
and Measurement Uncertainty


The
preparation of financial statements in accordance with generally accepted
accounting principles in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the reported amounts of revenues and expenses during the reporting
periods.  By their nature these estimates are subject to measurement
uncertainty.  The effect on the financial statements of changes in
such estimates in future periods could be material and would be accounted for in
the period the change occurs.





Foreign
Currency Translation





Foreign Currency
Transactions


Assets
and liabilities in foreign currencies have been translated at exchange rates in
effect at January 31, 2008 and 2007; income and expenses at average exchange
rates during the year.  Exchange gains or losses from such translation
practises are reflected in the income statement.





Basis of
Presentation


The
Company’s functional currency is the Canadian dollar.  These financial
statements, however, are presented in U.S. dollars with assets and liabilities
translated using the year end rate of exchange and revenue and expenses
translated using the average rate of exchange for the year.  The
related foreign exchange gains and losses arising on translation are included as
other comprehensive income.







Recently
Issued Accounting Pronouncements





In
September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 157 “Fair Value Measurement”.  SFAS No. 157 defines fair value,
establishes a framework for measuring fair value, and expands disclosures about
fair value measurements.  This Statement shall be effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years.  Earlier application is
encouraged, provided that the reporting entity has not yet issued financial
statements for that fiscal year, including any financial statements for an
interim period within that fiscal year.  The provisions of this
statement should be applied prospectively as of the beginning of the fiscal year
in which this statement is initially applied, except in some circumstance where
the statement shall be applied retrospectively.  The Company is
currently evaluating the impact of adopting SFAS No. 157 on its financial
statements.





In
February 2007, the FASB issued SFAS No.159, the Fair Value Option for Financial
Assets and Financial Liabilities- including an amendment to FAS 115.
This standard permits a company to choose to measure certain financial assets,
financial liabilities and firm commitments at fair value. The standard is
effective for fiscal years beginning after November 15, 2007. The Company is
currently evaluating the impact SFAS No.159 will have on its financial condition
and results of operations.











Continued...




KMA
GLOBAL SOLUTIONS INTERNATIONAL, INC.                  Page F-10
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 JANUARY
31, 2008 and 2007
 (expressed
in U.S. dollars)
 
  2.         SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES(Continued)





In
December 2007, the FASB issued SFAS No. 141 (R) “Business Combinations” (SFAS
141R). SFAS 141R establishes principles and requirements for how the acquirer of
a business recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any non-controlling interest in
the acquiree. SFAS 141R also provides guidance for recognizing and measuring the
goodwill acquired in the business combination and determines what information to
disclose to enable users of the financial statements to evaluate the nature and
financial effects of the business combination. The guidance will become
effective as of the beginning of the Company’s fiscal year beginning after
December 15, 2008. Management believes the adoption of this pronouncement will
not have a material impact on the Company's consolidated financial
statements.




In
December 2007, the FASB issued SFAS No. 160 “Non-controlling Interests in
Consolidated Financial Statements—an amendment of ARB No. 51” (SFAS 160). SFAS
160 establishes accounting and reporting standards for the non-controlling
interest in a subsidiary and for the deconsolidation of a subsidiary. The
guidance will become effective as of the beginning of the Company’s fiscal year
beginning after December 15, 2008. Management believes the adoption of this
pronouncement will not have a material impact on the Company's consolidated
financial statements.





In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No. 133”
(SFAS 161). This statement is intended to improve transparency in financial
reporting by requiring enhanced disclosures of an entity’s derivative
instruments and hedging activities and their effects on the entity’s financial
position, financial performance, and cash flows. SFAS 161 applies to all
derivative instruments within the scope of SFAS 133, “Accounting for Derivative
Instruments and Hedging Activities” (SFAS 133) as well as related hedged items,
bifurcated derivatives, and non-derivative instruments that are designated and
qualify as hedging instruments. Entities with instruments subject to SFAS 161
must provide more robust qualitative disclosures and expanded quantitative
disclosures. SFAS 161 is effective prospectively for financial statements issued
for fiscal years and interim periods beginning after November 15, 2008,
with early application permitted. The Company is currently evaluating the
disclosure implications of this statement.







3.        
INVENTORIES







January
      31,
              2008
              $
            
            
            January
      31,
              2007
              $Finished
      goods
            
            
            111,683
            
            
            
            117,702Raw
      materials
            
            
            191,251
            
            
            
            185,415302,934
            
            
            
            303,117





















Continued...




KMA
GLOBAL SOLUTIONS INTERNATIONAL, INC.                  Page F-11


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 JANUARY
31, 2008 and 2007
 (expressed
in U.S. dollars)
 
  4.         EQUIPMENT
AND PATENTS








Cost
              $
            
            
            Accumulated
              Amortization
              $
            
            
            January
      31,
              2008
              Net
              $Equipment
            
            
            1,591,033
            
            
            
            846,725
            
            
            
            744,308Patents
            
            
            95,170
            
            
            
            27,931
            
            
            
            67,239Computer
      equipment
            
            
            76,805
            
            
            
            35,631
            
            
            
            41,174Leasehold
      improvements
            
            
            75,339
            
            
            
            17,726
            
            
            
            57,613Office
      furniture
            
            
            20,595
            
            
            
            5,688
            
            
            
            14,9071,858,942
            
            
            
            933,701
            
            
            
            925,241








Cost
              $
            
            
            Accumulated
              Amortization
              $
            
            
            January
      31,
              2007
              Net
              $Equipment
            
            
            892,915
            
            
            
            460,364
            
            
            
            432,551Equipment
      under capital lease
            
            
            161,594
            
            
            
            29,626
            
            
            
            131,968Patents
            
            
            81,166
            
            
            
            19,049
            
            
            
            62,117Computer
      equipment
            
            
            36,379
            
            
            
            24,549
            
            
            
            11,830Office
      furniture
            
            
            4,720
            
            
            
            2,008
            
            
            
            2,7121,176,774
            
            
            
            535,596
            
            
            
            641,178








5.         INCOME
TAXES





The
reconciliation of the income tax provision, calculated using the combined
Canadian federal and provincial statutory income tax rate with the income tax
provision in the consolidated financial statements, is as follows:




January
      31,
              2008
              $
            
            
            January
      31,
              2007
              $Income
      tax provision at combined Canadian federal and
              provincial statutory rate of
      36.12% (2007 - 36.12%)
            
            
            (670,531
            )
            
            
            (395,977
            )Decrease
      due to:Equipment and
      patents
            
            
            52,637
            
            
            
            13,648Change in statutory tax
      rate
            
            
            -
            
            
            
            11,674Other
            
            
            25,772
            
            
            
            9,958Valuation allowance
            
            
            592,122
            
            
            
            --
            
            
            
            (360,697
            )








Continued...






KMA
GLOBAL SOLUTIONS INTERNATIONAL, INC.                  Page F-12
 NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
 JANUARY
31, 2008 and 2007
 (expressed
in U.S. dollars)


5.         INCOME TAXES(Continued)





Significant
      components of the Company’s future income tax assets and liabilities are
      as follows:





January
      31,
              2008
              $
            
            
            January
      31,
              2007
              $Future
      income tax assets:
              Losses carried
      forward
            
            
            1,134,131
            
            
            
            411,800Future
      income tax liabilities:
              Equipment and
      patents
            
            
            72,398
            
            
            
            (75,842
            )Valuation
      allowance
            
            
            (812,604
            )
            
            
            -Future
      tax asset
            
            
            393,925
            
            
            
            335,958





The
company has non-capital loss carry-forwards of $1,172,500 in Canada which expire
through January 31, 2028 as follows:





2009
              $
            
            
            2027
              $
            
            
            2028
              $Non-capital
      loss carry-forward
            
            
            59,300
            
            
            
            493,000
            
            
            
            620,200





The
Company has $1,611,200 of net operating loss carryforwards in the United States
and $145,200 of net operating loss carryforwards in Hong Kong.








6.         OBLIGATIONS
UNDER CAPITAL LEASE





The
Company entered into a leasing agreement for equipment dated March 15,
2005.  The lease bears an effective rate of interest of 13.8% per
annum, requires monthly payments of $5,893 Canadian dollars, and is secured by
the equipment.  The capital lease was paid in full as of January 31,
2008.










7.         ADVANCES
FROM SHAREHOLDERS





Advances
from shareholders are non-interest bearing, are unsecured and have no fixed
terms of repayment.













Continued...






KMA
GLOBAL SOLUTIONS INTERNATIONAL, INC.                  Page F-13
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 JANUARY
31, 2008 and 2007
 (expressed
in U.S. dollars)
 
  8.         SHAREHOLDERS’
EQUITY





Continuity
of Shareholders’ Equity – KMA Global Solutions Inc. (“KMA Canada”)


prior
to reverse merger




Common
              Shares
              $
            
            
            Par
              Value
              $
            
            
            Additional
              Paid-in
              Capital
              $
            
            
            Comp.
              Income
              $
            
            
            Accumulated
      Earnings
              $January
      31, 2006
            
            
            32,136,800
            
            
            
            -
            
            
            
            461,901
            
            
            
            43,547
            
            
            
            82,982Issuance
      of shares for
              consulting
      services
            
            
            408,000
            
            
            
            -
            
            
            
            52,173
            
            
            
            -
            
            
            
            -Issuance
      of shares for finder’s
              fee
            
            
            1,700,000
            
            
            
            -
            
            
            
            217,391
            
            
            
            -
            
            
            
            -March
      15, 2006
            
            
            34,244,800
            
            
            
            -
            
            
            
            731,465
            
            
            
            43,547
            
            
            
            82,982





Continuity
of Shareholders’ Equity - KMA Global Solutions International, Inc.




Common
              Shares
              $
            
            
            Par
              Value
              $
            
            
            Additional
              Paid-in
              Capital
              $
            
            
            Shares
              to
      be
              issued
              $
            
            
            Comp.
              Income
              $
            
            
            Accumulated
      Earnings/
              (losses)
              $January
      31, 2006
            
            
            4,920,250
            
            
            
            4,920
            
            
            
            166,421
            
            
            
            -
            
            
            
            -
            
            
            
            (171,341
            )Retired
      to treasury
            
            
            (4,225,427
            )
            
            
            (4,225
            )
            
            
            4,225
            
            
            
            -
            
            
            
            -
            
            
            
            -17:1
      share split
            
            
            11,117,168
            
            
            
            11,117
            
            
            
            (11,117
            )
            
            
            -
            
            
            
            -
            
            
            
            -Issuance
      of shares in
              reverse merger
            
            
            34,244,800
            
            
            
            34,245
            
            
            
            525,878
            
            
            
            -
            
            
            
            43,547
            
            
            
            82,982Accumulated
      deficit
              acquired in reverse
              merger
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            171,341Retirement
      of shares
            
            
            (5,344,800
            )
            
            
            (5,345
            )
            
            
            5,345
            
            
            
            -
            
            
            
            -
            
            
            
            -Issuance
      of replacement
              shares
            
            
            1,179,000
            
            
            
            1,179
            
            
            
            (1,179
            )
            
            
            -
            
            
            
            -
            
            
            
            -Currency
      translation
              adjustment
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            4,601
            
            
            
            -Issuance
      of shares for
              investor relations
      services
            
            
            25,000
            
            
            
            25
            
            
            
            11,025
            
            
            
            -
            
            
            
            -
            
            
            
            -Issuance
      of shares for
              consulting services
      (f)
            
            
            150,000
            
            
            
            150
            
            
            
            28,500
            
            
            
            -
            
            
            
            -
            
            
            
            -Net
      loss January 31, 2007
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            
            
            
            
            -
            
            
            
            (736,403
            )January
      31, 2007
            
            
            42,065,991
            
            
            
            42,066
            
            
            
            729,098
            
            
            
            -
            
            
            
            48,148
            
            
            
            (653,421
            )Shares
      to be issued
            
            
            6,742,175
            
            
            
            -
            
            
            
            -
            
            
            
            826,485
            
            
            
            2,883
            
            
            
            -48,808,166
            
            
            
            42,066
            
            
            
            729,098
            
            
            
            826,485
            
            
            
            51,031
            
            
            
            (653,421
            )







Continued...






KMA
GLOBAL SOLUTIONS INTERNATIONAL, INC.                  Page F-14
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 JANUARY
31, 2008 and 2007
 (expressed
in U.S. dollars)
 
  
 8.         SHAREHOLDERS’ EQUITY(Continued)





Continuity of Shareholders’ Equity -
KMA Global Solutions International, Inc.




Common
              Shares
              $
            
            
            Par
              Value
              $
            
            
            Additional
              Paid-in
              Capital
              $
            
            
            Subscriptions
              Receivable
              $
            
            
            Comp.
              Income
              $
            
            
            Accumulated
      losses
              $Issuance
      of shares for
              financing, net (i)
            
            
            10,000,000
            
            
            
            10,000
            
            
            
            965,000
            
            
            
            -
            
            
            
            -
            
            
            
            -Warrant
      valuation allocation
              (i)
            
            
            -
            
            
            
            -
            
            
            
            (346,000
            )
            
            
            -
            
            
            
            -
            
            
            
            -Issuance
      of shares for
              agent fees (i)
            
            
            1,000,000
            
            
            
            1,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Issuance
      of agent warrants
              on financing (i)
            
            
            -
            
            
            
            -
            
            
            
            (90,000
            )
            
            
            -
            
            
            
            -
            
            
            
            -Issuance
      of shares for
              consulting services
              (g)(h)(j)(k)
            
            
            1,867,328
            
            
            
            1,867
            
            
            
            337,183
            
            
            
            -
            
            
            
            -
            
            
            
            -Warrants
      exercised, net (l)
            
            
            11,000,000
            
            
            
            11,000
            
            
            
            2,134,000
            
            
            
            (930,000
            )
            
            
            -
            
            
            
            -Warrant
      valuation allocation
              on
      exercise
            
            
            -
            
            
            
            -
            
            
            
            436,000
            
            
            
            -
            
            
            
            -
            
            
            
            -Issuance
      of shares, net (m)
            
            
            8,000,000
            
            
            
            8,000
            
            
            
            1,942,000
            
            
            
            (1,800,000
            )
            
            
            -
            
            
            
            -Warrant
      valuation allocation
              Note
      9
            
            
            -
            
            
            
            -
            
            
            
            (771,000
            )
            
            
            -
            
            
            
            -
            
            
            
            -Issuance
      of shares for
              agent fees and
warrant
              valuation
      (m)
            
            
            1,400,000
            
            
            
            1,400
            
            
            
            (378,000
            )
            
            
            -
            
            
            
            -
            
            
            
            -Share
      issue costs
            
            
            -
            
            
            
            -
            
            
            
            (113,252
            )
            
            
            -
            
            
            
            -
            
            
            
            -Currency
      translation
              adjustment
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (62,261
            )
            
            
            -Net
      loss January 31, 2008
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,856,399
            )75,333,319
            
            
            
            75,333
            
            
            
            4,845,029
            
            
            
            (2,730,000
            )
            
            
            (11,230
            )
            
            
            (2,509,820
            )











(a)
            On
      February 15, 2006, KMA Canada issued 120,000 common shares (408,000 post
      split reorganization common shares) with a deemed value of Cdn $0.50 per
      share in exchange for services rendered by a group of consultants of KMA
      Canada.





(b)
            On
      February 28, 2006, KMA Canada issued 500,000 common shares (1,700,000 post
      split reorganization common shares) with a deemed value of Cdn $0.50 per
      share as an advance on finders fees in relation to a planned equity
      financing.  The advance was reflected as a deferred cost until
      such time as the planned equity financing is completed.  During
      the year ended January 31, 2008, $243,252 was recognized as a cost of
      issue.(c)
            On
      March 1, 2006, pursuant to a resolution of the Board of Directors, the
      issued and outstanding common shares of KMA Canada were subject to a
      reverse stock split at a ratio of five (5) shares to one (1), reducing the
      number of shares outstanding from 10,072,000 to 2,014,400 (34,244,800 post
      split reorganization common
shares).






Continued...
   KMA
GLOBAL SOLUTIONS INTERNATIONAL, INC.                  Page F-15
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 JANUARY
31, 2008 and 2007
 (expressed
in U.S. dollars)
 8.         SHAREHOLDERS’ EQUITY(Continued)





(d)
            KMA
      International, a corporation organized under the laws of the State of
      Nevada and KMA Canada entered into an acquisition agreement dated March
      15, 2006.  Pursuant to the terms of the agreement and upon the
      completion of satisfactory due diligence and receipt of applicable
      regulatory and shareholder approvals, KMA International acquired 100% of
      the outstanding shares of the capital stock of KMA Canada in exchange for
      34,244,800 post split reorganization common shares.  (34,244,800
      post split reorganization shares being the aggregate of 28,900,000 owned
      by KMA LLC and 5,344,800 owned by KMA Canada
      shareholders.)  Pursuant to an agreement between the KMA Canada
      shareholders and KMA International, the shares in KMA International owned
      by the KMA Canada shareholders were retired to treasury and cancelled and
      the KMA Canada shareholders received 1,179,000 post split reorganization
      shares.





KMA
International is the surviving corporation as a result of a merger transaction
with Espo’s, Ltd., a corporation formed under the laws of the State of New
York.  The merger occurred March 15, 2006.  At the time of
the merger transaction, Espo’s, Ltd. was a non-reporting public
corporation.  As a result of the merger and acquisition transactions
the former shareholders of Espo’s, Ltd. hold 11,811,991 or 28.2% of the post
split reorganization common shares of KMA International.  Pursuant to
the merger agreement, the remaining 71,832,259 post split reorganization shares
(4,225,427 pre split reorganization shares), held by individuals that were
former shareholders of Espo’s, were retired to treasury effective March 15, 2006
and cancelled on May 19, 2006.





The terms
of the merger transaction and the acquisition agreement provided that the mind
and management of KMA International would be replaced by the officers and
directors of KMA Canada and having had no significant business activity for a
number of years, upon the effective time of the acquisition, KMA International
adopted the business plan of KMA Canada.  The transaction was
therefore accounted for as a reverse acquisition with KMA Canada as the
acquiring party and KMA International as the acquired party, in substance, a
reorganization of KMA Canada.  Generally accepted accounting
principles in the United States of America require, among other considerations,
that a company whose stockholders retain a majority interest in a business
combination be treated as the acquirer for accounting
purposes.  Accordingly, the results of operations for the periods
prior to the combination are those of KMA Canada.





(e)
            On
      June 16, 2006, KMA International issued 25,000 common shares with a fair
      market value of Cdn $0.50 per share in exchange for investor relation
      services provided by a consulting company for KMA
      International.





(f)
            On
      October 20, 2006, KMA International issued 150,000 common shares with a
      fair market value of USD $0.19 per share in exchange for consulting
      services.







Continued...




KMA
GLOBAL SOLUTIONS INTERNATIONAL, INC.                  Page F-16


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 JANUARY
31, 2008 and 2007
 (expressed
in U.S. dollars)


8.         SHAREHOLDERS’ EQUITY(Continued)





(g)
            On
      December 12, 2006, KMA International agreed to issue 360,000 common shares
      at USD $0.15 per share with piggyback registration rights in exchange for
      consulting services.





(h)
            On
      December 12, 2006, KMA International agreed to issue 300,000 common shares
      at USD $0.15 per share with piggyback registration rights in exchange for
      consulting services.





(i)
            On
      January 15, 2007, a group of investors agreed to purchase 10,000,000
      shares of the Company’s common stock at a price of USD $0.10 per
      share.  The total purchase price of  $1,000,000 was
      paid to KMA International as follows: (i) $500,000 payable upon closing
      and (ii) $500,000 payable within 30 days of the effective date of the
      Registration Statement. The agreement includes 10,000,000 Warrants issued
      to the investors (exercised), which shall be exercisable only within 2
      years of the effective date of the Registration Statement, at an exercise
      price of $0.20 per share. Upon closing, the Agent was paid a fee of 10% of
      the gross value received or 1,000,000 common shares which was charged to
      share issue costs, together with Warrants exercisable within 2 years of
      the effective date of the Registration Statement, at an exercise price
      of  $0.20 per share (exercised).  The shares of common
      stock were registered on March 12, 2007.  Deferred share issue
      costs of $25,000 were charged to additional paid-in capital on this
      transaction.The fair value of
      these warrants was estimated using the Black-Scholes option model with the
      following assumptions: dividend yield 0%, expected volatility of 100%,
      risk-free interest rate of 4.1% and an expected life of two
      years.  The fair value assigned to these warrants was $436,000,
      which was allocated as $346,000 to additional paid-in capital and $90,000
      to share issue costs.





(j)
            On
      January 19, 2007, KMA International agreed to issue 1,000,000 common
      shares at  $0.20 per share with piggyback registration rights in
      exchange for consulting services.





(k)
            On
      January 31, 2007, KMA International issued 207,328 common shares for
      consulting services.  The shares were valued as follows; 71,429
      common shares at $0.14 per share, 59,701 common shares at $0.17 per share,
      57,471 common shares at $0.17 per share and 18,727 common shares at $0.53
      per share.





(l)
            During
      the year, KMA International issued 11,000,000 common shares pursuant to
      the exercise of warrants at an exercise price of $0.20 per
      share.  The company received $1,270,000 and $930,000 has been
      recorded as a subscription receivable at January 31,
      2008.  Deferred share issue costs of $55,000 were charged to
      additional paid-in capital on this
transaction.







Continued...




KMA
GLOBAL SOLUTIONS INTERNATIONAL, INC.                  Page F-17
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 JANUARY
31, 2008 and 2007
 (expressed
in U.S. dollars)
 
  8.         SHAREHOLDERS’ EQUITY(Continued)





(m)
            On
      September 21, 2007, KMA International agreed to issue 8,000,000 shares of
      common stock at $0.25 per share in connection with a private offering. The
      purchase price of the shares is $2,000,000 which will be paid as follows:
      (i) $200,000 shall be due upon the filing of the registration statement;
      (ii)  a payment of $600,000 shall be due 60 days after the
      effective date of the registration statement; (iii) an additional payment
      of $600,000 shall be due 90 days after the effective date of the
      registration statement; and (iv) a final payment is due 120 days after the
      effective date of the registration statement. As of January 31,2008, the
      company received $200,000 and recorded $1,800,000 as a subscription
      receivable.  The purchasers of the shares also received warrants
      to acquire an additional 8,000,000 shares of common stock at an exercise
      price of $0.30 per share for a period of 2 years.  See Note
      9.   The agent for the investors received a fee of
      1,400,000 shares of common stock at $0.43 per share and warrants to
      acquire 1,400,000 of common stock at an exercise price of $0.30 per share
      for a period of 2 years. Deferred share issue costs of $50,000 were
      charged to additional paid-in capital on this transaction.  See
      Note 13.








9.         WARRANTS





Warrant
transactions during the years were as follows:




January
      31, 2008
            
            
            January
      31, 2007Number
      of warrants
            
            
            Weighted
              Average
              Exercise
      Price
              $
            
            
            Number
      of warrants
            
            
            Weighted
      Average
              Exercise
      Price
              $Balance,
      January 31, 2007
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Granted, private
      placement
            
            
            10,000,000
            
            
            
            0.20
            
            
            
            -
            
            
            
            -Granted, agent warrants
      as
              share issue
    costs
            
            
            1,000,000
            
            
            
            0.20
            
            
            
            -
            
            
            
            -Warrants
    exercised
            
            
            (11,000,000
            )
            
            
            0.20
            
            
            
            -
            
            
            
            -Granted, private
      placement
            
            
            8,000,000
            
            
            
            0.30
            
            
            
            -
            
            
            
            -Granted, agent warrants
      as
              share issue
    costs
            
            
            1,400,000
            
            
            
            0.30
            
            
            
            -
            
            
            
            -Balance,
      end of year
            
            
            9,400,000
            
            
            
            0.30
            
            
            
            -
            
            
            
            -





At
January 31, 2008, outstanding and exercisable warrants to acquire common shares
of the Company were as follows:





Number
      of
              Warrants
            Exercise
      Price
            Expiry
      Date
            Fair
      Value$
            $9,400,000
            0.30
            September
      21, 2009
            1,149,000





The fair
value of these warrants was estimated using the Black-Scholes option model with
the following assumptions: dividend yield 0%, expected volatility of 100%,
risk-free interest rate of 4.1% and an expected life of two
years.  The fair value assigned to these warrants during the period
was $1,149,000.  As at January 31, 2008, the intrinsic value of the
warrants was $Nil per share.  See Note 13.










Continued...






KMA
GLOBAL SOLUTIONS INTERNATIONAL, INC.                  Page F-18
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 JANUARY
31, 2008 and 2007
 (expressed
in U.S. dollars)
 
  10.         COMMITMENTS





(a)
            The
      Company is committed to minimum annual rentals under long-term leases for
      premises with various expiry dates to March 14, 2010.  Minimum
      rental commitments remaining under these leases approximate $312,500
      including $209,300 due within one year, $92,000 due in 2010 and $11,200
      due in 2011.





The Company is also responsible for
common area costs.




(b)
            The
      Company has entered into various vehicle leases and has accounted for them
      as operating leases.  Obligations due approximate $26,300
      including $21,300 within one year and $5,000 due in
  2010.








11.         FINANCIAL
INSTRUMENTS




Fair
Value





Generally
accepted accounting principles in the United States require that the Company
disclose information about the fair value of its financial assets and
liabilities.  Fair value estimates are made at the balance sheet date,
based on relevant market information and information about the financial
instrument.  These estimates are subjective in nature and involve
uncertainties in significant matters of judgment and therefore cannot be
determined with precision.  Changes in assumptions could significantly
affect these estimates.





The
carrying amounts for cash, accounts receivable, accounts payable and advances
from shareholder on the balance sheet approximate fair value because of the
limited term of these instruments.





Foreign
Exchange Risk





Certain
of the Company's sales and expenses are incurred in Canadian and Hong Kong
currencies and are therefore subject to gains and losses due to fluctuations in
those currencies.





Credit
Risk





The
Company is exposed, in its normal course of business, to credit risk from its
customers. No one single party accounts for a significant balance of accounts
receivable.





Interest
Rate Risk





The
Company has interest-bearing borrowings for which general rate fluctuations
apply.


Continued...






KMA
GLOBAL SOLUTIONS INTERNATIONAL, INC.                  Page F-19


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 JANUARY
31, 2008 and 2007
 (expressed
in U.S. dollars)


12.
            SEGMENTED
      OPERATIONS







2008
            
            
            
            2007Canada
              $
            
            
            Hong
      Kong
              $
            
            
            U.S.
              $
            
            
            Total
              $
            
            
            Canada
              $
            
            
            Hong
      Kong
              $
            
            
            U.S.
              $
            
            
            Total
              $Assets
            
            
            1,676,023
            
            
            
            500,942
            
            
            
            -
            
            
            
            2,176,965
            
            
            
            2,200,620
            
            
            
            -
            
            
            
            -
            
            
            
            2,200,620Liabilities
            
            
            873,248
            
            
            
            485,405
            
            
            
            -
            
            
            
            1,358,653
            
            
            
            671,122
            
            
            
            -
            
            
            
            534,239
            
            
            
            1,205,361Sales
            
            
            3,485,273
            
            
            
            1,392,333
            
            
            
            -
            
            
            
            4,877,606
            
            
            
            6,630,884
            
            
            
            -
            
            
            
            -
            
            
            
            6,630,884Selling,
      general and
              administrative
              expenses
            
            
            1,579,430
            
            
            
            392,817
            
            
            
            1,090,039
            
            
            
            3,062,286
            
            
            
            1,864,205
            
            
            
            -
            
            
            
            521,200
            
            
            
            2,385,405






13.
            SUBSEQUENT
      EVENT





Subsequent
to January 31, 2008, the Company and the purchasers involved in the stock
purchase transaction dated September 21, 2007 (the “Transaction”) agreed to
rescind the stock purchase transaction.  As a result, the Company
issued a promissory note to the purchasers for $200,000 for the proceeds
received on the Transaction and the common share and warrant certificates were
returned to the Company's legal counsel.  (See Note
8(m)).