SECURITIES AND EXCHANGE COMMISSION
 
 
WASHINGTON, D.C. 20549
 
 
FORM 10-QSB
 
 
(Mark one)
 
x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURIT IES EXCHANGE ACT OF 1934.

For the quarterly period ended September 30, 2007
OR
o      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _____ to _____
 
Commission file number 0-16819
CREATIVE VISTAS, INC.
 
(Exact name of registrant as specified in its charter)
 
Arizona
(State or other jurisdiction of
incorporation or organization
6770
(Primary Standard Industrial
Classification Code Number)
86-0464104
(I.R.S. Employer
Identification No.)
 
2100 Forbes Street
Unit 8-10
Whitby, Ontario, Canada L1N 9T3
(905) 666-8676
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x       No o
 
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
 
 
As of November 14, 2007, there were 34,492,623 shares of common stock, no par value per share, outstanding.
 
 
 




 

 
FINANCIAL INFORMATION
 
     
Item 1.
Financial Statements
1
   
Item 2.
Management's Discussion And Analysis or Plan of Operation
16
   
Item 3.
Controls and Procedures
25
     
 
PART II.
OTHER INFORMATION
 
     
Item 1.
Legal Proceedings
26
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
26
     
Item 3.
Defaults upon Senior Securities
26
     
Item 4.
Submission of Matters to a Vote of Security Holders.
26
     
Item 5.
Other Information
26
     
Item 6.
Exhibits and Reports on Form 8-K
26





 
PART I.    FINANCIAL INFORMATION
Item 1.   Financial Statements
 
Creative Vistas, Inc.
Condensed Consolidated Balance Sheet (Unaudited)
 
 
September 30, 2007
 
Assets
     
Current Assets
     
Cash and bank balances
 
$
2,397,193
 
Accounts receivable, net of allowance for doubtful accounts $203,742
   
6,415,507
 
Income tax recoverable
   
411,634
 
Inventory and supplies
   
988,360
 
Prepaid expenses
   
307,331
 
Due from related parties
   
2,581
 
Total current assets
   
10,522,606
 
Property plant and equipment, net of depreciation
   
6,024,927
 
Goodwill
   
2,893,845
 
Intangible assets
   
1,150,000
 
Restricted cash
   
126,124
 
Deferred financing costs, net
   
596,941
 
Deferred income taxes
   
37,546
 
   
$
21,351,989
 
Liabilities and Shareholders' (Deficit)
       
Current Liabilities
       
Accounts payable and accrued liabilities
 
$
6,367,169
 
Current portion of obligation under capital leases
   
1,054,727
 
Deferred income
   
31,579
 
Deferred income taxes
   
25,858
 
Current portion of term notes
   
2,347,980
 
Due to related parties
   
2,718
 
Total current liabilities
   
9,830,031
 
Term notes
   
13,727,177
 
Notes payable to related parties
   
1,500,000
 
Obligation under capital lease
   
3,122,619
 
Due to related parties
   
233,178
 
     
28,413,005
 
Shareholders' (deficit)
       
Share capital
       
Authorized
       
50,000,000 no par value preferred shares undesignated, none issued or outstanding
   
-
 
100,000,000 no par value common shares 34,371,123 issued and outstanding
       
Common stock
   
1,188,763
 
Additional paid-in capital
   
4,562,063
 
Accumulated other comprehensive losses
   
(875,316
)
Accumulated (deficit)
   
(11,936,526
)
     
(7,061,016
)
   
$
21,351,989
 
The accompanying notes are an integral part of these financial statements



 

 
Creative Vistas, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
 
   
Three months ended
 
Nine months ended
 
   
September 30,
 
September 30,
 
   
2007
 
2006
 
2007
 
2006
 
Contract and service revenue
                 
Contract
 
$
1,715,233
 
$
1,352,412
 
$
4,576,497
 
$
4,259,369
 
Service
   
9,427,146
   
7,758,291
   
23,904,590
   
18,437,710
 
Other
   
11,082
   
10,031
   
42,575
   
37,919
 
     
11,153,461
   
9,120,734
   
28,523,662
   
22,734,998
 
Cost of sales
                         
Contract
   
1,184,318
   
768,977
   
3,150,460
   
2,587,574
 
Service
   
6,711,549
   
5,259,206
   
16,902,575
   
12,419,788
 
     
7,895,867
   
6,028,183
   
20,053,035
   
15,007,362
 
Gross margin
   
3,257,594
   
3,092,551
   
8,470,627
   
7,727,636
 
Operating expense
                         
Project
   
328,355
   
314,375
   
933,658
   
1,006,506
 
Selling
   
193,189
   
187,010
   
580,759
   
487,281
 
General and administrative
   
1,828,644
   
1,457,963
   
5,290,490
   
4,589,376
 
General and administrative - Non-cash stock compensation
   
229,500
   
92,939
   
515,201
   
379,139
 
     
2,579,688
   
2,052,287
   
7,320,108
   
6,462,302
 
Income from operations
   
677,906
   
1,040,264
   
1,150,519
   
1,265,334
 
Interest and other expenses
                 
Net financing expenses
   
844,469
   
529,913
   
2,143,758
   
4,083,354
 
Amortization of deferred charges
   
45,511
   
49,955
   
137,362
   
743,889
 
Foreign Currency Translation Gain
   
(479,582
)
 
84,155
   
(1,057,737
)
 
(117,972
)
Derivative instruments
   
-
   
(1,848,033
)
 
-
   
939,667
 
     
410,398
   
(1,184,010
)
 
1,223,383
   
5,648,938
 
Income (loss) before income taxes
   
267,508
   
2,224,274
   
(72,864
)
 
(4,383,604
)
Income taxes
   
-
   
-
   
-
   
-
 
Net income (loss)
   
267,508
   
2,224,274
   
(72,864
)
 
(4,383,604
)
Other comprehensive income (loss):
                 
Foreign currency translation adjustment
   
(305,083
)
 
2,292
 
 
(757,581
)
 
(258,155
)
Comprehensive income (loss)
 
$
(37,575
)
$
2,226,566
 
$
(830,445
)
$
(4,641,759
)
Basic weighted-average shares
   
33,963,778
   
32,393,095
   
33,653,259
   
32,315,582
 
Diluted weighted-average shares
   
40,046,891
   
34,997,732
   
33,653,259
   
32,315,582
 
Basic earnings (loss) per share
 
$
0.01
 
$
0.07
 
$
(0.00
)
$
(0.14
)
Diluted earnings (loss) per share
 
$
0.01
 
$
0.01
 
$
(0.00
)
$
(0. 14
)
 
The accompanying notes are an integral part of these financial statements
 



 

 
Creative Vistas, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
   
Nine months ended September 30,
 
   
 
2007
 
 
2006
 
           
Operating activities
         
Net cash provided by operating activities
 
$
974,510
 
$
162,870
 
Investing activities
             
Proceeds of sales of property and equipment
   
117,276
   
460,911
 
Purchase of property and equipment
   
(660,725
)
 
(695,012
)
Note receivable
   
-
   
125,000
 
Net cash (used in) investing activities
   
(543,449
)
 
(109,101
)
Financing activities
             
Proceeds from bank indebtedness
   
-
   
35,935
 
Repayment from notes payable
   
(28,564
)
 
(59,461
)
Due to related parties
   
(173
)
 
241
 
Proceeds from term note
   
-
   
2,091,871
 
Repayment of capital lease
   
(849,390
)
 
(631,132
)
Restricted cash
   
246,411
   
132,051
 
Repayment of term notes
   
(854,148
)
 
-
 
Repayment of convertible notes
   
-
   
(106,815
)
Net cash provided by (used in) financing activities
   
(1,485,874
)
 
1,462,690
 
Effect of foreign exchange rate changes on cash
   
(108,175
)
 
(454,307
)
Net change in cash and cash equivalents
   
(1,162,988
)
 
1,062,152
 
Cash and cash equivalents, beginning of period
   
3,560,181
   
1,756,399
 
Cash and cash equivalents, end of period
 
$
2,397,193
 
$
2,818,551
 

 
The accompanying notes are an integral part of these financial statements
 



Creative Vistas, Inc.
Notes to Consolidated Condensed Financial Statements
September 30, 2007
(Unaudited)

1.   Summary of Accounting Policies
 
Basis of presentation
 
The accompanying unaudited condensed consolidated balance sheet as at September 30, 2007, and the consolidated condensed statements of operations and cash flows for the periods ended September 30, 2006 and 2007, include the accounts of Creative Vistas, Inc. (“CVAS”), Creative Vistas Acquisition Corp. (“AC Acquisition”), AC Technical Systems Ltd. (“AC Technical”), Cancable Holding (“Cancable Holding”), Cancable Inc., Iview Holding Corp. (“Iview Holding”), and Iview Digital Solutions Inc. (“Iview DSI”). Intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, these condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) that are necessary for a fair presentation of the results for and as of the periods shown. The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States. However, certain information or footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The results of operations for such periods are not necessarily indicative of the results expected for 2007 or for any future period. These financial statements should be read in conjunction with the financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006, filed with the Securities and Exchange Commission.
 
Liquidity and going concern
 
Our consolidated condensed financial statements were prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. We have incurred a loss of $72,864 for the nine months ended September 30, 2007 and have an accumulated deficit of $11,936,526   at September 30, 2007.
 
We have outstanding term loans aggregating $16,075,157, together with common stock options and warrants, held by Laurus. We do not currently have the ability to repay the notes in the event of a demand by the holder. Furthermore, we granted a security interest to Laurus in substantially all of our assets and, accordingly, in the event of any default under our agreements with Laurus, they could conceivably attempt to foreclose on our assets, which could cause us to terminate our operations.

Over the next twelve months the Company believes that its existing capital will be sufficient to sustain its operations. Management plans to seek additional capital in the future to fund operations, growth and expansion through additional equity, debt financing or credit facilities. The Company has had early stage discussions with investors about potential investment in the Company at a future date. No assurance can be made that such financing would be available, and if available it may take either the form of debt or equity. In either case, the financing could have a negative impact on our financial condition and our shareholders. The Company has introduced cost cutting initiatives within the Administration, Project and Selling departments to improve efficiency within the Company and also improve cash flow. The Company has also increased its rates for service provided by AC Technical by 20 percent to improve gross margins. This is in line with our competitors. The Company also expects to see the benefits of its research and development efforts within the next 12 months as it starts to introduce its own line of customized products to the industry. These products and technologies are expected to improve gross margins. The Company believes that it will be eligible for research and development tax credits at year end for its research and development efforts during the year and these are additional sources of cash flow for the Company. The Company is also negotiating longer credit terms with its suppliers from 45 days to 60 to 75 days. For all the reasons mentioned above, we believe that we have adequate short term borrowing capability and that we will be able to sustain our operations and continue as a going concern for a reasonable period of time although there can be no assurance of this.


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

Earnings (loss) per share
 
The Company applies Statement of Financial Accounting Standards No. 128, Earnings Per Share (FAS 128). Basic loss per share (“LPS”) is computed using the weighted average number of common shares outstanding during the period. Diluted LPS is computed using the weighted average number of common and dilutive potential common shares outstanding during the period. Dilutive potential common shares consist of common stock issuable upon exercise of stock options and warrants using the treasury stock method. An adjustment to earnings per share calculation includes reversing the changes in derivative instruments.
 
Reclassifications
 
Certain amounts in the financial statements at September 30, 2006 have been reclassified to conform to the current year presentation.
 
2.   Deferred Financing Costs, Net
 
Deferred financing costs, net are associated with the Company’s term notes from Laurus Master Fund, Ltd., a Cayman Islands company. For the period ended September 30, 2007, the amortization of deferred financing cost was $137,362 (2006 - $743,889).
 
Cost
 
$
953,296
 
Accumulated amortization
   
(356,355
)
   
$
596,941
 
 
The estimated amortization expense for each of the next five fiscal years is as follows:
 
Year
   
Amount
 
2007
   
42,502
 
2008
   
172,742
 
2009
   
138,307
 
2010
   
132,601
 
2011
   
110,789
 
   
$
596,941
 

 
3.  Intangible Assets
 
   
 
Cost
 
Accumulated amortization
 
Net book value
 
Customer relationships
 
$
1,000,000
 
$
350,000
 
$
650,000
 
Trade name
   
1,200,000
   
700,000
   
500,000
 
   
$
2,200,000
 
$
1,050,000
 
$
1,150,000
 
 
Amortization expense for the nine months period ended September 30, 2007 amounted to $450,000 (2006-$Nil).
 

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

The Cancable Note bears interest at the prime rate plus 1.75% with a minimum rate of seven percent. Interest accrued on the term note but was not payable until February 1, 2006. Interest is calculated on the basis of a 360 day year. The minimum monthly payment on the term note is $81,726 commencing October 1, 2006. The Company is not obligated, except upon an event of default, to pay more than 25% of the Principal Amount prior to December 31, 2011.
 
In February 2006, the Company and its subsidiaries, Iview Holding and Iview DSI entered into a series of agreements with Laurus pursuant to a refinancing transaction whereby the Company issued to Laurus a secured term note (the “Company Note”) in the amount of $8,250,000, Iview DSI issued to Laurus a secured term note (the “Iview Note”) in the amount of $2,000,000, the Company issued to Laurus a related warrant to purchase up to 2,411,003 shares of common stock of the Company (up to 7.5% of the outstanding shares of the Company) at a price of $0.01 per share (the “Warrant”) and Iview Holding issued to Laurus a related option to purchase up to 20 shares of common stock of Holding (up to 20% of the outstanding shares of Holding) at a price of $0.01 per share (the “Option”). The loans are secured by all of the assets of the Company and its subsidiaries.

The Company Note bears interest at the prime rate plus 2% with a minimum rate of seven percent. Interest accrued on the term note but was not payable until April 1, 2006. Interest is calculated on the basis of a 360 day year. The minimum monthly payment on the term note is $137,500 commencing April 1, 2007 to March 1, 2009. The Company has deferred the principal repayment from April to October 2007 by issuing 756,000 warrants. $5,912,500 is payable on the maturity date.
 
The Iview Note bears interest at the prime rate plus 2% with a minimum rate of seven percent. Interest accrued on the term note but was not payable until April 1, 2006. Interest is calculated on the basis of a 360 day year. The minimum monthly payment on the term note is $8,333 commencing March 1, 2007 to February 1, 2011. $1,600,000 is payable on the maturity date. The Company is not obligated, except upon an event of default, to pay more than 25% of the Principal Amount prior to December 31, 2011.
 
Simultaneously with the closing of this refinancing transaction, the Company paid off the entire outstanding principal amount and all obligations due to Laurus under the Secured Convertible Term Note dated September 30, 2004, the Secured Convertible Minimum Borrowing Note dated September 30, 2004 and the Secured Revolving Note dated September 30, 2004 (collectively, the “2004 Notes”) and such 2004 Notes were subsequently cancelled.

Interest on the term notes for the nine months period ended September 30, 2007 was $1,260,102 (2006: $1,240,510).

   
Amount
 
Cancable term note bears interest at prime plus 1.75% with the minimum interest rate 7% and due on December 31, 2011
 
$
5,883,684
 
Company term note bears interest at prime plus 2% with the minimum interest rate 7% and due on December 31, 2011
   
8,250,000
 
Iview term note bears interest at prime plus 2% with the minimum interest rate 7% and due on December 31, 2011
   
1,941,473
 
     
16,075,157
 
Less: current portion
   
2,347,980
 
   
$
13,727,177
 

 

The principal payments for the next five fiscal years are as follows:
 
   
Amount
 
2007
 
$
545,178
 
2008
   
2,240,356
 
2009
   
6,425,000
 
2010
   
100,000
 
2011
   
6,764,623
 
   
$
16,075,157
 

5.   Net Financing Expenses
 
 
 
   
Nine months ended September 30,
 
   
  2007
   
2006
 
Capital leases
$
275,107
 
$
178,265
Interest of credit facility
 
1,260,102
   
1,240,510
Amortization of interest on debt instruments
 
-
   
168,171
Interest on deferred principal repayment of term note - 108,000 warrants
 
570,530
   
-
Interest and penalties on prepayment of convertible notes - cash
 
-
   
539,319
Interest and penalties on prepayment of convertible notes - 2,411,003 warrants
 
-
   
1,913,571
Others
 
38,019
   
43,518
 
$
2,143,758
 
$
4,083,354
 
6.   Note Payable to Related Parties

In September 2004, the Company issued two promissory notes with an aggregate principal amount of $3,300,000. On September 30, 2004, the Company repaid an aggregate of $1,800,000 of the principal balance. The outstanding principal bears interest at 3% per annum with no fixed terms of repayment. The notes each with an amount of $750,000 are due to The Burns Trust (the Company’s president is one of the beneficiaries of the trust) and the Navaratnam Trust (the Company’s CEO is one of the beneficiaries of the trust), respectively. During the period ended June 30, 2006, the above two notes payable have been transferred to Malar Trust Inc. (the Company’s CEO is the shareholder of Malar Trust Inc.).
 
Interest expense recognized for the nine months period ended September 30, 2007 was $38,019 (2006 - $33,750).
 
7.   Shareholders’ (Deficit)
 
The Company has total authorized share capital of 50,000,000 preferred shares, no par value and 100,000,000 common shares, no par value.
 
During the period ended March 31, 2007, the Company entered into one consulting agreements by issuing 16,666 shares stock in consideration for investor relations services rendered with the fair value of $6,999. Additionally, the Company issued 258,500 shares with the fair value of $253,330 for the executive officers of Cancable Inc., a subsidiary of the Company.
 
During the period ended June 30, 2007, the Company entered into a consulting agreement by issuing 90,000 shares stock in consideration for investor relations services rendered with the fair value of $171,300. Additionally, the Company issued 29,280 shares to Laurus for the exercise of the warrants issued on February 13, 2006.
 
During the period ended September 30, 2007, the Company entered into a consulting agreement by issuing 93,850 shares stock in consideration for investor relations and consulting services rendered with the fair value of $239,148. Additionally, the Company issued 625,469 shares to Laurus for the exercise of the options and warrants and 4,000 shares to the employees for the exercise of the employee stock options.
 


 
Options
 
On June 30, 2006, the Company granted 2,317,000 options to purchase a maximum of 2,317,000 shares of common stock to employees. The options allow the holders to buy the Company’s common stock at a price of $0.63 per share and expire on June 30, 2011.
 
The Company’s Stock Option Plan is intended to provide incentives for key employees, directors, consultants and other individuals providing services to the Company by encouraging their ownership of the common stock of the Company and to aid the Company in retaining such key employees, directors, consultants and other individuals upon whose efforts the Company’s success and future growth depends and in attracting other such employees, directors, consultants and individuals.
 
The Plan is administered by the Board of Directors, or its Compensation Committee. Under the Plan, options on a total of 4,000,000 shares of common stock may be issued. Shares of common stock covered by options which have terminated or expired prior to exercise are available for further options under the Plan. The maximum aggregate number of shares of Stock that may be issued under the Plan as “incentive stock options” is 3,500,000 shares. No options may be granted under the Plan after June 30, 2011; provided, however, that the Board of Directors may at any time prior to that date amends the Plan.
 
Options under the Plan may be granted to key employees of the Company, including officers or directors of the Company, and to consultants and other individuals providing services to the Company. Options may be granted to eligible individuals whether or not they hold or have held options previously granted under the Plan or otherwise granted or assumed by the Company. In selecting individuals for options, the Committee may take into consideration any factors it may deem relevant, including its estimate of the individual’s present and potential contributions to the success of the Company.
 
The Committee may, in its discretion, prescribe the terms and conditions of the options to be granted under the Plan, which terms and conditions need not be the same in each case, subject to the following:

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

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

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

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

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


At September 30, 2007 options to purchase 2,313,000 shares of common stock were outstanding. These options vest ratably in annual installments, over the four year period from the date of grant. As of September 30, 2007, there was $444,435 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over the four year vesting period. 579,250 options were vested as of September 30, 2007. The cost recognized for the period end September 30, 2007 was $158,825 which was recorded as general and administration expenses.

In valuing the options issued on June 30, 2006 the following assumptions were used

Expected volatility
45%
Expected dividends
0%
Expected term (in years)
3.0 - 4.5
Risk-free rate
5.10% - 5.13%

A summary of option activity under the Plan during the period ended September 30, 2007 is presented below:

Options
 
 
 
Shares
 
Weighted-Average
Exercise
Price
 
Weighted-Average
Remaining Contractual
Term
 
Intrinsic
Value
 
 
 
 
 
         
Outstanding at January 1, 2007
   
-
   
-
             
Granted
   
2,317,000
 
$
0.63
             
Exercised
   
4,000
 
$
0.63
          7,080  
Forfeited or expired
   
-
   
-
             
Outstanding at September 30, 2007
   
2,313,000
 
$
0.63
   
4.75
 
$
4,255,920
 
                           
Exercisable at September 30, 2007
   
579,250
 
$
0.63
   
-
 
$
1,065,820
 

Warrants
 
We use the Black-Scholes option pricing model to value warrants issued to non-employees, based on the market price of our common stock at the time the warrants are issued. All outstanding warrants may be exercised by the holder at any time. During the quarter ended March 31, 2007, in connection with financing arrangements, the Company issued warrants to purchase 108,000 shares of common stock. The fair value of the warrants of $39,519 was measured using the Black-Scholes option pricing model using the following assumptions: risk free interest rate of 4.25%, expected dividend yield of 0%, volatility of 45%, share price of $0.90 and expected life of 4 years. During the quarter ended September 30, 2007, in connection with financing arrangements, the Company issued warrants to purchase 324,000 shares of common stock. The fair value of the warrants of $206,940 was measured using the Black-Scholes option pricing model using the following assumptions: risk free interest rate of 4.54 to 4.93%, expected dividend yield of 0%, volatility of 45%, share price of $1.15 to $2.28 and expected life of 4 years. For the quarter ended September 30, 2007, in connection with financing arrangements, the Company issued warrants to purchase 324,000 shares of common stock. The fair value of the warrants of $324,071 was measured using the Black-Scholes option pricing model using the following assumptions: risk free interest rate of 4.54 to 4.93%, expected dividend yield of 0%, volatility of 45%, share price of $1.15 to $2.28 and expected life of 4 years.
 

As of September 30, 2007, we had the following options and warrants outstanding:
 
Issue Date
Expiry
Date
Number of
options or
warrants
Exercise Price
Per Share
 
Value -
issue date
Issued for
             
01-05-2004
01-05-2009
540,000
$0.33
$447,463
 
Consulting and investment banking fees
             
09-30-2004
09-30-2009
199,500
$1.00
$111,853
 
Consulting and investment banking fees
             
09-30-2004
09-30-2011
2,250,000
$1.15
$1,370,000
 
Financing
             
03-31-2005
03-31-2012
100,000
$1.20
$60,291
 
Financing
             
04-30-2005
04-30-2012
100,000
$1.01
$44,309
 
Financing
             
05-31-2005
05-31-2012
100,000
$1.01
$56,614
 
Financing
             
06-22-2005
06-22-2012
313,000
$1.00
$137,703
 
Financing
             
06-30-2005
06-30-2012
100,000
$0.90
$50,431
 
Financing
             
07-31-2005
07-31-2012
100,000
$1.05
$56,244
 
Financing
             
08-31-2005
08-31-2012
100,000
$1.05
$22,979
 
Financing
             
09-30-2005
09-30-2012
100,000
$0.80
$36,599
 
Financing
             
10-31-2005
10-31-2012
100,000
$0.80
$27,367
 
Financing
             
11-30-2005
11-30-2012
100,000
$0.80
$16,392
 
Financing
             
12-31-2005
12-31-2012
100,000
$0.80
$10,270
 
Financing
             
02-13-2006
02-13-2016
1,927,096
$0.01
$1,529,502
 
Financing
             
03-01-2007
03-01-2011
108,000
$0.90
$39,519
 
Financing
             
04-01-2007
04-01-2011
108,000
$1.15
$50,529
 
Financing
             
05-01-2007
05-01-2011
108,000
$1.25
$54,941
 
Financing
             
06-01-2007
06-01-2011
108,000
$2.28
$101,470
 
Financing
             
07-01-2007
07-01-2011
108,000
$2.10
$93,307
 
Financing
             
08-01-2007
08-01-2011
108,000
$2.55
$112,117
 
Financing
             
09-01-2007
09-01-2011
108,000
$2.73
$118,647
 
Financing
             
   
6,985,596
       

 
 
During the nine months ended September 30, 2007 the Company derived 59.8% of its revenue from a single customer in the amount of $17,078,000. The accounts receivable of this customer was $2,310,000 as at September 30, 2007.
 
10.   Segment Information
 
We determine and disclose our segments in accordance with SFAS No. 131 “Disclosures about Segments of an Enterprise and Related Information”, which uses a “management” approach for determining segments. The management approach designates the internal organization that is used by management for making operating decisions and assessing performance as the source of the reportable segments. Our management reporting structure provides for the following segments:
 
Cancable
 
Cancable Inc. (“Cancable”) is a Canadian based entity involved the provisioning, deployment and servicing of broadband technologies in both residential and commercial markets. The Cancable service offering, network deployment, IT integration, and support services, enable the cable television and telecommunications industries to deliver a high quality broadband experience to their customers. Cancable’s clients rely on Cancable’s knowledge and expertise to rapidly deploy the latest technologies to support advanced cable services, cable broadband Internet access and DSL. Services provisioned include new installations, reconnections, disconnections, service upgrades and downgrades, inbound technical call center sales and trouble resolution for cable Internet subscribers, and network servicing for broadband video, data, and voice services for residential, business, and commercial marketplaces.
 

AC Technical
 
A.C. Technical Systems Ltd. (“AC Technical”), a corporation incorporated under the laws of the Province of Ontario, is engaged in the engineering, design, installation, integration and servicing of various types of security systems.
 
Iview DVSI
 
Iview Digital Solutions Inc. (“Iview DVSI”), a corporation incorporated under the laws of the Province of Ontario. It is a newly formed subsidiary incorporated in late 2005 to focus on providing video surveillance products and technologies to the market.
 
The following table presents financial information with respect to the segments that management uses to make decisions.
 
   
Nine Months Ended
September 30, 2007
 
Nine Months Ended
September 30, 2006
 
Sales:
         
Cancable
 
$
22,784,559
 
$
17,442,767
 
AC Technical
   
5,632,174
   
5,159,381
 
Iview
   
102,826
   
132,850
 
CVAS
   
4,103
   
-
 
Consolidated Total
 
$
28,523,662
 
$
22,734,998
 
Depreciation and amortization:
             
Cancable
 
$
1,179,606
 
$
763,256
 
AC Technical
   
30,705
   
32,350
 
Consolidated Total
 
$
1,210,311
 
$
795,606
 
Interest expenses:
             
Cancable
 
$
746,128
 
$
681,503
 
AC Technical
   
1,650
   
8,221
 
Iview
   
149,290
   
129,455
 
AC Acquisition
   
36,369
   
33,750
 
CVAS
   
1,210,321
   
3,230,425
 
Consolidated Total
 
$
2,143,758
 
$
4,083,354
 
Net Income (Loss):
             
Cancable
 
$
2,235,371
 
$
1,071,027
 
AC Technical
   
6,638
   
86,397
 
Iview
   
(72,322
)
 
(119,818
)
Corporate (1)
   
(2,242,511
)
 
(5,421,210
)
Consolidated Total
 
$
(72,864
)
$
(4,383,604
)
Total Assets
             
Cancable
 
$
11,534,613
 
$
6,415,399
 
AC Technical
   
4,413,974
   
3,442,364
 
Iview
   
1,479,376
   
2,006,404
 
AC Acquisition
   
-
   
-
 
Corporate (1)
   
3,924,026
   
5,803,028
 
Consolidated Total
 
$
21,351,989
 
$
17,667,195
 
Capital assets :
             
Cancable
 
$
5,156,776
 
$
3,258,289
 
AC Technical
   
868,151
   
804,099
 
Consolidated Total
 
$
6,024,927
 
$
4,062,388
 
Capital Expenditures:
             
Cancable
 
$
2,774,887
 
$
380,686
 
AC Technical
   
3,917
   
-
 
Iview
   
-
   
-
 
AC Acquisition
   
-
   
-
 
Consolidated Total
 
$
2,778,804
 
$
380,686
 


(1)  
Corporate expenses primarily include certain stock-based compensation for consulting and advisory services and derivative financial instrument expense, which we do not internally allocate to our segments because they are related to our common stock and are non-cash in nature.
 
(2)  
Total cash paid for the purchase of capital assets was $660,725 (2006: $695,012). The remaining balances were purchased through capital assets.
 
 

Revenues by geographic destination and product group were as follows:

   
Nine Months Ended
September 30, 2007
 
Nine Months Ended
September 30, 2006
 
Contract
 
$
4,576,497
 
$
4,259,369
 
Service
   
23,904,590
   
18,437,710
 
Others
   
42,575
   
37,919
 
Total sales to external customers
 
$
28,523,662
 
$
22,734,998
 
               
All revenue generated by the Company was in Canada.

11.   Subsequent Events

On October 11, 2007, pursuant to an Agreement of Purchase and Sale, a subsidiary of Creative Vistas, Inc. (the “Registrant”), Cancable XL Inc. (“Cancable”), acquired all of the issued and outstanding common shares of XL Digital Services Inc. (“XL Digital”) from Barry Simons. The total consideration to be paid by Cancable for the shares of XL Digital will be an amount equal to the earnings before interest, taxes, depreciation and amortization derived from the carrying on of its business by XL Digital for the twelve month period after the completion of the acquisition times 2.5. The consideration will be paid in notes, warrants to acquire stock in the Registrant, and cash, with the total balance due on January 5, 2009. A portion of the purchase price will be paid in January, 2008.

Item 2.   Management's Discussion And Analysis or Plan of Operation
(Unaudited)
 
The following discussion of the financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes thereto. The following discussion contains certain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed therein. Factors that could cause or contribute to such differences include, but are not limited to, risks and uncertainties related to the need for additional funds, the rapid growth of the operations and our ability to operate profitably a number of new projects. Except as required by law, we do not intend to publicly release the results of any revisions to those forward-looking statements that may be made to reflect any future events or circumstances.
 

Results of Operations
Comparison of Three Months Period Ended September 30, 2007
to Period Ended September 30, 2006
 
For purposes of this “Management’s Discussion and Analysis or Plan of Operation”, we compared the first three month period ended September 30, 2007, to the comparable period in 2006.
 
Sales : Sales for the three months period ended 2007 increased 22.3% to $11,153,000 substantially from $9,120,734 for the three months period ended 2006. The increase in revenue was mainly due to the increase in service revenue of Cancable Segment to $8,968,200 for the three months period ended 2007 from $7,372,800 for the same period in 2006.
 
(a) Cancable Segment - The Company acquired Cancable through its wholly owned subsidiary on January 1, 2006. It is incorporated under the laws of Ontario and its principal business activity is the provisioning the deployment and servicing of broadband technologies in both residential and commercial markets. The Cancable service offering, network deployment, IT integration, and support services, enable the cable television and telecommunications industries to deliver a high quality broadband experience to their customers. Total revenue for the third quarter of fiscal 2007 was $8,968,200 compared to $7,372,800 in the same period of fiscal 2006. Rogers Cable Inc. is Cancable’s largest customer and the revenue from this customer for the second quarter of fiscal 2007 as approximately $6,860,000 or 76.5% of its total revenue compared to $5,807,400 or 78.8% of its total revenue for the same period in fiscal 2006. (b) AC Technical segment - Contract revenue increased to $1,681,100 for the second quarter or 15.1% for the three months ended September 30, 2007 compared to $1,262,400 in the same period of fiscal 2006. The increase was mainly due to an increase in the number of subcontracts for the provision of services to government contracts. Service revenue generated increased 19.0% to $458,900 for the third quarter of fiscal 2007 from $385,500 for the same period of fiscal 2006. Service revenue primarily represents the cumulative effect of the growth in contracts and number of customers over the past few years. We have experienced a significant increase in the number of inquiries for systems from the government and retail sector. This increased interest in security products and services may result in our achieving increased revenues in future periods if we are successful in attracting new customers or obtaining additional projects from existing customers. There is no assurance that the Company will be able to attract new customers.
 
Cost of Goods Sold : Cost of goods sold as a percentage of revenue for the three months ended September 30, 2007 was $7,895,900 or 70.8% of revenues compared to $6,028,200 or 66.1% of revenues for the three months period ended September 30, 2006. (a) Cancable segment - Cost of sales of this segment was $6,556,900 for the three months period ended September 30, 2007, which is comprised principally of labor expenses $5,061,100, vehicle expenses $548,600 and material cost $739,200. (b) AC Technical segment - Cost of sales of this segment was $1,309,100. The material cost was $788,900 or 36.9% of the AC Technical revenue for the three months ended September 30, 2007 compared to $485,400 or 28.4% of revenues in the same period of fiscal 2006. The increase in balance was mainly due to the increase in revenue. On the other hand, the labor and subcontractor cost decreased to $504,500 or 23.6% of AC Technical revenues for the three months ended September 30, 2007 and $312,000 or 18.3% of AC Technical revenues for fiscal 2006. The increase in labor and subcontractor cost was mainly due to the increase in revenue.
 
Project, Selling, General and Administrative Expenses : Projects, selling, general and administrative expenses for the three months ended September 30, 2007 was $2,579,700 or 23.1% of revenues for the three months period ended 2007 compared to $2,052,300 or 22.5% of revenues for the same period of fiscal 2006. The balance is mainly comprised of the following:
 
Project cost was $328,400 or 2.9% of revenue for three months ended September 30, 2007, compared to $314,400 or 3.4% for the same period of fiscal year 2006. Project cost was mainly related to AC Technical segment. The balance mainly includes the salaries and benefits of indirect staff amounting to $202,500 in the third quarter of fiscal 2007 compared to $188,100 for the same period of fiscal 2006 with no material fluctuation. The automobile and travel expenses of approximately $74,600 for the three months period ended September 30, 2007 compared to $72,400 for the same period of fiscal 2006. The increase in balance was mainly due to more travel by the staff.
 
Selling expenses was $193,200 or 1.7% of revenues for the three months period ended 2007 compared to $187,000 or 2.1% of revenues for the first quarter of fiscal 2006. Selling expenses were mainly related to AC Technical segment. As at September 30, 2007, we have 5 salespersons in AC Technical segment, which were 4 as at September 30, 2006. The balance for the three months period ended September 30, 2007 is mainly comprised of salaries and commission to salespersons of $141,600 compared to $151,400 for the same period of fiscal 2006. There was no material fluctuation. The advertising and promotion and trade show expenses were $23,700 in the third quarter of fiscal 2007 compared to $24,200 for the same period of fiscal 2006 with no material fluctuation.
 

General and administrative expenses were $2,058,100 or 18.4% of revenues for the three months period ended 2007 compared to $1,550,900 or 17.0% for fiscal 2006. The balance for the three months period ended September 30, 2007 is mainly comprised of $39,200 of professional fees related to fees for the quarterly reports and other corporate matters. In addition, investor relations expenses amounted to $289,500 for the three months period ended September 30, 2007 compared to $91,600 for the same period last year. Total salaries and benefits to administrative staff were $622,200 for the third quarter of 2007 compared to $647,800 for the same period last year. Total depreciation of property plant and equipment was $459,400 for the third quarter of fiscal 2007 compared to $206,800 for the same period of last year. The increase in balance was mainly due to the increase in property, plant and equipment.
 
Interest and other Expenses : Interest and net other expenses for the three months ended September 30, 2007, was $410,400 or 3.7% of revenues compared to net income of $1,184,010 or 12.9% of the revenues for the same period of fiscal 2006. The balance for the current period is primarily comprised of the amortization of deferred charges amounting to $45,500 compared to $49,960 for the same period of fiscal 2006. Additionally, net financing expenses decreased to $844,500 or 7.6% of revenues compared to $529,900 or 5.8% of revenues for the same period of fiscal 2006. The increase in balance was mainly due to the 324,000 warrants issued to Laurus with the fair value of $324,100 relating to the deferral of principal repayment of the Company Term Note (also see Note 4 in the financial statement). The changes of derivative instruments income were $1,848,100 for the period ended September 30, 2006. There was no such income for the period ended September 30, 2007 as the Company has adopted the FASB issued FASB Staff Position EITF 00-19-2 “Accounting for Registration Payment Arrangements” (FSP EITF 00-19-2). See Note 4 in the financial statements.
 
Income taxes : No income tax provision for the period ended September 30, 2007, which was mainly due to the Company has losses carried forward to offset all income generated from the Company. All prior taxes already been accounted for in the income tax recoverable and therefore, there is no additional provision for income taxes recoverable and deferred tax asset.
 
Net Income/Loss : Net income for the three months ended September 30, 2007 was $267,500 compared to net income of $2,224,300 for the three month period ended September 30, 2006. The Company’s operating income was $677,900 for the third quarter of fiscal 2007 compared to $1,040,300 for the same period of fiscal 2006. The growth was mainly due to the increase in revenue of Cancable segment.
 

Results of Operations
Comparison of Nine Months Period Ended September 30, 2007
to Period Ended September 30, 2006
 
For purposes of this “Management’s Discussion and Analysis or Plan of Operation”, we compared the first nine months period ended September 30, 2007, to the comparable period in 2006.
 
Sales : Sales for the nine months period ended 2007 increased 25.5% to $28,523,700 from $22,735,000 for the nine months period ended 2006. The increase in revenue was mainly due to the increase in service revenue of Cancable Segment to $22,768,900 for the nine months period ended 2007 from $17,422,800 for the same period in 2006.
 
(a) Cancable Segment - The Company acquired Cancable through its wholly owned subsidiary on January 1, 2006. It is incorporated under the laws of Ontario and its principal business activity is the provisioning the deployment and servicing of broadband technologies in both residential and commercial markets. The Cancable service offering, network deployment, IT integration, and support services, enable the cable television and telecommunications industries to deliver a high quality broadband experience to their customers. Total revenue for the nine months period ended September 30, 2007 was $22,768,900 compared to $17,422,800 in the same period of fiscal 2006. Rogers Cable Inc. is Cancable’s largest customer and the revenue from this customer for the nine months ended September 30, 2007 was approximately $17,078,800 or 75.0% of its total revenue compared to $13,813,000 or 79.2% of its total revenue for the same period in fiscal 2006. (b) AC Technical segment - Contract revenue was $4,505,000 for the nine months ended September 30, 2007 or 80.1% of its total revenue compared to $4,137,200 in the same period of fiscal 2006. The increase in revenue was mainly due to the increase in number of subcontracts for the provision of services to contracts. Service revenue generated increased 19.9% to $1,120,000 for the nine months ended September 30, 2007 from $973,200 for the same period of fiscal 2006. Service revenue primarily represents the cumulative effect of the growth in contracts and number of customers over the past few years. We have experienced a significant increase in the number of inquiries for systems from the government and retail sector. This increased interest in security products and services may result in our achieving increased revenues in future periods if we are successful in attracting new customers or obtaining additional projects from existing customers. There is no assurance that the Company will be able to attract new customers.
 
Cost of Goods Sold : Cost of goods sold as a percentage of revenue for the nine months ended September 30, 2007 was $20,053,100 or 70.3% of revenues compared to $15,007,400 or 66.0% of revenues for the nine months period ended September 30, 2006. (a) Cancable segment - Cost of sales of this segment was $16,766,600 for the nine months ended September 30, 2007 which is mainly comprised of labor expenses $12,843,100, vehicle expenses $1,520,300 and material cost $1,859,900 (b) AC Technical segment - Cost of sales of this segment was $3,223,300. The material cost was $2,015,900 or 35.8% of the AC Technical revenue for the nine months ended September 30, 2007 compared to $1,585,800 or 30.7% of revenues in the same period of fiscal 2006. The increase in percentage of the material cost was mainly due to some contracts with higher percentage of materials. On the other hand, the labor and subcontractor cost decreased to $1,161,900 or 20.7% of AC Technical revenues for the nine months ended September 30, 2007, and $967,500 or 18.6% of AC Technical revenues for fiscal 2006. The increase in balance was mainly due to the increase in revenue.
 
Project, Selling, General and Administrative Expenses : Projects, selling, general and administrative expenses for the nine months ended September 30, 2007 was $7,320,100 or 25.7% of revenues for the nine months period ended 2006 compared to $6,462,300 or 28.4% of revenues for the same period of fiscal 2006. The balance is mainly comprised of the following:
 
Project cost was $933,700 or 3.3% of revenue for nine months ended September 30, 2007, compared to $1,006,500 or 4.4% for the same period of fiscal year 2006. Project cost was mainly related to AC Technical segment. The balance mainly includes the salaries and benefits of indirect staff amounting to $542,000 for the nine months ended September 30, 2007, compared to $561,100 for the same period of fiscal 2006. The decrease in expenses was mainly due to the change in headcounts. The automobile and travel expenses were approximately $220,900 for the nine months period ended September 30, 2007 compared to $278,600 for the same period of fiscal 2006. The decrease in balance was mainly due to the decrease in number of vehicles and less travel for the nine months ended September 30, 2007.
 
Selling expenses were $580,800 or 2.0% of revenues for the nine months period ended 2007 compared to $487,300 or 2.1% of revenues for the same period of fiscal 2006. Selling expenses was mainly related to AC Technical segment. The balance for the nine months ended September 30, 2007 is mainly comprised of salaries and commission to salespersons of $361,100 compared to $257,800 for the same period of fiscal 2006. The increase was mainly due to the increase in commission and changes in headcounts. The advertising, promotion and trade show expenses were $74,600 for the nine months ended September 30, 2007, and $74,200 for the same period of fiscal 2006. There was no material fluctuation for two fiscal years.
 
General and administrative costs were $5,905,700 or 20.3% of revenues for the nine months period ended 2006 compared to $4,968,500 or 21.9% for same period of fiscal 2006. The balance for the nine months period ended September 30, 2007, mainly is comprised of $232,200 of professional fees related to fees for the quarterly reports and other corporate matters. The investor relations expenses was increased to $577,500 for the nine months period ended September 30, 2007, compared to $340,400 for the same period last year. Total salaries and benefits to administrative staff to $1,765,200 for the nine months period ended of fiscal 2007 compared to $2,046,900 for the same period last year. The decrease was mainly due to the decrease in headcounts. Total depreciation of property plant and equipment was $1,210,300 for the nine months ended September 30, 2007, compared to $795,600 for the same period of last year. The balance for current period mainly represents the depreciation of vehicles and equipment of Cancable segment.
 

Interest and other Expenses (Income) : Interest and net other expenses for the nine months ended September 30, 2007, of $1,222,383 or 4.3% of revenues compared to net expenses of $5,648,900 or 24.8% of the revenues for the same period of fiscal 2006. The balance for the current period is primarily comprised of the amortization of deferred charges amounting to $137,400 compared to $743,900 for the same period of fiscal 2006. The decrease was mainly due to the deferred financing costs of $600,500 carried forward from the fiscal 2005 which was written off during the first quarter of fiscal 2006. The Company has paid off the entire outstanding principal amount and all obligations due to Laurus under the Secured Convertible Term Note dated September 30, 2004, the Secured Convertible Minimum Borrowing Note dated September 30, 2004 and the Secured Revolving Note dated September 30, 2004, through a refinancing transaction. Additionally, net financing expenses decreased to $2,143,800 or 7.5% of revenues compared to $4,083,400 or 17.9% of revenues for the same period of fiscal 2006. Last year balance mainly included interest and penalties relating to the new refinancing transactions in 2006 with the amount of $2,452,900 which included 2,411,003 warrants issued to Laurus with the fair value of $1,913,600. The changes of derivative instruments expenses were $939,700 for the period ended September 30, 2006. There was no such expense for the period ended September 30, 2007 as the Company has adopted the FASB issued FASB Staff Position EITF 00-19-2 “Accounting for Registration Payment Arrangements” (FSP EITF 00-19-2).
 
Income taxes : No income tax provision for the period ended September 30, 2007 which was mainly due to the Company has losses carried forward to offset all income generated from the Company. All prior taxes already been accounted for in the income tax recoverable and therefore, there is no additional provision for income taxes recoverable and deferred tax asset.
 
Net Income/Loss : Net loss for the nine months ended September 30, 2007 was $72,900 compared to net loss of $4,383,600 for the nine months period ended September 30, 2006. The net loss for the nine months ended September 30, 2006 was attributed to the unrealized losses on remeasurement of derivative instruments amounting to $939,700. Additionally, the Company has issued 2,411,003 warrants to Laurus for the refinancing transaction with the fair value of $1,913,600 and written off the amortization of deferred charges carried forward from fiscal 2005 in the amount of $600,500.
 
Liquidity and Capital Resources
 
Since our inception, we have financed our operations through bank debt, loans and equity from our principals, loans from third parties and funds generated by our business. At September 30, 2007, we had $2,397,200 in cash. Additionally we had $126,100 which was deposited in a restricted bank account. Pursuant to the Securities Purchase Agreement between Laurus and the Company and a restricted account agreement entered into by the Company, Laurus and a US bank, $500,000 was deposited into a restricted account for the benefit of Laurus as additional security for the obligations of the Company under the purchase agreement and the related agreements. The restricted account is to be maintained at the US bank and Laurus shall apply any part of this deposit to any payment obligation for Iview Note. We believe that cash from operations and our credit facilities with Laurus Master Funds, Ltd. will continue to be adequate to satisfy the ongoing working capital needs of the Company. During the fiscal year 2007, our primary objectives in managing liquidity and cash flows will be to ensure financial flexibility to support growth and entry into new markets and improve inventory management and to accelerate the collection of accounts receivable.
 
Net Cash Used in Operating Activities . Net cash provided by operating activities amounted to $974,500 for the nine months ended September 30, 2007. The changes in operating assets and liabilities resulted in a use of cash of $819,800, which included a $1,703,900 increase in accounts receivable, a $88,600 increase in inventory, a $139,400 decrease in prepaid expenses, a $882,000 decrease in accounts payable, a $48,700 decrease in deferred revenue.
 

Compared the balance sheet as at September 30, 2007 to December 31, 2006
 
Accounts Receivable
 
Our accounts receivable increased by approximately $2,554,500 compared to the balance as at December 31, 2006. Accounts receivable of Cancable segment was $3,866,200 as at September 30, 2007 compared to $1,799,500 as at December 31, 2006. The increase in balance was mainly due to the increase in revenue. Accounts receivable of AC Technical segment was $2,439,000 as at September 30, 2007 compared to $2,040,800 as at December 31, 2006. The increase in accounts receivable of AC Technical was mainly due the increase in revenue. Approximately 65% of the accounts receivable outstanding at September 30, 2007 was less than 90 days old.
 
Inventory
 
Inventory on hand at September 30, 2007, increased 29.3% compared to the balance as at December 31, 2006. The inventory of Cancable segment as at September 30, 2007 was $342,900 compared to $250,400 as at December 31, 2006. The inventory of AC Technical segment as at September 30, 2007 was $553,400 compared to $430,300 as at December 31, 2006. The increase in inventory was mainly due to the expected increase in revenue in the third quarter of 2007.
 
Accounts Payable and Accrued Liabilities
 
Accounts payable approximately increased to $6,367,200 as at September 30, 2007 from $4,655,000 as at December 31, 2006. The accounts payable and accrued liabilities as at September 30, 2007 of Cancable segment was $3,208,200 compared to $2,590,600 as at December 31, 2006 with no material fluctuation. The accounts payable and accrued liabilities as at September 30, 2007 of AC Technical segment was $2,637,000 compared to $1,826,100 as at December 31, 2006. The increase was mainly due to the timing of payments to our suppliers.
 
Deferred Revenue
 
Deferred revenue decreased to $31,579 as at September 30, 2007 compared to the balance as at December 31, 2006. The increase was mainly due to the timing of payments by our customers. Deferred revenue primarily relates to payments associated with the contracts where revenue is recognized on a percentage of completion basis.
 
Incomes Taxes Recoverable
 
The income taxes recoverable was mainly related to the Company received refund from the Government relating to the losses carried back to prior years and investment tax credits.
 
Net Cash Used in Investing Activities . Net cash used in investing activities was $543,400 for the nine months ended September 30, 2007, compared to $109,100 used for the nine months ended September 30, 2006. The balance for the both periods was mainly due to the purchase of property and equipment of the Company and offset by the sale proceeds from the sales of property and equipment.
 
Net Cash Provided From Financing Activities . Net cash used in financing activities was $1,485,900 for the nine months ended September 30, 2007 compared to net cash provided $1,462,700 for the nine months period ended September 30, 2006. Last year balance was mainly represents the additional borrowings from Laurus Master Fund, Ltd. from the refinancing transaction in 2006. The current year balance was mainly represents the repayment of capital leases and term notes in the amount of $1,703,600.
 
Our capital requirements have grown since our inception with the growth of our operations and staffing. We expect our capital requirements to continue to increase in the future as we seek to expand our operations. On September 30, 2004, we obtained additional funding through a series of agreements entered with Laurus. In 2006, the Company through its wholly owned subsidiary acquired all of the issued and outstanding shares of capital stock and any other equity interests of Cancable Inc. Simultaneously, Cancable entered into a series of agreements with Laurus whereby Cancable issued to Laurus a secured term note (the “Cancable Note”) in the amount of $6,865,000. Also, the Company has completed the refinancing transaction in February 2006; the Company issued to Laurus a secured term note (the “Company Note”) in the amount of $8,250,000, Iview DSI issued to Laurus a secured term note (the “Iview Note”) in the amount of $2,000,000. Simultaneously with the closing of this refinancing transaction, the Company paid off the entire outstanding principal amount and all obligations due to Laurus under the Secured Convertible Term Note dated September 30, 2004, the Secured Convertible Minimum Borrowing Note dated September 30, 2004 and the Secured Revolving Note dated September 30, 2004 (collectively, the “2004 Notes”) and such 2004 Notes were subsequently cancelled.  
 

Over the next twelve months we believe that our existing capital will be sufficient to sustain our operations. Management plans to seek additional capital in the future to fund operations, growth and expansion through additional equity, debt financing or credit facilities. We have had early stage discussions with investors about potential investment in our firm at a future date. No assurance can be made that such financing would be available, and if available it may take either the form of debt or equity. In either case, the financing could have a negative impact on our financial condition and our shareholders.
 
Recent Accounting Pronouncements
 
In February 2006, the Financial Accounting Standards Board issued SFAS 155 - “Accounting for Certain Hybrid Financial Instruments—an amendment of FASB Statements No. 133 and 140.”
 
This Statement amends FASB Statements No. 133, Accounting for Derivative Instruments and Hedging Activities, and No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. This Statement resolves issues addressed in Statement 133 Implementation Issue No. D1, “Application of Statement 133 to Beneficial Interests in Securitized Financial Assets.”
 
This Statement:
 
a.  
Permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation.
 
b.  
Clarifies which interest-only strips and principal-only strips are not subject to the requirements of Statement 133.
 
c.  
Establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation.
 
d.  
Clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives.
 
e.  
Amends Statement 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument.
 
This Statement is effective for all financial instruments acquired or issued after the beginning of our first fiscal year that begins after September 15, 2006.
 
The fair value election provided for in paragraph 4(c) of this Statement may also be applied upon adoption of this Statement for hybrid financial instruments that had been bifurcated under paragraph 12 of Statement 133 prior to the adoption of this Statement. Earlier adoption is permitted as of the beginning of our fiscal year, provided we have not yet issued financial statements, including financial statements for any interim period, for that fiscal year. Provisions of this Statement may be applied to instruments that we hold at the date of adoption on an instrument-by-instrument basis.
 
The Company is currently reviewing the effects of adoption of this statement but it is not expected to have a material impact on our financial statements.
In September 2006, the Financial Accounting Standards Board issued SFAS 156 - “Accounting for Servicing of Financial Assets—an amendment of FASB Statement No. 140.”
 
This Statement amends FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, with respect to the accounting for separately recognized servicing assets and servicing liabilities. This Statement:
 

1.    Requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in certain situations.
 
2.    Requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable.
 
3.    Permits an entity to choose either the amortization method or the fair value measurement method for each class of separately recognized servicing assets and servicing liabilities.
 
4.    At its initial adoption, permits a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights, without calling into question the treatment of other available-for-sale securities under Statement 115, provided that the available-for-sale securities are identified in some manner as offsetting the entity’s exposure to changes in fair value of servicing assets or servicing liabilities that a service elects to subsequently measure at fair value.
 
5.    Requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities.
 
Adoption of this Statement is required as of the beginning of the first fiscal year that begins after September 15, 2006. The adoption of this statement is not expected to have a material impact on our financial statements.
 
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” This standard establishes a standard definition for fair value, establishes a framework under generally accepted accounting principles for measuring fair value and expands disclosure requirements for fair value measurements. This standard is effective for financial statements issued for fiscal years beginning after November 15, 2007. Adoption of this statement is not expected to have any material effect on our financial position or results of operations .
 
In September 2006, the FASB issued Financial Accounting Standard No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statement Nos. 87, 88, 106, and 132(R ) ,” or FAS 158. This Statement requires an employer that is a business entity and sponsors one or more single-employer defined benefit plans to (a) recognize the funded status of a benefit plan—measured as the difference between plan assets at fair value (with limited exceptions) and the benefit obligation—in its statement of financial position; (b) recognize, as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost pursuant to FAS 87, Employers’ Accounting for Pensions , or FAS 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions ; (c) measure defined benefit plan assets and obligations as of the date of the employer’s fiscal year-end statement of financial position (with limited exceptions); and (d) disclose in the notes to financial statements additional information about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition assets or obligations. An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. This statement is not expected to have a significant effect on our financial statements.
 
In February 2007, the FASB issued   Financial Accounting Standard No. 159 The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115 or FAS 159. This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of this Statement apply only to entities that elect the fair value option.
 
The following are eligible items for the measurement option established by this Statement:
 
1.  
Recognized financial assets and financial liabilities except:
 
a.  
An investment in a subsidiary that the entity is required to consolidate
 
b.  
An interest in a variable interest entity that the entity is required to consolidate
 

 
c.  
Employers’ and plans’ obligations (or assets representing net overfunded positions) for pension benefits, other postretirement benefits (including health care and life insurance benefits), post employment benefits, employee stock option and stock purchase plans, and other forms of deferred compensation arrangements.
 
d.  
Financial assets and financial liabilities recognized under leases as defined in FASB Statement No. 13, Accounting for Leases.  
 
e.  
Deposit liabilities, withdrawable on demand, of banks, savings and loan associations, credit unions, and other similar depository institutions
 
f.  
Financial instruments that are, in whole or in part, classified by the issuer as a component of shareholder’s equity (including “temporary equity”). An example is a convertible debt security with a noncontingent beneficial conversion feature.
 
2.  
Firm commitments that would otherwise not be recognized at inception and that involve only financial instruments
 
3.  
Nonfinancial insurance contracts and warranties that the insurer can settle by paying a third party to provide those goods or services
 
4.  
Host financial instruments resulting from separation of an embedded nonfinancial derivative instrument from a nonfinancial hybrid instrument.
 
The fair value option:
 
1.  
May be applied instrument by instrument, with a few exceptions, such as investments otherwise accounted for by the equity method
 
2.  
Is irrevocable (unless a new election date occurs)
 
3.  
Is applied only to entire instruments and not to portions of instruments.
 
The Statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of FASB Statement No. 157, Fair Value Measurements . We have not yet determined what effect, if any, adoption of this Statement will have on our financial position or results of operations .  
 
SAB 108 - ‘Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements’
 
In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (SAB 108), Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. SAB 108 provides guidance on the consideration of the effects of prior year unadjusted errors in quantifying current year misstatements for the purpose of a materiality assessment. Adoption of this statement is not expected to have any material effect on our financial position or results of operations .  
 
FIN 48 - ‘Accounting for Uncertainty in Income Taxes’
 
In June 2006, the FASB issued Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes”, an interpretation of SFAS No. 109. FIN 48 prescribes a comprehensive model for how companies should recognize, measure, present and disclose uncertain tax positions taken or expected to be taken on a tax return. Under FIN 48, we shall initially recognize tax positions in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. We shall initially and subsequently measure such tax positions as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and all relevant facts. FIN 48 also revises disclosure requirements to include an annual tabular roll-forward of unrecognized tax benefits. We will adopt this interpretation as required in 2007 and will apply its provisions to all tax positions upon initial adoption with any cumulative effect adjustment recognized as an adjustment to retained earnings. Adoption of this statement is not expected to have any material effect on our financial position or results of operations.
 

EITF 00-19-2, "Accounting for Registration Payment Arrangements".
 
In December 2006, the FASB issued Staff Position FSP EITF 00-19-2, "Accounting for Registration Payment Arrangements". This statement is effective for existing registration payment arrangements as of January 1, 2007, with earlier application permitted in previously-unissued financial statements. As discussed in Note 8 and as permitted by the FSP, we adopted the provisions of this FSP in our fourth quarter of 2006, resulting in re-classification of certain of our outstanding warrants from derivative instrument liabilities to equity.

Off Balance Sheet Arrangements
 
None  
 
DISCUSSION OF CRITICAL ACCOUNTING ESTIMATES
 
Critical accounting estimates are those that management deems to be most important to the portrayal of our financial condition and results of operations, and that require management’s most difficult, subjective or complex judgments, due to the need to make estimates about the effects of matters that are inherently uncertain. We have identified six critical accounting estimates: accounts receivable allowances, goodwill, revenue, inventory, accounting for income taxes and financial instruments. See our Form 10-KSB for the year ended December 31, 2006, for a discussion of our critical accounting estimates.
 
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This quarterly report contains forward-looking statements about our company that are not historical facts but, rather, are statements about future expectations. When used in this document, the words “anticipates,” “believes,” “expects,” “intends,” “should” and similar expressions as they relate to us, or to our management, are intended to identify forward-looking statements. However, forward-looking statements in this document are based on management’s current views and assumptions and may be influenced by factors that could cause actual results, performance or events to be materially different from those projected. These forward-looking statements are subject to numerous risks and uncertainties. Important factors, some of which are beyond our control, could cause actual results, performance or events to differ materially from those in the forward-looking statements. These factors include impact of general economic conditions in North America, changes in laws and regulations, fluctuation in interest rates and access to capital markets.
 
Our actual results or performance could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, we cannot predict whether any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what impact they will have on our results of operations and financial condition.
 
For further information about these and other risks, uncertainties and factors, please review the disclosure included in our December 31, 2006, Annual Report on Form 10-KSB under the caption “Risk Factors.”
 
You should not place undue reliance on any forward-looking statements. Except as otherwise required by federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements or risk factors, whether as a result of new information, future events, changed circumstances or any other reason after the date of this quarterly report.
 
Item 3.   Controls and Procedures
 
We maintain a system of disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
 

We have carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the des ign and operation of our disclosure controls and procedures. Based upon their evaluation and subject to the foregoing , the Chief Executive Officer and Chief Financial Officer concluded that such controls and procedures were effective as of the end of the period covered by this report, in all material respects, to ensure that required information will be disclosed on a timely basis in our reports filed under the Exchange Act.
 
In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply their judgment in evaluating the cost-benefit relationship of   possible controls and procedures.

There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2006, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
 
PART II.    OTHER INFORMATION
 
Item 1.  
Legal Proceedings
 
Not applicable.
 
Item 2.  
Unregistered Sales of Equity Securities and Use of Proceeds
 
Not applicable.
 
Item 3.  
Defaults upon Senior Securities
 
Not applicable.
 
Item 4.  
Submission of Matters to a Vote of Security Holders
 
Not applicable.
 
Item 5.  
Other Information
 
Not applicable.
 
Item 6.  
Exhibits
 
(a)    Exhibits
 
31.1
 
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
 
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
 
Chief Executive Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2
 
Chief Financial Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 

SIGNATURES
 
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
CREATIVE VISTAS, INC.
 
 
By: /s/ Sayan Navaratnam  
Sayan Navaratnam, CEO

Dated: November 14, 2007



 
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