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

For the quarterly period ended JuneSeptember 30, 2011
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____
 
Commission file number 0-16819
CREATIVE VISTAS, INC.
 
(Exact name of registrant as specified in its charter)
 
Arizona
(State or other jurisdiction of
incorporation or organization
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 ¨
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨x   No ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):
 
Large Accelerated Filer ¨
Accelerated Filer ¨
   
Non-Accelerated Filer ¨
Smaller Reporting Company x
(Do not check if a smaller reporting company)  

 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
¨Yes   xNo
 
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
 
At August 15,November 14, 2011, the number of shares outstanding of the registrant’s common stock, no par value (the only class of voting stock), was 37,488,714.


 
 
 

PART I. 
FINANCIAL INFORMATION 
  
Item 1.Condensed Consolidated Financial Statements1
   
Item 2.Management's Discussion And Analysis of Financial Condition and Results of Operations13
   
Item 3.Quantitative and Qualitative Disclosures about Market Risk18
   
Item 4.Controls and Procedures18
   
PART II.
OTHER INFORMATION
 
Item 1.Legal Proceedings19
   
Item 1A.Risk Factors19
   
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds19
   
Item 3.Defaults upon Senior Securities19
   
Item 4.Removed and Reserved.Reserved19
   
Item 5.Other Information19
   
Item 6.Exhibits19

 
 
 

PART I.                      
PART I.
FINANCIAL INFORMATION
Item 1.Financial Statements
      
Creative Vistas, Inc.
Condensed Consolidated Balance Sheets
 June 30, 2011  December 31, 2010  September 30, 2011  December 31, 2010 
 (Unaudited)     (Unaudited)    
Assets            
Current Assets            
Cash and bank balances $2,275,488  $2,030,707  $1,190,904  $1,779,345 
Accounts receivable, net of allowance for doubtful accounts of $178,582 (2010 - $253,714)  3,744,378   3,039,739 
Accounts receivable, net of allowance for doubtful accounts of $69,524 (2010 - $98,000)  996,663   1,129,942 
Income tax receivable  80,506   180,000   171,429   180,000 
Inventory and supplies  634,916   692,881   387,292   476,968 
Prepaid expenses  223,891   372,507   24,269   14,765 
Current assets of discontinued operations  -   2,734,814 
Total current assets  6,959,179   6,315,834   2,770,557   6,315,834 
Property, plant and equipment, net of depreciation and amortization  3,471,401   4,407,739   707,173   790,874 
Deposits  214,406   228,434   19,048   22,500 
Deferred financing costs, net  151,755   225,107   -   2,157 
Intangible assets, net  41,468   56,316 
Deferred income taxes  37,788   37,430   36,879   37,430 
Noncurrent assets of discontinued operations  -   4,102,065 
 $10,875,997  $11,270,860  $3,533,657  $11,270,860 
Liabilities and Shareholders' (Deficiency)   ��            
Current Liabilities                
Bank indebtedness $1,076,799  $650,744  $-  $255,312 
Accounts payable and accrued liabilities  4,344,779   3,990,875   1,582,934   1,748,604 
Current portion of obligations under capital leases  1,666,238   1,487,460 
Deferred income  44,463   110,485   30,073   110,485 
Deferred income taxes  25,858   25,858   25,858   25,858 
Current portion of term notes  14,001,128   14,051,128   1,548,207   8,902,374 
Current liabilities of discontinued operations  -   9,273,917 
Total current liabilities  21,159,265   20,316,550   3,187,072   20,316,550 
Term notes  1,819,553   1,702,218 
Notes payable to related parties  1,500,000   1,500,000   1,500,000   1,500,000 
Obligations under capital lease, net of current portion  899,966   1,899,524 
Due to related parties  238,010   230,870   219,876   230,870 
Noncurrent liabilities of discontinued operations  -   3,601,742 
  25,616,794   25,649,162   4,906,948   25,649,162 
Shareholders' (deficiency)                
Share capital                
Preferred stock no par value, 50,000,000 shares authorized; none issued or outstanding                
Common stock, no par value 100,000,000 shares authorized; 37,488,714 shares issued and outstanding                
Common stock  6,555,754   6,555,754   6,555,754   6,555,754 
Additional paid-in capital  14,334,030   14,314,354   14,334,030   14,314,354 
Accumulated (deficit)  (33,645,258)  (33,638,922)  (21,998,750)  (33,638,922)
Accumulated other comprehensive (losses)  (1,985,323)  (1,609,488)  (264,325)  (1,609,488)
  (14,740,797)  (14,378,302)  (1,373,291)  (14,378,302)
 $10,875,997  $11,270,860  $3,533,657  $11,270,860 

The accompanying notes are an integral part of these financial statements

 
1
 

Creative Vistas, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)

Creative Vistas, Inc.Creative Vistas, Inc. 
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) 
(Unaudited)(Unaudited) 
 Three months ended  Six months ended  Three months ended  Nine months ended 
 June 30  June 30  September 30  September 30 
 2011  2010  2011  2010  2011  2010  2011  2010 
Contract and service revenue                        
Contract $1,832,003  $1,662,091  $3,721,569  $2,776,818  $1,136,419  $1,471,711  $4,857,989  $4,248,529 
Service  8,101,229   8,646,467   15,231,545   16,768,246   334,549   291,360   1,058,045   1,126,498 
Other  904   1,287   1,459   2,395   328   587   1,786   2,983 
  9,934,136   10,309,845   18,954,573   19,547,459   1,471,296   1,763,658   5,917,820   5,378,010 
Cost of sales (excluding depreciation and amortization))                
Cost of sales (excluding depreciation and amortization)                
Contract  914,957   1,017,603   1,976,688   1,571,874   592,115   1,049,019   2,568,801   2,620,893 
Service  6,590,189   6,522,220   12,200,451   12,870,947   141,898   126,015   507,695   380,744 
Project expenses  294,458   234,088   587,082   463,887   292,140   235,534   879,222   699,421 
Selling expenses  268,517   202,109   496,288   470,234   226,124   231,315   722,413   701,549 
General and administrative expenses  954,865   1,364,203   1,956,621   2,587,835   737,690   230,914   1,610,685   1,336,889 
Depreciation expense  429,078   584,338   907,370   1,183,204   12,917   20,443   53,971   61,592 
Amortization of intangible assets  8,295   57,812   16,422   115,548   -   50,000   -   150,000 
  9,460,359   9,982,373   18,140,922   19,263,529   2,002,884   1,943,240   6,342,787   5,951,088 
Income from operations  473,777   327,472   813,651   283,930 
Loss from operations  (531,588)  (179,582)  (424,967)  (573,078)
Interest and other expenses (income)                                
Net financing expenses  509,721   577,403   1,021,412   1,171,771   120,852   191,424   473,632   591,357 
Amortization of deferred charges  39,112   43,376   79,482   86,308   -   6,384   2,179   19,502 
Foreign currency translation (gain) loss  1,092   353,849   (280,907)  92,574   121,920   (35,618)  83,571   (23,096)
  549,925   974,628   819,987   1,350,653   242,772   162,190   559,382   587,763 
(Loss) before income taxes  (76,148)  (647,156)  (6,336)  (1,066,723)
(Loss) from continuing operations before income taxes  (774,360)  (341,772)  (984,349)  (1,160,841)
Income taxes  -   -   -   -   -   -   -   - 
Net (loss)  (76,148)  (647,156)  (6,336)  (1,066,723)
Other comprehensive (loss):                
(Loss) from continuing operations  (774,360)  (341,772)  (984,349)  (1,160,841)
Discontinued operations:                
Income from discontinued operations, net of income taxes  247,845   975,116   451,498   727,464 
Gain on disposal of discontinued operations, net of income taxes  12,173,023   -   12,173,023   - 
Income from discontinued operations  12,420,868   975,116   12,624,521   727,464 
Net income (loss)  11,646,508   633,344   11,640,172   (433,377)
Other comprehensive income (loss):                
Foreign currency translation adjustment  -   472,246   (375,835)  124,701   1,720,999   (345,703)  1,345,163   (221,002)
Comprehensive (loss) $(76,148) $(174,910) $(382,171) $(942,022)
Comprehensive income (loss) $13,367,507  $287,641  $12,985,335  $(654,379)
Basic and diluted weighted-average shares  37,488,714   37,488,714   37,488,714   37,488,714   37,488,714   37,488,714   37,488,714   37,488,714 
Basic and diluted (loss) per share $(0.00) $(0.02) $(0.00) $(0.03)
Basic and diluted income (loss) per share                
Continuing operations $(0.02) $(0.01) $(0.03) $(0.03)
Discontinued operations $0.33  $0.03  $0.34  $0.02 
Net income (loss) $0.31  $0.02  $0.31  $(0.01)
 
The accompanying notes are an integral part of these financial statements

 
2
 
 
Creative Vistas, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaduited)

Creative Vistas, Inc.Creative Vistas, Inc. 
Condensed Consolidated Statements of Cash FlowsCondensed Consolidated Statements of Cash Flows 
(Unaudited)(Unaudited) 
 Six months ended June 30,  Nine months ended September 30 
 2011  2010  2011  2010 
            
Operating activities            
Net cash provided by operating activities $800,320  $455,005 
Net cash (used in) provided by operating activities $(295,258) $13,374 
Investing activities                
Proceeds from sales of property and equipment  17,035   7,611 
Purchase of property and equipment  (28,915)  (36,966)  (4,692)  (6,720)
Net cash (used in) investing activities  (11,880)  (29,355)  (4,692)  (6,720)
Financing activities                
Proceeds from (repayment of) bank indebtedness  384,727   76,503   (260,664)  207,066 
Repayment of capital leases  (752,717)  (744,678)
Repayment of term notes  (50,000)  (50,000)  (66,667)  (75,000)
Net cash (used in) financing activities  (417,990)  (718,175)
Net cash (used in) provided by financing activities  (327,331)  132,066 
Effect of foreign exchange rate changes in cash  (125,669)  41,013   38,840   6,424 
Net change in cash and cash equivalents  244,781   (251,512)  (588,441)  145,144 
Cash and cash equivalents, beginning of period
  2,030,707   2,441,204   1,779,345   2,274,306 
Cash and cash equivalents, end of period
 $2,275,488  $2,189,692  $1,190,904  $2,419,450 
Supplemental Cash Flow Information        
Loan interest or penalties paid with warrant $13,507  $84,934 
Assignment of term loan as a result of sale of Cancable $7,287,500  $- 
 
The accompanying notes are an integral part of these financial statements

 
3
 
 
Creative Vistas, Inc.
Notes to Consolidated Condensed Financial Statements
JuneSeptember 30, 2011 (Unaudited)
 
1.           
1.Summary of Accounting Policies
 
Basis of presentation
 
The accompanying unaudited condensed consolidated balance sheet as at JuneSeptember 30, 2011, and the consolidated condensed statements of operations and cash flows for the periods ended JuneSeptember 30, 2010 and 2011, include the accounts of Creative Vistas, Inc. (“CVAS”), Creative Vistas Acquisition Corp. (“AC Acquisition”), AC Technical Systems Ltd. (“AC Technical”), Cancable Holding Corp. (“Cancable Holding”), Cancable Inc., Cancable XL Inc., XL Digital Services Inc. (“XL Digital”), 2141306 Ontario Inc., Iview Holding Corp. (“Iview Holding”), Iview Digital Video Solutions Inc. (“Iview DSI”) and OSSIM View Inc (collectively the “Company”). As a result of the sale of Cancable Holding, Cancable Inc., Cancable XL Inc., XL Digital and 2141306 Ontario Inc. (collectively the “Cancable Group”) on September 16, 2011 as discussed below, the results of the Cancable Group up to September 16, 2011 is presented as discontinued operations. All material inter-company accounts, transactions and profits have been eliminated.   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 United States generally accepted accounting principles.  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 2011 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, 2010, filed with the Securities and Exchange Commission.

Discontinued Operations
On September 16, 2011, the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Cancable Holding Corp., a wholly-owned subsidiary of the Company (“Cancable”) and Cancable and Dependable Hometech, LLC (“Purchaser”), pursuant to which the Company sold its equity interest in Cancable to Purchaser for a consideration of US$1.00 on such date.  In connection with such sale, the Company assigned certain of its liabilities and obligations to Cancable, including (i) a secured term note of the Company dated February 13, 2006, for an original principal amount of US$8.25 million, which is currently held by Valens U.S. SPV I, LLC (“VUS”), Valens Offshore SPV I, Ltd. and PSource Structured Debt Limited (“PSource”), (ii)  a secured term note of the Company dated June 24, 2008, for an original principal amount of US$800,000, which is currently held by VUS, and (iii) a secured term note of the Company dated June 24, 2008, for an original principal amount of US$1,700,000, which is currently held by Valens Offshore SPV II, Corp. (such holders of the term notes listed in clauses (i) to (iii), collectively, the “Holders”, and such term notes, collectively, the “Notes”).  The aggregate outstanding amount owed under the Notes (including accrued and unpaid interest) was approximately US$9,800,000 as of September 16, 2011.  The Holders also (a) terminated and cancelled all guarantees, security interest and other obligations of the Company and certain of its subsidiaries related to approximately US$1,500,000 of indebtedness owed to the Holders by certain other subsidiaries of the Company, (b) cancelled their warrants and options to purchase approximately 15,600,000 shares of common stock of the Company, as well as the stock of certain of the Company’s subsidiaries, and (c) terminated and cancelled all guarantees, security interest and other obligations of the Company and certain of its subsidiaries related to approximately US$5,100,000 of indebtedness owed to the Holders by Cancable and its subsidiaries.  In addition, in connection with the sale of Cancable to Purchaser, the Company assigned its rights in certain receivables owed to the Company by certain wholly-owned subsidiaries of Cancable, totaling approximately US$4,800,000 as of September 16, 2011. The Holders are affiliates of Laurus Master Fund, Ltd. (“Laurus”)

As a result of our sale of Cancable Group on September 16, 2011, information related to Cancable Group has been reflected in the accompanying condensed consolidated financial statements as follows:

Balance Sheets – Cancable Group’s assets and liabilities have been aggregated and classified as assets and liabilities of discontinued operations in our December 31, 2010 balance sheet.

4

Statements of Operations and Comprehensive income (loss) – Cancable Group’s income from operations for all periods presented has been reclassified to discontinued operations (see further discussion below). Discontinued operations also includes our estimated income on Cancable Group’s disposal; and

Statements of Cash Flows – Cancable Group’s cash flows for all periods presented have been removed from all our cash flows.

The Company does not expect to have continuing operational involvement in Cancable Group after the sale and future Cancable Group results of operations and cash flows will be eliminated from the Company’s financial statements. As a result, we classified Cancable Group’s results of operations as discontinued operations for all periods presented.

The following table details Cancable Group’s revenues and income from operations which have been reported in discontinued operations:

  July 1 through  
Three months
ended
  January 1 through  
Nine months
ended
 
  September 16  September 30  September 16  September 30 
  2011  2010  2011  2010 
Service revenue $7,194,092  $9,393,317  $21,702,141  $25,326,424 
                 
Cost of sales  5,776,780   7,016,057   17,611,414   19,632,268 
General and administrative expenses  456,974   634,578   1,540,620   2,116,444 
Depreciation expense  312,343   516,474   1,178,659   1,658,529 
Amortization of intangible assets  6,933   7,737   23,355   23,284 
   6,553,030   8,174,846   20,354,048   23,430,525 
Income from operations  641,062   1,218,471   1,348,093   1,895,899 
Interest and other expenses (income)                
Net financing expenses  242,756   368,547   911,388   1,140,386 
Amortization of deferred charges  56,834   36,604   134,137   109,793 
Foreign currency translation (gain) loss  93,627   (161,796)  (148,930)  (81,744)
   393,217   243,355   896,595   1,168,435 
Income from discontinued operations, net of income tax  247,845   975,116   451,498   727,464 
Gain on disposal of discontinued operations, net of income taxes  12,173,023   -   12,173,023   - 
Income from discontinued operations $12,420,868  $975,116  $12,624,521  $727,464 

5

The assets and liabilities of Cancable Group are classified as assets and liabilities of discontinued operations as of December 31, 2010 as follows:

  December 31, 2010 
    
Cash and bank balances $251,362 
Accounts receivable, net of allowance for doubtful accounts  1,909,797 
Inventory and supplies  215,913 
Prepaid expenses  357,742 
Current assets of discontinued operations $2,734,814 
     
Property, plant and equipment, net of depreciation and amortization $3,616,865 
Deposits  205,934 
Deferred financing costs, net  222,950 
Intangible assets, net  56,316 
Noncurrent assets of discontinued operations $4,102,065 
     
Bank indebtedness $395,432 
Accounts payable and accrued liabilities  2,242,271 
Current portion of obligations under capital leases  1,487,460 
Current portion of term notes  5,148,754 
Current liabilities of discontinued operations $9,273,917 
     
Term notes $1,702,218 
Obligations under capital lease, net of current portion  1,899,524 
Noncurrent liabilities of discontinued operations $3,601,742 
At the date of the sale of Cancable on September 16, 2011, total assets and liabilities were approximately as follows:

  September 16, 2011 
Total Assets $6,836,879 
Total Liabilities  20,292,628 
   (13,455,699)
Reversal of Foreign currency translation adjustments in other comprehensive income  1,282,676 
Gain on Disposal $12,173,023 
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 contemplate the realization of assets and liquidation of liabilities in the normal course of business. We have an accumulated deficit of $33,645,258,$21,988,750, a stockholders’ deficit of $14,740,797$1,373,291 and a working capital deficit of $ 14,200,086416,515 at JuneSeptember 30, 2011, and at such date have current maturities of term loans aggregating to $14,001,128. We do$1,548,207 (“Iview Note”) to Laurus which the Company does not currently have the ability to repaypay. As a result of the notes insale of Cancable Group as discussed above, the eventHolders of a demand by the holder. Furthermore, we granted aIview Note terminated and cancelled all guarantees, security interest to Laurusinterests and other obligations of the Company and certain of its related entities in substantially all of our assets and, accordingly, in the event of any default under our agreements with Laurus and its related entities, they could conceivably attempt to foreclose on our assets, which could cause us to terminate our operations. As of June 30, 2011, there were 15,644,983 shares of common stock issuable upon the exercise of warrants and 1,704,155 shares issuable upon the exercise of options (1,575,000 sharessubsidiaries related to the Employee Stock Options (see Note 8 in the Financial Statements)). Also, included in the balance, 15,860,983 shares of common stock issuable upon the exercise of warrants and 129,155 shares issuable upon the exercise of options issued to Laurus Master Fund, Ltd and its related entities, Erato Corporation, Valens Offshore Fund and Valens U.S. Fund, LLC and PSource Structured Debt Limited (“Laurus”). Additionally, there were 49 shares of common stock of Cancable Holding issuable upon the exercise of options and 20 shares of common stock of Iview Holding issuable upon the exercise of options to Laurus and its related entities.Note.

ManagementAssuming that Laurus does not demand repayment of their term loans, management believes that its existing capital will be sufficient to sustain its operations if the Company can refinance our and/or restructure its debt due in 2011.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 reduced general and administrative expenses to improve cash flow and has also increased its rates for services provided by AC Technical to improve gross margins. This is in line with our competitors. The Company also expects to see the benefits of its research and development efforts within the next 12 months as it starts to introduce its own line of customized products to the industry. These products and technologies are expected to improve gross margins.  The Company 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. Finally, 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 capital and 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.

 
46
 

Inventory

Inventory consists of parts, materials and supplies and is stated at the lower of cost or market.  Cost is generally determined on the first in, first out basis.  The inventory is net of estimated obsolescence ($100,000 at JuneSeptember 30, 2011 and December 31, 2010), and excess inventory based upon assumptions about future demand and market conditions.

Earnings (loss) per share
 
Basic earnings (loss) per share (“EPS”) is computed using the weighted average number of common shares outstanding during the period.  Diluted EPS is computed using the weighted average number of common and dilutive potential common shares outstanding during the period.  Dilutive potential common shares consist of common stock issuable upon exercise of stock options and warrants and conversion of debt using the treasury stock method. Adjustments to earnings per share calculation include reversing interest related to the convertible debts and changes in derivative instruments. During periods when losses are incurred dilutive common shares are not considered in the EPS computations as their effect would be anti-dilutive. There were no common equivalent shares included in the calculation of diluted earnings per share for the three and nine months ended September 30, 2011 and 2010 because we had losses from operations for such periods and therefore such common equivalent shares were anti-dilutive.
 
2.           
2.Deferred Financing Costs, Net
 
Deferred financing costs, net are associated with the Company’s term notes. For the sixnine months ended JuneSeptember 30, 2011, the amortization of deferred financing cost was approximately $79,482$2,179 (2010 - $86,308)$19,502).
Cost $1,214,997 
Accumulated amortization  (1,063,222)
     
  $151,775 
The estimated amortization expense for each of the next three fiscal years is as follows:
Year Amount 
2011 $78,492 
2012  48,911 
2013  24,352 
  $151,755 
deferred financing costs were fully amortized by September 30, 2011.
 
3.Intangible AssetsBank Indebtedness
  Cost  
Accumulated
amortization
  Net book value 
Customer relationships $1,402,062  $1,360,594  $41,468 
Amortization expense for the six months period ended June 31, 2011 amounted to $16,422 (2010-$115,548).
5
4.           Bank Indebtedness
 
In 2008, the Company established credit facilities with a Canadian chartered bank to provide for borrowings by its subsidiaries, AC Technical and Cancable Inc.  As a result of the sale of Cancable Group as discussed above, the credit facility for Cancable was removed. The credit facilitiesfacility for AC Technical and Cancable wereis $500,000 and $3,500,000 respectively, and bearbears interest at the bank’s domestic prime rate plus 1.5% to 3.4% for Canadian dollar amounts.  Interest is payable monthly. The facilities arefacility is secured by a first security interest in book debts, inventory, certain other assets and life insurance. As at JuneSeptember 30, 2011, the interest rate of the Canadian dollar amount was 4.0% to 5.9%. At JuneSeptember 30, 2011, thethere were no borrowings outstanding under both facilities were $1,076,799the facility and the average borrowing outstanding during the sixnine months ended JuneSeptember 30, 2011 was $863,772.$127,656.  The agreements contain financial covenants pertaining to maintenance of tangible net worth and debt service coverage ratio. In the event of default, the bank could at its discretion cancel the facilities and demand immediate repayment of all outstanding amounts.

At JuneSeptember 30, 2011, the Company was contingently liable under an irrevocable letter of credit issued by our bank in November 2010 in the amount of $150,000 which will expire in November 2011. The letter of credit was issued to a customer as a security for the performance of a preventive maintenance contract awarded to AC Technical.

5.4.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, subject to the bank’s security interest.
The Cancable Note bears interest at the prime rate plus 1.75% withwas assigned to Cancable as a minimum rateresult of 7%, and requires minimum monthly paymentssale of $81,726 until the indebtedness is paid in full except that the Company is not obligated, except upon an event of default, to pay more than 25% of the original principal amount prior to December 31, 2011, at which time the debt matures.Cancable on September 16, 2011.


7

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 and Iview DSI issued to Laurus a secured term note (the “Iview Note”) in the amount of $2,000,000. Concurrently, the Company issued to Laurus a related warrant to purchase up to 2,411,003 shares of common stock of the Company (up to 7.5% of the outstanding shares of the Company) at a price of $0.01 per share (the “Warrant”) and Iview Holding issued to Laurus a related option to purchase up to 20 shares of common stock of Iview Holding (up to 20% of the outstanding shares of Iview Holding) at a price of $0.01 per share (the “Option”). As a result of the sale of Cancable on September 16, 2011, the Company Note was assigned to Cancable.
The Iview Note bears interest at the prime rate plus 2% with a minimum rate of 7%.  Interest is calculated on the basis of a 360-day year.  Per the original terms of this note, the minimum monthly payments on the term note were $8,333 through the original maturity date (February 1, 2011), with the balance of $1,600,000 payable on such date. As a result of the sale of Cancable, the loans are no longer guaranteed and secured by substantially all of the assets of the Company (exclusive of those under capital lease, which are subject to the obligor’s security interest in such assets) and its subsidiaries.subsidiaries; however, the note is still outstanding at September 30, 2011 in the amount of $1,548,207.
 
The options held by Laurus to acquire 49% of Cancable Holding and 20% of Iview Holding are accounted for as noncontrolling interests.  BecauseAs a result of the sale of Cancable on September 16, 2011, the options have not been exercised and because Cancable Holding and Iview Holding have incurred losses, no noncontrolling interests have been recognized at June 30, 2011.cancelled by Laurus.

The Company Note bears interest at the prime rate plus 2% with a minimum rate of 7%. Interest is calculated on the basis of a 360-day year. Per the original terms of this note, the minimum monthly payments on the term note were $137,500 commencing March 1, 2007 to February 1, 2011, with a balance of $4,950,000 payable on the maturity date. However, as allowed by the debt agreement, since March 2007, the Company has deferred such monthly payments until maturity by issuing warrants to purchase up to 4,860,000 shares of common stock of the Company at per-share prices from $0.03 to $2.84. The Company extendedAs a result of the maturity datesale of this note to December 31, 2011, at which time the entire principal will be due.
The Iview Note bears interest at the prime rate plus 2% with a minimum rate of 7%. Interest is calculated on the basis of a 360-day year. Per the original terms of this note, the minimum monthly payments on the term note were $8,333 through the original maturity date (February 1, 2011), with the balance of $1,600,000 payable on such date. On August 13, 2011,Cancable, the Company extended the maturity dateNote was assigned to December 31, 2011.Cancable and all warrants issued were cancelled.
 
In June 2008, the Company and its subsidiary, Cancable Inc., entered into a financing transaction whereby the Company issued to Valens Offshore SPV II, Corp. (“Valens Offshore”) and Valens U.S. SPV I, LLC (“Valens U.S.VUS.”) secured term notes in the amount of $1,700,000 and $800,000, respectively (collectively, the “Company Second Notes”). Valens Offshore and Valens U.S.VUS are entities related to Laurus.  The Company also issued to Valens Offshore and Valens U.S.VUS warrants to purchase up to 1,333,333 and 627,451 shares, respectively, of common stock of the Company at a price of $0.01 per share. The loans are secured by substantially all of the assets of the Company, subject to the bank’s security interest. As a result of the sale of Cancable, the term loans were assigned to Cancable and all warrants issued were cancelled.
6

Interest on the term notes for the sixnine months ended JuneSeptember 30, 2011 was $789,484$419,138 (2010: $771,607)$466,642).
 
  June 30, 2011 
Cancable Note interest at prime plus 1.75% (minimum of 7%), due December 31, 2011 $5,148,754 
Company Note interest at prime plus 2% (minimum of 7%), due December 31, 2011  7,287,500 
Iview Note interest at prime plus 2% (minimum of 7%), due on December 31, 2011  1,564,873 
Company Second Notes. interest at 12%, due on June 24, 2013  2,500,000 
Less: unamortized discount  (680,446)
   15,820,681 
Less: current portion  14,001,128 
  $1,819,553 
Scheduled principal payments forAs a result of the next three fiscal years aresale of Cancable, the term loans assigned to Cancable Group were as follows:
 
  Amount 
2011 $14,001,128 
2012  - 
2013  1,819,553 
  $15,820,681 
September 16, 2011
Cancable Note interest at prime plus 1.75% (minimum of 7%)5,148,754
Company Note interest at prime plus 2% (minimum of 7%)7,287,500
Company Second Notes. interest at 12%2,500,000
Less: unamortized discount(1,082,175)
13,854,079

8
 
6.           
5.Net Financing Expenses
 
 Six months ended June 30,  Nine months ended September 30, 
 2011  2010  2011  2010 
Capital leases $191,198  $306,552 
Interest on credit facility and term notes  789,484   771,607  $419,138  $466,642 
Interest on deferred principal repayment of term note  13,507   67,191   13,507   84,934 
Related parties  27,223   26,421   40,987   39,781 
 $1,021,412  $1,171,771  $473,632  $591,357 

7.           
6.Note Payable to Related Parties

Notes payable to related parties consists of two notes payable for $750,000, each bearing interest at 3% per annum and having no fixed terms of repayment. However, pursuant to the Laurus Financing, these notes have been subordinated to the Company’s obligations to Laurus and they are classified as non-current. The notes are due to Malar Trust Inc. (the Company’s chairman is the shareholder of Malar Trust Inc.).
 
Interest expense recognized for the sixnine months period ended JuneSeptember 30, 2011 was $27,223$40,987 (2010 - $26,421)$39,781).
 
8.           Shareholders’ (Deficit)
7.Income Taxes
 
As a result of prior large net operating losses, the gain on sale of Cancable resulted in no income taxes payable. The Company has unutilized taxable losses in the United States available for carry forward to reduce net income of approximately $3,000,000, which expire in various years between 2028 and 2030.  In addition, the Company has unutilized taxable losses in the Canadian taxes available for carry forward to reduce net income of approximately $1,000,000 otherwise payable in future years which begin to expire in 2015 through 2020.
8.Shareholders’ (Deficit)
Options
 
In conjunction with the issuance of the Cancable Note and Iview Notes in 2006, the Company had granted Laurus options to purchase up to 49% of Cancable Holding Corp. and 20% of Iview Holding Corp. The financial statementsAs a result of the sale of Cancable Holding Corp. and Iview Holding Corp. have negative equity on a stand alone basis. At such time when these entities have positive equity and generate net income, the Company will account forSeptember 16, 2011, the options granted to Laurus as non-controlling interests.

7
mentioned above were cancelled.
 
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.  The Plan allowed for the issuance of 4,000,000 options to purchase shares of common stock and shares of common stock covered by options which terminated or expired prior to exercise were available for further options under the Plan. The maximum aggregate number of shares of Stock that were allowed to be issued under the Plan as “incentive stock options” was 3,500,000 shares.

 
9

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 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.

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 also impose 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. 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 JuneSeptember 30, 2011, options to purchase 1,575,000360,000 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 JuneSeptember 30, 2011, there was $17,314$15,216 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 a remaining weighted average period of 1.04 years. At June 30, 2011, 1,387,500 options were vested. The cost recognized for the six monthsnine month period ended JuneSeptember 30, 2011 was $6,169 (2010: $46,200) which was recorded as general and administrative expenses.

8

A summary of option activity under the Plan during the period ended JuneSeptember 30, 2011 and the sixnine months ended JuneSeptember 30, 2011 is presented below:

 Shares  
Weighted-Average
Exercise
Price
  
Weighted-Average
Remaining
Contractual
Term
  
Intrinsic
Value
  Shares  
Weighted-Average
Exercise
Price
  
Weighted-Average
Remaining
Contractual
Term
  
Intrinsic
Value
 
Options                        
Outstanding at December 31, 2009  2,005,000  $0.65   4.75   -   2,005,000  $0.65   4.75   - 
Granted  -   -   -   -   -   -   -   - 
Exercised  -   -   -   -   -   -   -   - 
Forfeited or expired  (405,000) $0.63   0.96   -   (405,000) $0.63   0.96   - 
Outstanding at December 31, 2010  1,600,000  $0.65   1.04   -   1,600,000  $0.65   1.04   - 
Granted  -   -   -   -   -   -   -   - 
Exercised  -   -   -   -   -   -   -   - 
Forfeited or expired  (25,000) $0.63   0.25   -   (1,240,000) $0.63   -   - 
Outstanding at June 30, 2011  1,575,000  $0.65   0.56   - 
Outstanding at September 30, 2011  360,000  $0.72   2.18   - 
                                
Exercisable at June 30, 2011  1,387,500  $0.65   0.21   - 
Exercisable at September 30, 2011  232,500  $0.76   1.8   - 
 
As of JuneSeptember 30, 2011, the aggregate intrinsic value of all stock options outstanding and expected to vest was $0 and the aggregate intrinsic value of currently exercisable stock options was $0.  The intrinsic value of each option is the difference between the fair market value of the common stock and the exercise price of such option to the extent it is “in-the-money”.  Aggregate intrinsic value represents the value that would have been received by the holders of in-the-money options had they exercised their options on the last trading day of the year and sold the underlying shares at the closing stock price on such day.  The intrinsic value calculation is based on the $0.03$0.05 closing stock price of the common stock on JuneSeptember 30, 2011, the last trading day of the second quarter of fiscal 2010.  There were no in-the-money options outstanding and exercisable as of JuneSeptember 30, 2011.

10

Since there were no options exercised during the year ended December 31, 2010 or the sixnine months ended JuneSeptember 30, 2011, there was no intrinsic value of options exercised.

The total fair value of options granted during the sixnine months ended JuneSeptember 30, 2011 and the year ended December 31, 2010 was $0 (none were granted in 2011 and 2010).   

The following table summarizes information about fixed price stock options at JuneSeptember 30, 2011:
 
Exercise
Price
 
Weighted
Average Number
Outstanding
  
Weighted
Average
Contractual Life
  
Weighted
Average
Exercise Price
  
Number
Exercisable
  
Exercise
Price
 
Exercise
Price
Exercise
Price
  
Weighted 
Average Number 
Outstanding
  
Weighted 
Average 
Contractual Life
  
Weighted 
Average 
Exercise Price
  
Number 
Exercisable
  
Exercise 
Price
 
$0.63  1,465,000   0.54  $0.63   1,280,000  $0.63 0.63   250,000   2.91  $0.63   125,000  $0.63 
$ 0.90  100,000   0.67  $0.90   100,000  $0.90 0.90   100,000   0.42  $0.90   100,000  $0.90 
$ 1.12  10,000   1.98  $1.12   7,500  $1.12 1.12   10,000   1.73  $1.12   7,500  $1.12 
   1,575,000           1,387,500         360,000           232,500     

The number and weighted average grant-date fair value of options non-vested at the beginning of the year, non-vested at the end of JuneSeptember 30, 2011 and granted, vested or canceled during the sixnine month period ended JuneSeptember 30, 2011 was as follows:

  Number of Options  
Weighted-Average
Grant Date Fair Values
 
Non-vested at January 1, 2011  217,500  $0.17 
Granted  -   - 
Vested  (30,000) $0.22 
Canceled  -   - 
Non-vested at June 30, 2011  187,500  $0.14 
9
  Number of Options  
Weighted-Average
Grant Date Fair Values
 
Non-vested at January 1, 2011  217,500  $0.17 
Granted  -   - 
Vested  (90,000) $0.22 
Canceled  -   - 
Non-vested at June 30, 2011  127,500  $0.14 
 
Warrants
 
The Company uses the Black-Scholes option pricing model to value warrants issued to non-employees, based on the market price of our common stock at the time the warrants are issued. All outstanding warrants may be exercised by the holder at any time. During the sixnine months ended JuneSeptember 30, 2011, in connection with financing, the Company issued warrants to purchase 648,000 shares of common stock.  The fair value of the warrants of $13,506 was measured using the Black-Scholes option pricing model using the following assumptions: risk free interest rate of 1.17% to 1.78%, expected dividend yield of 0%, volatility of 140%, exercise prices of $0.02 to $0.03 and the life of the warrants 4 years. As a result of the sale of Cancable, total issued warrants to purchase 15,444,983 shares (including the 648,000 warrants mentioned above) of common stock were cancelled.  Total outstanding warrants as of September 30, 2011 were 200,000 issued to a non-employee for consulting service with the expiry date of December 31, 2014.
 
As of June 30, 2011, we had the following common stock warrants outstanding:
Issue Date Expiry Date  
Number of
 warrants
  
Exercise Price
 Per share
  
Value-issue
 date
 Issued for
09-30-2004 09-30-2016   2,250,000  $1.15  $1,370,000 Financing
03-31-2005 03-31-2012   100,000  $1.20  $60,291 Financing
04-30-2005 04-30-2017   100,000  $1.01  $44,309 Financing
05-31-2005 05-31-2012   100,000  $1.01  $56,614 Financing
06-22-2005 06-22-2017   313,000  $1.00  $137,703 Financing
06-30-2005 06-30-2017   100,000  $0.90  $50,431 Financing
07-31-2005 07-31-2012   100,000  $1.05  $56,244 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 03-01-2016   108,000  $0.90  $39,519 Financing
04-01-2007 04-01-2016   108,000  $1.15  $50,529 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
10-01-2007 10-01-2011   108,000  $2.43  $105,362 Financing
11-01-2007 11-01-2011   108,000  $2.60  $111,868 Financing
12-01-2007 12-01-2011   108,000  $2.55  $107,284 Financing
01-01-2008 01-01-2012   108,000  $2.84  $108,331 Financing
01-22-2008 01-22-2058   812,988  $0.01  $1,470,687 Acquisition
01-22-2008 01-22-2058   1,738,365  $0.01  $3,144,685 Financing
01-30-2008 01-30-2058   506,250  $0.01  $1,001,909 Financing
01-30-2008 01-30-2058   292,500  $0.01  $578,880 Financing
02-01-2008 02-01-2012   108,000  $2.09  $85,612 Financing
03-01-2008 03-01-2012   108,000  $2.04  $80,253 Financing
04-01-2008 04-01-2012   108,000  $1.09  $162,748 Financing
05-01-2008 05-01-2012   108,000  $1.19  $103,180 Financing
06-01-2008 06-01-2012   108,000  $1.02  $88,114 Financing
06-23-2008 06-23-2018   627,451  $0.01  $560,736 Financing
06-23-2008 06-23-2018   1,333,333  $0.01  $1,211,168 Financing
02-01-2009 02-01-2013   108,000  $0.25  $22,728 Financing
03-01-2009 03-01-2013   108,000  $0.19  $17,277 Financing
04-01-2009 04-01-2013   108,000  $0.18  $15,868 Financing
05-01-2009 05-01-2013   108,000  $0.16  $14,557 Financing
06-01-2009 06-01-2013   108,000  $0.27  $24,105 Financing
07-01-2009 07-01-2013   108,000  $0.27  $24,105 Financing
08-01-2009 08-01-2013   108,000  $0.25  $22,786 Financing
09-01-2009 09-01-2013   108,000  $0.16  $14,567 Financing
10-01-2009 10-01-2013   108,000  $0.12  $10,921 Financing
11-01-2009 11-01-2013   108,000  $0.15  $13,656 Financing
12-01-2009 12-01-2013   108,000  $0.08  $7,275 Financing
01-01-2010 01-01-2014   108,000  $0.08  $7,292 Financing
02-01-2010 02-01-2014   108,000  $0.12  $10,925 Financing
03-01-2010 03-01-2014   108,000  $0.08  $25,484 Financing
04-01-2010 04-01-2014   108,000  $0.09  $8,461 Financing
05-01-2010 05-01-2014   108,000  $0.07  $8,457 Financing
06-01-2010 06-01-2014   108,000  $0.07  $6,572 Financing
07-01-2010 07-01-2014   108,000  $0.07  $6,566 Financing
08-01-2010 08-01-2014   108,000  $0.07  $6,562 Financing
09-01-2010 09-01-2014   108,000  $0.05  $4,615 Financing
10-01-2010 10-01-2014   108,000  $0.05  $4,613 Financing
11-01-2010 11-01-2014   108,000  $0.04  $1,844 Financing
12-01-2010 12-01-2014   108,000  $0.04  $3,200 Financing
12-31-2010 12-31-2014   200,000  $0.03  $5,051 Consulting
01-01-2011 01-01-2015   108,000  $0.03  $3,200 Financing
02-01-2011 02-01-2015   108,000  $0.03  $3,200 Financing
03-01-2011 03-01-2015   108,000  $0.03  $3,200 Financing
04-01-2011 04-01-2015   108,000  $0.03  $1,302 Financing
05-01-2011 05-01-2015   108,000  $0.03  $1,302 Financing
06-01-2011 06-01-2015   108,000  $0.02  $1,302 Financing
      15,644,983          
10
9.           Major Customers
During the six months ended June 30, 2011, the Company derived 62.5% (2010:62.9%) of its revenue from two customers. The accounts receivable from these customers comprise 35.6% (2010: 44.7%) of the total trade receivable.
10.           
8.
Segment Information
 
We determine and disclose our segments in accordance with the “Segment Reporting” topic of the Financial Accounting Standards Board Standards Codification, 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
11
 
Cancable Inc. and its wholly owned subsidiaries XL Digital Services, Inc. and 2141306 Ontario Inc are Canadian based entities. Cancable, Inc. is a US based entity which is also the wholly owned subsidiary of Cancable Inc. (collectively, “Cancable”). Cancable is in the business of providing deployment and servicing of broadband technologies in both residential and commercial markets. The Cancable service offering, network deployment, IT integration, and support services, enable the cable television and telecommunications industries to deliver a high quality broadband experience to their customers. Cancable’s clients rely on Cancable’s knowledge and expertise to rapidly deploy the latest technologies to support advanced cable services, cable broadband Internet access and DSL. Services provisioned include new installations, reconnections, disconnections, service upgrades and downgrades, inbound technical call center sales and trouble resolution for cable Internet subscribers, and network servicing for broadband video, data, and voice services for residential, business, and commercial marketplaces.

AC Technical
 
A.C. Technical Systems Ltd. (“AC Technical”), a corporation incorporated under the laws of the Province of Ontario, is engaged in the engineering, design, installation, integration and servicing of various types of security systems.
 
Iview DSI
 
Iview Digital Video Solutions Inc. (“Iview DSI”) and its wholly owned subsidiary OSSIM View Inc., corporations incorporated under the laws of the Province of Ontario, provide video surveillance products and technologies to the market.
 
  June 30, 2011  June 30, 2010 
Sales:      
Cancable $14,508,050  $15,933,108 
AC Technical  4,393,063   3,576,632 
Iview  52,040   36,320 
Creative Vistas, Inc.  1,420   1,399 
Consolidated Total $18,954,573  $19,547,459 
Depreciation and amortization:        
Cancable $866,316  $1,142,055 
AC Technical  21,210   20,946 
Iview  19,844   20,203 
Consolidated Total $907,370  $1,183,204 
Interest expense:        
Cancable $668,633  $771,837 
Iview  55,570   49,844 
AC Acquisition  27,223   26,421 
Creative Vistas, Inc.  269,986   323,669 
Consolidated Total $1,021,412  $1,171,771 
Net (Loss):        
Cancable $(171,230) $(765,194)
AC Technical  277,858   202,836 
Iview  (48,206)  (51,644)
AC Acquisition  58,894   (26,421)
Corporate (1)  (123,652)  (426,300)
Consolidated Total $(6,336) $(1,066,723)
Total Assets        
Cancable $6,047,403  $8,798,549 
AC Technical  3,532,067   3,193,054 
Iview  526,214   757,445 
Creative Vistas, Inc.  770,313   1,353,033 
Consolidated Total $10,875,997  $14,102,081 
Property, plant and equipment        
Cancable $2,693,900  $4,547,587 
AC Technical  774,927   745,622 
Iview  2,574   40,779 
Consolidated Total $3,471,401  $5,333,988 
Property, Plant and Equipment Expenditures        
Cancable $25,259  $30,592 
AC Technical  3,656   6,374 
Iview  -   - 
Consolidated Total $28,915  $36,966 
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(1)Corporate expenses primarily include certain stock-based compensation for consulting and advisory services, which we do not internally allocate to our segments because they are related to our common stock and are non-cash in nature.
  September 30, 2011  September 30, 2010 
Sales:      
AC Technical $5,868,160  $5,330,094 
Iview  47,910   45,960 
Creative Vistas, Inc.  1,750   1,956 
Consolidated Total $5,917,820  $5,378,010 
Depreciation and amortization:        
AC Technical $31,579  $31,336 
Iview  22,392   30,256 
Consolidated Total $53,971  $61,592 
Interest expense:        
Iview  74,804   79,801 
AC Acquisition  40,987   39,780 
Creative Vistas, Inc.  357,841   471,776 
Consolidated Total $473,632  $591,357 
Loss from continuing operations        
AC Technical $(9,680) $(117,310)
Iview  (287,228)  (173,894)
AC Acquisition  (40,987)  (39,780)
Creative Vistas, Inc.  (646,454)  (829,857)
Consolidated Total $(984,349) $(1,160,841)
Total Assets        
AC Technical $2,610,918  $3,116,884 
Iview  125,677   823,509 
Creative Vistas, Inc.  797,062   1,154,042 
Consolidated Total $3,533,657  $5,094,435 
Property, plant and equipment        
AC Technical $707,173  $856,848 
Iview  -   31,816 
Consolidated Total $707,173  $888,664 
Property, Plant and Equipment Expenditures        
AC Technical $4,692  $6,374 
Iview  -   345 
Consolidated Total $4,692  $6,719 
 
Revenues by geographic destination and product group were as follows:

 June 30, 2011  June 30, 2010  September 30, 2011  September 30, 2010 
Contract $3,721,569  $2,776,818  $4,857,989  $4,248,529 
Service  15,231,545   16,768,246   1,058,045   1,126,498 
Others  1,459   2,395   1,786   2,983 
Total sales to external customers $18,954,573  $19,547,459  $5,917,820  $5,378,010 

For the sixnine months ended JuneSeptember 30, 2011, revenue generated by the Company in Canada and the United States was $16,997,443$5,905,150 (2010:$16,489,613)5,373,915) and $1,957,130$12,670 (2010: $3,057,846)$4,095), respectively.

11.Contingency

By Notice of Application issued in the Federal Court of Appeal on September 17, 2010 by our Subsidiary, XL Digital Services Inc. (“XL Digital”), as applicant against Communications, Energy and Paperworkers Union of Canada (“CEP”) as respondent, XL Digital applied to the Federal Court of Appeal for judicial review of the decision of the Canada Industrial Relations Board (the “Board”) dated August 23, 2010 wherein the Board concluded that it had jurisdiction over XL Digital, and found CEP to be a trade union within the meaning of the Canada Labour Code, and certified CEP to be the bargaining agent for all employees of XL Digital working in and out of its London, Ontario office. The application for judicial review was heard by the Federal Court of Appeal on May 18, 2011 and the judge dismissed the application for judicial review requested by XL Digital. The Company expects there may be a financial impact as a result of CEP becoming the bargaining agent of the London, Ontario employees of XL Digital and the operations of the London, Ontario employees being under federal jurisdiction but it is impossible to quantify the impact at this time.
 
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Item 2.Management's Discussion And Analysis of Financial Condition and Results of Operations
 
The following discussion of the financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes thereto.  The following discussion contains certain forward-looking statements that involve risks and uncertainties.  Our actual results could differ materially from those discussed therein.  Factors that could cause or contribute to such differences include, but are not limited to, risks and uncertainties related to the need for additional funds, the rapid growth of our operations and our ability to operate profitably a number of new projects.  Except as required by law, we do not intend to publicly release the results of any revisions to those forward-looking statements that may be made to reflect any future events or circumstances.
Overview and Recent Developments
On September 16, 2011, the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Cancable Holding Corp., a wholly-owned subsidiary of the Company (“Cancable”) and Cancable and Dependable Hometech, LLC (“Purchaser”), pursuant to which the Company sold its equity interest in Cancable to Purchaser for a consideration of US$1.00 on such date.  In connection with such sale, the Company assigned certain of its liabilities and obligations to Cancable, including (i) a secured term note of the Company dated February 13, 2006, for an original principal amount of US$8.25 million, which is currently held by Valens U.S. SPV I, LLC (“VUS”), Valens Offshore SPV I, Ltd. and PSource Structured Debt Limited (“PSource”), (ii)  a secured term note of the Company dated June 24, 2008, for an original principal amount of US$800,000, which is currently held by VUS, and (iii) a secured term note of the Company dated June 24, 2008, for an original principal amount of US$1,700,000. which is currently held by Valens Offshore SPV II, Corp. (such holders of the term notes listed in clauses (i) to (iii), collectively, the “Holders”, and such term notes, collectively, the “Notes”).  The aggregate outstanding amount owed under the Notes (including accrued and unpaid interest) was approximately US$9,800,000 as of September 16, 2011.  The Holders also (a) terminated and cancelled all guarantees, security interest and other obligations of the Company and certain of its subsidiaries related to approximately US$1,500,000 of indebtedness owed to the Holders by certain other subsidiaries of the Company, (b) cancelled their warrants and options to purchase approximately 15,600,000 shares of common stock of the Company, as well as the stock of certain of the Company’s subsidiaries, and (c) terminated and cancelled all guarantees, security interest and other obligations of the Company and certain of its subsidiaries related to approximately US$5,100,000 of indebtedness owed to the Holders by Cancable and its subsidiaries.  In addition, in connection with the sale of Cancable to Purchaser, the Company assigned its rights in certain receivables owed to the Company by certain wholly-owned subsidiaries of Cancable, totaling approximately US$4,800,000 as of September 16, 2011. The Holders are affiliates of Laurus Master Fund, Ltd. (“Laurus”).
 
Results of Operations
Comparison of Three Month Period Ended JuneSeptember 30, 2011
to Three Month Period Ended JuneSeptember 30, 2010
 
For purposes of this “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, we compared the three month period ended JuneSeptember 30, 2011 to the comparable period in 2010.
 
Sales:  Sales for the three months ended JuneSeptember 30, 2011 decreased 3.6%16.6% to $9,934,100$1,471,300 from $10,309,800$1,763,700 for the three months ended JuneSeptember 30, 2010.  The decrease in revenue was mainly due to the decline in servicecontract revenue of the Cancable Segment to $7,763,900$1,136,400 for the three month period ended JuneSeptember 30, 2011 from $8,256,000$1,471,700 for the corresponding period in 2010.  The decline in contract revenue primarily resulted from less contracts being completed during the Cancable segmentthird quarter of fiscal 2011 and less contracts were received during this quarter.  The service revenue was offset with the growth of revenue from the AC Technical Segment.
(a)           Cancable Segment – This segment includes Cancable Inc., Cancable, Inc., XL Digital and 2141306 Ontario Inc. (collectively, the “Cancable Group”). The principal activity is provisioning the deployment and servicing of broadband technologies in both residential and commercial markets. The Cancable Group’s service offering, network deployment, IT integration, and support services enable the cable television and telecommunications industries to deliver a high quality broadband experience to their customers. The total revenue from the Cancable segment was $7,763,900$334,500 for the three months ended JuneSeptember 30, 2011, compared to $8,256,000 for same period in 2010, representing a decrease of $492,100 or 5.9%. The decrease in revenue was primarily due to the decrease in revenue generated from our customer Rogers Cable Inc. Rogers Cable Inc. is Cancable Group’s largest customer and the revenue from this customer for the three months ended June 30, 2011 was $5,395,400 or 69.5% of total Cancable revenue compared to $5,614,300 or 68.0% for same period in 2010. Total revenue generated in the United States for the three months ended June 30, 2011 was $1,017,500 compared to $1,466,600 for same period in 2010. The decline in revenue was primarily due to Cancable’s exit from two markets located in Louisiana. Revenue generated from the two exited markets was $913,300 for the three months ended June 30, 2010. The company has plans to expand to other stronger markets in the United States. (b) AC Technical segment - Total revenue of the AC Technical segment was $2,154,800 for the three months ended June 30, 2011 compared to $2,029,400 for the corresponding period in 2010. The increase in revenue primarily resulted from the increase in contract revenue to $1,817,500 for the three months ended June 30, 2011 compared to $1,638,900 for same period in 2010. The service revenue was $337,300 for the three months ended June 30, 2011, compared to $390,400 for same period in 2010.
Direct Expenses (excluding depreciation and amortization): Direct expenses for the three months ended June 30, 2011 was $7,505,200 or 75.5% of revenues compared to $7,539,800 or 73.1% of revenues$291,400 for same period in 2010.
 
(a) Cancable Segment – Direct expensesCost of this segment were $6,422,600sales (excluding depreciation and amortization):  Cost of sales for the three months ended JuneSeptember 30, 2011 comprised principallywas $734,000 or 49.9% of labor expensesrevenues compared to $1,175,000 or 66.7% of $4,900,700, vehicle expenses of $597,100 and material cost of $395,800. The direct expensesrevenues for the three months ended June 30, 2010 were comprised principally of labor expenses of $4,975,100, vehicle expenses of $528,100 and material cost of $455,600. The decrease since last year was primarily due to the decreasesame period in revenue.
(b) AC Technical Segment – Direct expenses of this segment were $1,082,500.2010.  The material cost was $671,700$436,200 or 31.2%29.7% of the AC Technical revenue for the three months ended JuneSeptember 30, 2011 compared to $515,600$794,600 or 25.4%45.1% of revenues in the same period of fiscal 2010. The increasedecrease in percentage of material costs was primarily a result of certain contracts having greaterlesser material needs. On the other hand, the laborLabor and subcontractor cost increaseddecreased to $394,500$285,000 or 18.3%19.3% of AC Technicalthe revenues for the three months ended JuneSeptember 30, 2011 compared to $586,800$344,900 or 28.9%19.6% of AC Technical revenues for the corresponding period of fiscal 2010.  The decrease in labor and subcontractor cost resulted primarily from certain contracts having less labor needsdue to the decrease in the second quarter of fiscal 2011.revenues.

 
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Project expenses: Project expenses increased to $294,500$292,100 or 3.0%19.9% of revenue for the three months ended JuneSeptember 30, 2011, compared to $234,100$235,500 or 2.3%13.4% for the same period in 2010. These expenses were mainly related to the AC Technical segment. The balance mainly includes the salaries and benefits of indirect staff amounting to $178,900$185,500 in the secondthird quarter of fiscal 2011 compared to $158,700$153,700 for the same period of fiscal 2010 with no material fluctuation.2010. The increase in balance was mainly due to the increase in headcount. In addition, automobile and travel expenses increased to $85,500$78,700 for the three months ended JuneSeptember 30, 20102011 compared to $55,800$57,300 for the same period of fiscal 2010. The increase was primarily due to the increase in gas prices.
 
Selling expenses: Selling expenses were $268,500$226,100 or 2.7%15.4% of revenues for the secondthird quarter of fiscal 2011 compared to $202,100$231,300 or 2.0%13.1% of revenues for the same period in 2010.  Selling expenses were mainly related to the AC Technical segment. The balance for the three months ended JuneSeptember 30, 2011 is mainly comprised of salaries and commission to salespersons of $138,000$170,470 compared to $87,400$168,800 for the same period of fiscal 2010. Advertising and promotion and trade show expenses were $36,900$35,000 in the secondthird quarter of 2011 compared to $29,200$39,900 for the same period of fiscal 2010.
 
General and administrative expenses: General and administrative expenses were $954,900$737,700 or 9.6%50.1% of revenues for the secondthird quarter of fiscal 2011 compared to $1,364,200$230,900 or 13.2%13.1% for the same period in 2010.  For the three months ended JuneSeptember 30, 2011 these costs were mainly comprised of $187,100$187,300 of professional fees related to preparation of quarterly reports and other corporate and legal matters, compared to $123,500$105,000 for the same period in 2010. In addition, investor relations expenses amounted to $20,000 for the second quarter of fiscal 2010 and there was no such expense for the same period of fiscal 2011. Total salaries and benefits to administrative staff were $496,000$104,400 for the secondthird quarter of fiscal 2011 compared to $545,800$90,100 for the corresponding period of 2010. Additionally, the balance also included unrealized exchange losses related to translation of intercompany balances in the amount of $144,400 for the third quarter of fiscal 2011 compared to unrealized exchange gain of $60,800 for the same period of fiscal 2010.  Total expenses for research and development were $46,500 for the third quarter of fiscal 2011 compared to net benefit of $201,500 for the corresponding period of 2010 as we have received the government credit in the third quarter of fiscal 2010. The decreasegovernment credit for 2011 was received in balance was mainly due to higher headcount in 2010.the second quarter of fiscal 2011.
 
Depreciation: Total depreciation of property, plant and equipment was $429,100$12,900 for the secondthird quarter of fiscal 2011 compared to $584,400$20,400 for the same period in 2010. The decrease in the balance was primarily due to certain assets acquired in 2006 and 2007 being fully amortized.
 
Amortization of intangible assets: Amortization of customer relationships and trade name was $8,300zero for the three months ended JuneSeptember 30, 2011 compared to $57,800$50,000 for the same period of fiscal 2010.  The decrease was mainly due to the trade name, which was acquired in 2006, being fully amortized.
 
Interest and other expenses (income):  Interest and other expenses for the three months ended JuneSeptember 30, 2011 were $549,900$242,800 or 5.5%16.5% of revenues compared to interest and other income of $974,600$162,200 or 9.5%9.2% of revenues for the same period in 2010. The balance for the three months ended JuneSeptember 30, 2011 was primarily comprised of net financing expenses of $509,700$120,900 or 5.1%8.2% of revenues compared to $577,400$191,400 or 5.6%10.8% of revenues for the same period of 2010.  The interest due with respect to the Company’s credit facilities was $401,200$107,100 for the three months ended JuneSeptember 30, 2011 compared to $394,900$160,300 for the same period in 2010.  The decrease in balance was mainly due to the decrease of term loans in the amount of $7,287,500 after the sale of Cancable in September 2011. Additionally, the foreign currency translation loss for the quarter ended JuneSeptember 30, 2011 was $1,100$121,900 compared to a foreign currency translation lossgain of $353,800$35,700 for the same period of 2010. The change was related to the foreign currency translation of term notes which resulted from the Canadian dollar trading higherlower than the U.S. dollar at JuneSeptember 30, 2011 as compared to the same period of 2010.
 
Income taxes:  No income taxes were paid and/or owed during the three months ended JuneSeptember 30, 2011 and 2010, which was mainly due to the Company’s losses carried forward to offset all income generated by the Company. Because of this and because we have fully reserved our deferred income tax assets, there was no provision and/or benefits for income taxes.
 
Net Income/Loss from operations: Net lossLoss from operations for the secondthird quarter of fiscal 2011 was $76,100$531,600 compared to $179,600 the same period in 2010. The increase in loss from operations was attributable to the decline in revenue and also increases in general and administration expenses for the three months ended September 30, 2011.

14

Loss from continuing operations: Loss from continuing operations for the three months ended September 30, 2011 was $774,400 compared to $341,800 the same period in 2010. Loss from continuing operations for three months ended September 30, 2011 was higher which was mainly due to the increase in operating losses.
Net Income:  Net income for the third quarter of fiscal 2011 was $11,646,500 compared to a net lossincome of $647,200$633,344 for the same period in 2010. The Company’s operatingnet income was $473,800 for the three months ended JuneSeptember 2011 includes income from discontinued operations of $247,800 and gain on disposal of discontinued operations of $12,173,000. The Company’s operating loss was $531,600 for the three months ended September 30, 2011 compared to $327,500$179,600 for the corresponding period of 2010.  The year-over-year increase in operatingnet income primarily reflected a focused cost reduction program acrosswas primilary due to the Company.sale of Cancable Group.
 
Results of Operations
Comparison of SixNine Month Period Ended JuneSeptember 30, 2011
to Period Ended JuneSeptember 30, 2010
 
For purposes of this “Management’s Discussion and Analysis of Results of Operations”, we compared the sixnine months ended JuneSeptember 30, 2011 to the corresponding period in 2010.
 
14
Sales:  Sales for the sixnine month period ended 2011 decreased 3.0%increased 10.0% to $18,954,600$5,917,800 from $19,547,500$5,378,000 for the sixnine month period ended 2010. The decrease in revenue was mainly due to the decrease in service revenue of the Cancable segment to $14,508,100 for the six month period ended 2011 from $15,933,100 for the same period in 2010.
(a)           Cancable Segment – This segment includes, but is not limited to, Cancable Inc., XL Digital Services, Inc. and 2141306 Ontario Inc. (collectively, the “Cancable Group”). The principal activity is provisioning the deployment and servicing of broadband technologies in both residential and commercial markets. The Cancable Group’s service offering, network deployment, IT integration, and support services, enable the cable television and telecommunications industries to deliver a high quality broadband experience to their customers. The total revenue from the Cancable segment was $14,508,100 for the six months ended June 30, 2011, compared to $15,933,100 for same period in 2010. The decrease in revenue was primarily due to the decrease in revenue generated from our customer Rogers Cable Inc. Rogers Cable Inc. is Cancable Group’s largest customer and the revenue from this customer for the six months ended June 30, 2011 was $9,890,800 or 52.2% of total Cancable Group’s revenue compared to $10,332,300 or 64.8% of total Cancable Group’s revenue for same period in 2010. Total revenue generated in the United States for the six months ended June 30, 2011 was $1,957,100 compared to $3,057,800 for same period in 2010.
(b)           AC Technical segment - Total revenue of the AC Technical segment was $4,393,100 for the six months ended June 30, 2011 compared to $3,576,600 for the corresponding period in 2010.  The increase in revenue was mainly due to the increase in contract revenue which was $3,721,600 for the six monthsnine month period ended June 30, 2011 to $4,858,0000 compared to $2,776,800$4,248,500 for same period in 2010.  The increase in contract revenue was primarily due to more contracts being received in the first nine months compared to the same period in 2010. The service revenue was $727,700$1,058,000 for the sixnine months ended JuneSeptember 30, 2011, compared to $823,000$1,126,500 for same period in 2010.
 
Direct ExpensesCost of sales (excluding depreciation and amortization):  Cost of sales for the sixnine months ended JuneSeptember 30, 2011 was $14,177,100$3,076,500 or 75.8%52.0% of revenues compared to $14,442,800$3,001,600 or 73.9%55.8% of revenues for same period in 2010.
(a)           Cancable segment – Cost The material cost was $2,019,400 or 34.1% of sales of this segment was $11,792,300 or 81.3% of Cancable Group’s revenue for the sixnine months ended JuneSeptember 30, 2011 compared to $12,616,200$1,739,300 or 79.2% for the six months ended June 30, 2010. Cost of sales is comprised principally of labor expenses of $9,119,400, vehicle expenses of $1,105,400 and material cost of $666,800. For the six months ended June 30, 2010, cost of sales was comprised principally of labor expenses of $9,754,200, vehicle expenses of $1,057,900 and material cost of $840,300.
(b) AC Technical segment – Direct expenses of this segment were $2,342,500. The material cost was $1,583,200 or 36.0% of the AC Technical revenue for the six months ended June 30, 2011 compared to $944,700 or 26.4%32.3% of revenues in the same period of fiscal 2010. The increase in percentage of material costs was primarily a result of some contracts requiring more material. On the other hand, labor and subcontractor cost decreased to $719,100$1,004,000 or 16.4%17.0% of AC Technical revenues for the sixnine months ended JuneSeptember 30, 2011 compared to $832,100$1,177,400 or 23.3%21.9% of AC Technical revenues for the same period of fiscal 2010.  The decrease in labor and subcontractor cost was mainly due to some contracts requiring less labor hours.
 
Project expenses: Project expenses increased to $587,100$879,200 or 3.1%14.9% of revenue for the sixnine months ended JuneSeptember 30, 2011, compared to $463,900$699,400 or 2.4%13.0% of revenue for the same period in 2010. These expenses were mainly related to the AC Technical segment. The balance mainly includes the salaries and benefits of indirect staff amounting to $346,900$532,400 in the sixnine months ended JuneSeptember 30, 2011 compared to $306,500$460,200 for the same period of fiscal 2010. The increase in salaries and benefits was primarily due to the increase in headcount. Automobile and travel expenses increased to $174,700$228,700 for the sixnine months ended JuneSeptember 30, 2011 compared to $118,900$176,200 for the same period of fiscal 2010. The increase in automobile and travel expenses was due to the increase in gas prices and travel by the staff.
 
Selling expenses: Selling expenses were $496,300$722,400 or 2.6%12.2% of revenues for the sixnine months ended JuneSeptember 30, 2011 compared to $470,200$701,500 or 2.4%13.0% of revenues for the same period in 2010. Selling expenses were mainly related to the AC Technical segment. The balance for the sixnine months ended JuneSeptember 30, 2011 is mainly comprised of salaries and commissions to salespersons of $253,700$564,500 compared to $196,900$488,300 for the same period of fiscal 2010. The increase was primarily due to the increase in commission expenses as a result of increased revenues. Advertising, promotion and trade show expenses were $58,600$93,700 for the sixnine months ended JuneSeptember 30, 2011 compared to $96,200$136,100 for the same period of fiscal 2010.
 
General and administrative expenses: General and administrative expenses were $1,956,600$1,610,700 or 10.3%27.2% of revenues for the sixnine months ended JuneSeptember 30, 2011 compared to $2,587,800$1,336,900 or 13.2%24.9% for the same period in 2010. The balance for the sixnine months ended JuneSeptember 30, 2011 was mainly comprised of $340,700$447,000 of professional fees related to preparation of quarterly reports and other corporate matters compared to $258,600$190,800 for the same period in 2010. The increase in professional fees was primarily due to the increase in legal cost for corporate matters. In addition, investor relations expensesmatters and the sale of $50,000 for the six months ended June 30, 2010 and there was no such expense for the same period of fiscal 2011.Cancable. Total salaries and benefits to administrative staff of $979,700increased to $291,800 for the sixnine months ended JuneSeptember 30, 2011 compared to $1,119,400$274,200 for the corresponding period of 2010. Total expenses for research and development were $167,400 for the nine months ended September 30, 2011 compared to $79,500 for the corresponding period of 2010.  The decreaseincrease in general and administrative expenses was primarilymainly due to the result of cost reduction initiatives.Company receiving a higher government credit for the nine months ended September 30, 2010 than the government credit received in 2011.

 
15
 

Depreciation: Total depreciation of property plant and equipment was $907,400$54,000 for the sixnine months ended JuneSeptember 30, 2011 compared to $1,183,200$61,600 for the same period in 2010. The decrease in the balance was primarily due to certain assets acquired in 2006 and 2007 being fully amortized.
Amortization of intangible assets: Amortization of customer relationships and trade name was $16,400zero for the sixnine months ended JuneSeptember 30, 2011 compared to $115,500$150,000 for the same period of fiscal 2010.  The decrease was mainly due to the trade name acquired in 2006 being fully amortized.
 
Interest and other expenses (income):  Interest and net other expenses for the sixnine months ended JuneSeptember 30, 2011 were $820,000$559,400 or 4.3%9.4% of revenues compared to $1,350,700$587,800 or 6.9%10.9% of revenues for the same period in 2010. The balance for the sixnine months ended JuneSeptember 30, 2011 was primarily comprised of net financing expenses which decreased to $1,021,400$473,600 or 5.4%8.0% of revenues compared to $1,171,800$591,400 or 6.0%11.0% of revenues for the same period of 2010.  The interest due with respect to the Company’s credit facilities was $789,500$419,100 for the sixnine months ended JuneSeptember 30, 2011 compared to $771,600$466,700 for the same period in 2010.  The decrease in balance was mainly due to the decrease of term loans in the amount of $7,287,500 after the sale of Cancable in September 2011. Additionally, the foreign currency translation gainloss for the sixnine months ended JuneSeptember 30, 2011 was $280,900$83,600 compared to a foreign currency translation lossgain of $92,600$23,100 for the same period of 2010. The change was related to the foreign currency translation of term notes which resulted from the Canadian dollar trading higherlower than the U.S. dollar at JuneSeptember 30, 2011 as compared to the same period ofreverse situation at September 30, 2010.
 
Income taxes:  No income taxes were paid and/or owed during the sixnine months ended JuneSeptember 30, 2011 and 2010, which was mainly due to the Company’s losses carried forward to offset all income generated by the Company. Because of this and because we have fully reserved our deferred income tax assets, there was no provision and/or benefits for income taxes.
Loss from operations: Loss from operations for the nine months ended September 30, 2011 was $425,000 compared to $573,000 the same period in 2010. The year-over-year decrease in loss from operations was primilary due to the increase in revenue and decrease in cost of sales. The improvement was offset with the increase in general and administration expenses for the nine months ended September 30, 2011.
 
Loss from continuing operations: Loss from continuing operations for the nine months ended September 30, 2011 was $984,300 compared to $1,160,800 the same period in 2010. Loss from continuing operations for nine months ended September 30, 2011 was lower which was mainly due to the decrease in operating losses and net financing expenses.
Net Income/Loss:  Net lossincome for the sixnine months ended JuneSeptember 30, 2011 was $6,300$11,640,200 compared to a net loss of $1,066,700$433,400 for the same period in 2010. The net income for the nine months ended September 2011 includes income from discontinued operations of $451,500 and gain on disposal of discontinued operations of $12,173,000. The Company’s operating incomeloss was $813,700$425,000 for the sixnine months ended JuneSeptember 30, 2011 compared to an operating incomeloss of $283,900$573,100 for the same period of 2010. The year-over-year increase in operatingnet income was primarily reflected a focused cost reduction program acrossdue to the Company.sale of Cancable.
 
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 JuneSeptember 30, 2011, we had $2,275,488$1,190,904 in cash. We have an accumulated deficit of $33,645,258,$21,998,750, a stockholders’ deficit of $14,740,797$1,373,291 and a working capital deficit of $14,200,086$416,515 at JuneSeptember 30, 2011, and at such date we have current maturities of term loans aggregating $14,001,128.$1,548,207. We believe that cash from operations and our credit facilities with Laurus will continue to be adequate to satisfy our ongoing working capital needs as we do not expect Laurus to demand acceleration of the loans extended to the Company. We do not currently haveAs a result of the ability to repay the notes in the eventsale of a demand by the holder. Furthermore, we granted aCancable Group, Laurus also terminated and cancelled all guarantees, security interest and other obligations of the Company and certain of its subsidiaries related to approximately US$1,548,207 of indebtedness owed to Laurus and its related entities in substantially allby certain other subsidiaries of our assets and accordingly, in the event of any default under our agreements with Laurus and its related entities, they could conceivably attempt to foreclose on our assets, which could cause us to terminate our operations.Company. During Fiscal Year 2011, our primary objectives in managing liquidity and cash flows will beare to ensure financial flexibility to support growth and entry into new markets and improve inventory management and to accelerate the collection of accounts receivable.

 
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In addition, we have reduced general and administrative expenses to improve cash flow. We have also increased our rates for services provided by AC Technical to improve gross margins. This is in line with our competitors. Finally, we expect to realize additional benefits of our research and development efforts within the next 12 months as we start to introduce our own line of customized products to the industry in Iview DSI. These products and technologies are expected to improve gross margins.  We plan 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 company at a future date however no assurance can be made that such financing would be available, and if available that it would be on terms acceptable to us.

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Net Cash Provided by Operating Activities. Activities.  Net cash used by operating activities amounted to $295,300 for the nine months ended September 30, 2011 compared to net cash provided by operating activities amounted to $800,300 for the six months ended June 30, 2011 compared to $455,000of $13,400 for the corresponding period of 2010. The changes were primarily a result of a decrease in net loss from continuing operations as well as factors discussed below.
 
Comparison of  the balance sheet as at JuneSeptember 30, 2011 to December 31, 2010
 
Accounts Receivable
 
Our accounts receivable increased by approximately $704,600 compareddecreased to the balance$996,700 as at December 31, 2010. Accounts receivable of the Cancable segment were $2,137,500 as at JuneSeptember 30, 2011 compared to $1,909,800 as at December 31, 2010. The increase was attributable to the timing of payments from our customers. Accounts receivable of AC Technical segment were $1,531,400 as at June 30, 2011 compared to $1,207,800$1,129,900 as at December 31, 2010. The fluctuation in balance was mainly due to the increasedecrease in revenue.revenue during the third quarter of fiscal 2011.
 
Inventory
 
Inventory at JuneSeptember 30, 2011 was $634,900$387,300 compared to $692,900$477,000 as at December 31, 2010. The inventorydecrease in balance was mainly due to the decrease in contract revenue during the third quarter of the Cancable segmentfiscal 2011.
Accounts Payable and Accrued Liabilities
Accounts payable decreased to approximately $1,582,900 as at JuneSeptember 30, 2011 was $213,100 compared to $215,900from $1,748,600 as at December 31, 2010. The inventory of AC Technical segment as at June 30, 2011 was $421,900 compared to $476,900 as at December 31, 2010.
Accounts Payable and Accrued Liabilities
Accounts payable increased to approximately $4,344,800 as at June 30, 2011 from $3,990,900 as at December 31, 2010. The increasedecrease was mainly due to fluctuations in the timing of payments to our suppliers.
 
Deferred Income
 
Deferred income revenue decreased to $44,500$30,100 as at JuneSeptember 30, 2011 compared to $110,500 as at December 31, 2010. Deferred revenue primarily relates to payments associated with contracts which are paid in advance and for which revenue is recognized over the term of the contract.
 
Net Cash Used in Investing Activities.  Net cash used byin investing activities was $11,900$4,700 for the sixnine months ended JuneSeptember 30, 2011, compared to net cash used byin investing activities of approximately $29,400$6,700 for the sixnine months ended JuneSeptember 30, 2010.
 
Net Cash Provided By Financing Activities.  Net cash used in financing activities was approximately $418,000$327,300 for the sixnine months ended JuneSeptember 30, 2011 compared to $718,200net cash provided by financing activities of $132,100 for the sixnine months ended JuneSeptember 30, 2010. The change was primarily the result of net inflowsoutflows of $384,700$260,700 for the sixnine months ended JuneSeptember 30, 2011 from our line of credit, compared to $76,500net inflows of $207,100 in 2010. Our capital lease repayments during the period ended June 30, 2011 were $752,700, compared to $744,700 in 2010.
 
Recent Accounting Pronouncements – From time to time, new accounting pronouncements are issued by the FASB that are adopted by the Company as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the company’s consolidated financial statements upon adoption.

Off Balance Sheet Arrangements
 
None

 
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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 the following critical accounting estimates: accounts receivable allowances, contract revenues, inventory reserves, stock-based compensation and financial instruments. See our Form 10-K for the year ended December 31, 2010, for a discussion of our critical accounting estimates.

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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, 2010 Annual Report on Form 10-K 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.
Quantitative and Qualitative Disclosures about Market Risk
 
This item is not applicable to the Company because we are a smaller reporting company.
 
Item 4.Controls and Procedures
 
Evaluation of Disclosure Controls and Procedures   We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our filings under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the periods specified in the rules and forms of the SEC.  This information is accumulated to allow timely decisions regarding required disclosure.  As of JuneSeptember 30, 2011, the end of the period covered by this quarterly report on Form 10Q, our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our disclosure controls and procedures, as such terms are defined under rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this assessment, our management concluded that our disclosure controls and procedures were effective as of the end period covered by this quarterly report.
 
Changes in Internal Control Over Financial Reporting   There has not been any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our secondthird fiscal quarter of 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 
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PART II.                
PART II.OTHER INFORMATION
 
Item 1.Legal Proceedings
 
By Notice of Application issued in the Federal Court of Appeal on September 17, 2010 by our Subsidiary, XL Digital Services Inc. (“XL Digital”), as applicant against Communications, Energy and Paperworkers Union of Canada (“CEP”) as respondent, XL Digital applied to the Federal Court of Appeal for judicial review of the decision of the Canada Industrial Relations Board (the “Board”) dated August 23, 2010 wherein the Board concluded that it had jurisdiction over XL Digital, and found CEP to be a trade union within the meaning of the Canada Labour Code, and certified CEP to be the bargaining agent for all employees of XL Digital working in and out of its London, Ontario office. The application for judicial review was heard by the Federal Court of Appeal on May 18, 2011 and the judge dismissed the application for judicial review requested by XL Digital. The Company expects there may be a financial impact as a result of CEP becoming the bargaining agent of all of the London, Ontario employees of XL Digital and the operations of the London, Ontario employees being under federal jurisdiction but it is impossible to quantify the impact at this time.None
 
Item 1A.Risk Factors
 
This item is not applicable to the Company because we are a smaller reporting company.
 
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
 
None.
 
Item 3.Defaults upon Senior Securities
 
None.
 
Item 4.[Removed and Reserved]
 
Not applicable.
 
Item 5.Other Information
 
During the period covered by this quarterly report, there has been no material change in the nomination process for directors.
 
Exhibits
 
31.131.1* Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.231.2* Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.132.1* 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
32.232.2* 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
99.2+
Stock Purchase Agreement is incorporated by reference to Exhibit 99.2 to the Company's Current Report on Form 8-K filed on September 16, 2011 (SEC file number: 000-30585)
99.3+
Assignment and Assumption Agreement (Valens Debt Assignment and Assumption), dated September 16, 2011, between the Company and Cancable is incorporated by reference to Exhibit 99.3 to the Company's Current Report on Form 8-K filed on September 16, 2011
99.4+
Assignment and Assumption Agreement (Intercompany Receivables), dated September 16, 2011, between the Company and Cancable is incorporated by reference to Exhibit 99.4 to the Company's Current Report on Form 8-K filed on September 16, 2011
99.5+
Assignment and Assumption Agreement (Side Agreement), dated September 16, 2011, between the Company and Cancable is incorporated by reference to Exhibit 99.5 to the Company's Current Report on Form 8-K filed on September 16, 2011

+ Previously Filed and incorporated by reference

* Filed herewith.

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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/ Dominic Burns
 Dominic Burns, CEO
By:/s/ Heung Hung Lee
 Heung Hung Lee, CFO

Dated:  August 15,November 14, 2011

 
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