Press Release

Form 10KSB for CREATIVE VISTAS INC

April 18, 2006

Annual Report

Item 6. Managements Discussion and Analysis

MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

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

Overview and Recent Developments

On September 22, 2004, we incorporated a new Ontario company, A.C. Technical Acquisition Corp., in order to effect the acquisition of A.C. Technical Systems Ltd. Creative Vistas, Inc. owns 50 VFV shares (voting fixed value shares) and 100 NVE shares (non-voting equity shares) of AC Acquisition. Brent Swanick owns the remaining 50 VFV shares. The total issued share capital was CDN$100 (CDN$1 for each VFV share). Each VFV share is only entitled to a return of CDN$1 upon dissolution of AC Acquisition and has no share in AC Acquisitions profits; AC Acquisition is a direct subsidiary of ours and our 100 NVE shares have the entire interest in the profits of AC Acquisition.

On September 29, 2004, pursuant to a Stock Purchase Agreement with The Burns Trust (our president is one of the beneficiaries of the trust), The Navaratnam Trust (our CEO is one of the beneficiaries of the trust) and A.C. Technical Systems Ltd., AC Acquisition acquired all of the issued and outstanding shares of AC Technical from The Burns Trust and The Navaratnam Trust for consideration consisting of promissory notes in the aggregate amount of $3,300,000. AC Technical became an indirect subsidiary of the Company and a wholly owned direct subsidiary of AC Acquisition.

On September 30, 2004 the shareholders (The Burns Trust and The Navaratnam Trust) of A.C. Technical Systems Ltd., an Ontario corporation, entered into a series of transactions to acquire a controlling stock interest in Creative Vistas. On September 30, 2004, pursuant to a Common Stock Purchase Agreement with Miller Capital Corporation and Tudor Investments LTD Profit Sharing Plan, Sayan Navaratnam, Dominic Burns, Randy Stern and Malar Trust, Inc. purchased 28,500,000 shares of Creative Vistas, Inc.s common stock from Miller Capital Corporation and Tudor Investments LTD Profit Sharing Plan for cash consideration of $300,000. Immediately prior to this purchase, there were 1,500,000 shares of Creative Vistas, Inc. common stock outstanding, which remained outstanding and were retained by the pre-existing stockholders of Creative Vistas, Inc.

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On September 30, 2004, we entered into a series of agreements with Laurus Master Fund, Ltd., one of the selling shareholders, whereby we issued to Laurus (i) a secured convertible term note in the amount of $4.5 million, (ii) secured revolving notes in the aggregate maximum amount of $3 million, (iii) a related option to purchase up to 1,499,997 shares of our common stock at a price of two-thirds of a cent per share, and (iv) a seven year warrant to purchase up to 2,250,000 shares of our common stock at a price of $1.15 per share. The loan is secured by all of our assets and the assets of our subsidiaries.

The Company loaned the proceeds of the term note and the revolving notes to AC Acquisition. AC Acquisition used the funds received to repay an aggregate of $1.8 million of the principal amount of the promissory notes and to pay transaction costs.

After the completion of the business acquisition and leveraged buyout transactions Sayan Navaratnam and Dominic Burns controlled 56% and 37% respectively of the common stock of the Company. Consequently, the acquisition of the controlling stock interest in the non-operating public shell corporation, Creative Vistas (the legal acquirer), by the shareholders of AC Technical, has been accounted for in accordance with EITF 88-16, Basis in Leveraged Buyout Transactions.

The above structure was set up for Canadian tax purposes. This allows AC Technical to maintain its status as a Canadian Controlled Private Corporation (CCPC), which makes it eligible for Canadian research and development tax credits. A CCPC is a corporation that is not controlled by a non-Canadian entity. Consequently Brent Swanick, who is Canadian, holds 50% of the voting shares and the Company holds 50% of the voting shares and 100% of the non-voting equity shares so as to satisfy the requirement for CCPC tax treatment. To provide protection to the Company, there is a voting agreement between Mr. Swanick and Creative Vistas, Inc. granting Creative Vistas, Inc. the power at any time to cause Mr. Swanick to transfer his VFV shares to another person designated by Creative Vistas. The result is that under the Canadian tax law, control is not with a foreign entity and AC Technical Systems Ltd. is considered a CCPC. However, Creative Vistas, Inc. by virtue of its ability to cause the transfer at any time of the VFV shares, completely controls AC Technical. However, the provisions of the voting agreement do not affect AC Technicals qualification as a CCPC entitled to certain tax credits.

On September 20, 2005, we incorporated a new Ontario Company, Iview Digital Video Solutions Inc. (Iview DSI). Iview DSI is to focus on providing video surveillance products and technologies to the market.

Subsequent to fiscal year ended 2005, the Company entered into an agreement, through its wholly owned newly formed Delaware subsidiary, Cancable Holding Corp. (Holding), to acquire all of the issued and outstanding shares of capital stock and any other equity interests of Cancable Inc., an Ontario corporation (Cancable). To finance the acquisition, also on December 31, 2005, subsidiaries of the Company entered into a loan agreement with Laurus Master Fund, Ltd. (Laurus) to which the Company became a guarantor.

The Company, Cancable, Holding, Covington Capital Corporation (Covington) and BMO Capital Corporation (BMO) entered into a Stock Purchase Agreement for the purchase by Holding of all the issued and outstanding shares of capital stock and any other equity interests of Cancable.

Cancable and Holding entered into a series of agreements with Laurus whereby Cancable issued to Laurus a secured term note (the Note) in the amount of Six Million Eight Hundred Sixty Five Thousand Dollars ($6,865,000) and Holding issued to Laurus a related option to purchase up to 49 shares of common stock of Holding (up to 49% of the outstanding shares of Holding) at a price of $0.01 per share (the Option). The loan is secured by all of the assets of the Company and its subsidiaries. The principal amount of the Note bears interest at the prime rate plus one and three quarters percent with a minimum rate of seven percent. Cancable and Holding have granted Laurus a right of first refusal with respect to any debt or equity financings for a period of 180 days after closing.

On February 13, 2006, the Company and its subsidiaries, Iview Holding Corp., a newly formed Delaware corporation and direct subsidiary of the Company (Holding), and Iview Digital Video Solutions Inc. (Iview), entered into a series of agreements with Laurus Master Fund Ltd. (Laurus) pursuant to a refinancing transaction whereby the Company issued to Laurus a secured term note (the Company Note) in the amount of Eight Million Two Hundred Fifty Thousand Dollars ($8,250,000), Iview issued to Laurus a secured term note (the Iview Note) in the amount of Two Million Dollars ($2,000,000), the Company issued to Laurus a related warrant to purchase up to 2,411,003 shares of common stock of the Company (up to 7.5% of the outstanding shares of the Company) at a price of $0.01 per share (the Warrant) and Holding issued to Laurus a related option to purchase up to 20 shares of common stock of Holding (up to 20% of the outstanding shares of Holding) at a price of $0.01 per share (the Option). The loans are secured by all of the assets of the Company and its subsidiaries: A.C. Technical Systems Ltd., Creative Vistas Acquisition Corp., Holding, Iview, Cancable Holding Corp., Cancable and Cancable, Inc.

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The current corporate structure is as follows:

Results of Operations

Comparison of Year Ended December 31, 2005 to Year Ended December 31, 2004

No financial statements are presented for the shell company, Creative Vistas, Inc., prior to the business acquisition and leverage buyout transactions because, prior to the September 30, 2004 transaction, its assets and results were immaterial. Prior to September 30, 2004 Creative Vistas refers to the shell company. Additionally, we did not include any discussion relating to the Companies acquired or formed after the fiscal year ended December 31, 2005. As a result, the financial statements of Cancable Holding Corp., Cancable Inc., Cancable, Inc. and Iview Holding Corp. were not included in the accompany consolidated financial statements for the year ended December 31, 2005 and 2004.

The term the Company refers to the post business acquisition and leverage buyout consolidated entity.

Since our business tends to be seasonal, most of the jobs are usually processed by us in the first or the fourth quarter of the calendar year. For example, the Canadian federal government has a March year end, and as a result, we experience an increase in government contracts in the first quarter of the calendar year.

For purposes of this Managements Discussion and Analysis or Plan of Operation the numbers in the financial statements covering the successor period from September 30, 2004 to December 31, 2004 were combined with the predecessor period from January 1, 2004 to September 29, 2004 to reflect the entire fiscal year ended December 31, 2004.

Sales: Sales for fiscal 2005 totaled $8,718,000 representing an increase of 3.1% from the 2004 fiscal year. The increase represents a 28.2% increase in service revenue offset in part by a 0.3% decrease in contract revenue. Our contract revenue decreased by 0.3%, which was mainly due to project and constructions delays. In addition, contract revenue from one of our major customers decreased from $1,800,000 in 2004 to $559,000 in 2005. Fiscal 2004s revenue was higher as this customer had a greater number of stores that required security systems and the numbers of contracts received from this customer were reduced in 2005. The decrease in revenue of this customer was offset by the increase in number of new contracts received during the year. The increase in service revenue primarily represents the cumulative effect of the growth in service contracts and number of customers over the past few years. We have experienced a significant increase in the number of inquiries for systems from the government and retail sector. This increased interest in security products and services may result in our achieving increased revenues in future periods if we are successful in attracting new customers or obtaining additional projects from existing customers. There is no assurance that the Company will be able to attract new customers.

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Cost of Goods Sold: Cost of goods sold as a percentage of revenue for the twelve months ended December 31, 2005 decreased to $5,831,600 or 66.9% of revenues from $5,883,800 or 69.6% of revenues, for the twelve months ended December 31, 2004. The decrease was mainly due to the decrease in material cost to $3,897,900 or 45.7% of revenues in fiscal 2005 from $4,082,900 or 48.5% in fiscal 2004. The decrease in the cost of materials was mainly due to a decrease in contract revenue for which we required material. The percentage decrease in material costs was mainly due to the increase in service revenue for which we required less material. As a result, our gross margin increased. On the other hand, the labor and subcontractor cost decreased to $1,443,600 or 16.6% of revenues for fiscal 2005 from $1,756,400 or 20.9% of revenues for fiscal 2004. This reduction was attributable to our efficient integration/engineering capabilities, different product mix, more efficient labor utilization.

Project, Selling, General and Administrative Expenses: Projects, selling, general and administrative expenses for the twelve months ended December 31, 2005 increased to $4,032,700 or 46.2% of revenues for fiscal 2004 from $4,065,000 or 48.1% of revenues for fiscal 2004. The increase was mainly due to the following:

Project cost was $1,228,700 or 14.1% of revenue for fiscal 2005 compared to $1,403,000 or 16.6% for the same period of fiscal year 2004. Balance mainly includes the salaries and benefits of indirect staff and consulting fees amounting to $697,100 for fiscal 2005 compared to $771,000 for fiscal 2004. The decrease was mainly due to the decrease in number of headcount. Leasing cost of the automobile was approximately $167,900 for fiscal 2005 compared to $209,300 for fiscal 2004. Automobile insurance was decreased to $54,500 in fiscal 2005 from $74,000 in fiscal 2004. The decrease was mainly due to the decrease in number of vehicles used by the Company. Travel and gas expenses were $239,000 for fiscal 2005 compared to $199,800 for fiscal 2004. The increase was mainly due to the increase in travel by the staff.

Selling expenses were $743,000 or 8.5% of revenues for fiscal 2005 compared to $1,002,900 or 11.9% of revenues for fiscal 2004. Balance for the twelve months period ended December 31, 2005 is mainly comprised of salaries, commission and consulting fees to salespersons and the president of $589,300 compared to $726,300 for fiscal 2004. Decrease in the balance was mainly due to the decrease in number of salespersons from 7 as December 31, 2004 to 5 as at December 31, 2005. The advertising and promotion expenses were $62,900 for fiscal 2005 compared to $136,700 for fiscal 2004. The decrease was mainly due to a better control of the expenses.

General and administrative cost was $2,061,000 or 23.6% of revenues for fiscal 2005 compared to $1,659,600 or 19.6% for fiscal 2004. The balance for fiscal 2005 is comprised mainly of salaries and benefits to administrative staff of $507,600 compared to $507,200 for fiscal 2004. There was no material fluctuation between two fiscal years. Additionally, the research and development expense has increased by approximately for $100,000 for the current year. The professional fees were $380,000 for fiscal 2005 compared to $287,000 for fiscal 2004. The increase in professional fees was mainly due to the registration statements and other corporate matters. The investor relations fees were $366,000 compared to $27,000 for fiscal 2004.

Operating Income/Loss: The Company has a higher gross margin of 33% for fiscal 2005 compared to 30% for fiscal 2004. Our losses were mainly due to the large professional fees for the registration statements and the quarterly report and investor relations expenses.

Interest and Other Expenses or income: Net interest and other income for fiscal 2005 was $1,973,800 or 22.6% of revenues compared to net interest and other expenses $2,673,000 or 31.6% of the revenues for the same period of fiscal 2004. Balance is primarily comprised of the amortization of deferred charges amounting to $450,500 for fiscal 2005 compared to $125,400 for fiscal 2004. In addition, total cash interest on convertible term notes and other notes payable was $668,000 for fiscal 2005 compared to $133,400 for fiscal 2004. The increase was mainly due to only three months interest in 2004 on term loans from Laurus, which started on September 30, 2004. Also, there was non-cash interest related to amortization of embedded derivatives of approximately $1,600,000 included in interest for fiscal 2005. In addition, there were penalties in the amount of $137,000 to Laurus for failure of the Company to cause its registration statement registering the shares to be declared effective by the SEC on the required date. Laurus waived any liquated damages due and payable to Laurus and the Company issued 313,000 warrants to Laurus. The warrants were recorded at fair value by using the Black-Scholes option pricing model. (see Note 12 and Note 16). Also, there was net income of the movement of derivative financial instruments of $5,373,200 for fiscal 2005 compared to net expenses of $2,414,700 for fiscal 2004. The Company also wrote off the goodwill amounted to $503,900 in the current fiscal year.

Income taxes: There is no income tax provision for fiscal year 2005 which was mainly due to the Companys losses for the period. All prior taxes have already been accounted for in the income tax recoverable and therefore, there is no additional provision for income taxes recoverable and deferred tax asset.

Net Income/Loss: Net income for fiscal 2005 was $827,600 compared to net loss of $4,014,800 for fiscal 2004. The income was mainly due to remeasurement of derivative instruments of $5,373,200 for fiscal 2005 and there were net expenses of $2,414,700 for fiscal 2004. The increase in income was offset by the amortization of deferred charges amounted to $450,500 compared to $125,400 for fiscal 2004. In addition, there were professional and investor relations expenses incurred due to public company expenses and also the additional interest expenses on long term debts.

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 December 31, 2005, we had $532,700 in cash. We believe that cash from operations and our credit facilities with Laurus Master Funds, Ltd. will continue to be adequate to satisfy the ongoing working capital needs of the Company. The balance available under credit facilities was $329,000 as at December 31, 2005. During fiscal year 2006, our primary objectives in managing liquidity and cash flows will be to ensure financial flexibility to support growth and entry into new markets and improve inventory management and to accelerate the collection of accounts receivable.

Net Cash Used in Operating Activities. Net cash used in operating activities amounted to $1,096,000 for fiscal 2005. The changes in operating assets and liabilities resulted in net cash provided of $187,300, which included a $25,800 increase in accounts receivable, a $9,500 increase in inventory, a $8,500 increase in prepaid expenses, a $561,700 increase in accounts payable, a $157,000 increase in income taxes recoverable and a $173,600 decrease in deferred revenue.

Compared the balance sheet as at December 31, 2005 to December 31, 2004

Accounts Receivable

Our accounts receivable decreased to $2,620,000 as at December 31, 2005 from $2,641,000 as at December 31, 2004. Approximately 60% of the accounts receivable outstanding at December 31, 2005 were less than 90 days old. The Company will continue to accelerate the collection of accounts receivable in order to improve the cash flow of the Company.

Inventory

Inventory on hand at December 31, 2005 increased $9,500 compared to the balance as at December 31, 2004. The level of inventory remains consistent with the balance as at December 31, 2004 which was mainly due to the improvement of inventory control and keeping minimum levels of inventory.

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities increased approximately by $561,700 compared to the balance as at December 31, 2004 which was mainly due to the increase in purchases of material, in the last twelve months and the timing of payments to our suppliers. Total trade payable as at December 31, 2005 increased by approximately $361,000 compared to the balance as at December 31, 2004 and the accrued liabilities increased by approximately $187,000. The increase in accrued liabilities was mainly due to the increase in accrual of professional fees, interest and payroll with the amount of $50,000, $40,000 and $30,000 respectively. The increase in accrued liabilities was mainly due to the timing of payments.

Deferred Revenue

Deferred revenue decreased by $173,600 at December 31, 2005 compared to the balance as at December 31, 2004. This increase was mainly due to the timing of payments by our customers. Deferred revenue primarily relates to payments associated with the contracts where revenue is recognized on a percentage of completion basis. (See summary of accounting policy in our condensed consolidated financial statements).

Incomes Taxes Recoverable

The income taxes recoverable were mainly due to the expected refund from losses carried back to prior years.

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Net Cash Used in Investing Activities. Net cash used in investing activities was $125,000 for the twelve months ended December 31, 2005 compared to $1,800,000 for the twelve months ended December 31, 2004. The balance for the twelve months ended 2005 was mainly due to the note receivable to dataBahn of $125,000. Last year balance was mainly due to the acquisition of A.C. Technical Systems Ltd. for cash payment of $1,800,000.

Net Cash Provided From Financing Activities. Net cash provided from financing activities was $1,486,800 for the twelve months ended December 31, 2005 compared to net cash provided of $4,162,700 for the twelve months ended December 31, 2005. The balance for the twelve months ended December 31, 2005 was mainly due to net cash received from the convertible term note financed from Laurus. Last year balance was higher as the net cash received from the convertible term note financed from Laurus was approximately $4,000,000.

We plan to adopt an incentive stock option plan in the second quarter of fiscal 2005. The terms of the inventive stock option plan are not yet known.

Our capital requirements have grown since our inception with the growth of our operations and staffing. We expect our capital requirements to continue to increase in the future as we seek to expand our operations. On September 30, 2004, we obtained additional funding through a series of agreements entered with Laurus (see details on Note 1 and 8 in the condensed consolidated financial statements). If Laurus converts the term note and/or the revolving notes into shares of the Companys common stock, the Company may avoid or reduce any cash payment required for principal and interest payable. As a result, it will improve our cash flow. However, such conversion by Laurus will dilute the existing shareholders.

Over the next twelve months the Company believes that its existing capital will be sufficient to sustain its operations. Management plans to seek additional capital in the future to fund operations, growth and expansion through additional equity, debt financing or credit facilities. The Company has had early stage discussions with investors about potential investment in the Company into the firm at a future date. No assurance can be made that such financing would be available, and if available it may take either the form of debt or equity. In either case, the financing could have a negative impact on our financial condition and our shareholders. The Company has introduced cost cutting initiatives within the Administration and Project and Selling departments to improve efficiency within the Company and also improve cash flow. The Company has also increased its rates for service by 20 percent to improve gross margins. This is in line with our competitors. The Company also expects to see the benefits of its research and development efforts within the next 12 months as it starts to introduce its own line of customized products to the industry. These products and technologies are expected to improve gross margins. The Company believes that it will be eligible for research and development tax credits at year end for its research and development efforts during the year and these are additional sources of cash flow for the Company. The Company is also negotiating longer credit terms with its suppliers from 45 days to 60 to 75 days. Also, if Laurus chooses to convert its term note and interest into common stock it would improve the Companys cash position.

Recent Accounting Pronouncements -

In November 2004, the Financial Accounting Standards Board issued SFAS No. 151, Inventory Costs-an Amendment of ARB No. 43, Chapter 4. The standard adopts the view related to inventories that abnormal amounts of idle capacity and spoilage costs should be excluded from the cost of inventory and expensed when incurred. Additionally, the meaning of the term normal capacity was clarified. Based on managements evaluation, the adoption is not expected to have a material effect on the consolidated financial statements.

In December 2004, the Financial Accounting Standard Board issued FASB Statement No. 123R (Revised), Share-Based Payment which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation. Statement No. 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash Flows. Statement No. 123(R ) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values and, for small business issuers, is effective at the beginning of the first annual period of the registrants first fiscal year that begins after December 15, 2005. During the year, the Company has not issued any stock-based awards to employees.

In September 2004, the Financial Accounting Standard Board issued EITF 04-8, The Effect of Contingently Convertible Instruments on Diluted Earnings per Share. This Issue addresses when contingently convertible instruments should be included in diluted earnings per share. The Task Force reached a consensus that contingently convertible instruments should be included in diluted earnings per share (if dilutive) regardless of whether the market price trigger has been met. The Task Force also agreed that the consensus should be applied to instruments that have multiple contingencies if one of the contingencies is a market price trigger and the instrument is convertible or settleable in shares based on meeting a market condition. Based on managements evaluation of EITF 04-8, the adoption did not have a significant effect on the consolidated financial statements.

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In December 2004, the FASB issued SFAS 153 "Exchanges of Non monetary Assets - an amendment of APB Opinion No. 29". This Statement amended APB Opinion 29 to eliminate the exception for non-monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance. A non- monetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The adoption of this Standard is not expected to have any material impact on the Company's financial position, results of operations or cash flows.

In March 2005, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No.107 (SAB 107) which provides guidance regarding the interaction of SFAS 123(R) and certain SEC rules and regulations. The new guidance includes the SEC's view on the valuation of share-based payment arrangements for public companies and may simplify some of SFAS 123(R)s implementation challenges for registrants and enhance the information investors receive.

In March 2005, the FASB issued FIN 47, Accounting for Conditional Asset Retirement Obligations, which clarifies that the term 'conditional asset retirement obligation as used in SFAS 143, Accounting for Asset Retirement Obligations, refers to a legal obligation to perform an asset retirement . . .

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