**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-KSB**





(Mark
      One)


**[X]
      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE**


**ACT
      OF 1934**





**For
      the Fiscal Year Ended February 28, 2005**





**[_]
      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: 0-23506**





**IGIA,
      INC.**


(Exact
      name of registrant as specified in its charter)





**Delaware**
            **33-0601498**(State
                or other jurisdiction of incorporation or organization)
            (IRS
                Employer Identification No.)





**521
      5** **th** **Avenue, 20** **th** **Floor**


**New
      York, NY 10175**


(Address
      of principal executive offices)





**(212)
      575-0500**


(Registrant's
      telephone number, including area code)





**11
      West 42nd Street, 7th Floor, New York, New York 10036**


(Former
      name, former address and former fiscal year, if changed since last
      report)





Securities
      registered under Section 12(b) of the Exchange Act: None.





Securities
      registered pursuant to Section 12(g) of the Act: Common Stock, par value
      $.001





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 of1934 during the
      past 12 months (or for such shorter period that the registrant was required
      to
      file such reports), and (2) has been subject to such filing requirements for
      the
      past 90 days. Yes [X] No [ ]





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of Registrant's knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. [ ]





State
      Registrant's revenues for fiscal year ended February 28, 2005:
      $11,324,450





State
      the
      aggregate market value of the common stock held by non-affiliates of the
      Registrant: $164,912 as of June 17, 2005 based on the average bid and asked
      price of $0.021 per share as of June 17, 2005





State
      the
      number of shares outstanding of each of the registrant's classes of common
      equity, as of the latest practicable date: 18,002,933 shares issued and
      outstanding as of June17, 2005.








1





**FORWARD
      LOOKING STATEMENTS**





This
      Annual Report on Form 10-KSB (including the section regarding Management's
      Discussion and Analysis of Financial Condition and Results of Operations)
      contains forward-looking statements regarding our business, financial condition,
      results of operations and prospects. Words such as "expects," "anticipates,"
      "intends," "plans," "believes," "seeks," "estimates" and similar expressions
      or
      variations of such words are intended to identify forward-looking statements,
      but are not deemed to represent an all-inclusive means of identifying
      forward-looking statements as denoted in this Annual Report on Form 10-KSB.
      Additionally, statements concerning future matters are forward-looking
      statements.





Although
      forward-looking statements in this Annual Report on Form 10-KSB reflect the
      good
      faith judgment of our Management, such statements can only be based on facts
      and
      factors currently known by us. Consequently, forward-looking statements are
      inherently subject to risks and uncertainties and actual results and outcomes
      may differ materially from the results and outcomes discussed in or anticipated
      by the forward-looking statements. Factors that could cause or contribute to
      such differences in results and outcomes include, without limitation, those
      specifically addressed under the heading "Risks Related to Our Business" below,
      as well as those discussed elsewhere in this Annual Report on Form 10-KSB/A.
      Readers are urged not to place undue reliance on these forward-looking
      statements, which speak only as of the date of this Annual Report on Form
      10-KSB/A. We file reports with the Securities and Exchange Commission ("SEC").
      You can read and copy any materials we file with the SEC at the SEC's Public
      Reference Room at 450 Fifth Street, NW, Washington, DC 20549. You can obtain
      additional information about the operation of the Public Reference Room by
      calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet
      site (www.sec.gov) that contains reports, proxy and information statements,
      and
      other information regarding issuers that file electronically with the SEC,
      including us.





We
      undertake no obligation to revise or update any forward-looking statements
      in
      order to reflect any event or circumstance that may arise after the date of
      this
      Annual Report on Form 10-KSB/A. Readers are urged to carefully review and
      consider the various disclosures made throughout the entirety of this annual
      Report, which attempt to advise interested parties of the risks and factors
      that
      may affect our business, financial condition, results of operations and
      prospects.





**PART
      I**





**ITEM
      1. - BUSINESS**





**Our
      History**





We
      were
      incorporated in the State of Delaware in May 1992 under the name Quasar Projects
      Company for the purpose of merging with or acquiring a company with operations
      and assets. From its inception through April 28, 1999, we generated nominal
      revenues and did not actively engage in business.




On
      April
      28, 1999, we acquired Diva Entertainment, Inc., a Florida corporation, which
      was
      engaged in the business of operating and managing two wholly-owned talent
      management companies: Prima Eastwest Model Management, Inc., a California
      corporation, and Que Management, Inc., a New York corporation. At that time,
      we
      changed our name to Diva Entertainment, Inc. From April 28, 1999 through June
      10, 2004, we were in the business of representing professional fashion models,
      commercial actors and theatrical actors.




On
      June
      11, 2004, we entered into the Securities Purchase Agreement described above
      under the heading "Recent Developments," pursuant to which we acquired our
      wholly owned subsidiary Tactica International, Inc. and sold our former
      subsidiary Diva Entertainment, Inc.




Since
      June 11, 2004, we have been in the business of the direct marketing and
      distribution of proprietary and branded personal care and home care products.
      We
      are no longer in the business of talent management.




**General
      Background**




We,
      through our wholly-owned operating subsidiary, Tactica International, Inc.
      ("Tactica"), are a direct marketer and distributor of proprietary and branded
      personal care and home care products. Primarily through direct response
      television advertising of Tactica’s infomercials, Tactica has successfully
      established a niche and growing position within the direct marketing industry,
      a
      market which the "Direct Marketing Association" expects to grow from $2 to
      $3
      trillion dollars in annual sales within the next five years. Tactica also sells
      through major retail chains and mail order catalogs and on Tactica's
      website.




2


All
      of
      our operations occur in our Tactica subsidiary, which we acquired as of June
      11,
      2004. We established a wholly-owned subsidiary, Shopflash, Inc. (“Shopflash”),
      on April 7, 2005 that we plan to operate as a direct marketer of other niche
      products not marketed by Tactica. We do not currently have any operations at
      the
      parent level.




In
      March
      2000, a majority interest in Tactica was purchased by Helen of Troy Limited
      or
      HoT, a developer and marketer of personal care products. The transaction gave
      Tactica access to capital to expand marketing and distribution. Tactica expanded
      its focus on distribution and more than doubled the number of retail outlets
      carrying Tactica's products to more than 45,000 worldwide. On April 29, 2004,
      Tactica's management purchased back the 55% interest in Tactica held by HoT.
      In
      exchange for HoT's 55% interest and approximately $17 million of secured Tactica
      debt and accrued interest payable, HoT received marketable securities,
      intellectual properties, including the Epil-Stop® brand, and the right to
      certain Tactica tax refunds. On June 11, 2004, Tactica acquired us pursuant
      to
      an acquisition by us of all of the outstanding securities of Tactica and the
      acquisition by Tactica's stockholders of the majority of our outstanding
      securities.




**Summary
      of Historical Financial Information**




Set
      forth
      below is a summary of our historical financial information. For accounting
      purposes, t he
      June
      11, 2004 transaction with Tactica is accounted for as a purchase of us by
      Tactica. As a result, the audited financial statements for the fiscal year
      ended
      February 29, 2004 are the financial statements of Tactica. The summary financial
      information for the years ended February 28, 2005 and February 29, 2004 is
      derived from the financial statements attached hereto.






**Fiscal
                Year Ending**
              **(Amounts
                in thousands)****February
                28,**
              **2005**
            
            
            **February
                29,**
              **2004****Gross
                Sales**
            
            $
            15,253
            
            $
            62,130**Net
                Sales**
            
            
            11,324
            
            
            39,610**Gross
                Profit (Loss)**
            
            
            (234
            )
            
            19,234**SG&A**
            
            
            14,209
            
            
            32,727**Operating
                Loss**
            
            
            (14,443
            )
            
            (13,493
            )**Reorganization
                Items**
            
            
            (1,558
            )
            
            --**Net
                Loss**
            
            
            (16,197
            )
            
            (9,015
            )





**Products**




We
      design, develop and sell a full line of personal care and other consumer
      products in categories such as hair care, hair removal, dental care, skin care,
      sports and exercise, household, and kitchen. Some of the products we develop
      and
      market are trend-oriented personal care products. We continue to develop new
      products and enhance existing products in order to maintain and improve our
      position in the personal care and comfort product market. The following table
      lists the primary products that we sell.




PRODUCTS




**Personal
                  Care Products:**Hair
                  Clippers and TrimmersHard
                  and Soft-bonnet hair dryersHair
                  Styling and utility implementsDecorative
                  hair accessoriesLiquid hair styling products
   3
 PRODUCTS
  Paraffin
                    baths, facial brushes, and facial saunas, and other skin care
                    appliancesFoot
                    bathsFoot
                    massagers, hydro massagers, cushionMassagers
                    and body massagersAromatherapy
                    and spaAir
                    Purifiers and IonizersLight
                    therapy systemsNail
                    care systemsDental
                    CareTeeth
                    Whitening SystemEpilation
                    DevicesBeddings
                    and pillowsFoot
                    care systemLip
                    careFitness
                    productsLiquid
                    skin care productsSkin
                    care powder**Hair
                    Care Products:**Hand-held
                    hair dryersCurling
                    irons, straightening irons, hot air brushes and brush
                    ironsHair
                    setters**Household
                    Products:**Upright
                    vacuumSteam
                    cleanerHand
                    held vacuumBags
                    and accessories




**Sales
      and Marketing**




Since
      its
      inception in 1992, Tactica has established a worldwide market for its family
      of
      personal and skin care products, and the Epil-Stop® hair removal products the
      latter of which was sold to HoT in April 2004. Tactica utilizes a comprehensive
      and focused marketing and distribution program that includes widespread
      television and print advertising combined with global product placement in
      well
      known retail outlets worldwide, as well as through popular mail order catalogs,
      and directly through Tactica’s websites, primarily www.igia.com.




We
      use
      direct response marketing to sell these products directly to consumers primarily
      under our own brands and licensed trademarks. The acquisition of licensing
      rights represents an important component of our growth strategy. Tactica’s line
      of floor care products has been marketed under the Singer brand, which we began
      licensing in fiscal 2004. Tactica’s products are also sold through major
      pharmacy and general merchandise retail chains and globally recognized mail
      order catalogs. Tactica’s products are also periodically featured on home
      shopping channels such as QVC and Tactica infomercials are shown on national
      cable and broadcast television channels such as The Hallmark Channel, CNBC
      and
      The Game Show Channel. Tactica markets its products internationally through
      distributors covering more than 100 countries worldwide. No customer accounted
      for 10% or more of net sales during fiscal 2005 or 2004.Tactica’s U.S. sales
      comprised 68% and 85% of total net sales in fiscal 2005 and 2004, respectively.




4


**Manufacturing
      and Distribution**




We
      contract with unaffiliated manufacturers both within and outside the U.S. to
      manufacture our products. We arrange for our products to be shipped to a third
      party warehouse facility in Los Angeles, California for shipment to individuals
      or retail customers. Tactica also sometimes ships products from manufacturers
      directly to retailers. Tactica’s retail customers often seek to minimize their
      inventory levels and often demand that we fulfill their orders within relatively
      short time frames. Consequently, these inventory management practices often
      required us to carry substantial levels of inventory in order to meet our
      customers’ needs, which given the required level of working capital had limited
      our ability to satisfy retail customer orders.




Most
      of
      our products manufactured outside the countries in which they are sold are
      subject to import duties, which have the effect of increasing the amount we
      pay
      to obtain such products.




**License
      Agreements, Trademarks and Patents**




In
      April
      2003, Tactica entered into a license agreement with The Singer Company B.V.,
      for
      use of the Singer brand name on its line of floor products sold exclusively
      through Tactica within the United States and Canada. The sales of Tactica’s
      Singer floor care products line depends materially upon the continued use of
      the
      Singer trademark. Tactica’s license agreement with Singer terminates on December
      31, 2004 unless sooner terminated; however, Tactica has the option to extend
      the
      license agreement for up to ten additional one-year periods, provided Tactica
      pays minimum royalties, meets minimum sales volumes, and makes minimum levels
      of
      advertising expenditures. Tactica has not yet achieved these minimums and may
      not achieve them due to a delay in scaling up related promotional activities.
      Tactica has the right to continuing marketing its line of floor care products
      without use of the Singer trademark.




Pursuant
      to a stock purchase agreement, dated as of April 29, 2004, Tactica transferred
      ownership of the Epil-Stop brand to HoT in exchange for HoT’s equity interest in
      Tactica, and HoT provided a royalty-free perpetual license to use certain
      technologies. Tactica received a three-year license for the exclusive right
      to
      sell Epil-Stop products in all markets except the U.S., Canada, Mexico, Central
      and South America and the Caribbean. Tactica has certain future minimum royalty
      obligations that must be satisfied to retain the license.




Tactica
      has filed or obtained licenses for design and utility patents in the U.S. and
      several foreign countries. We do not believe that the loss of any particular
      patent or patent license would have a materially adverse effect on its business.
      Tactica has granted HoT a non-exclusive royalty-free license to its U.S. patent,
      as well as corresponding patent applications, for the life of such patents
      pursuant to the stock purchase agreement between HoT and Tactica.




**Backlog**




Tactica
      ships some of its products to direct response customers and provides these
      customers with estimated delivery dates at the time that it receives their
      respective orders. There was no significant backlog of orders in any of
      Tactica’s distribution channels at February 28, 2005.




**Competition**




We
      sell
      products in the “As Seen on TV” market, the personal care products market
      including depilatories (hair removal products), the household appliance market
      and the floor care products market. These markets are very competitive.
      Maintaining and gaining market share depends heavily on product development
      and
      enhancement, pricing, quality, performance, packaging and availability, brand
      name recognition, patents, and marketing and distribution approaches. Our
      primary competitors in these markets include Thane International and Helen
      of
      Troy Limited or HoT. Most of our competitors have significantly greater
      financial and other resources than we do.




**Regulation**




Our
      products are generally not regulated by the U.S. Food and Drug Administration
      (FDA), however its products could be and have been subject to FDA regulations.
      National Advertising Council (NAC) has, from time to time, reviewed our
      advertising and communicated recommended modifications to us and the U.S.
      Federal Trade Commission (FTC). In addition, the FTC, and state and local
      consumer affairs bodies oversee aspects of our sales and marketing activities
      and customer handling processes. Our ability to sell products can be and has
      been adversely affected by actions taken by the FDA, FTC, NAC, and state and
      local authorities and by future changes in regulations.




5


Our
      electrical products must meet the safety standards imposed in various national,
      state, local, and provincial jurisdictions. Our electrical products sold in
      the
      U.S. are designed, manufactured, and tested to meet the safety standards of
      Underwriters Laboratories, Inc. or Electronic Testing Laboratories.





**Employees**





As
      of
      June 10, 2005, we had a total of 30 full-time employees, of which  3
      are
      senior management, 8 are dedicated to sales, marketing and customer service,
      4
      are distribution employees, 4 are accounting and finance employees, 3 are
      dedicated to information systems and 8 are administrative personnel.




None
      of
      our employees are covered by a collective bargaining agreement. We have never
      experienced a work stoppage and we believe that we have satisfactory working
      relations with our employees.








**Risk
      Related to Business**





You
      should carefully consider the following risk factors and all other information
      contained herein as well as the information included in this Annual Report
      in
      evaluating our business and prospects. The risks and uncertainties described
      below are not the only ones we face. Additional risks and uncertainties, other
      than those we describe below, that are not presently known to us or that we
      currently believe are immaterial may also impair our business operations. If
      any
      of the following risks occur, our business and financial results could be
      harmed. You should refer to the other information contained in this Annual
      Report, including our consolidated financial statements and the related
      notes.





**Risks
      Relating to Our Business** **:**





**The
      Chapter 11 Reorganization Has A Material Negative Effect On Our Business,
      Financial Condition And Results of Operations.**




In
      October 2004, Tactica, our operating subsidiary filed to reorganize under
      Chapter 11 of the U.S. Bankruptcy Code. Tactica did not have sufficient working
      capital to operate its business and was unable to obtain financing.
      Notwithstanding the protection of the Bankruptcy Court, there is no assurance
      Tactica has obtained sufficient funding to emerge from bankruptcy and continue
      to operate its business. As described under “Liquidity and Capital Resources”
      there are numerous reasons why Tactica may be unable to emerge from bankruptcy.
      In such event, we would seek to find a strategic merger, acquisition or sale
      of
      assets or otherwise be forced to discontinue Tactica’s operations.





**Auditors
      Have Expressed Substantial Doubt About Our Ability To Continue As A Going
      Concern.**





In
      their
      report dated June 10, 2005, Russell
      Bedford Stefanou Mirchandani LLP stated that the financial statements of IGIA
      for the year ended February 28, 2005 were prepared assuming that IGIA would
      continue as a going concern. Our ability to continue as a going concern is
      an
      issue raised as a result of Tactica having filed for bankruptcy protection
      on
      October 21, 2004, its recurring losses from operations and our net capital
      deficiency. We continue to experience net operating losses. Our ability to
      continue as a going concern is subject to our ability to generate a profit.
      Our
      continued net operating losses and stockholders’ deficit increases the
      difficulty in meeting such goals and there can be no assurances that such
      methods will prove successful.




**Our
      Common Stock Trades In A Limited Public Market, The NASD OTC Electronic Bulletin
      Board; Accordingly, Investors Face Possible Volatility Of Share
      Price.**




Our
      common stock is currently quoted on the NASD OTC Bulletin Board under the ticker
      symbol IGAI.OB. As of June 17, 2005, there were 18,002,933 shares of Common
      Stock outstanding.





There
      can
      be no assurance that a trading market will be sustained in the future. Factors
      such as, but not limited to, technological innovations, new products,
      acquisitions or strategic alliances entered into by us or our competitors,
      government regulatory action, patent or proprietary rights developments, and
      market conditions for penny stocks in general could have a material effect
      on
      the liquidity of our common stock and volatility of our stock
      price.




6


**Our
      Future Operations Are Contingent On Our Ability To Recruit
      Employees.**




In
      the
      event we are able to expand our business, we expect to experience growth in
      the
      number of employees and the scope of our operations. In particular, we may
      hire
      additional sales, marketing and administrative personnel. Additionally,
      acquisitions could result in an increase in employee headcount and business
      activity. Such activities could result in increased responsibilities for
      management. We believe that our ability to increase our customer support
      capability and to attract, train, and retain qualified technical, sales,
      marketing, and management personnel, will be a critical factor to our future
      success.




**We
      May Not Be Able To Manage Our Growth Effectively.**




Our
      future success will be highly dependent upon our ability to successfully manage
      the expansion of our operations. Our ability to manage and support our growth
      effectively will be substantially dependent on our ability to: implement
      adequate improvements to financial and management controls, reporting and order
      entry systems, and other procedures and hire sufficient numbers of financial,
      accounting, administrative, and management personnel. Our expansion and the
      resulting growth in the number of our employees would result in increased
      responsibility for both existing and new management personnel. We are in the
      process of establishing and upgrading our financial accounting and procedures.
      We may not be able to identify, attract, and retain experienced accounting
      and
      financial personnel. Our future operating results will depend on the ability
      of
      our management and other key employees to implement and improve our systems
      for
      operations, financial control, and information management, and to recruit,
      train, and manage its employee base. We may not be able to achieve or manage
      any
      such growth successfully or to implement and maintain adequate financial and
      management controls and procedures, and any inability to do so would have a
      material adverse effect on its business, results of operations, and financial
      condition.




**Our
      Success Is Dependent On Our Ability To Address Market
      Opportunities.**




Our
      future success depends upon our ability to address potential market
      opportunities while managing our expenses to match our ability to finance our
      operations. This need to manage our expenses will place a significant strain
      on
      our management and operational resources. If we are unable to manage our
      expenses effectively, we may be unable to finance our operations. By adjusting
      our operations and development to the level of capitalization, we believe we
      have sufficient capital resources to meet projected cash flow deficits. However,
      if during that period or thereafter, we are not successful in generating
      sufficient liquidity from operations or in raising sufficient capital resources,
      on terms acceptable to us, this could have a material adverse effect on our
      business, results of operations liquidity and financial condition and would
      prevent us from being able to utilize potential market opportunities.




**We
      May Be Required To Seek Additional Means Of Financing.**




In
      financing our operations since filing for reorganization under Chapter 11 of
      the
      U.S. Bankruptcy Code, Tactica has relied mostly on advances from debtor in
      possession loans. Therefore, we will need additional capital to continue our
      operations and will endeavor to raise funds through the sale of equity shares
      and revenues from operations.




On
      March
      23, 2005, we entered into a Securities Purchase Agreement for the sale of an
      aggregate of $3,000,000 principal amount of callable secured convertible notes.
      However, there can be no assurance that we will generate adequate revenues
      from
      operations. Failure to generate such operating revenues would have an adverse
      impact on our financial position and results of operations and ability to
      continue as a going concern. Our operating and capital requirements during
      the
      next fiscal year and thereafter will vary based on a number of factors,
      including the level of sales and marketing activities for our products.
      Accordingly we may be required to obtain additional private or public financing
      including debt or equity financing and there can be no assurance that such
      financing will be available as needed, or, if available, on terms favorable
      to
      us. Any additional equity financing may be dilutive to stockholders and such
      additional equity securities may have rights, preferences or privileges that
      are
      senior to those of our existing common stock.




Furthermore,
      debt financing, if available, will require payment of interest and may involve
      restrictive covenants that could impose limitations on our operating
      flexibility. Our failure to successfully obtain additional future funding may
      jeopardize our ability to continue our business and operations.




If
      we
      raise additional funds by issuing equity securities, existing stockholders
      may
      experience a dilution in their ownership. In addition, as a condition to giving
      additional funds to us, future investors may demand, and may be granted, rights
      superior to those of existing stockholders.




**The
      Sales Of Our Products Have Been Very Volatile And Our Results Of Operations
      Could Fluctuate Materially.**




7


The
      sales
      of certain of our products rely on television advertising and direct response
      marketing campaigns. In addition, some of our products have short life cycles.
      This leads to volatility in our revenues and results of operations. For example,
      our net sales for the fiscal year ended February 28, 2005 decreased by
      approximately 71.40% as compared with the fiscal year ended February 29, 2004
      and we incurred a $16,197,364 operating loss for the fiscal year ended February
      28, 2005. This was primarily caused by substantially reduced sales. In addition,
      as part of our April 2004 purchase agreement with Helen of Troy, or HoT, HoT
      acquired the right to market and sell Epil-Stop, one of our most popular
      products, in the United States and assumed the liabilities associated with
      United States sales of the Epil-Stop product. We therefore expect that our
      sales
      could continue to decline or be volatile and as a result, that our financial
      position could be adversely affected.




**Changes
      In Foreign Policy, International Law Or The Internal Laws Of The Countries
      Where
      Our Manufacturers Are Located Could Have A Material Negative Effect On Our
      Business, Financial Condition And Results Of Operations.**




All
      of
      our products are manufactured by unaffiliated companies, some of which are
      in
      the Far East. Risks associated with such foreign manufacturing include: changing
      international political relations; changes in laws, including tax laws,
      regulations and treaties; changes in labor laws, regulations, and policies;
      changes in customs duties and other trade barriers; changes in shipping costs;
      interruptions and delays at port facilities; currency exchange fluctuations;
      local political unrest; and the availability and cost of raw materials and
      merchandise. To date, these factors have not significantly affected our
      production capability. However, any change that impairs our ability to obtain
      products from such manufacturers, or to obtain products at marketable rates,
      would have a material negative effect on our business, financial condition
      and
      results of operations.




**Our
      Business Will Suffer If We Do Not Develop And Competitively Market Products
      That
      Appeal To Consumers.**




We
      sell
      products in the “As Seen on TV” market. These markets are very competitive.
      Maintaining and gaining market share depends heavily upon price, quality, brand
      name recognition, patents, innovative designs of new products and replacement
      models, and marketing and distribution approaches. We compete with domestic
      and
      international companies, some of which have substantially greater financial
      and
      other resources than we have. We believe that our ability to produce reliable
      products that incorporate developments in technology and to satisfy consumer
      tastes with respect to style and design, as well as our ability to market a
      broad offering of products in each applicable category at competitive prices,
      are keys to our future success.




**Our
      Business, Financial Condition And Results Of Operations Could Be Materially
      Adversely Affected If We Are Unable To Sell Products Under Our Licensed
      Trademarks.**




A
      significant portion of our sales revenue is derived from sales of products
      under
      licensed trademarks. As the percentage of our sales of such products increases,
      we will become increasingly dependent upon the continued use of such trademarks.
      Actions taken by licensors, such as Singer and HoT and other third parties,
      with
      respect to products we license from them could greatly diminish the value of
      any
      of our licensed trademarks. If we are unable to develop and sell products under
      existing or newly acquired licensed trademarks or the value of the trademarks
      were diminished by the licensor or third parties, the effect on our business,
      financial condition and results of operations could be materially adversely
      effected.




**Many
      Of Our Competitors Are Larger And Have Greater Financial And Other Resources
      Than We Do And Those Advantages Could Make It Difficult For Us To Compete With
      Them.**





Many
      of
      our current and potential competitors may have substantial competitive
      advantages relative to us, including: longer operating histories; significantly
      greater financial, technical and marketing resources; greater brand name
      recognition; larger existing customer bases; and more popular products.




These
      competitors may be able to respond more quickly to new or emerging technologies
      and changes in customer requirements and devote greater resources to develop,
      promote and sell their products or services than we can.




8


**We
      Are Dependent On Our Management Team And The Loss Of Any Key Member Of This
      Team
      May Prevent Us From Implementing Our Business Plan In A Timely Manner.**




Our
      success depends largely upon the continued services of our executive officers
      and other key personnel, particularly Avi Sivan, our Chief Executive Officer,
      and Prem Ramchandani, our President. We have entered into employment agreements
      with Mr. Sivan and Mr. Ramchandani. We obtained key person life insurance
      policies on Mr. Sivan and Mr. Ramchandani in accordance with terms of the March
      23, 2005 Securities Purchase Agreement. The loss of Mr. Sivan or Mr. Ramchandani
      services would be expected to have a material adverse effect on our
      operations.




**Our
      Business, Financial Condition And Results Of Operations Will Suffer If We Do
      Not
      Accurately Forecast Customers’ Demands.**




Because
      of our reliance on manufacturers in the Far East, our production lead times
      are
      relatively long. Therefore, we must commit to production well in advance of
      customer orders. If we fail to forecast consumer demand accurately, we may
      encounter difficulties in filling customer orders or in liquidating excess
      inventories, or may find that customers are canceling orders or returning
      products. Our relatively long production lead time may increase the amount
      of
      inventory and the cost of storing inventory. Additionally, changes in retailer
      inventory management strategies could make inventory management more difficult.
      Any of these results could have a material adverse effect on our business,
      financial condition and results of operations.




**Our
      Products And Business Practices May Be Subject To Review By Third Party
      Regulators And Consumer Affairs Monitors And Actions Resulting From Such
      Reviews, Including But Not Limited To Cease And Desist Orders, Fines And
      Recalls.**




Although
      our products are generally not regulated by the U.S. Food and Drug
      Administration (FDA), we have in the past and on occasion may in the future
      sell
      products that are subject to FDA regulations. Our advertising is subject to
      review by the National Advertising Council (NAC) and our advertisements could
      be
      and have been subject to NAC recommendations for modification. The U.S. Federal
      Trade Commission (FTC) and state and local consumer affairs bodies oversee
      various aspects of our sales and marketing activities and customer handling
      processes. If any of these agencies, or other agencies that have a right to
      regulate our products, engage in reviews of our products or marketing procedures
      we may be subject to various enforcement actions from such agencies. If such
      reviews take place, as they have in the past, our executives may be forced
      to
      spend time on the regulatory proceedings as opposed to running our business.
      In
      addition to fines, adverse actions from an agency could result in our being
      unable to market certain products the way we would like or at all, or prevent
      us
      from selling certain products entirely.




**We
      Purchase Essential Services And Products From Third Parties, Which If
      Interrupted, Could Have A Material Impact On Our Ability To
      Operate.**




We
      currently outsource significant portions of our business functions, including,
      but not limited to, warehousing, customer service, inbound call center functions
      and payment processing for all direct response sales, customer order
      fulfillment, and product returns processing and shipping. From time to time
      we
      have experienced interruptions in these essential services for varying periods
      of time and future interruptions can and will occur. If such interruptions
      occur
      for extended periods of time, our operations may be materially adversely
      affected. Many of our products are produced in South China. Should we experience
      any interruption or interference with the operations of the third party
      suppliers of goods and services, we might experience a shortage of inventory.
      This type of shortage could have a material adverse effect on our financial
      position, results of operations, and for cash flow.




**Our
      Direct Response Sales Operation Is Dependent On Having Adequate Credit Card
      Activity Processing Capacity With The Major Credit Card Companies And A Credit
      Card Processor.**




A
      third
      party credit card processor regulates our daily credit card sales order volume
      and sets limits as to the maximum daily sales volume it will process. In
      addition, credit card companies, such as Visa and MasterCard, and credit card
      processors typically maintain a record of the level of customer requests to
      have
      charges for our products reversed (chargebacks). The credit card companies
      and
      processors may fine us for “high chargeback levels”, modify our daily sales
      volume limit, or even discontinue doing business with us. The direct response
      business is known for relatively high chargeback levels and we have experienced
      periods of higher than accepted levels of chargeback activity that has led
      to
      fines and disruptions in credit card processing of customer orders. We endeavor
      to maintain reasonable business practices and customer satisfaction, which
      in
      part, contribute to lower levels of chargeback activity. Nevertheless, excess
      chargeback activity could result in our being unable to have customers pay
      us
      using credit cards.




**Our
      Future Acquisitions, If Any, And New Products May Not Be Successful, Which
      Could
      Have A Material Adverse Effect On Our Financial Condition And Results Of
      Operations.**




9


We
      have
      in the past, and may in the future, decide to acquire new product lines and
      businesses. The acquisition of a business or of the rights to market specific
      products or use specific product names involves a significant financial
      commitment. In the case of an acquisition, such commitments are usually in
      the
      form of either cash or stock consideration. In the case of a new license, such
      commitments could take the form of license fees, prepaid royalties, and future
      minimum royalty and advertising payments. While our strategy is to acquire
      businesses and to develop products that will contribute positively to earnings,
      there is no guarantee that all or any of our acquisitions will be successful.
      Anticipated synergies may not materialize, cost savings may be less than
      expected, sales of products may not meet expectations and acquired businesses
      may carry unexpected liabilities. Each of these factors could result in a newly
      acquired business or product line having a material negative impact on our
      financial condition and results of operations.





**A
      Controlling Interest In Our Common Stock Was Recently Acquired By Former
      Shareholders Of Our Operating Subsidiary, Tactica International, Inc, And We
      Have a Limited Operating History Upon Which You Can Base An Investment
      Decision.**




On
      June
      11, 2004, we completed a share exchange with the former stockholders of Tactica
      International, Inc., resulting in Tactica’s former stockholders owning the
      majority of our common stock on a fully diluted basis. Therefore, we have a
      limited operating history upon which you can make an investment decision, or
      upon which we can accurately forecast future sales. You should, therefore,
      consider us subject to the business risks associated with a new business. The
      likelihood of our success must be considered in light of the expenses,
      difficulties and delays frequently encountered in connection with the formation
      and initial operations of a new business.




**Our
      Company And/Or Our Former Management May Be Subject To Fines, Sanctions And/Or
      Penalties Of An Indeterminable Nature As A Result Of Potential Violations Of
      Federal Securities Laws In Connection With The Amendment Of Our Certificate
      Of
      Incorporation From 20,000,000 To 100,000,000 On June 8,
      2004.**





On
      May
      27, 2004, the shareholders holding a majority of our outstanding common stock
      voted to increase our authorized our common stock to 100,000,000 shares. On
      June
      8, 2004, prior to mailing the required information statement, we filed a
      certificate of amendment with the Delaware Secretary of State to increase the
      number of shares of common stock we are authorized to issue. As a result, we
      filed the certificates of amendment prior to fully complying with all Federal
      securities laws. Due to the aforementioned, we may be subject to fines,
      sanctions and/or penalties.





**Risks
      Relating to Our Current Financing Arrangement** **:**





**There
      Are A Large Number Of Shares Underlying Our Callable Secured Convertible Notes,
      And Warrants That May Be Available For Future Sale And The Sale Of These Shares
      May Depress The Market Price Of Our Common Stock.**





As
      of
      June 17, 2005, we had 18,002,933 shares of common stock issued and outstanding
      and callable secured convertible notes outstanding or an obligation to issue
      callable secured convertible notes that may be converted into an estimated
      300,000,000 shares of common stock at current market prices, and outstanding
      warrants or an obligation to issue warrants to purchase 6,000,000 shares of
      common stock. In addition, the number of shares of common stock issuable upon
      conversion of the outstanding callable secured convertible notes may increase
      if
      the market price of our stock declines. All of the shares, including all of
      the
      shares issuable upon conversion of the notes and upon exercise of our warrants,
      may be sold without restriction. The sale of these shares may adversely affect
      the market price of our common stock.





**The
      Continuously Adjustable Conversion Price Feature of Our Callable Secured
      Convertible Notes Could Require Us To Issue A Substantially Greater Number
      Of
      Shares, Which Will Cause Dilution To Our Existing
      Stockholders.** ****





Our
      obligation to issue shares upon conversion of our callable secured convertible
      notes is essentially limitless. The following is an example of the amount of
      shares of our common stock that are issuable, upon conversion of the callable
      secured convertible notes (excluding accrued interest), based on market prices
      25%, 50% and 75% below the current conversion price, as of June 17, 2005 of
      $0.02.




%
                  Below
                Market
              
              Price
                  Per
                Share
              
              With
                  Discount
                at
                  50%
              
              Number
                of
                  Shares
                Issuable
              
              %
                  of
                Outstanding
                Stock25%
              
              $.015
              
              $.0075
              
              400,000,000
              
              95.69%50%
              
              $.010
              
              $.0050
              
              600,000,000
              
              97.09%75%
              
              $.005
              
              $.0025
              
              1,200,000,000
              
              98.52%


As
      illustrated, the number of shares of common stock issuable upon conversion
      of
      our secured convertible notes will increase if the market price of our stock
      declines, which will cause dilution to our existing stockholders.





10


**The
      Continuously Adjustable Conversion Price Feature Of Our Callable Secured
      Convertible Notes May Encourage Investors To Make Short Sales In Our Common
      Stock, Which Could Have A Depressive Effect On The Price Of Our Common Stock.**





The
      callable secured convertible notes are convertible into shares of our common
      stock at a 50% discount to the trading price of the common stock prior to the
      conversion. The significant downward pressure on the price of the common stock
      as the selling stockholder converts and sells material amounts of common stock
      could encourage short sales by investors. This could place further downward
      pressure on the price of the common stock. The selling stockholder could sell
      common stock into the market in anticipation of covering the short sale by
      converting their securities, which could cause the further downward pressure
      on
      the stock price. In addition, not only the sale of shares issued upon conversion
      or exercise of notes, warrants and options, but also the mere perception that
      these sales could occur, may adversely affect the market price of the common
      stock.





**The
      Issuance Of Shares Upon Conversion Of The Callable Secured Convertible Notes
      And
      Exercise Of Outstanding Warrants May Cause Immediate And Substantial Dilution
      To
      Our Existing Stockholders.**





The
      issuance of shares upon conversion of the callable secured convertible notes
      and
      exercise of warrants may result in substantial dilution to the interests of
      other stockholders since the selling stockholders may ultimately convert and
      sell the full amount issuable on conversion. Although the selling stockholders
      may not convert their callable secured convertible notes and/or exercise their
      warrants if such conversion or exercise would cause them to own more than 4.99%
      of our outstanding common stock, this restriction does not prevent the selling
      stockholders from converting and/or exercising some of their holdings and then
      converting the rest of their holdings. In this way, the selling stockholders
      could sell more than this limit while never holding more than this limit. There
      is no upper limit on the number of shares that may be issued which will have
      the
      effect of further diluting the proportionate equity interest and voting power
      of
      holders of our common stock, including investors in this offering.





**In
      The Event That Our Stock Price Declines, The Shares Of Common Stock Allocated
      For Conversion Of The Callable Secured Convertible Notes, To Be Registered
      Pursuant To A Registration Statement Filed on April 14, 2005, May Not Be
      Adequate And We May Be Required To File A Subsequent Registration Statement
      Covering Additional Shares. If The Shares We Have Allocated And Are Registering
      Herewith Are Not Adequate And We Are Required To File An Additional Registration
      Statement, We May Incur Substantial Costs In Connection
      Therewith.**





Based
      on
      our current market price and the potential decrease in our market price as
      a
      result of the issuance of shares upon conversion of the callable secured
      convertible debentures, we have made a good faith estimate as to the amount
      of
      shares of common stock that we are required to register and allocate for
      conversion of the convertible debentures. As we do not currently have the
      required amount of shares available, we may be required to file an additional
      registration statement after we have increased our authorized common stock.
      In
      the event that our stock price decreases, the shares of common stock we have
      allocated for conversion of the callable secured convertible debentures and
      are
      registering hereunder may not be adequate. If the shares we have allocated
      to
      the registration statement are not adequate and we are required to file an
      additional registration statement, we may incur substantial costs in connection
      with the preparation and filing of such registration statement. ****





**If
      We Are Required For Any Reason To Repay Our Outstanding Callable Secured
      Convertible Notes, We Would Be Required To Deplete Our Working Capital, If
      Available, Or Raise Additional Funds. Our Failure to Repay the Callable Secured
      Convertible Notes, If Required, Could Result In Legal Action Against Us, Which
      Could Require The Sale Of Substantial Assets.**





On
      March
      23, 2005, we entered into a Securities Purchase Agreement for the sale of an
      aggregate of $3,000,000 principal amount of callable secured convertible notes.
      The callable secured convertible notes are due and payable, with 8% interest,
      three years from the date of issuance, unless sooner converted into shares
      of
      our common stock. Although we currently have $2,000,000 callable secured
      convertible notes outstanding, the investor is obligated to purchase additional
      callable secured convertible notes in the aggregate amount of $1,000,000. In
      addition, any event of default such as our failure to repay the principal or
      interest when due, our failure to issue shares of common stock upon conversion
      by the holder, our failure to timely file a registration statement or have
      such
      registration statement declared effective, breach of any covenant,
      representation or warranty in the Securities Purchase Agreement or related
      convertible note, the assignment or appointment of a receiver to control a
      substantial part of our property or business, the filing of a money judgment,
      writ or similar process against us in excess of $50,000, the commencement of
      a
      bankruptcy, insolvency, reorganization or liquidation proceeding against us
      and
      the delisting of our common stock could require the early repayment of the
      callable secured convertible notes, including a default interest rate of 15%
      on
      the outstanding principal balance of the notes if the default is not cured
      within the specified grace period. We anticipate that the full amount of the
      callable secured convertible notes will be converted into shares of our common
      stock, in accordance with the terms of the callable secured convertible notes.
      If we are required to repay the callable secured convertible notes, we would
      be
      required to use our limited working capital and raise additional funds. If
      we
      were unable to repay the notes when required, the note holders could commence
      legal action against us and foreclose on all of our assets to recover the
      amounts due. Any such action would require us to curtail or cease operations.





11


**Risks
      Relating to Our Common Stock** **:**





**If
      We Fail To Remain Current On Our Reporting Requirements, We Could Be Removed
      From The OTC Bulletin Board Which Would In Turn Trigger Default Provisions
      Under
      the Callable Secured Convertible Notes and Limit The Ability of Broker-Dealers
      To Sell Our Securities And The Ability Of Stockholders To Sell Their Securities
      In The Secondary Market.**





Companies
      trading on the OTC Bulletin Board, such as us, must be reporting issuers under
      Section 12 of the Securities Exchange Act of 1934, as amended, and must be
      current in their reports under Section 13, in order to maintain price quotation
      privileges on the OTC Bulletin Board. If we fail to remain current on our
      reporting requirements, we could be removed from the OTC Bulletin Board and,
      in
      turn, declared in default of the Callable Secured Convertible Notes. As a
      result, the market liquidity for our securities could be severely adversely
      affected by limiting the ability of broker-dealers to sell our securities and
      the ability of stockholders to sell their securities in the secondary market.
      In
      addition, we may be unable to cure the default, which may have an adverse
      material effect on our Company.





**Our
      Common Stock Is Subject To The "Penny Stock" Rules Of The SEC And The Trading
      Market In Our Securities Is Limited, Which Makes Transactions In Our Stock
      Cumbersome And May Reduce The Value Of An Investment In Our Stock.**





The
      Securities and Exchange Commission has adopted Rule 15g-9 which establishes
      the
      definition of a "penny stock," for the purposes relevant to us, as any equity
      security that has a market price of less than $5.00 per share or with an
      exercise price of less than $5.00 per share, subject to certain exceptions.
      For
      any transaction involving a penny stock, unless exempt, the rules require:





·
            that
                a broker or dealer approve a person's account for transactions in
                penny
                stocks; and


·
            the
                broker or dealer receives from the investor a written agreement to
                the
                transaction, setting forth the identity and quantity of the penny
                stock to
                be purchased.





In
      order
      to approve a person's account for transactions in penny stocks, the broker
      or
      dealer must:





·
            obtain
                financial information and investment experience objectives of the
                person;
                and


·
            make
                a reasonable determination that the transactions in penny stocks
                are
                suitable for that person and the person has sufficient knowledge
                and
                experience in financial matters to be capable of evaluating the risks
                of
                transactions in penny stocks.





The
      broker or dealer must also deliver, prior to any transaction in a penny stock,
      a
      disclosure schedule prescribed by the Commission relating to the penny stock
      market, which, in highlight form:





·
            sets
                forth the basis on which the broker or dealer made the suitability
                determination; and


·
            that
                the broker or dealer received a signed, written agreement from the
                investor prior to the transaction.





Generally,
      brokers may be less willing to execute transactions in securities subject to
      the
      "penny stock" rules. This may make it more difficult for investors to dispose
      of
      our common stock and cause a decline in the market value of our
      stock.





**ITEM
      2 - PROPERTIES**





Our
      subsidiary Tactica subleases approximately 9,500 square feet of office space
      from a non-affiliated subtenant, located at 521 Fifth Avenue, 20 th Floor,
      New York, New York 10175 at a rate of approximately $15,000 per month. The
      sublease for the New York office space commenced on February 1, 2005 and expires
      April 29, 2006. Tactica also contracts with third party logistics companies
      for
      fulfillment services and the use of warehouse space in Los Angeles, California,
      Reno, Nevada and Brampton, Ontario on standard terms. We does not lease or
      own
      any property other than through Tactica.




The
      Company considers its premises adequate for its
      purposes for the immediate future.   **ITEM
      3 - LEGAL PROCEEDINGS**




In
      the
      ordinary course of business, we may be involved in legal proceedings from time
      to time. Although occasional adverse decisions or settlements may occur,
      management believes that the final disposition of such matters will not have
      a
      material adverse effect on its financial position, results of operations or
      liquidity.





On
      October 21, 2004, Tactica, which accounts for all of our current operations,
      filed a voluntary petition for relief under chapter 11 of title 11 of the United
      States Bankruptcy Code. We are not seeking bankruptcy protection. Tactica
      remains in possession of its assets and the management of its property as a
      debtor in possession under Sections 1107 and 1108 of the Bankruptcy Code. On
      October 25, 2004, the Bankruptcy Court approved, on an interim basis, a
      Stipulation and Consent Order (the “Stipulation”) with Innotrac Corporation
      (“Innotrac”) (a copy of the Stipulation and the Order approving the Stipulation
      on an interim basis, are filed as an exhibit to the Form 8-K for October 21,
      2004, filed by us). Following the interim approval of the Stipulation by the
      Bankruptcy Court on October 25, 2004, Innotrac began processing, packing and
      releasing Tactica's inventory for fulfillment of customer orders.




12


The
      Stipulation provided for a mechanism which was to have enabled Tactica to have
      its inventory shipped and sold to its customers. Pursuant to the Stipulation,
      Innotrac agreed to release its lien with respect to Tactica's inventory at
      the
      time such inventory is released for shipments to customers.  With respect
      to the first $1.6 million in customer orders, Tactica was to pay Innotrac 55%
      of
      the sales proceeds promptly upon receipt of customer payments and Tactica was
      to
      retain the remainder for its working capital.  With respect to subsequent
      customer orders, Tactica was to pay Innotrac 60% of the sales proceeds upon
      receipt of customer payments and retain the remainder. The proceeds
      paid to
      Innotrac reduced the agreed upon $2,753,281 of debt owed by Tactica to Innotrac,
      plus to the extent allowable under the Bankruptcy Code or other applicable
      law,
      pre-petition interest and post-petition interest, fees, cost, charges and
      expenses including attorney’s fees.




The
      Stipulation provided for Tactica to prepay Innotrac for fulfillment services,
      pay monthly storage charges to Innotrac, remit customer payments to Innotrac
      within a specified period, and make minimum monthly payments to reduce its
      debt
      owed Innotrac and repay the debt in full by August 31, 2005. Innotrac issued
      a
      Stipulation default notice on January 18, 2005 and ceased order processing
      activities. Tactica disputes the alleged defaults and the parties are seeking
      a
      resolution prior to a possible Court trial that would provide for a consensual
      liquidation of the inventory and distribution of the proceeds therefrom to
      Innotrac, Tactica’s unsecured creditors and a secured Tactica creditor. In the
      event that Innotrac prevails, Innotrac could receive Court approval to liquidate
      Tactica’s products and use the proceeds to reduce Tactica’s obligation to
      Innotrac.





**ITEM
      4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.**





On
      May
      27, 2004, the holders of a majority of our issued and outstanding shares of
      common stock authorized an increase in the number of our authorized shares
      of
      common stock from 20,000,000 to 100,000,000 shares.





On
      November 18, 2004, holders of a majority of our issued and outstanding shares
      of
      common stock authorized an additional increase in the number of our authorized
      shares of common stock from 100,000,000 to 500,000,000 shares.





On
      March
      22, 2005, the holders of a majority of our issued and outstanding shares of
      common stock authorized an additional increase in the number of our authorized
      shares of common stock from 500,000,000 to 1,000,000,000 shares.





On
      March
      29, 2005, the holders of a majority of our issued and outstanding shares of
      common stock authorized the adoption of the Company’s 2005 Stock Incentive Plan
      and the authorization of the reservation for issuance of 2,500,000 shares of
      common stock thereunder.




13


**PART
      II**





**ITEM
      5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
      MATTERS**





**Market
      Information**





Our
      Common Stock is traded on the OTC Bulletin Board, referred to herein as the
      OTCBB, under the symbol "IGAI.ob". The following table sets forth the high
      and
      low bid prices of our Common Stock, as reported by the OTCBB for each quarter
      since our stock began trading on the OTCBB. The quotations set forth below
      reflect inter-dealer prices, without retail mark-up, markdown or commission
      and
      may not represent actual transactions.




2005
                  Fiscal Year
              
              High
              
              LowDecember
                  1, 2004 - February 28, 2005
              
              $0.090
              
              $0.035September
                  1, 2004 - November 30, 2004
              
              $0.500
              
              $0.030June
                  1, 2004 - August 31, 2004
              
              $5.000
              
              $0.050
              *March
                  1, 2004 - April 4, 2005
              
              $0.035
              
              $0.0202004
                  Fiscal Year
              
              High
              
              LowDecember
                  1, 2003 - February 29, 2004
              
              $0.050
              
              $0.050
              *September
                  1, 2003 - November 30, 2003
              
              $0.050
              
              $0.050
              *June
                  1, 2003 - August 31, 2003
              
              $0.050
              
              $0.050
              *April
                  15, 2003 - May 31, 2003
              
              $0.050
              
              $0.050
              *


*
      On
      April 15, 2004 we had a market maker establish a bid price for our common stock
      on the OTC Bulletin Board; however, our common stock did not begin to trade
      until June 18, 2004.





As
      of
      June 17, 2005, there were approximately 311 holders of record of our common
      stock.





We
      have
      appointed Continental Stock Transfer & Trust Company, 17 Battery Place, New
      York, New York 10004, as transfer agent for our shares of Common
      Stock.





**Dividend
      Policy**





We
      have
      never paid any cash dividends on our capital stock and do not anticipate paying
      any cash dividends on the Common Shares in the foreseeable future. We intend
      to
      retain future earnings to fund ongoing operations and future capital
      requirements of our business. Any future determination to pay cash dividends
      will be at the discretion of the Board and will be dependent upon our financial
      condition, results of operations, capital requirements and such other factors
      as
      the Board deems relevant.





**Equity
      Compensation Plan Information**





We
      had no
      equity compensation plans as of the fiscal year ended February 28, 2005.
      However, on March 29, 2005, the majority of our stockholders approved a stock
      incentive plan and authorized 2,500,000 shares of common stock for issuance
      of
      stock awards and stock options thereunder. We will adopt this stock incentive
      plan twenty days after a definitive information statement is mailed to our
      stockholders.




14


**ITEM
      6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION**





**Overview**




The
      following discussion contains forward-looking statements that are subject to
      significant risks and uncertainties about us, our current and planned products,
      our current and proposed marketing and sales, and our projected results of
      operations. There are several important factors that could cause actual results
      to differ materially from historical results and percentages and results
      anticipated by the forward-looking statements. We have sought to identify the
      most significant risks to our business, but cannot predict whether or
      to
      what extent any of such risks may be realized nor can there be any assurance
      that we have identified all possible risks that might arise.





Investors
      should carefully consider all of such risks before making an investment decision
      with respect to our stock. The following discussion and analysis should be
      read
      in conjunction with our financial statements and notes thereto. This discussion
      should not be construed to imply that the results discussed herein will
      necessarily continue into the future, or that any conclusion reached herein
      will
      necessarily be indicative of actual operating results in the future. Such
      discussion represents only the best present assessment from our
      management.




Information
      about us, including a description of our business, markets, properties,
      competition and historical financial information, is provided in summary form
      regarding our business and affairs. This information is not intended to be
      complete and should be read in conjunction with the financial statements and
      other documents appended hereto or described herein.




**History**




We
      were
      incorporated in the State of Delaware in May 1992 under the name Quasar Projects
      Company for the purpose of merging with or acquiring a company with operations
      and assets. From its inception through April 28, 1999, we generated nominal
      revenues and did not actively engage in business.




On
      April
      28, 1999, we acquired Diva Entertainment, Inc., a Florida corporation, which
      was
      engaged in the business of operating and managing two wholly-owned talent
      management companies: Prima Eastwest Model Management, Inc., a California
      corporation, and Que Management, Inc., a New York corporation. At that time,
      we
      changed our name to Diva Entertainment, Inc. From April 28, 1999 through June
      10, 2004, we were in the business of representing professional fashion models,
      commercial actors and theatrical actors.




On
      June
      11, 2004, we entered into the Securities Purchase Agreement described above
      under the heading "Recent Developments," pursuant to which we acquired our
      wholly-owned subsidiary Tactica International, Inc. and sold our former
      subsidiary Diva Entertainment, Inc.




Since
      June 11, 2004, we have been in the business of the direct marketing and
      distribution of proprietary and branded personal care and home care products.
      We
      are no longer in the business of talent management.




**General
      Background**




We,
      through our wholly-owned operating subsidiary, Tactica International, Inc.
      ("Tactica"), are a direct marketer and distributor of proprietary and branded
      personal care and home care products. Primarily through direct response
      television advertising of Tactica’s infomercials, Tactica has successfully
      established a niche and growing position within the direct marketing industry,
      a
      market which the "Direct Marketing Association" expects to grow from $2 to
      $3
      trillion dollars in annual sales within the next five years. Tactica also sells
      through major retail chains and mail order catalogs and on Tactica's
      website.




All
      of
      our operations occur in our Tactica subsidiary, which we acquired as of June
      11,
      2004. We do not currently have any operations at the parent level.




In
      March
      2000, a majority interest in Tactica was purchased by Helen of Troy Limited
      or
      HoT, a developer and marketer of personal care products. The transaction gave
      Tactica access to capital to expand marketing and distribution. Tactica expanded
      its focus on distribution and more than doubled the number of retail outlets
      carrying Tactica's products to more than 45,000 worldwide. On April 29, 2004,
      Tactica's management purchased back the 55% interest in Tactica held by HoT.
      In
      exchange for HoT's 55% interest and approximately $17 million of secured Tactica
      debt and accrued interest payable, HoT received marketable securities,
      intellectual properties, including the Epil-Stop® brand, and the right to
      certain Tactica tax refunds. On June 11, 2004, Tactica acquired us pursuant
      to
      an acquisition by us of all of the outstanding securities of Tactica and the
      acquisition by Tactica's stockholders of the majority of our outstanding
      securities.




15


**Comparison
      of Fiscal Years Ended February 28, 2005 To February 29,
      2004**




*Results
      of Operations*




*Revenue*




We,
      through our wholly-owned subsidiary Tactica, sell a variety of personal care
      and
      other products to retailers (the “retail segment”) and directly to consumers
      (the “direct response segment”). Tactica uses television and print media
      advertising extensively to promote sales in both segments. Tactica’s net sales
      for the fiscal year ended February 28, 2005 (“fiscal 2005”) were approximately
      $11,324,000, a decrease of $28,286,000, or 71.4%, compared to net sales of
      $39,610,000 for the fiscal year ended February 29, 2004 (“fiscal 2004”).




The
      decrease in revenue for the fiscal 2005 as compared to fiscal 2004 was primarily
      the result of the effects of Tactica’s filing for bankruptcy protection and our
      reduced spending on media advertising, order fulfillment services, and product
      purchases. Revenues for fiscal 2005 also declined due to reduced selling
      prices associated with our sales of excess inventory to specialty
      retailers.  As a result of our efforts to reduce the amount inventory
      we carried, sales of our excess inventory have increased relative to other
      sales.





In
      the
      ordinary course of its business, Innotrac provided warehousing, sale order
      processing and fulfillment services to Tactica provided that the balance owed
      for such services was within an acceptable range. At times during fiscal 2005,
      due to our low level of working capital, sales order processing was temporarily
      suspended. In addition, we invested less in acquiring new inventory which has
      delayed fulfillment of customer orders and caused order
      cancellations.







We
      incur
      chargeback claims, primarily product returns, from our retailer customers which
      reduce our revenues. For fiscal 2005 and 2004, Tactica's revenues were
      reduced by approximately $3,751,000 and $19,367,000, respectively, for
      chargeback claims.  We have incurred a high level of chargebacks for
      our
      products that we sold, especially Epil-Stop®, as a result of the reduction in
      our promotional efforts that stimulated retail sales of our products. In
      addition, the launch of Epil-Stop(R) Wipe-Aways, a new hair removal product,
      was
      not promoted extensively and did not produce as much revenues as anticipated,
      and is resulting in significant retail chargebacks. Under terms of an April
      29,
      2004 agreement, we transferred all rights to the Epil-Stop(R) brand to Helen
      of
      Troy and they granted us a three-year license to sell Epil-Stop(R) products
      to
      customers outside of North America, Central America, South America and the
      Caribbean. Our accrued chargeback reserve provides for estimated chargeback
      claims and it was significantly increased to account for chargebacks for
      Epil-Stop(R) products, now that we do not support the brand in the U.S., and
      other of our products.





Tactica
      was granted a three-year license to sell Epil-Stop(R) products to customers
      outside of North America, Central America, South America and the Caribbean.
      Although sales of Epil-Stop® in these markets during the license period have not
      been significant, we expect to seek a continuation of the agreement and
      settlement of a minimum royalty due on January 30, 2005 and the minimum
      royalties due thereafter.




We
      are
      currently focusing on generating future revenue by selling its products directly
      to consumers through their responses to our television advertising of select
      Singer® products. We are advertising our products that have indicated
      encouraging levels consumer acceptance. Continued sales of Tactica’s line of
      Singer® floor care products depends in part upon a third party license agreement
      for use of the Singer brand name. Tactica’s exclusive license for Singer®
      branded floor care products includes targets for royalty payments and
      promotional spending through December 31, 2004. Tactica is seeking additional
      time to achieve the targets of $1,000,000 in royalties paid and $200,000 in
      product promotion spent on each Singer® product. As a result of the shortfall in
      achieving the targets, the licensor has the option to continue, modify or
      terminate the license. Future sales of Singer® floor care products are dependent
      in part on our ability to continue the license under acceptable terms. We have
      the right to continuing marketing our line of floor care products without use
      of
      the Singer trademark.




Gross
      Profit (Loss)




Our
      gross
      loss was ($234,146) or (2.1%) for fiscal 2005 versus our gross profit of
      $19,234,203 for fiscal 2004. The $19,468,349 decrease in gross profit for fiscal
      2005 is primarily the result of the decrease in revenue discussed above and
      a
      $2,305,252 charge taken in cost of sales to writedown inventory held by
      Innotrac. Tactica disputes the alleged defaults and the parties are seeking
      a
      resolution that would permit Innotrac to liquidate Tactica’s products and use
      the proceeds to clear Tactica’s obligations to Innotrac and reduce Tactica’s
      obligations to other creditors. Management evaluated the recoverability of
      the
      inventory and concluded from the results of this evaluation that a significant
      impairment charge was required for inventory held by Innotrac because the
      inventory’s estimated market value less Innotrac’s handling charges and other
      disposal cost were less than its cost. Accordingly, we recorded a charge of
      $2,305,252 during fiscal 2005 for impairment of previously acquired inventory.
      Our gross profit percentages for fiscal 2005, as compared to fiscal 2004
      decreased, in part, due to increased sales of excess inventory to specialty
      retailers at reduced prices, including sales of products at below our
      cost.




16


*Operating
      expenses*




Operating expenses
      for fiscal 2005 were $14,208,962, a decrease of $18,518,255 from
      $32,727,217, or 56.6% as compared to fiscal 2004. We spent approximately
      $10,990,000 or 94.7% less on media advertising in fiscal 2005 as compared fiscal
      2004. We use television infomercials and print advertisements to sell our
      products directly to consumers and to increase awareness of the products we
      sell
      to retailers. Media advertising requires Tactica to make upfront investments
      of
      its working capital, which we have moderated in recognition of our level of
      working capital.





Our
      promotional efforts for Epil-Stop products were significantly lower in fiscal
      2005 as compared to fiscal 2004 due, in part, to the April 29, 2004 transfer
      of
      its Epil-Stop brand to Helen of Troy. We also reduced personnel, warehouse
      operations costs and other general and administrative expense in connection
      with
      the lower level of sales activity. During fiscal 2005, we recorded a one-time
      expense of $3,275,000 for financial advisory fees that were incurred in
      connection with the June 2004 reverse merger transaction. The fees consisted
      of
      1,250,000 shares of our Common Stock issued and paid to its financial advisor
      upon the closing of the June 11, 2004 reverse merger transaction We recorded
      a
      $630,000 one-time charge for estimated settlements of two Tactica pre-petition
      matters that we anticipate settling in the bankruptcy proceedings.




For
      fiscal 2005, we recognized a $21,948 charge to other selling, general and
      administrative expense for the issuances of 6,693,340 shares of our Common
      Stock
      in the conversion of all outstanding Diva Series A, B and C Convertible
      Preferred Shares, 5,593,593 shares of our Common Stock in exchange for remaining
      outstanding shares of Diva Common Stock and an aggregate of 9,400,000 shares
      of
      our Common Stock and 261,000 Series E Convertible Preferred Stock.




*Interest
      expense and Other income / expense*




We
      incurred net interest expense of $176,425 and $589,644 in fiscal 2005 and fiscal
      2004, respectively. The decreases are due to the elimination on April 29, 2004
      of Tactica's line of credit with Helen of Troy and resulting interest expense
      charges.




*Reorganization
      items:*




In
      fiscal
      2005, Tactica incurred $1,558,103 of expense in connection with its business
      restructuring and reorganization under chapter 11 including professional
      fees of $686,683 and a $871,420 one-time charge for the estimated remaining
      lease obligations under the Sublease Agreement for our New York offices
      ($813,094) and for telephone equipment ($58,326). We rejected the lease
      agreements under the Bankruptcy Code and moved into less costly New York offices
      in March 2005. The lease obligations are pre-petition liabilities.




Net
      Loss




Our
      net
      loss for fiscal 2005 was $16,197,364 in contrast to a $9,014,554 net loss for
      fiscal 2004. Our losses are attributable to decreased revenues and gross profits
      that were not fully offset by the decreases in operating expenses and certain
      significant chargers. The $16,197,364 net loss for fiscal 2005 includes: an
      inventory writedown charge of approximately $2,305,000; approximately $3,751,000
      in charges to increase the allowance for doubtful accounts receivable primarily
      for retail customer chargebacks; a $3,275,000 one-time financial advisory fee
      in
      connection with the June 2004 reverse merger that was paid in our Common Stock;
      approximately $609,000 in professional fees incurred primarily in connection
      with the HoT transaction, the reverse merger, fundraising efforts, public
      company matters, and $1,558,103 in reorganization expenses in connection
      with Tactica’s bankruptcy filing; and a $630,000 charge for anticipated
      settlements of two pending pre-petition legal matters.




Our
      net
      loss per common share (basic and diluted) was ($0.90) and $(0.50) for fiscal
      2005 and fiscal 2004, respectively.




The
      weighted average number of outstanding shares was 18,002,933 for the fiscal
      2005
      and fiscal 2004.




17




**Liquidity
      and Capital Resources**




Overview





As
      of
      February 28, 2005, we had a $14.4 million working capital deficit and negative
      net worth of $14.3 million. Excluding pre-petition liabilities, net working
      capital was approximately $1.2 million as of February 28, 2005. As of February
      29, 2004, Tactica had a working capital deficit in excess of $12.6 million
      and
      negative net worth of approximately $11.2 million **.** On
      April
      29, 2004, Tactica and HoT entered into an agreement under which Tactica was
      released from $16,891,838 in secured debt payable to HoT in exchange for certain
      Tactica corporate income tax refunds of $2,901,115, marketable securities of
      $3,030,000 and certain Tactica intangible assets, including all rights to the
      Epil-Stop(R) brand that had no book value. In connection with the transaction,
      Tactica increased its accrued chargeback reserve by $1,000,000 for Epil-Stop
      claims and eliminated a $2,025,473 deferred tax asset used to offset the gain
      from the transaction. The $7,935,250 net result was added to additional
      paid-in-capital. The $3,030,000 marketable securities given to HoT were obtained
      by Tactica from its minority stockholders as full satisfaction for $3,500,000
      in
      loans receivable from the minority stockholders together with accrued interest
      of $1,266,663, which was extinguished prior to its maturity date of March 14,
      2005. The $1,736,663 net result was deducted from additional paid-in-capital.
      Tactica loaned its three minority stockholders a total of $3,500,000 on March
      14, 2000 in connection with a $3,500,000 loan by HoT to Tactica. The loan
      receivable accrued interest at 8.75% per annum.





For
        the
        year ended February 28, 2005 we generated a net cash flow deficit from operating
        activities of $ 1,078,279 consisting ting primarily of year to date losses
        of $
        16,197,364, adjusted for non cash expenses of $ 3,275,000 of equity issued
        for
        services and a $ 7,519,202 decrease in inventory.
 
 Cash
        used
        in investing activities totaled $ 14,842, which was utilized for the acquisition
        of property and equipment. Cash provided by financing activities totaled
        $
        910,037consisting of $ 300,000 in proceeds from loans, net of repayments,
        and $
        96,225 advanced by a significant shareholder of the Company, net of repayments,
        respectively.
 
 We
        expect
        capital expenditures to be nominal for fiscal 2005. These anticipated
        expenditures are for continued investments in property and equipment used
        in our
        business.
 
 Acquisition
        of Tactica





The
      June
      11, 2004 reverse merger between us and Tactica gave us access to public markets
      for financing and enabled Tactica to convert approximately $3.6 million of
      accounts payable into Series E Convertible Preferred Stock. Despite the
      transaction with Helen of Troy and reverse merger, we were not yet able to
      raise
      sufficient additional working capital. As a result of the foregoing factors,
      Tactica did not have an available source of working capital to satisfy a demand
      by Innotrac that Tactica immediately pay all amounts allegedly due to Innotrac
      and continue its normal operation of business. Tactica and Innotrac agreed
      upon
      the terms of a Stipulation which contemplated the filing of a bankruptcy
      petition that was subsequently made and approved on an interim basis by the
      Bankruptcy Court.





The
      Stipulation allowed Tactica to resume fulfillment of customer orders for
      products held in inventory at the Innotrac warehouse (“Innotrac Inventory”).
      Sales of the Innotrac Inventory have been primarily made at reduced prices
      to
      closeout retailers and catalog merchants. Tactica was required under the
      Stipulation to prepay Innotrac for fulfillment services and remit 55% of the
      proceeds from sales of the Innotrac Inventory. Tactica was required
      to make
      a minimum of $120,000 in monthly payments to Innotrac to reduce the debt owed
      to
      Innotrac, which balance is currently approximately $2,781,000.





Innotrac
      issued a Stipulation default notice on January 18, 2005 and ceased order
      processing services. Tactica disputes the alleged defaults and the parties
      are
      seeking a resolution prior to a possible court trial. Management evaluated
      the
      recoverability of the inventory and concluded from the results of this
      evaluation that a significant impairment charge was required for inventory
      held
      by Innotrac because the inventory’s estimated market value less Innotrac’s
      handling charges and other disposal costs was less than its cost. 
      Accordingly, we recorded a charge of $2,305,252 during fiscal 2005 for
      impairment of previously acquired inventory.





The
      Stipulation default has caused Tactica to lose the use
      of the
      Innotrac Inventory.  Management has shifted its
      focus away
      from selling the Innotrac Inventory, which has low gross margins and
      insufficient contribution to current liquidity, and to increasing our
      direct response sales efforts.  We have been selling newly
      manufactured products directly to consumers through responses to our
      television advertising.  We expect to continue fulfilling direct response
      orders through other fulfillment companies. In addition, we expect to continue
      selling newly-manufactured products that we direct ship from
      third
      party manufacturers to mail order catalog companies, international
      customers, retail chains and specialty retailers.





On
      December 8, 2004, Tactica entered into a Credit Agreement with Tactica Funding
      1, LLC (“Tactica Funding”), under which Tactica Funding agreed to provide
      Tactica with a secured loan of up to an aggregate principal amount of $300,000
      (the “Loan”), to provide funds for Tactica’s continued ordinary course
      operations and working capital needs, as evidenced by a promissory note. The
      Loan bears interest at a rate of 9% per annum and is payable monthly.
      Notwithstanding the foregoing, the Loan bears a default rate of interest of
      12%
      per annum. The entire principal was due and payable on February 28, 2005. As
      Security for the Loan, Tactica granted to Tactica Funding a first priority
      security interest in substantially all of the assets of Tactica, except as
      to
      permitted liens for which the Tactica Funding security interest is junior and
      subordinate, including Innotrac, certain carve out expenses that Tactica incurs
      for professional fees and other bankruptcy case matters. Pursuant to the Credit
      Agreement, Tactica’s default of the Stipulation is an event of default on the
      Loan. Tactica and Tactica Funding are discussing the default and potential
      for a
      forbearance agreement.




18


Tactica
      is seeking to emerge from bankruptcy by generating profits from sales of its
      products to consumers through response to our television advertising of select
      Singer® and IGIÁ® products that have demonstrated encouraging levels of consumer
      acceptance. Tactica plans to use proceeds from these direct response sales
      to
      increase purchases of the goods from manufacturers, buy additional television
      airtime to run our advertisements, pay for fulfillment services and fund its
      plan of reorganization and exit from bankrupcy. We reduced operating costs
      by
      moving to less costly office space, by decreasing staff levels, and by
      restructuring sales compensation plans. In addition, our sales to retail
      customers are reduced by our limited working capital and their adverse response
      to our bankruptcy, which has enabled us to reduce operations that were not
      generating liquidity.




Continued
      sales of Tactica’s line of Singer® floor care products depends in part upon a
      third party license agreement for use of the Singer brand name. Tactica’s
      exclusive license for Singer® branded floor care products includes targets for
      royalty payments and promotional spending through December 31, 2004. Tactica
      is
      seeking additional time to achieve the targets of $1,000,000 in royalties paid
      and $200,000 in product promotion spend on each Singer® product. As a result of
      the shortfall in achieving the targets, the licensor has the option to continue,
      modify or revoke the license. Future sales of Singer® floor care products are
      dependent in part on our ability to continue the license under acceptable terms.
      In the event that the Singer® license is not retained, we would expect that it
      would not have a material impact on the Company’s future results of operations
      and cash flows from operations




Tactica’s
      ability to emerge from bankruptcy is dependent on several factors, including
      but
      not limited to, its ability to: generate liquidity from operations; satisfy
      its
      ongoing operating costs on a timely basis; develop an acceptable exit plan;
      receive requisite approval from Tactica’s pre-petition creditors and the
      Bankruptcy Court of a settlement of the bankruptcy case; and to pay all
      administrative costs incurred in bankruptcy prior to emergence.




If
      we are
      unable to service financial obligations as they become due, we will be required
      to adopt alternative strategies, which may include, but are not limited to,
      actions such as further reducing management and employee headcount and
      compensation, attempting to further restructure financial obligations and/or
      seeking a strategic merger, acquisition or a sale of assets. There can be no
      assurance that any of these strategies could be affected on satisfactory
      terms.





By
      adjusting our operations and development to the level of capitalization, we
      believe we have sufficient capital resources to meet projected cash flow
      deficits. However, if during that period or thereafter, we are not successful
      in
      generating sufficient liquidity from operations or in raising sufficient capital
      resources, on terms acceptable to us, this could have a material adverse effect
      on our business, results of operations liquidity and financial condition.




Financings





To
      obtain
      funding for the
      purpose of providing a loan to Tactica International, Inc., our wholly-owned
      subsidiary , in the
      form of debtor in possession financing and/or exit financing in the context
      of
      Tactica’s chapter 11 case subject to Bankruptcy Court approval, we
      entered into a Securities Purchase Agreement with New Millennium Capital
      Partners II, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and AJW
      Partners, LLC on March 23, 2005 for the sale of (i) $3,000,000 in callable
      secured convertible notes and (ii) warrants to buy 6,000,000 shares of our
      common stock. This prospectus relates to the resale of the common stock
      underlying these secured convertible notes and warrants. Provided that the
      terms
      and conditions of the Securities Purchase Agreement are satisfied, the investors
      are obligated to provide us with an aggregate of $3,000,000 as follows:





·
            $1,000,000
                was disbursed on March 24, 2005;





·
            $1,000,000
                was disbursed on April 20, 2005;
                and





·
            $1,000,000
                will be disbursed within five days of the registration statement
                that we
                filed on April 14, 2005 being declared effective.





Accordingly,
      we have received a total of approximately $1,700,000 in net proceeds
      after
      deducting approximately $300,000 of expenses and prepaid
      interest pursuant to the Securities Purchase Agreement. The funds from
      the
      sale of the callable secured convertible notes will be used for business
      development purposes, business acquisitions, working capital needs, pre-payment
      of interest, payment of consulting, accounting and legal fees and borrowing
      repayment in accordance with the April 20, 2005 Credit Agreement between IGIA,
      Inc. and Tactica.





19


The
      callable secured convertible notes bear interest at 8%, mature three years
      from
      the date of issuance, and are convertible into our common stock, at the
      investors' option, at the lower of (i) $0.04 or (ii) 50% of the average of
      the
      three lowest intraday trading prices for the common stock on a principal market
      for the 20 trading days before but not including the conversion date. The full
      principal amount of the callable secured convertible notes is due upon default
      under the terms of secured convertible notes. The warrants are exercisable
      until
      five years from the date of issuance at a purchase price of $0.03 per share.
      In
      addition, the conversion price of the secured convertible notes and the exercise
      price of the warrants will be adjusted in the event that we issue common stock
      at a price below the fixed conversion price, below market price, with the
      exception of any securities issued in connection with the Securities Purchase
      Agreement. The conversion price of the callable secured convertible notes and
      the exercise price of the warrants may be adjusted in certain circumstances
      such
      as if we pay a stock dividend, subdivide or combine outstanding shares of common
      stock into a greater or lesser number of shares, or take such other actions
      as
      would otherwise result in dilution of the selling stockholder’s position. The
      selling stockholders have contractually agreed to restrict their ability to
      convert or exercise their warrants and receive shares of our common stock such
      that the number of shares of common stock held by them and their affiliates
      after such conversion or exercise does not exceed 4.99% of the then issued
      and
      outstanding shares of common stock. In addition, we have granted the investors
      a
      security interest in substantially all of our assets and intellectual property
      and registration rights.





Since
      the
      conversion price will be less than the market price of the common stock at
      the
      time the secured convertible notes are issued, we anticipate recognizing a
      charge relating to the beneficial conversion feature of the callable secured
      convertible notes during the quarter in which they are issued, including the
      first fiscal quarter ended May 31, 2005 when $2,000,000 of secured convertible
      notes were issued. In addition, in connection with services provided to the
      Company in arranging and concluding the funding, the Company has committed
      to
      issuing 3,000,000 shares of its common stock to a third party upon the
      effectiveness of the registration statement.





We
      will
      still need additional investments in order to continue operations to cash flow
      break even. Additional investments, including $1,000,000 to be received under
      the Securities Purchase Agreement should our registration statement that we
      filed on April 14, 2005, be declared effective, are being sought, but we cannot
      guarantee that we will be able to obtain such investments. Financing
      transactions may include the issuance of equity or debt securities, obtaining
      credit facilities, or other financing mechanisms. However, the trading price
      of
      our common stock and the downturn in the U.S. stock and debt markets could
      make
      it more difficult to obtain financing through the issuance of equity or debt
      securities. Even if we are able to raise the funds required, it is possible
      that
      we could incur unexpected costs and expenses, fail to collect significant
      amounts owed to us, or experience unexpected cash requirements that would force
      us to seek alternative financing. Further, if we issue additional equity or
      debt
      securities, stockholders may experience additional dilution or the new equity
      securities may have rights, preferences or privileges senior to those of
      existing holders of our common stock. If additional financing is not available
      or is not available on acceptable terms, we will have to curtail our operations
      again.




The
        independent auditor's report on the Company's February 28, 2005 financial
        statements included in this Annual Report states that the Company's recurring
        losses raise substantial doubts about the Company's ability to continue as
        a
        going concern.


The
      effect of inflation on our revenue and operating results was not significant.
      Our operations are located in North America and there are no seasonal aspects
      that would have a material effect on our financial condition or results of
      operations.




Off
      Balance Sheet Arrangements




The
      Company does not maintain off-balalnce sheet arrangements nor does it
      participate in non-exchange traded contracts requiring fair value accounting
      treatment.


**CRITICAL
      ACCOUNTING POLICIES AND USE OF ESTIMATES**





Financial
      Reporting Release No. 60, recently released by the Securities and Exchange
      Commission, requires all companies to include a discussion of critical
      accounting policies or methods used in the preparation of financial statements.
      The notes to the consolidated financial statements include a summary of
      significant accounting policies and methods used in the preparation of our
      Consolidated Financial Statements. In addition, Financial Reporting Release
      No.
      61 was recently released by the SEC requires all companies to include a
      discussion which addresses, among other things, liquidity, off-balance sheet
      arrangements, contractual obligations and commercial commitments. The following
      is a brief discussion of the more significant accounting policies and methods
      used by us.





The
      discussion and analysis of our financial condition and results of operations
      are
      based upon our consolidated financial statements, which have been prepared
      in
      accordance with accounting principles generally accepted in the United States.
      The preparation of financial statements in accordance with generally accepted
      accounting principles in the United States requires management to make estimates
      and assumptions that affect the reported amounts of assets and liabilities,
      including the recoverability of tangible and intangible assets, disclosure
      of
      contingent assets and liabilities as of the date of the financial statements
      and
      the reported amounts of revenues and expenses during the reported period.





On
      an
      on-going basis, we evaluate our estimates. The most significant estimates relate
      to our recognition of revenue, the allowance for doubtful accounts receivable
      and inventory valuation reserves.





We
      believe the following critical accounting policies affect our more significant
      judgments and estimates used in the preparation of our consolidated financial
      statements:





20


***Revenue
      Recognition***




In
        accordance with generally accepted accounting principles (“GAAP”) in the United
        States, revenue is recognized only when the price is fixed or determinable,
        persuasive evidence of an arrangement exists, the service is performed, and
        collectibility of the resulting receivable is reasonably assured. Noted below
        are brief descriptions of the product or service revenues that the Company
        recognizes in the financial statements contained herein.


We
      recognize revenue when we ship our product to customers. Customers at times
      request credits for returned product or in connection with incentives such
      as
      cooperative advertising agreements. We reduce sales or increase selling,
      general, and administrative expenses, depending on the nature of the credits,
      for estimated future credits to customers. Management bases such estimates
      either on historical information about credits issued, relative to total sales,
      or on specific knowledge of incentives offered to retailers.




Allowance
        for doubtful accounts
  We
        maintain an allowance for doubtful accounts to reduce amounts to their estimated
        realizable value. A considerable amount of judgment is required when we assess
        the realization of accounts receivables, including assessing the probability
        of
        collection and the current credit-worthiness of each customer. If the financial
        condition of our customers were to deteriorate, resulting in an impairment
        of
        their ability to make payments, an additional provision for doubtful accounts
        could be required. We initially record a provision for doubtful accounts
        based
        on our historical experience, and then adjust this provision at the end of
        each
        reporting period based on a detailed assessment of our accounts receivable
        and
        allowance for doubtful accounts. In estimating the provision for doubtful
        accounts, we consider: (i) the aging of the accounts receivable; (ii) trends
        within and ratios involving the age of the accounts receivable; (iii) the
        customer mix in each of the aging categories and the nature of the receivable;
        (iv) our historical provision for doubtful accounts; (v) the credit worthiness
        of the customer; and (vi) the economic conditions of the customer’s industry as
        well as general economic conditions, among other factors.


***Inventories***





Inventories
      consist almost entirely of finished goods. We account for inventory using a
      first-in-first-out system in which we record inventory on our balance sheets
      at
      the lower of our cost or net realizable value. A product’s cost is comprised of
      the amount that we pay our manufacturer for product, tariffs and duties
      associated with transporting product across national borders and freight costs
      associated with transporting the product from our manufacturers to our warehouse
      locations. When circumstances dictate that we use net realizable value in lieu
      of cost, we base our estimates on expected future selling prices less expected
      disposal costs. The Cost of goods sold line item on the Statements of Operations
      is comprised of the book value (lower of cost or net realizable value) of
      inventory sold to customers during the reporting period.


**Stock-Based
        Compensation**
 
 In
        December 2002, the FASB issued SFAS No. 148 - Accounting for Stock-Based
        Compensation - Transition and Disclosure. This statement amends SFAS No.
        123 -
        Accounting for Stock-Based Compensation, providing alternative methods of
        voluntarily transitioning to the fair market value based method of accounting
        for stock based employee compensation. FAS 148 also requires disclosure of
        the
        method used to account for stock-based employee compensation and the effect
        of
        the method in both the annual and interim financial statements. The provisions
        of this statement related to transition methods are effective for fiscal
        years
        ending after December 15, 2002, while provisions related to disclosure
        requirements are effective in financial reports for interim periods beginning
        after December 31, 2003.
 
 We
        elected to continue to account for stock-based compensation plans using the
        intrinsic value-based method of accounting prescribed by APB No. 25, "Accounting
        for Stock Issued to Employees," and related interpretations. Under the
        provisions of APB No. 25, compensation expense is measured at the grant date
        for
        the difference between the fair value of the stock and the exercise
        price.
 
 The
        Company has incurred significant costs in connection with the issuance of
        equity- based compensation, which is comprised primarily of our common stock
        and
        warrants to acquire our common stock, to non-employees. The Company anticipates
        continuing to incur such costs in order to conserve its limited financial
        resources. The determination of the volatility, expected term and other
        assumptions used to determine the fair value of equity based compensation
        issued
        to non-employees under SFAS 123 involves subjective judgment and the
        consideration of a variety of factors, including our historical stock price,
        option exercise activity to date and the review of assumptions used by
        comparable enterprises.
 
 We
        account for equity based compensation, issued to non-employees in exchange
        for
        goods or services , in accordance with the provisions of SFAS No. 123 and
        EITF
        No. 96-18, “Accounting for Equity Instruments That are Issued to Other Than
        Employees for Acquiring, or in Conjunction with Selling, Goods or Services”.




21




**ITEM
      7 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**





**INDEX
      TO FINANCIAL STATEMENTS**





**IGIA,
                INC. AND SUBSIDIARY**
            
            PageReport
                of Independent Registered Public Accounting Firm
            
            F-2Consolidated
                Balance Sheet as of February 28, 2005
            
            F-3Consolidated
                Statement of Operations for the year ended
              February
                28, 2005
            
            F-4Consolidated
                Statement of Deficiency inStockholders' Equity for the year ended
                February 28, 2005
            
            F-5Consolidated
                Statement of Cash Flows for the year ended
              February
                28, 2005
            
            F-6Notes
                to Consolidated Financial Statements
            
            F-7
                - F-17**TACTICA
                INTERNATIONAL, INC.**
            
            F-18Report
                of Independent Registered Public Accounting Firm
            
            F-19Balance
                Sheet as of February 29, 2004
            
            F-20Statement
                of Operations for the year ended February 29, 2004
            
            F-21Statement
                of Stockholders' Deficit for the year endedFebruary 29,
                2004
            
            F-22Statement
                of Cash Flows for the year ended
              February
                29, 2004
            
            F-23Notes
                to Financial Statements
            
            F-24
                - F-31




F-1


**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





The
      Board
      of Directors


IGIA,
      Inc.:





We
      have
      audited the accompanying consolidated balance sheet of IGIA, Inc. and 
      its wholly-owned subsidiary (the "Company") as of February 28, 2005, and the
      related consolidated statements of operations, deficiency in stockholders'
      equity, and cash flows for the year then ended. These financial statements
      are
      the responsibility of the Company’s management. Our responsibility is to express
      an opinion on these financial statements based on our audit.





We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audit provides a
      reasonable basis for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the consolidated financial position of the Company as of
      February 28, 2005, and the consolidated results of its operations and its cash
      flows for the year then ended in conformity with accounting principles generally
      accepted in the United States of America.





The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. As discussed in Note 1 to the financial
      statements, the Company has suffered recurring losses from operations and has
      a
      net capital deficiency that raise substantial doubt about its ability to
      continue as a going concern. Management’s plans in regard to these matters are
      also described in Note 1. The consolidated financial statements do not include
      any adjustments that might result from the outcome of this uncertainty.





/s/
      Russell Bedford Stefanou Mirchandani LLP





New
      York,
      New York


June
      15,
      2005




F-2




IGIA,
                      INC.(Formerly
                      Tactica International, Inc.)CONSOLIDATED
                      BALANCE SHEET
    **ASSETS**
                    
                    February
                          28,2005**CURRENT
                        ASSETS:**Cash
                    
                    $
                    2,160Accounts
                        receivable, net of allowance for doubtful accounts
                    
                    
                    93,633Inventories
                    
                    
                    3,070,652Prepaid
                        expenses
                    
                    
                    136,592Total
                        current assets
                    
                    
                    3,303,037Property
                        and equipment, net of accumulated depreciation
                    
                    
                    137,426Other
                        asset
                    
                    
                    35,054Total
                        Assets
                    
                    $
                    3,475,517**LIABILITIES
                        AND DEFICIENCY IN STOCKHOLDERS’ EQUITY****CURRENT
                        LIABILITIES:**Pre-petition
                        liabilities
                    
                    $
                    15,643,072Accounts
                        payable
                    
                    
                    1,255,476Accrued
                        expenses
                    
                    
                    526,595Note
                        payable
                    
                    
                    305,579Total
                        current liabilities
                    
                    
                    17,730,722**DEFICIENCY
                        IN STOCKHOLDERS’ EQUITY:**Preferred
                          stock, Series E, par value $0.001 per share; 1,000,000
                          shares authorized;
                          261,574shares,
                          issued and outstanding
                    
                    
                    262Common
                          stock, par value $ 0.001 per share; 100,000,000 shares
                          authorized,
                          18,002,933 shares issued and outstanding
                    
                    
                    18,003Additional
                        paid -in- capital
                    
                    
                    13,942,910Accumulated
                        deficit
                    
                    
                    (28,216,380
                    )Total
                        Deficiency in Stockholders’ Equity
                    
                    
                    (14,255,205
                    )Total
                        Liabilities and Deficiency in Stockholders’ Equity
                    
                    $
                    3,475,517
    See
                        accompanying footnotes to the consolidated financial
                        statements
    F-3
 IGIA,
                        INC.(Formerly
                        Tactica International, Inc.)CONDENSED
                        CONSOLIDATED STATEMENT OF
                        OPERATIONS
  Year
                            EndedFebruary 28, 2005REVENUES:Net
                        sales
                    
                    $
                    11,324,450Cost
                        of sales
                    
                    
                    11,558,596Gross
                        loss
                    
                    
                    (234,146
                    )OPERATING
                        EXPENSES:Media
                        advertising
                    
                    
                    613,867Financial
                        advisory fee
                    
                    
                    3,275,000Other
                        selling, general and administrative
                    
                    
                    10,320,095Total
                        operating expenses
                    
                    
                    14,208,962LOSS
                        FROM OPERATIONS
                    
                    
                    (14,443,108
                    )OTHER
                        INCOME EXPENSE:Interest
                        expense, net
                    
                    
                    (176,425
                    )Other
                    
                    
                    (19,728
                    )(196,153
                    )LOSS
                        BEFORE REORGANIZATION ITEMS AND INCOME TAXES
                    
                    
                    (14,639,261
                    )REORGANIZATION
                        ITEMS:Provision
                        for rejected executory contracts
                    
                    
                    (871,420
                    )Professional
                        fees
                    
                    
                    (686,683
                    )(1,558,103
                    )LOSS
                        BEFORE INCOME TAXES
                    
                    
                    (16,197,364
                    )Income
                        taxes
                    
                    
                    —NET
                        LOSS
                    
                    $
                    (16,197,364
                    )Net
                        loss per common share (basic and diluted)
                    
                    $
                    (0.90
                    )Weighted
                        average common shares outstanding
                    
                    
                    18,002,933
  See
                          accompanying footnotes to the consolidated financial
                          statements
   F-4
 IGIA,
                    INC.(Formerly
                    Tactica International, Inc.)CONSOLIDATED
                    STATEMENT OF DEFICIENCY IN STOCKHOLDERS’
                    EQUITY
  TotalAdditional
                  
                  
                  
                  Deficiency
                      inSeries
                      E
                  
                  
                  
                  
                  
                  Paid-In
                  
                  Accumulated
                  
                  Stockholders’Preferred
                      Stock
                  
                  Common
                      Stock
                  
                  Capital
                  
                  Deficit
                  
                  EquityBalance
                      at March 1, 2004
                  
                  
                  —
                  
                  
                  —
                  
                  
                  1,000
                  
                  $
                  77,000
                  
                  $
                  756,480
                  
                  $
                  (12,019,016
                  )
                  $
                  (11,185,536
                  )Exchange
                      of net assets and liabilities, with previous majority shareholder
                      of
                      Tactica, for 100% of previous owners’ equity interest
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  6,198,587
                  
                  
                  
                  
                  
                  6,198,587Cancellation
                      of Tactica International, Inc. shares
                  
                  
                  
                  
                  
                  
                  
                  
                  (1,000
                  )
                  
                  (77,000
                  )
                  
                  77,000
                  
                  
                  
                  
                  
                  —Issuance
                      of shares in connection with merger with Diva Entertainment,
                      Inc.
                  
                  
                  
                  
                  
                  
                  
                  
                  9,400,000
                  
                  
                  9,400
                  
                  
                  
                  
                  
                  
                  
                  
                  9,400Receipt
                      and subsequent cancellation of shares received in exchange
                      for
                      distribution of wholly-owned subsidiary to shareholder
                  
                  
                  
                  
                  
                  
                  
                  
                  (3,725,000
                  )
                  
                  (3,725
                  )
                  
                  3,725
                  
                  
                  
                  
                  
                  —Cancellation
                      of shares previously issued in connection with merger with
                      Diva
                      Entertainment, Inc.
                  
                  
                  
                  
                  
                  
                  
                  
                  (1,209,000
                  )
                  
                  (1,209
                  )
                  
                  1,209
                  
                  
                  
                  
                  
                  —Issuance
                      of shares in exchange for previously issued and outstanding
                      shares held by
                      Diva Entertainment, Inc. preferred shareholders
                  
                  
                  
                  
                  
                  
                  
                  
                  6,693,340
                  
                  
                  6,693
                  
                  
                  
                  
                  
                  
                  
                  
                  6,693Issuance
                      of shares in exchange for previous issued and outstanding shares
                      held by
                      Diva Entertainment, Inc. common shareholders
                  
                  
                  
                  
                  
                  
                  
                  
                  5,593,593
                  
                  
                  5,594
                  
                  
                  
                  
                  
                  
                  
                  
                  5,594Issuance
                      of preferred shares in connection with merger with Diva Entertainment,
                      Inc.
                  
                  
                  261,000
                  
                  
                  261
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  261Issuance
                      of shares in exchange for services rendered
                  
                  
                  
                  
                  
                  
                  
                  
                  1,250,000
                  
                  
                  1,250
                  
                  
                  3,273,750
                  
                  
                  
                  
                  
                  3,275,000Issuance
                      of shares in exchange for services rendered
                  
                  
                  
                  
                  
                  
                  
                  
                  1,750,000
                  
                  
                  1,750
                  
                  
                  4,583,250
                  
                  
                  
                  
                  
                  4,585,000Cancellation
                      of previously issued shares in connection with services
                      rendered
                  
                  
                  
                  
                  
                  
                  
                  
                  (1,750,000
                  )
                  
                  (1,750
                  )
                  
                  (4,583,250
                  )
                  
                  
                  
                  
                  (4,585,000
                  )Issuance
                      of preferred shares in exchange for previously incurred
                      debt
                  
                  
                  574
                  
                  
                  1
                  
                  
                  
                  
                  
                  
                  
                  
                  3,632,159
                  
                  
                  
                  
                  
                  3,632,160Net
                      Loss
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (16,197,364
                  )
                  
                  (16,197,364
                  )Balance
                      at February 28, 2005
                  
                  
                  261,574
                  
                  $
                  262
                  
                  
                  18,002,933
                  
                  $
                  18,003
                  
                  $
                  13,942,910
                  
                  $
                  (28,216,380
                  )
                  $
                  (14,255,205
                  )
   See
                        accompanying footnotes to the consolidated financial
                        statements
   F-5
 IGIA,
                        INC.(Formerly
                        Tactica International, Inc.)CONSOLIDATED
                        STATEMENTS OF CASH FLOWS
  Year
                            EndedFebruary 28,2005Cash
                        flows from operating activities:Net
                        loss
                    
                    $
                    (16,197,364
                    )Adjustments
                        to reconcile net loss to net cash used in operating
                        activities:Depreciation
                        and amortization
                    
                    
                    76,520Issuance
                        of common stock for services
                    
                    
                    3,275,000Common
                        stock issued in reverse merger
                    
                    
                    21,948Interest
                        income debited to notes receivable
                    
                    
                    (51,042
                    )Interest
                        expense credited to notes payable
                    
                    
                    74,855Changes
                        in operating assets and liabilities:Accounts
                        receivable
                    
                    
                    860,846Inventory
                    
                    
                    7,519,202Tax
                        refund receivable
                    
                    
                    107,058Other
                        current assets
                    
                    
                    988,188Deposits
                        and other assets
                    
                    
                    (7,114
                    )Accounts
                        payable
                    
                    
                    1,241,145Other
                        current liabilities
                    
                    
                    526,595Pre-petition
                      liabilities
                    
                    
                    485,884Net
                        cash used in operating activities
                    
                    
                    (1,078,279
                    )Cash
                        flows from investing activitiesPurchases
                        of property and equipment
                    
                    
                    (14,842
                    )Net
                        cash used in investing activities
                    
                    
                    (14,842
                    )Cash
                        flows from financing activitiesProceeds
                        from line of credit
                    
                    
                    510,037Proceeds
                        from note payable
                    
                    
                    300,000Pre-petition
                        liabilities
                    
                    
                    100,000Net
                        cash provided by financing activities
                    
                    
                    910,037Net
                        decrease in cash
                    
                    
                    (183,084
                    )Cash
                        at beginning of year
                    
                    
                    185,244Cash
                        at end of year
                    
                    $
                    2,160Supplemental
                        disclosures of cash flow information:Cash
                        paid during the year for interest
                    
                    $
                    10,000Cash
                        paid during the year for taxes
                    
                    $
                    —
  See
                        accompanying footnotes to the consolidated financial
                        statements
   F-6
 **IGIA,
        INC.**


(Formerly
      Tactica International, Inc.)


Notes
      to
      Consolidated Financial Statements


February
      28, 2005








**(1)**
            **Summary
                of Significant Accounting Policies**





***(a)***
            ***General***





IGIA,
      Inc., formerly Tactica International, Inc. (the "Company", "Registrant" or
      "IGIA"), is incorporated under the laws of the State of Delaware. The Company,
      through its wholly-owned subsidiary, Tactica International, Inc. ("Tactica")
      designs, develops, imports, and distributes personal care and household products
      to major retailers and through direct marketing. We purchase our products from
      unaffiliated manufacturers most of which are located in the People's Republic
      of
      China and the United States. The consolidated financial statements include
      the
      accounts of the Registrant and its wholly-owned subsidiary, Tactica. All
      significant inter-company transactions and balances have been eliminated in
      consolidation.








***(b)***
            ***Chapter
                11 Reorganization and******Going Concern***





On
      October 21, 2004, Tactica, which accounts for all of the current operations
      of
      the Company, filed a voluntary petition for relief under Chapter 11 of Title
      11
      of the United States Bankruptcy Code (the “Bankruptcy Code”) in Bankruptcy Court
      for the Southern District of New York (the “Court”). IGIA is not seeking
      bankruptcy protection. Tactica remains in possession of its assets and the
      management of its property as a debtor in possession under Sections 1107 and
      1108 of the Bankruptcy Code. On October 25, 2004, the Court approved, on an
      interim basis, a Stipulation and Consent Order (the “Stipulation”) with Innotrac
      Corporation (“Innotrac”) (a copy of the Stipulation and the Order approving the
      Stipulation on an interim basis, are filed as an exhibit to the Form 8-K for
      October 21, 2004, filed by IGIA). Following the interim approval of the
      Stipulation by the Court on October 25, 2004, Innotrac began processing, packing
      and releasing Tactica's inventory for fulfillment of customer orders.





In
      the
      ordinary course of Tactica’s business, Innotrac warehoused Tactica’s products,
      processed orders and inventory and shipped these products to Tactica’s
      customers.  Innotrac informed Tactica that Innotrac would not permit
      Tactica to remove its inventory stored with Innotrac unless Tactica paid
      Innotrac all amounts allegedly due. Despite numerous attempts to obtain
      financing prior to its filing for bankruptcy protection, Tactica was unable
      to
      do so. As a result of the foregoing factors, Tactica did not have a sufficient
      available source of working capital to continue its normal operation of
      business. Although Tactica and Innotrac attempted to reach an out of court
      agreement to resolve the terms of payment to Innotrac, the terms could not
      be
      agreed upon. The parties agreed upon the terms of the Stipulation, which
      contemplated the filing of a bankruptcy petition and Court approval.







The
      Stipulation provided for a mechanism which was to have enabled Tactica to have
      its inventory shipped and sold to its customers. Pursuant to the Stipulation,
      Innotrac agreed to release its lien with respect to Tactica's inventory at
      the
      time such inventory was released for shipments to customers.  With respect
      to the first $1.6 million in customer orders, Tactica was to pay Innotrac 55%
      of
      the sales proceeds promptly upon receipt of customer payments and Tactica was
      to
      retain the remainder for its working capital.  With respect to subsequent
      customer orders, Tactica was to pay Innotrac 60% of the sales proceeds upon
      receipt of customer payments and retain the remainder. The proceeds
      paid to
      Innotrac reduced the agreed upon $2,753,281 of debt owed by Tactica to Innotrac,
      plus to the extent allowable under the Bankruptcy Code or other applicable
      law,
      pre-petition interest and post-petition interest, fees, cost, charges and
      expenses including attorney’s fees.




The
      Stipulation provided for Tactica to prepay Innotrac for fulfillment services,
      pay monthly storage charges to Innotrac, remit customer payments to Innotrac
      within a specified period, and make minimum monthly payments to reduce its
      debt
      owed Innotrac and repay the debt in full by August 31, 2005. Innotrac issued
      a
      Stipulation default notice on January 18, 2005 and ceased order processing
      activities. Tactica disputes the alleged defaults and the parties are seeking
      a
      resolution prior to a Court trial that would provide for a consensual
      liquidation of the inventory and distribution of the proceeds therefrom to
      Innotrac, Tactica’s unsecured creditors and a secured Tactica creditor. In the
      event that Innotrac prevails, Innotrac could receive Court approval to liquidate
      Tactica’s products and use the proceeds to reduce Tactica’s obligation to
      Innotrac.





The
      accompanying financial statements have been prepared assuming the Company will
      continue as a going concern. The bankruptcy petition, losses, negative working
      capital and net worth of Tactica raise substantial doubt about Tactica’s ability
      to continue as a going concern. Tactica’s ability to obtain additional financing
      depends on the availability of its borrowing capacity, the success of its growth
      strategy, its future performance and its ability to successfully emerge from
      bankruptcy, each of which is subject to general economic, financial,
      competitive, legislative, regulatory, and other factors beyond the Company’s
      control. The inability to obtain financing when required would have a material
      adverse effect on the Company and the implementation of its business plan.
      The
      financial statements do not include any adjustments that might result from
      the
      outcome of this uncertainty.




F-7


**IGIA,
        INC.**
 (Formerly
        Tactica International, Inc.)
 Notes
        to
        Consolidated Financial Statements
 February
        28, 2005


***(c)***
            ***Revenue
                Recognition***





Revenues
        are recognized in the period that services are provided. For revenue from
        product sales, the Company recognizes revenue in accordance with Staff
        Accounting Bulletin No. 104, REVENUE RECOGNITION ("SAB104"), which superceded
        Staff Accounting Bulletin No. 101, REVENUE RECOGNITION IN FINANCIAL STATEMENTS
        ("SAB101"). SAB 101 requires that four basic criteria must be met before
        revenue
        can be recognized: (1) persuasive evidence of an arrangement exists; (2)
        delivery has occurred; (3) the selling price is fixed and determinable; and
        (4)
        collectibility is reasonably assured. Determination of criteria (3) and (4)
        are
        based on management's judgments regarding the fixed nature of the selling
        prices
        of the products delivered and the collectibility of those amounts. Provisions
        for discounts and rebates to customers, estimated returns and allowances,
        and
        other adjustments are provided for in the same period the related sales are
        recorded. The Company defers any revenue for which the product has not been
        delivered or is subject to refund until such time that the Company and the
        customer jointly determine that the product has been delivered or no refund
        will
        be required.
 
 SAB
        104
        incorporates Emerging Issues Task Force 00-21 ("EITF 00-21"),
        MULTIPLE-DELIVERABLE REVENUE ARRANGEMENTS. EITF 00-21 addresses accounting
        for
        arrangements that may involve the delivery or performance of multiple products,
        services and/or rights to use assets. The effect of implementing EITF 00-21
        on
        the Company's consolidated financial position and results of operations was
        not
        significant.





***(d)***
            ***Consideration
                Paid to Customers***





We
      offer
      our customers certain incentives in the form of cooperative advertising
      arrangements, product markdown allowances, trade discounts, cash discounts,
      and
      slotting fees. We account for these incentives in accordance with Emerging
      Issues Task Force Issue No. 01-9, *Accounting
      for Consideration Given by a Vendor to a Customer* ,
      (EITF
      01-9). Markdown allowances, trade discounts, cooperative advertising program
      participation and cash discounts are all recorded as reductions of Net sales.
      Customer incentives included in Other approximated $652,000 for fiscal
      year
      2005.




***(e)***
              ***Shipping
                  and Handling Revenues and Expenses***


We
      report
      revenue from shipping and handling charges on the Net sales line of our
      Statements of Operations, in accordance with paragraph 5 of Emerging Issues
      Task
      Force Issue 00-10, *Accounting
      for Shipping and Handling Fees and Costs* .
      We only
      include charges for shipping and handling in Net sales for sales made to direct
      response customers and retail customers ordering relatively small dollar amounts
      of product. Our shipping and handling expenses far exceed our shipping and
      handling revenues. Shipping and handling expenses are included in our Statements
      of Operations on the Other operating expenses line. Our expenses for shipping
      and handling approximated $1,627,000 during fiscal year 2005.




***(f)***
            ***Advertising
                Expense***





Advertising
      expense is comprised of media, agency, and production expenses. In accordance
      with Statement of Position 93-7, *Reporting
      on Advertising Costs* ,
      direct
      response advertising expenses are charged to expense in the period in which
      the
      related revenues are recognized. Certain production costs to produce direct
      response advertising are capitalized and amortized over the expected life of
      the
      advertisement. Amortization expense relating to the production costs for the
      fiscal year 2005 approximated $428,000.




***(g)***
                ***Cash
                    and Cash Equivalents***
 For
            purposes of the Statement of Cash Flows, the Company considers all highly
            liquid
            debt instruments purchased with a maturity date of three months or less
            to be
            cash equivalents.





***(h)***
            ***Valuation
                of Accounts Receivable***


Our
        allowance for doubtful accounts reflects our best estimate of probable losses,
        determined principally on the basis of historical experience and specific
        allowances for known troubled accounts.
  ***(i)***
                ***Inventories
                    and Cost of Goods Sold***
 
 Inventories
          consist primarily of finished products held in public warehouses that are
          stated
          at the lower of cost or market, determined on a FIFO (first-in, first-out)
          basis. A product’s cost is comprised of the amount that we pay our manufacturer
          for product, tariffs and duties associated with transporting product across
          national borders and freight costs associated with transporting the product
          from
          our manufacturers to our warehouse locations. Innotrac holds Tactica’s products
          at its Reno, Nevada facility under terms of the Stipulation and maintains
          a
          first priority secured interest in the inventory. Innotrac issued a Stipulation
          default notice on January 18, 2005 and ceased order processing services.
          Tactica
          disputes the alleged defaults and the parties are seeking a resolution
          prior to
          Court trial. Management evaluated the recoverability of the inventory and
          concluded from the results of this evaluation that a significant impairment
          charge was required for inventory held by Innotrac because the inventory’s
          estimated market value less Innotrac’s handling charges and other disposal costs
          was less than its cost.  Accordingly, the Company recorded a charge
          of
          $2,305,252 for impairment of previously acquired inventory.
 
 The
          Cost
          of Goods Sold line item on the Statements of Operations is comprised of
          the book
          value (lower of cost or net realizable value) of inventory sold to customers
          during the reporting period.


F-8


**IGIA,
      INC.**


(Formerly
      Tactica International, Inc.)


Notes
      to
      Consolidated Financial Statements


February
      28, 2005




***(j)***
              ***Property
                  and Equipment***
 
 Property
        and equipment is capitalized at cost and depreciated using the straight-line
        method over the estimated useful lives of the various assets. Expenditures
        for
        normal maintenance and repairs are expensed as incurred. The cost of property
        and equipment sold or otherwise retired and the related accumulated depreciation
        is removed from the accounts, with any resulting gain or loss included in
        results from operations.


***(k)***
            ***Income
                Taxes***




The
        Company has adopted Financial Accounting Standard No. 109 (SFAS 109) which
        requires the recognition of deferred tax liabilities and assets for the expected
        future tax consequences of events that have been included in the financial
        statement or tax returns. Under this method, deferred tax liabilities and
        assets
        are determined based on the difference between financial statements and tax
        basis of assets and liabilities using enacted tax rates in effect for the
        year
        in which the differences are expected to reverse. Temporary differences between
        taxable income reported for financial reporting purposes and income tax purposes
        are insignificant.





***(l)***
            ***Use
                of Estimates***




The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and disclosure of
      contingent assets and liabilities at the date of the financial statements and
      the reported amounts of revenue and expenses during the reporting period. Actual
      results could differ from those estimates.




***(m)***
            ***Reclassification***





Certain
      reclassifications have been made to conform the prior period’s data to the
      current presentation. These reclassifications had no effect on reported
      losses.




***(n)***
              ***Long-Lived
                  Assets***
 The
        Company has adopted Statement of Financial Accounting Standards No. 144 (SFAS
        144). The Statement requires that long-lived assets and certain identifiable
        intangibles held and used by the Company be reviewed for impairment whenever
        events or changes in circumstances indicate that the carrying amount of an
        asset
        may not be recoverable. Events relating to recoverability may include
        significant unfavorable changes in business conditions, recurring losses,
        or a
        forecasted inability to achieve break-even operating results over an extended
        period. The Company evaluates the recoverability of long-lived assets based
        upon
        forecasted undercounted cash flows. Should impairment in value be indicated,
        the
        carrying value of intangible assets will be adjusted, based on estimates
        of
        future discounted cash flows resulting from the use and ultimate disposition
        of
        the asset. SFAS No. 144 also requires assets to be disposed of be reported
        at
        the lower of the carrying amount or the fair value less costs to
        sell.


***(o)***
                  ***Net
                      Loss Per Common Share***
 The
        Company computes earnings per share under Financial Accounting Standard No.
        128,
        "Earnings Per Share" (SFAS 128). Net loss per common share is computed by
        dividing net loss by the weighted average number of shares of common stock
        and
        dilutive common stock equivalents outstanding during the year. Dilutive common
        stock equivalents consist of shares issuable upon conversion of convertible
        preferred shares and the exercise of the Company's stock options and warrants
        (calculated using the treasury stock method). During 2005, common stock
        equivalents are not considered in the calculation of the weighted average
        number
        of common shares outstanding because they would be anti-dilutive, thereby
        decreasing the net loss per common share.
 ***(p)***
                    ***Liquidity***
 As
        shown
        in the accompanying financial statements, the Company has incurred a net
        loss of
        $16,197,364 during the year ended February 28, 2005. The Company's current
        liabilities exceeded its current assets by $14,427,685 as of February 28,
        2005.
        The Company's liabilities exceeded its current assets by $14,427,685 as of
        February 28, 2005.
  ***(q)***
                      ***Concentrations
                            of Credit
                            Risk***
  Financial
              instruments and related items, which potentially subject the Company
              to
              concentrations of credit risk, consist primarily of cash, cash equivalents
              and
              accounts receivable. The Company places its cash and temporary cash
              investments
              with credit quality institutions. At times, such investments may be
              in excess of
              the FDIC insurance limit. The Company periodically reviews its trade
              receivables
              in determining its allowance for doubtful accounts. The allowance for
              doubtful
              accounts was $2,667,113 at February 28, 2005.
  ***(r)***
                      ***Stock
                            Based
                            Compensation***
 In
                December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
                Compensation-Transition and Disclosure-an amendment of SFAS 123."
                This statement
                amends SFAS No. 123, "Accounting for Stock-Based Compensation," to
                provide
                alternative methods of transition for a voluntary change to the fair
                value based
                method of accounting for stock-based employee compensation. In addition,
                this
                statement amends the disclosure requirements of SFAS No. 123 to require
                prominent disclosures in both annual and interim financial statements
                about the
                method of accounting for stock-based employee compensation and the
                effect of the
                method used on reported results. The Company has chosen to continue
                to account
                for stock-based compensation using the intrinsic value method prescribed
                in APB
                Opinion No. 25 and related interpretations. Accordingly, compensation
                expense
                for stock options is measured as the excess, if any, of the fair
                market value of
                the Company's stock at the date of the grant over the exercise price
                of the
                related option. The Company has adopted the annual disclosure provisions
                of SFAS
                No. 148 in its financial reports for the year ended February 28,
                2005.
 ***(s)***
                          ***Comprehensive
                                Income***
  Statement
                  of Financial Accounting Standards No. 130, "Reporting Comprehensive
                  Income"
                  (SFAS 130), establishes standards for reporting and display of
                  comprehensive
                  income, its components and accumulated balances. Comprehensive
                  income is defined
                  to include all changes in equity except those resulting from investments
                  by
                  owners and distributions to owners. Among other disclosures, SFAS
                  130 requires
                  that all items that are required to be recognized under current
                  accounting
                  standards as components of comprehensive income be reported in
                  a financial
                  statement that is displayed with the same prominence as other financial
                  statements. The Company adopted SFAS 130 during the year ended
                  February 28, 2005
                  and has no items of comprehensive income to
                  report.
 ***(t)***
                        ***Segment
                                Information***
 
 Statement
        of Financial Accounting Standards No. 131, Disclosures about Segments of
        an
        Enterprise and Related Information (SFAS 131) establishes standards for
        reporting information regarding operating segments in annual financial
        statements and requires selected information for those segments to be presented
        in interim financial reports issued to stockholders. SFAS 131 also establishes
        standards for related disclosures about products and services and geographic
        areas. Operating segments are identified as components of an enterprise about
        which separate discrete financial information is available for evaluation
        by the
        chief operating decision maker, or decision-making group, in making decisions
        how to allocate resources and assess performance. The information disclosed
        herein, materially represents all of the financial information related to
        the
        Company's principal operating segment.
  ***(u)***
                ***Research
                    and Development***
  The
          Company accounts for research and development costs in accordance with
          Statement
          of Financial Accounting Standards No. 2, "Accounting for Research and
          Development Costs” (SFAS 2). Under SFAS 2, all research and development costs
          must be charged to expense as incurred. Accordingly, internal research
          and
          development costs are expensed as incurred. Third-party research and
          developments costs are expensed when the contracted work has been performed
          or
          as milestone results have been achieved. Company-sponsored research and
          development costs related to both present and future products are expensed
          in
          the period incurred. The Company incurred research and product development
          costs
          of $0 for the year ended February 28, 2005.




F-9


**IGIA,
      INC.**


(Formerly
      Tactica International, Inc.)


Notes
      to
      Consolidated Financial Statements


February
      28, 2005




***(v)***
            ***New
                Accounting Guidance***




In
        November 2004, the Financial Accounting Standards Board (FASB) issued SFAS
        No.
        151, INVENTORY COSTS-- AN AMENDMENT OF ARB NO. 43, CHAPTER 4. This Statement
        amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify
        the accounting for abnormal amounts of idle facility expense, freight, handling
        costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4,
        previously stated that ". . . under some circumstances, items such as idle
        facility expense, excessive spoilage, double freight, and rehandling costs
        may
        be so abnormal as to require treatment as current period charges. . . ."
        This
        Statement requires that those items be recognized as current-period charges
        regardless of whether they meet the criterion of "so abnormal." In addition,
        this Statement requires that allocation of fixed production overheads to
        the
        costs of conversion be based on the normal capacity of the production
        facilities. This Statement is effective for inventory costs incurred during
        fiscal years beginning after June 15, 2005. Management does not believe the
        adoption of this Statement will have any immediate material impact on the
        Company.
 
 In
        December 2004, the FASB issued SFAS No.152, "Accounting for Real Estate
        Time-Sharing Transactions--an amendment of FASB Statements No. 66 and 67"
        (SFAS
        152) The amendments made by Statement 152 This Statement amends FASB Statement
        No. 66, Accounting for Sales of Real Estate, to reference the financial
        accounting and reporting guidance for real estate time-sharing transactions
        that
        is provided in AICPA Statement of Position (SOP) 04-2, Accounting for Real
        Estate Time-Sharing Transactions. This Statement also amends FASB Statement
        No.
        67, Accounting for Costs and Initial Rental Operations of Real Estate Projects,
        to state that the guidance for (a) incidental operations and (b) costs incurred
        to sell real estate projects does not apply to real estate time-sharing
        transactions. The accounting for those operations and costs is subject to
        the
        guidance in SOP 04-2. This Statement is effective for financial statements
        for
        fiscal years beginning after June 15, 2005. with earlier application encouraged.
        The Company does not anticipate that the implementation of this standard
        will
        have a material impact on its financial position, results of operations or
        cash
        flows.
 
 On
        December 16, 2004, the FASB published
        Statement of Financial Accounting Standards No. 123 (Revised 2004), "SHARE-BASED
        PAYMENT" (SFAS 123R). SFAS 123R requires that compensation cost related to
        share-based payment transactions be recognized in the financial statements.
        Share-based payment transactions within the scope of SFAS 123R include stock
        options, restricted stock plans, performance-based awards, stock appreciation
        rights, and employee share purchase plans. The provisions of SFAS 123R are
        effective as of the first interim period that begins after June 15, 2005.
        Accordingly, the Company will implement the revised standard in the third
        quarter of fiscal year 2005. Currently, the Company accounts for its share-based
        payment transactions under the provisions of APB 25, which does not necessarily
        require the recognition of compensation cost in the financial statements.
        Management is assessing the implications of this revised standard, which
        may
        materially impact the Company's results of operations in the third quarter
        of
        fiscal year 2005 and thereafter.
 
 On
        December 16, 2004, FASB issued Statement of Financial Accounting Standards
        No.
        153, " EXCHANGES OF NONMONETARY ASSETS, AN AMENDMENT OF APB OPINION NO. 29,
        ACCOUNTING FOR NONMONETARY TRANSACTIONS" (SFAS 153). This statement amends
        APB
        Opinion 29 to eliminate the exception for nonmonetary exchanges of similar
        productive assets and replaces it with a general exception for exchanges
        of
        nonmonetary assets that do not have commercial substance. Under SFAS 153,
        if a
        nonmonetary exchange of similar productive assets meets a commercial-substance
        criterion and fair value is determinable, the transaction must be accounted
        for
        at fair value resulting in recognition of any gain or loss. SFAS 153 is
        effective for nonmonetary transactions in fiscal periods that begin after
        June
        15, 2005. The Company does not anticipate that the implementation of this
        standard will have a material impact on its financial position, results of
        operations or cash flows.
 
 In
        May
        2005, the FASB issued Statement of Financial Accounting Standards No. 154
        ( SFAS 154) ,
        "Accounting Changes and Error Corrections" which provides guidance on the
        accounting for and reporting of accounting changes and correction of errors.
        This statement changes the requirements for the accounting for and reporting
        of
        a change in accounting principle and applies to all voluntary changes in
        accounting principle. It also applies to changes required by an accounting
        pronouncement in the unusual instance that the pronouncement does not include
        specific transition provisions. This statement is effective for accounting
        changes and corrections of errors made in fiscal years beginning after December
        15, 2005. The Company does not anticipate a material effect upon the adoption
        of
        this statement.




**(2)**
            **Acquisition
                and Capital Restructure**





*Corporate
      Restructure of Tactica*





Through
      April 29, 2004, Tactica was a majority owned subsidiary of Helen of Troy Limited
      (“HoT”). On April 29, 2004, the Company and its stockholders entered into a
      series of transactions that consolidated ownership of Tactica, whereby the
      minority stockholders, who collectively owned a 45% interest in the Company,
      contributed $3,030,000 in marketable securities to Tactica. The majority
      stockholder, HoT, sold its 55% ownership interest in Tactica to the minority
      stockholders and accepted the marketable securities and rights to certain
      Tactica tax refunds and intellectual properties in full satisfaction of
      $17,261,000 owed by Tactica under the secured line of credit and loan payable.
      In connection with these transactions, the Company’s loans to the minority
      stockholders were eliminated.





The
      assets transferred and liabilities assumed were valued at their historical
      costs, which did differ materially from their fair values.





The
      Company accounted for the transaction in accordance with APB No. 29, Accounting
      for Non Monetary Transactions, and as a result, the Company realized a net
      forgiveness of indebtedness of $6,198,587 as an adjustment to additional paid
      in
      capital. No gain or loss was recognized in connection with the transaction.
      On
      June 11, 2004, the Company entered into a Securities Purchase Agreement and
      Plan
      of Reorganization ("Merger") with Diva Entertainment, Inc. ("Diva") an inactive
      publicly registered shell corporation with no significant assets or operations.
      In accordance with SFAS No. 141, the Company was the acquiring entity. While
      the
      transaction is accounted for using the purchase method of accounting, in
      substance the Agreement is a recapitalization of the Company's capital
      structure.






F-10


**IGIA,
        INC.**
 (Formerly
        Tactica International, Inc.)
 Notes
        to
        Consolidated Financial Statements
 February
        28, 2005


For
      accounting purposes, the Company has accounted for the transaction as a reverse
      acquisition and the Company shall be the surviving entity. From July 1999,
      until
      the date of the Merger, Diva was an inactive entity, with no operations. The
      Company did not recognize goodwill or any intangible assets in connection with
      the transaction.




Diva
      changed its name to IGIA, Inc. and effective with the Merger, 6,693,340 shares
      of IGIA Common Stock were issued for the conversion of all outstanding Diva
      Series A, B and C convertible preferred stock. In addition, IGIA issued
      5,593,593 shares of common Stock in exchange for remaining outstanding shares
      of
      Common Stock held by Diva shareholders.




Effective
      with the Merger, Diva received 3,725,000 shares of Common Stock from a
      stockholder in exchange for its wholly-owned subsidiary that was also named
      Diva
      Entertainment, Inc, an entity with no material assets or significant operations.
      In connection with the exchange, Diva cancelled its 3,725,000 shares. No gain
      or
      loss was recognized in connection with this transaction.




Effective
      with the Merger, all previously outstanding 1,000 shares of common stock were
      exchanged for an aggregate of 9,400,000 shares of the Diva's Common Stock and
      261,000 shares of Series E Convertible Preferred Stock. The value of the stock
      that was issued was the historical cost of the Diva's net tangible assets,
      which
      did not differ materially from their fair value.




Effective
      with the Merger, Diva agreed and cancelled 1,209,000 shares of its Common
      Stocks.




IGIA
      issued a total of 3,000,000 shares of Common Stock to its financial advisors
      of
      which 1,250,000 shares related to the Merger and 1,750,000 shares were subject
      to release from escrow upon the Company raising certain additional capital
      within a specified time period, a contingency that was not satisfied. As a
      result, the 1,750,000 shares were returned to the Company and cancelled. These
      shares were valued at the weighted average of $2.62 per share which represents
      the fair value of services received, which did not differ materially from the
      value of the shares issued.





The
      Company and certain Tactica vendors agreed to convert $3,632,159 of accounts
      payable into IGIA Series E Convertible Preferred Stock. IGIA issued 574 new
      Series E shares and caused certain additional Series E shares to be given by
      Company management stockholders to the vendors.





The
      accompanying financial statements present the historical financial condition,
      results of operations and cash flows of the Company prior to the merger with
      Diva.







**(3)**
            **Accounts
                Receivable**




Accounts
      receivable was comprised of the following at
      February 28, 2005:




Accounts
                  receivable
              
              $
              2,760,746Less
                  allowance for doubtful accounts
              
              
              (2,667,113
              )Accounts
                  receivable, net
              
              $
              93,633
  In
          addition, IGIA, Inc. has an accounts receivable of $6,905,344 that is due
          from
          Tactica as of February 28, 2005, which resulted from IGIA’s issuance of shares
          of Common Stock in satisfaction of Tactica’s financial advisory fee (see Note 2)
          and issuance of Series E shares to Tactica’s vendors (see Note 2). The
          receivable has been eliminated in the consolidated financial
          statements.


**(4)**
            **Inventories**




Inventories
        are stated at the lower of cost or market determined by the first-in first-out
        method. Components of inventories as of February 28, 2005, are as
        follows:
 
 Finished
                  goods
              
              $
              8,233,445Write
                  down
              
              
              (5,162,793
              )Total
              
              $
              3,070,652




**(5)**
            **Property
                and Equipment**





A
      summary
      of property and equipment at February 28, 2005 is as follows:




F-11


**IGIA,
        INC.**
 (Formerly
        Tactica International, Inc.)
 Notes
        to
        Consolidated Financial Statements
 February
        28, 2005




Usefullives
                    (years)Furniture
                  and fixtures
              
              
              7
              
              $
              50,318Computer
                  equipment
              
              
              5
              
              
              268,300Office
                  equipment
              
              
              5
              
              
              88,325Computer
                  software
              
              
              3
              
              
              61,110Vehicles
              
              
              5
              
              
              21,264489,317Less
                  accumulated depreciation
              
              
              
              
              
              (351,891
              )$
              137,426





Depreciation
      and amortization expense for the fiscal 2005 was approximately
      $77,000.




**(6)**
            **Pre-Petition
                Liabilities**





Under
      the
      Bankruptcy Code, Tactica’s liabilities as of the October 21, 2004 filing date
      are deemed pre-petition liabilities that are subject to a Court supervised
      and
      approved resolution. The Company carries pre-petition liabilities on the balance
      sheet until such time as they are liquidated through the Stipulation and other
      bankruptcy proceedings. Tactica’s pre-petition liabilities are subject to
      comprise and consist of the following:




Accounts
                    payable
                
                $
                9,491,195Accrued
                    expenses
                
                
                5,087,378Prepayments
                    received from customers
                
                
                481,411Advances
                    under factoring facility
                
                
                475,188Note
                    payable
                
                
                107,900$
                15,643,072





Pre-petition
      accounts payable include Tactica’s obligation to Innotrac and the remaining
      $250,000 owed to the U.S. Federal Trade Commission for an April 2004 judgment
      that is secured by certain customer accounts receivable.





Pre-petition
      accrued expenses include an $813,094 liability for remaining rent due under
      a
      Sublease Agreement. The Company rejected the Sublease Agreement under the
      Bankruptcy Code and moved into another New York office in February 2005. Also
      included in pre-petition accrued expenses are chargeback claims made by a single
      retail customer that exceed Tactica’s total accounts receivable from that
      customer by approximately $3 million, of which approximately $2 million in
      claims were transferred by the retail customer to HoT, the former 55%
      shareholder of Tactica. In accordance with the April 29, 2004 agreement with
      HoT, as further described herein, Tactica granted HoT, a security interest
      in
      its accounts receivable from the customer and Tactica is to remit any payments
      received from the customer to HoT. No payments have been received to date and
      none are expected in the foreseeable future.





On
      April
      29, 2004, Tactica and HoT, entered into an Amended and Restated Factoring
      Agreement (“Factoring Agreement”) under which the parties agreed on the amount
      previously paid to Tactica for purchase of certain customer purchase orders
      and
      accounts receivable. The company is in default of the Factoring Agreement hence
      advances under factoring facility currently bear interest at a default rate
      of
      18% per annum.





On
      August
      27, 2004, the Company received net proceeds from issuance of a $100,000
      convertible note payable bearing interest at 10% per annum (the “Bridge Note”)
      and warrants to purchase 100,000 shares of Common Stock at $1.00 per share
      over
      a five-year period. The Bridge Note matures, upon the earlier of an equity
      capital raise of at least $3,000,000, an acquisition of a controlling interest
      in the Company by a third party or a sale of substantially all of the Company’s
      assets.




Prior
      to
      maturity, the Bridge Note holder has the option of converting unpaid note
      principal together with accrued and unpaid interest to the Company’s common
      stock at $1.00 per share. In accordance with Emerging Issues Task Force Issue
      98-5, Accounting for Convertible Securities with a Beneficial Conversion
      Features or Contingently Adjustable Conversion Ratios (“EITF 98-5”), the Company
      recognized an imbedded beneficial conversion feature present in the Bridge
      Note
      and determined that an insignificant portion of the proceeds was attributable
      to
      the intrinsic value of that feature and also to the warrants.





F-12


**IGIA,
      INC.**


(Formerly
      Tactica International, Inc.)


Notes
      to
      Consolidated Financial Statements


February
      28, 2005







(Continued)








**(7)**
            **Income
                Taxes**








The
      Company’s effective tax rate differed from the statutory federal income tax rate
      at February 28, 2005 due to the following:




Income
                tax at statutory rate
            
            
            35.0State
                and local income tax provision
            
            
            10.0Valuation
                allowance
            
            
            (45.0
            )Effective
                tax rate
            
            
            0.0








(Continued)




F-13


**IGIA,
      INC.**


(Formerly
      Tactica International, Inc.)


Notes
      to
      Consolidated Financial Statements


February
      28, 2005





The
      tax
      effects of significant temporary differences representing deferred tax assets
      at
      February 28, 2005 were as follows:




Net
                operating loss carryforwards
            
            $
            7,289,000Valuation
                allowance
            
            
            (7,289,000
            )Net
                deferred tax assets
            
            $
            0








At
      February 28, 2005, the Company had net operating loss carry forwards of
      approximately $16.2 million. The realization of deferred tax assets is dependent
      upon the generation of future taxable income during the periods in which those
      temporary differences become deductible. In assessing the realizability of
      deferred tax assets, management considers whether it is more likely than not
      that some portion or all of the deferred tax assets will not be realized. Given
      the uncertainty over the Company’s ability to continue as a going concern,
      realization of the deferred tax assets is not more likely than not, therefore
      the asset is fully offset by a valuation allowance.





At
      February 29, 2004 a net deferred tax asset was established based on the purchase
      of the 55% interest of the majority stockholder, along with the debt forgiveness
      of the $17,261,000 of secured debt and accrued interest, management expects
      a
      positive effect on future levels of taxable income. With this, Tactica realized
      of all of the deferred tax asset.





As
      of the
      end of fiscal year 2005, the net operating loss carryforwards included in the
      gross deferred tax asset totaling approximately $16 million will expire if
      not
      utilized by fiscal year 2026.





The
      components of income tax expense were as follows:




Current
            
            $
            0Deferred
            
            
            0$
            0








(Continued)




F-14


**IGIA,
        INC.**
 (Formerly
        Tactica International, Inc.)
 Notes
        to
        Consolidated Financial Statements
 February
        28, 2005


**(8)**
            **Capital
                Stock**





We
      are
      authorized to issue 100,000,000 shares of Common Stock and 1,000,000 shares
      of
      preferred stock, of which 261,574 have been designated Series E Convertible
      Preferred Stock. As of February 28, 2005, we had 18,002,933 shares of Common
      Stock, and 261,574 shares of Series E Convertible Preferred Stock issued and
      outstanding.




Tactica
      is developing a plan of reorganization under the bankruptcy proceedings that
      includes the issuance of 1,800,000 shares of Common Stock upon confirmation
      of
      the plan by the Court.




**Preferred
      Stock**




We
      are
      authorized to issue up to 1,000,000 shares of preferred stock, having a par
      value of $0.001 per share. Our preferred stock may be issued in one or more
      series, the terms of which may be determined at the time of issuance by our
      board of directors, without further action by stockholders, and may include
      voting rights (including the right to vote as a series on particular matters),
      preferences as to dividends and liquidation, conversion, redemption rights
      and
      sinking fund provisions.







Current
      holders of our preferred stock (i) have general ratable rights to dividends
      from
      funds legally available therefore, when, as and if declared by the Board of
      Directors; (ii) are entitled to share ratably in all assets available for
      distribution to stockholders upon liquidation, dissolution or winding up of
      our
      affairs; (iii) do not have preemptive, subscription or conversion rights, nor
      are there any redemption or sinking fund provisions applicable thereto; and
      (iv)
      are entitled to one vote per share on all matters on which stockholders may
      vote
      at all stockholder meetings. The preferred stock does not have cumulative voting
      rights.




*Series
      E Convertible Preferred Stock*




As
      of
      February 28, 2005 there were 261,574 shares of our Series E Convertible
      Preferred Stock issued and outstanding. All issued and outstanding shares of
      Series E Convertible Preferred Stock will automatically convert into an
      aggregate of 26,157,421 shares of our Common Stock upon satisfaction of certain
      shareholder requirements.




Subsequent
      to the Merger, the Company issued an aggregate of 574 shares of Series E
      preferred stock to settle certain outstanding accounts payable of
      $3,632,159.







**Warrants**




Non-Employee
        Warrants
 
 The
        following table summarizes the changes in warrants outstanding and the related
        prices for the shares of the Company's common stock issued to non-employees
        of
        the Company as of February 28, 2005:
 
 Warrants
                  Outstanding
              
              Warrants
                  ExercisableExercise
                Prices
              
              Number
                Outstanding
              
              Weighted
                  Average
                Remaining
                  Contractual
                Life
                  (Years)
              
              Weighted
                Average
                Exercise
                Price
              
              Number
                Exercisable
              
              Weighted
                Average
                Exercise
                Price$
                  0.01 - $ 0.99
              
              
              0
              
              
              0.00
              
              $
              0.00
              
              
              0
              
              $
              0.00$
                  1.00
              
              
              100,000
              
              
              4.42
              
              
              1.00
              
              
              100,000
              
              
              1.00$
                  1.01 - $ 2.00
              
              
              0
              
              
              0.00
              
              
              0.00
              
              
              0
              
              
              0.00100,000
              
              
              4.42
              
              $
              1.00
              
              
              100,000
              
              $
              1.00
 
 Transactions
        involving warrants issued to non-employees are summarized as
        follows:
 
 Number
                  ofShares
              
              WeightedAveragePrice
                  Per ShareOutstanding
                  at March 01, 2004
              
              
              --
              
              
              --Granted
              
              
              100,000
              
              
              1.00Canceled
                  or expired
              
              
              --
              
              
              --Exercised
              
              
              --
              
              
              --Outstanding
                  at February 28, 2005
              
              
              100,000
              
              $
              1.00
 
 Warrants
        issued to non-employees did not result in any charge to operations. The
        significant assumptions used to determine the fair values, using a Black-Scholes
        option pricing model are as follows:
 
 2005Significant
                  assumptions (weighted-average):Risk-free
                  interest rate at grant date
              
              
              1.29
              %Expected
                  stock price volatility
              
              
              135
              %Expected
                  dividend payout
              
              
              --Expected
                  option life-years (a)
              
              
              5.00
 
 (a)
        The
        expected option life is based on contractual expiration
        dates.




**(9)**
            **Cash
                Flows**





The
      following are non-cash transaction for fiscal 2005:




On
        April
        29, 2004, Tactica and HoT entered into an agreement under which Tactica was
        released from $17,261,334 in secured debt payable to HoT in exchange for
        certain
        Tactica corporate income tax refunds of $2,901,115, accounts receivable of
        $369,495, marketable securities of $3,030,000 and certain Tactica intangible
        assets, including all rights to the Epil-Stop(R) brand that had no book value.
        In connection with the transaction, Tactica increased its accrued chargeback
        reserve by $1,000,000 for Epil-Stop claims and eliminated a $2,025,473 deferred
        tax asset used to offset the gain from the transaction. The $7,935,250 net
        result was added to additional paid-in-capital.


The
      $3,030,000 marketable securities given to HoT were obtained by Tactica from
      its
      minority stockholders as full satisfaction for $3,500,000 in loans receivable
      from the minority stockholders together with accrued interest of $1,266,663,
      which was extinguished prior to its maturity date of March 14, 2005. The
      $1,736,663 net result was deducted from additional paid-in-capital. Tactica
      loaned its three minority stockholders a total of $3,500,000 on March 14, 2000
      in connection with a $3,500,000 loan by HoT to Tactica. The loan receivable
      accrued interest at 8.75% per annum.





F-15


**IGIA,
        INC.**
 (Formerly
        Tactica International, Inc.)
 Notes
        to
        Consolidated Financial Statements
 February
        28, 2005




Effective
      with the Merger, 6,693,340 shares of IGIA Common Stock were issued for the
      conversion of all outstanding Diva Series A, B and C convertible preferred
      stock. In addition, IGIA issued 5,593,593 shares of Common Stock in Exchange
      for
      remaining outstanding of shares of Diva Common Stock.





Prior
      to
      the Merger, Diva received 3,725,000 shares of Common Stock from a stockholder
      in
      exchange for its wholly-owned subsidiary that was also named Diva Entertainment,
      Inc. in connection with the exchange Diva cancelled its 3,725,000
      shares.





Effective
      with the Merger, all previously outstanding 1,000 shares of common stock owned
      by the Company’s shareholders were exchanged for an aggregate of 9,400,000
      shares of the Diva's Common Stock and 261,000 shares of Series E Convertible
      Preferred Stock. The value of the stock that was issued was the historical
      cost
      of the Diva's net tangible assets, which did not differ materially from their
      fair value.




Effective
      with the Merger, Diva agreed and cancelled 1,209,000 shares of its Common
      Stocks.




The
      Company issued a total of 3,000,000 shares of Common Stock to its financial
      advisors of which 1,250,000 shares related to the Merger. These share were
      valued at the weighted average of $2.62 per share which represents the fair
      value of services received which did not differ materially from the value of
      the
      stock issued and 1,750,000 shares were subject to release from escrow upon
      the
      Company raising certain additional capital within a specified time period,
      a
      contingency that was not satisfied.




The
      Company and certain Tactica vendors agreed to convert $3,632,159 of accounts
      payable into IGIA Series E Convertible Preferred Stock. IGIA issued 574 new
      Series E shares and caused certain additional Series E shares to be given by
      Company management stockholders to the vendors.




**(10)**
            **Commitments
                and Contingencies**




Beginning
      in February 2005, the Company leases its office facility under a noncancelable
      operating lease expiring in April 2006. Rent expense for years ended February
      28, 2005 was $ 716,392.





Future
      remaining minimum rentals for noncancelable operating leases with terms in
      excess of one year as of February 28, 2005 were as follows:




2006
                
                $
                192,7942007
                
                
                35,053$
                227,847


Included
      in the results of operations for the year ended February 28, 2005 and in accrued
      expenses at February 28, 2005 are costs incurred or accrued related to
      litigation and contingencies arising in the normal course of business.
      Management believes that amounts accrued are adequate as of February 28, 2005
      and that any additional costs that may result from resolution of these
      contingencies would not have a material effect on the Company’s financial
      position, results of operations, or cash flows.





(Continued)




F-16


**IGIA,
      INC.**


(Formerly
      Tactica International, Inc.)


Notes
      to
      Consolidated Financial Statements


February
      28, 2005




**(11)**
            **Related
                Party Transactions**




Mr.
      Sivan
      and Mr. Ramchandani, stockholders of the Company, have an ownership interest
      in
      Prime Time Media, a company which has a pre-petition accounts payable from
      the
      Company in the amount of $455,734. The Company did not purchase any goods or
      services from Prime Time Media in fiscal 2005.





Mr.
      Sivan
      and Mr. Ramchandani have an ownership interest in Brass Logistics LLC, a company
      which has a post-petition accounts payable in the amount of $45,754. The Company
      purchased $355,960 in services from Brass Logistics LLC in fiscal
      2005.




On
        December 8, 2004, Tactica entered into a Credit Agreement with Tactica Funding
        1, LLC (“Tactica Funding”), under which Tactica Funding agreed to provide
        Tactica with a secured loan of up to an aggregate principal amount of $300,000
        (the “Loan”), to provide funds for Tactica’s continued ordinary course
        operations and working capital needs, as evidenced by a promissory note.
        The
        Loan bears interest at a rate of 9% per annum and is payable monthly.
        Notwithstanding the foregoing, the Loan bears a default rate of interest
        of 12%
        per annum. The Company owed $305,579 as of February 28, 2005, consisting
        of
        entire Note principal and related accrued interest. As Security for the Loan,
        Tactica granted to Tactica Funding a first priority security interest in
        substantially all of the assets of Tactica, except as to permitted liens
        for
        which the Tactica Funding security interest is junior and subordinate, including
        Innotrac, certain carve out expenses that Tactica incurs for professional
        fees
        and other bankruptcy case matters. Pursuant to the Credit Agreement, Tactica’s
        default of the Stipulation is an event of default on the Loan. Tactica and
        Tactica Funding are discussing the default and potential for a forbearance
        agreement.




**(12)**
            **Subsequent
                Events**




To
      obtain
      funding for the purpose of providing a loan to Tactica, in the form of debtor
      in
      possession financing and/or exit financing in the context of Tactica’s chapter
      11 case subject to Bankruptcy Court approval, the Company entered into a
      Securities Purchase Agreement with New Millennium Capital Partners II, LLC,
      AJW
      Qualified Partners, LLC, AJW Offshore, Ltd. and AJW Partners, LLC on March
      23,
      2005 for the sale of (i) $3,000,000 in callable secured convertible notes and
      (ii) warrants to buy 6,000,000 shares of our common stock. Provided that the
      terms and conditions of the Securities Purchase Agreement are satisfied, the
      investors are obligated to provide the Company with an aggregate of $3,000,000
      as follows:





·
            $1,000,000
                was disbursed on March 24, 2005;





·
            $1,000,000
                was disbursed on April 20, 2005;
                and





·
            $1,000,000
                will be disbursed within five days of the registration statement
                that we
                filed on April 14, 2005 being declared effective.





Accordingly,
      the Company has received a total of approximately $1,700,000 in net proceeds
      after deducting approximately $300,000 of expenses and prepaid interest pursuant
      to the Securities Purchase Agreement. The funds from the sale of the callable
      secured convertible notes will be used for business development purposes,
      business acquisitions, working capital needs, pre-payment of interest, payment
      of consulting, accounting and legal fees and borrowing repayment in accordance
      with the April 20, 2005 Credit Agreement between IGIA, Inc. and Tactica.





The
      callable secured convertible notes bear interest at 8%, mature three years
      from
      the date of issuance, and are convertible into our common stock, at the
      investors' option, at the lower of (i) $0.04 or (ii) 50% of the average of
      the
      three lowest intraday trading prices for the common stock on a principal market
      for the 20 trading days before but not including the conversion date. The full
      principal amount of the callable secured convertible notes is due upon default
      under the terms of secured convertible notes. The warrants are exercisable
      until
      five years from the date of issuance at a purchase price of $0.03 per share.
      In
      addition, the conversion price of the secured convertible notes and the exercise
      price of the warrants will be adjusted in the event that we issue common stock
      at a price below the fixed conversion price, below market price, with the
      exception of any securities issued in connection with the Securities Purchase
      Agreement. The conversion price of the callable secured convertible notes and
      the exercise price of the warrants may be adjusted in certain circumstances
      such
      as if we pay a stock dividend, subdivide or combine outstanding shares of common
      stock into a greater or lesser number of shares, or take such other actions
      as
      would otherwise result in dilution of the selling stockholder’s position. The
      selling stockholders have contractually agreed to restrict their ability to
      convert or exercise their warrants and receive shares of our common stock such
      that the number of shares of common stock held by them and their affiliates
      after such conversion or exercise does not exceed 4.99% of the then issued
      and
      outstanding shares of common stock. In addition, we have granted the investors
      a
      security interest in substantially all of our assets and intellectual property
      and registration rights.





Since
      the
      conversion price will be less than the market price of the common stock at
      the
      time the secured convertible notes are issued, we anticipate recognizing a
      charge relating to the beneficial conversion feature of the callable secured
      convertible notes during the quarter in which they are issued, including the
      first fiscal quarter ended May 31, 2005 when $2,000,000 of secured convertible
      notes are issued.





In
      connection with assistance provided to the Company in arranging and concluding
      the funding, the Company has committed to issuing 3,000,000 shares of its common
      stock to a third party upon the effectiveness of the registration statement.





F-17




**TACTICA
      INTERNATIONAL, INC.**




Financial
      Statements




February
      29, 2004




(With
      Independent Auditors’ Report Thereon)






F-18


**Report
      of Independent Registered Public Accounting Firm**




The
      Board
      of Directors


Tactica
      International, Inc.:




We
      have
      audited the accompanying balance sheet of Tactica International, Inc. (the
      Company) as of February 29, 2004, and the related statements of operations,
      stockholders’ deficit, and cash flows for the year then ended. These financial
      statements are the responsibility of the Company’s management. Our
      responsibility is to express an opinion on these financial statements based
      on
      our audit.




We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require
      that we
      plan and perform the audit to obtain reasonable assurance about whether the
      financial statements are free of material misstatement. An audit includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements. An audit also includes assessing the accounting
      principles used and significant estimates made by management, as well as
      evaluating the overall financial statement presentation. We believe that our
      audit provides a reasonable basis for our opinion.




In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of Tactica International, Inc. as
      of
      February 29, 2004, and the results of its operations and its cash flows for
      the
      year then ended in conformity with U.S. generally accepted accounting
      principles.




The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. As discussed in Note 1 to the financial
      statements, the Company has suffered recurring losses from operations and has
      a
      net capital deficiency that raise substantial doubt about its ability to
      continue as a going concern. Management’s plans in regard to these matters are
      also described in Note 1. The financial statements do not include any
      adjustments that might result from the outcome of this uncertainty.




/s/
      KPMG LLP




El
      Paso,
      Texas


May
      12,
      2004









F-19


**TACTICA
      INTERNATIONAL, INC.**


Balance
        Sheet
 February
        29, 2004
 
 **Assets**Cash
              
              $
              185,244Accounts
                  receivable, net
              
              
              1,323,974Income
                  tax refund receivable
              
              
              3,008,174Inventories
              
              
              10,589,854Prepaid
                  expenses
              
              
              696,441Production
                  television costs, net of amortization
              
              
              428,339Deferred
                tax asset
              
              
              2,025,473Total
                  current assets
              
              
              18,257,499Property
                  and equipment, net of accumulated depreciation
              
              
              184,773Security
                  deposits and other
              
              
              27,940Loans
                  to minority stockholders
              
              
              4,715,621Total
                  assets
              
              $
              23,185,833**Liabilities
                  and Stockholders’ Deficit**Accounts
                  payable
              
              $
              14,046,366Accrued
                  expenses
              
              
              3,159,894Line
                  of credit - majority stockholder
              
              
              13,665,109Total
                  current liabilities
              
              
              30,871,369Loan
                  payable - majority stockholder
              
              
              3,500,000Total
                  liabilities
              
              
              34,371,369Stockholders’
                  deficit:Common
                  stock; 1,000 shares authorized, 1,000shares
                  outstanding
              
              
              77,000Additional
                  paid-in capital
              
              
              756,480Accumulated
                  deficit
              
              
              (12,019,016
              )Total
                  stockholders’ deficit
              
              
              (11,185,536
              )Total
                  liabilities and stockholders’ deficit
              
              $
              23,185,833
 
 See
        accompanying notes to financial statements.
 
 F-20
 **TACTICA
        INTERNATIONAL, INC.**
 Statement
        of Operations
 Year
        ended February 29, 2004
 
 Net
                  sales
              
              $
              39,609,912Cost
                  of goods sold
              
              
              20,375,709Gross
                  profit
              
              
              19,234,203Operating
                  expenses:Media
                  advertising
              
              
              11,603,395Other
              
              
              21,123,82232,727,217Operating
                  loss
              
              
              (13,493,014
              )Other
                  income (expense):Interest
                  expense
              
              
              (895,993
              )Interest
                  income
              
              
              306,349Other,
                  net
              
              
              348,063Total
                  other expense
              
              
              (241,581
              )Loss
                  before income tax
              
              
              (13,734,595
              )Income
                  tax benefit
              
              
              4,720,041Net
                  loss
              
              $
              (9,014,554
              )
 
 See
        accompanying notes to financial statements.
  F-21
 **TACTICA
        INTERNATIONAL, INC.**
 Statement
        of Stockholders’ Deficit
 Year
        ended February 29, 2004
 
 **Additional**
              
              
              
              
              
              **Total****Common**
              
              
              **paid-in**
              
              
              **Accumulated**
              
              
              **stockholders’****stock**
              
              
              **capital**
              
              
              **deficit**
              
              
              **deficit**Balances,
                  February 28, 2003
              
              $
              77,000
              
              $
              756,480
              
              $
              (3,004,462
              )
              $
              (2,170,982
              )Net
                  loss
              
              
              —
              
              
              —
              
              
              (9,014,554
              )
              
              (9,014,554
              )Balances,
                  February 29, 2004
              
              $
              77,000
              
              $
              756,480
              
              $
              (12,019,016
              )
              $
              (11,185,536
              )
 
 See
        accompanying notes to financial statements.
  F-22
 **TACTICA
        INTERNATIONAL, INC.**
 Statement
        of Cash Flows
 Year
        ended February 29, 2004
 
 Cash
                  flows from operating activities:Net
                  loss
              
              $
              (9,014,554
              )Adjustments
                  to reconcile net loss to net cash provided byoperating
                  activities:Depreciation
                  and amortization
              
              
              77,869Accrued
                  interest on loans to minority stockholders
              
              
              (306,250
              )Allowance
                  for doubtful accounts
              
              
              (1,972,299
              )Changes
                  in operating assets and liabilities:Deferred
                  tax expense
              
              
              (1,892,004
              )Trade
                  accounts receivable
              
              
              5,743,109Inventories
              
              
              597,671Prepaid
                  expenses and other assets
              
              
              (233,125
              )Television
                  production costs and other assets
              
              
              123,972Trade
                  accounts payable
              
              
              10,799,143Accrued
                  expenses
              
              
              (1,780,467
              )Income
                  taxes payable/receivable
              
              
              (1,137,943
              )Net
                  cash provided by operating activities
              
              
              1,005,122Cash
                  flows from investing activities:Purchases
                  of property and equipment
              
              
              (28,577
              )Net
                  cash used in investing activities
              
              
              (28,577
              )Cash
                  flows from financing activities:Net
                  change on line of credit - majority stockholder
              
              
              (1,185,210
              )Net
                  cash used in financing activities
              
              
              (1,185,210
              )Net
                  decrease in cash
              
              
              (208,665
              )Cash,
                  beginning of period
              
              
              393,909Cash,
                  end of period
              
              $
              185,244Supplemental
                  disclosures:Interest
                  paid
              
              $
              3,223,138
 
 See
        accompanying notes to financial statements.


F-23


**TACTICA
        INTERNATIONAL, INC.**
  Notes
        to
        Financial Statements
  February
        29, 2004


**(1)**
            **Summary of Significant Accounting
              Policies**





***(a)***
            ***General***Tactica International, Inc. (Tactica
              or the
              Company) designs, develops, imports, and distributes personal care
              and
              household products to major retailers and through direct marketing.
              We
              purchase our products from unaffiliated manufacturers, most of which
              are
              located in the Peoples’ Republic of China and the U.S. Our financial
              statements are prepared in U.S. Dollars and in accordance with accounting
              principles generally accepted in the United States of America. On March
              14, 2000, the Company entered into an agreement in which substantially
              all
              the assets and liabilities of Tactica International, LLC and Health
              Direct, LLC (collectively, the Predecessor Company) were transferred
              to
              the Company.***(b)***
            ***Going
                Concern***The accompanying financial statements
              have
              been prepared assuming the Company will continue as a going concern.
              Losses, negative working capital, and negative cash flows raise
              substantial doubt about the Company’s ability to continue as a going
              concern. The Company’s ability to obtain suitable interim financing
              depends on the availability of borrowing capacity, the success of its
              growth strategy and its future performance, and its ability to raise
              additional equity capital, each of which is subject to general economic,
              financial, competitive, legislative, regulatory, and other factors
              beyond
              the Company’s control. The inability to obtain financing when required
              would have a material adverse effect on the Company and the implementation
              of its growth strategy. The financial statements do not include any
              adjustments that might result from the outcome of this
              uncertainty.***(c)***
            ***Revenue
              Recognition***The
                Company recognizes revenue when it ships its product to customers.
                Customers at times request credits for returned product or in connection
                with incentives such as cooperative advertising agreements. The Company
                reduces sales or increases selling, general, and administrative expenses,
                depending on the nature of the credits, for estimated future credits
                to
                customers. Management bases such estimates either on historical
                information about credits issued, relative to total sales, or on
                specific
                knowledge of incentives offered to retailers.***(d)***
            ***Consideration*Paid to Customers**We offer our customers certain incentives
              in
              the form of cooperative advertising arrangements, product markdown
              allowances, trade discounts, cash discounts, and slotting fees. We
              account
              for these incentives in accordance with Emerging Issues Task Force
              Issue
              No. 01-9, *Accounting
              for Consideration Given by a Vendor to a Customer*,
              (EITF 01-9). In instances where the customer is required to provide
              us
              with proof of performance, reductions in amounts received from customers
              as a result of cooperative advertising programs are included in our
              Statement of Operations on the line entitled Other. Other reductions
              in
              amounts received from customers as a result of cooperative advertising
              programs are recorded as reductions of Net sales. Markdown allowances,
              trade discounts, and cash discounts are all recorded as reductions
              of Net
              sales. Customer incentives included in other were approximately $2,033,000
              for fiscal year 2004.




(Continued)


F-24


**TACTICA
          INTERNATIONAL, INC.**
  Notes
          to
          Financial Statements
  February
          29, 2004
  ***(e)***
                ***Shipping and Handling
                  Revenues
                  and Expenses***We
                    report revenue from shipping and handling charges on the Net
                    sales line of
                    our Statement of Operations, in accordance with paragraph 5 of
                    Emerging
                    Issues Task Force Issue 00-10,*Accounting
                    for Shipping and Handling Fees and Costs*.
                    We only include charges for shipping and handling in Net sales
                    for sales
                    made to direct response customers and retail customers ordering
                    relatively
                    small dollar amounts of product. Our shipping and handling expenses
                    far
                    exceed our shipping and handling revenues. Shipping and handling
                    expenses
                    are included in our Statement of Operations on the Other operating
                    expenses line. Our expenses for shipping and handling totaled
                    approximately $4,574,000 during fiscal year 2004.***(f)***
                ***Advertising
                  Expense***Advertising
                    expense is comprised of media, agency, and production expenses.
                    Advertising expenses are charged to expense in the month in which
                    the
                    advertising first takes place. Certain production costs to produce
                    direct
                    response advertising are capitalized and amortized over the expected
                    life
                    of the advertisement.***(g)***
                ***Valuation of Accounts
                  Receivable***Our
                    allowance for doubtful accounts reflects our best estimate of
                    probable
                    losses, determined principally on the basis of historical experience
                    and
                    specific allowances for known troubled accounts.***(h)***
                ***Inventories and Cost
                  of Goods
                  Sold***Inventories
                    at February 29, 2004 consist almost entirely of finished goods.
                    We account
                    for inventory using a first-in-first-out system in which we record
                    inventory on our balance sheet at the lower of our cost or net
                    realizable
                    value. A product’s cost is comprised of the amount that we pay our
                    manufacturer for product, tariffs and duties associated with
                    transporting
                    product across national borders and freight costs associated
                    with
                    transporting the product from our manufacturers to our warehouse
                    locations. When circumstances dictate that we use net realizable
                    value in
                    lieu of cost, we base our estimates on expected future selling
                    prices less
                    expected disposal costs. The Cost of goods sold line item on
                    the Statement
                    of Operations is comprised of the book value (lower of cost or
                    net
                    realizable value) of inventory sold to customers during the reporting
                    period.***(i)***
                ***Property and Equipment***Property
                    and equipment is capitalized at cost and depreciated using the
                    straight-line method over the estimated useful lives of the various
                    assets. Expenditures for normal maintenance and repairs are expensed
                    as
                    incurred. The cost of property and equipment sold or otherwise
                    retired and
                    the related accumulated depreciation is removed from the accounts,
                    with
                    any resulting gain or loss included in results from operations.***(j)***
                ***Income
                  Taxes***Income
                  taxes are accounted for under the asset and liability method. Deferred
                  tax
                  assets and liabilities are recognized for the future tax consequences
                  attributable to differences between the financial statement carrying
                  value
                  amounts of existing assets and liabilities and their respective
                  tax bases,
                  as well as operating loss and tax credit carryforwards. Deferred
                  tax
                  assets and liabilities are measured using enacted rates expected
                  to apply
                  to taxable income in the years in which those temporary differences
                  are
                  expected to be recovered or settled. The effect on deferred tax
                  assets and
                  liabilities of a change in tax rates is recognized in income in
                  the period
                  that includes the enactment
                  date.


(Continued)


F-25


**TACTICA
      INTERNATIONAL, INC.**


Notes
        to
        Financial Statements
  February
        29, 2004


***(k)***
              ***Use of Estimates***The
                  preparation of financial statements in conformity with generally
                  accepted
                  accounting principles requires management to make estimates and
                  assumptions that affect the reported amounts of assets and liabilities
                  and
                  disclosure of contingent assets and liabilities at the date of
                  the
                  financial statements and the reported amounts of revenue and expenses
                  during the reporting period. Actual results could differ from those
                  estimates.***(l)***
              ***New Accounting
                Guidance***On April 30, 2003, the FASB issued
                FASB
                Statement No. 149, *Amendment
                of Statement 133 on Derivative Instruments and Hedging
                Activities,*(SFAS 149). These amendments clarify the definition of derivatives,
                expand
                the nature of exemptions from Statement 133, clarify the application
                of
                hedge accounting when using certain instruments and modify the cash
                flow
                presentation of derivative instruments that contain financing elements.
                The Statement clarifies the accounting for option-based contracts
                used as
                hedging instruments in a cash flow hedge of the variability of the
                functional-currency-equivalent cash flows for a recognized
                foreign-currency-denominated asset or liability that is re-measured
                at
                spot exchange rates. This approach was issued to alleviate income
                statement volatility that is generated by the mark-to-market accounting
                of
                an option's time value component. This Statement is effective for
                all
                derivative transactions and hedging relationships entered into or
                modified
                after June 30, 2003. We currently do not have any derivative instruments
                nor have we engaged in hedging activities that are covered under
                this
                statement. In May 2003, the FASB issued FASB Statement No. 150,*Accounting
                for Certain Financial Instruments with Characteristics of Both Liabilities
                and Equity*,
                (SFAS 150). This statement establishes standards for how an issuer
                classifies and measures in its statement of financial position certain
                financial instruments with characteristics of both liabilities and
                equity.
                It requires that issuers classify as liabilities a financial instrument
                that is within its scope as a liability because that financial instrument
                embodies an obligation of the issuer. This Statement does not affect
                the
                timing of recognition of financial instruments as contingent consideration
                nor does it apply to obligations under stock-based compensation
                arrangements if those obligations are accounted for under APB Opinion
                No.
                25. We are still reviewing the effects of SFAS 150 on our financial
                statements. We currently do not have any financial instruments that
                are
                covered under this statement.In December 2003, the FASB issued FASB
                Interpretation No. 46R (FIN 46R),*Consolidation
                of Variable Interest Entities,*(FIN 46R). FIN 46R replaces the same titled FIN 46 that was issued
                in
                January 2003. FIN 46R identifies when entities must be consolidated
                with
                the financial statements of a company where the investors in an entity
                do
                not have the characteristics of a controlling financial interest
                or the
                entity does not have sufficient equity at risk for the entity to
                finance
                its activities without additional subordinated financial support.
                Application of this Interpretation is effective for any financial
                statements we issue after December 15, 2003. We have no interests
                in any
                entities, therefore, FIN 46R had no effect on our financial statements.





(Continued)
 F-26


**TACTICA
      INTERNATIONAL, INC.** Notes
          to
          Financial Statements
  February
          29, 2004


**(2)**
              **Accounts Receivable and Income
                Taxes
                Receivable**Accounts receivable was comprised
                of the
                following at February 29, 2004:





Accounts
                    receivable
                
                $
                3,369,382Less
                    allowance for doubtful accounts
                
                
                (2,045,408
                )Accounts
                    receivable, net
                
                $
                1,323,974


Income
                taxes receivable was comprised of the following at February 29,
                2004:




Federal
              
              $
              3,001,758New
                  York State
              
              
              6,012New
                  York City
              
              
              404$
              3,008,174




(Continued)


F-27


TACTICA
      INTERNATIONAL, INC. Notes
          to
          Financial Statements
  February
          29, 2004


**(3)**
            **Property
              and Equipment**A
                summary of property and equipment at February 29, 2004 was as
                follows:




**Useful**lives
                  (years)Furniture
                  and fixtures
              
              7
              
              $50,318Leasehold
                  improvements
              
              10
              
              42,150Showroom
              
              7
              
              47,971Computer
                  equipment
              
              5
              
              265,300Office
                  equipment
              
              5
              
              64,505Computer
                  software
              
              3
              
              58,835Vehicles
              
              5
              
              21,264550,343Less
                  accumulated depreciation
              
              
              
              
              
              (365,570
              )$
              184,773




**(4)**
                **Income
                  Taxes**The
                  Company’s effective tax rate differed from the statutory federal income
                  tax rate at February 29, 2004 due to the
                  following:


Income
                tax at statutory rate
            
            
            35.0State
                and local income tax provision
            
            
            10.0Valuation
                allowance
            
            
            (12.9
            )Other
            
            
            2.3Effective
                tax rate
            
            
            34.4






(Continued)


F-28


**TACTICA
      INTERNATIONAL, INC.** Notes
          to
          Financial Statements
  February
          29, 2004


The
              tax effects of significant temporary differences representing deferred
              tax
              assets at February 29, 2004 were as follows:




Uniform
                capitalization adjustment, depreciation,
                and
                  amortization
              
              $
              (943,493
              )Net
                  operating loss carryforwards
              
              
              4,297,788Allowance
                  for doubtful accounts
              
              
              206,739Unearned
                  revenue
              
              
              221,051Other
              
              
              13,5813,795,666Valuation
                  allowance
              
              
              (1,770,193
              )Net
                  deferred tax assets
              
              $
              2,025,473




At
                  February 29, 2004, the Company had net operating loss carry forwards
                  of
                  approximately $5,957,274, which will be fully realized during the
                  year
                  ending February 28, 2005. The realization of deferred tax assets
                  is
                  dependent upon the generation of future taxable income during the
                  periods
                  in which those temporary differences become deductible. In assessing
                  the
                  realizability of deferred tax assets, management considers whether
                  it is
                  more likely than not that some portion or all of the deferred tax
                  assets
                  will not be realized.Based
                  on the purchase of the 55% interest of the majority stockholder,
                  along
                  with the debt forgiveness of the $17,161,000 of secured debt and
                  accrued
                  interest, management expects a positive effect on future levels
                  of taxable
                  income. With this, Tactica expects the realization of the majority,
                  or
                  all, of the deferred tax asset.As
                  of the end of fiscal year 2004, the net operating loss carryforwards
                  included in the gross deferred tax asset totaling $4,297,788 will
                  expire
                  if not utilized by fiscal year 2024.The
                  components of income tax benefit were as follows:






Current
              
              $
              1,057,844Deferred
              
              
              3,662,197$
              4,720,041




**(5)**
              **Line of Credit - Majority
                Stockholder**The
                  Company had a $17,500,000 line of credit with the 55% stockholder
                  in the
                  Company expiring on March 14, 2005. Borrowings under the line of
                  credit
                  bore interest at the prime rate (4.0% at February 29, 2004). Borrowings
                  under the line of credit at February 29, 2004 were $13,665,109.
                  The
                  unpaid balance and interest on the line of credit has a maturity
                  date of
                  March 14, 2005. The line of credit contains covenants requiring
                  minimum
                  working capital, net worth, cash flow from operations, and earnings
                  before
                  interest, taxes, depreciation, and amortization (EBITDA). At February
                  29,
                  2004, the Company was not in compliance with certain of these covenants.
                  Under the provisions of the related loan agreement, the related
                  party
                  could have declared the loans in default and demanded immediate
                  payment.
                  Accordingly, the line of credit has been classified as a current
                  liability
                  at February 29, 2004. See note 9.




(Continued)


F-29


**TACTICA
      INTERNATIONAL, INC.**


Notes
            to
            Financial Statements
  February
            29, 2004


**(6)**
            **Note Payable - Majority Stockholder**As of February 29, 2004 the Company
              had a
              note payable to the 55% stockholder in the Company. Interest was due
              quarterly at a rate of 8.75% per annum. The loan was due and payable
              on
              March 14, 2005. See note 9.**(7)**
            **Commitments and
              Contingencies**Beginning in July 2003, the Company
              leases
              its office facilities under a noncancelable operating lease expiring
              in
              February 2006. Rent expense for the year ended February 29, 2004 was
              $823,446.Future remaining minimum rentals for
              noncancelable operating leases with terms in excess of one year as
              of
              February 29, 2004 were as follows:





2005
              
              $
              778,8872006
              
              
              778,887$
              1,557,774




Included
                in the results of operations for the year ended February 29, 2004
                and in
                accrued expenses at February 29, 2004 are costs incurred or accrued
                related to litigation and contingencies arising in the normal course
                of
                business. Management believes that amounts accrued are adequate as
                of
                February 29, 2004 and that any additional costs that may result from
                resolution of these contingencies would not have a material effect
                on the
                Company’s financial position, results of operations, or cash flows.




(Continued)


F-30




**(8)**
            **Related Party
              Transactions**The Company loaned the three minority
              stockholders of the Company a total of $3,500,000 on March 14, 2000.
              The
              loans bore interest at 8.75% per annum. All principal and unpaid interest
              on the loans is due and payable March 14, 2005.Two
              minority stockholders of the Company have an ownership interest
              in
              PrimeTime Media, a company that is owed $455,734 by Tactica. This amount
              is included in accounts payable at February 29, 2004.**(9)**
            **Subsequent
              Events**On April 29, 2004, the Company and its
              stockholders entered into a series of transactions that consolidated
              ownership of Tactica and reduced the working capital deficiency. The
              stockholder-operating managers, who collectively owned a 45% interest
              in
              the Company, contributed $3,050,000 in marketable securities to Tactica.
              The majority stockholder transferred its 55% interest in Tactica to
              the
              stockholder-operating managers and accepted the marketable securities
              and
              rights to certain Tactica tax refunds and intellectual properties in
              full
              satisfaction of $17,161,000 owed by Tactica under the secured line
              of
              credit and loan payable. In connection with these transactions, the
              Company’s loans to the minority stockholders were eliminated.





F-31




**ITEM
      8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
      AND**


**FINANCIAL
      DISCLOSURE** .





On
        July
        20, 2004, the Company, formerly known as Diva Entertainment, Inc.
        ,
        dismissed Paritz & Company P.A. ("Paritz") as its principal independent
        auditors, and the Company engaged Russell Bedford Stefanou Mirchandani LLP
        as
        its certifying accountant for the fiscal year ending February 28, 2005. The
        decision to change its certifying accountant was approved by the Company's
        Board
        of Directors. The Company has not previously consulted Russell Bedford Stefanou
        Mirchandani LLP.
 
 Paritz's
        reports on the consolidated financial statements of Diva for fiscal
        years ended June 30, 2003 and 2002 did not contain any adverse opinion or a
        disclaimer of opinion, and were not qualified or modified as to uncertainty, audit
        scope or accounting principles; however, the audit reports for the years ended
        June 30, 2003 and 2002 contained an explanatory paragraph regarding the substantial
        doubt about Diva's ability to continue as a going concern. During fiscal
        years 2003 and 2002 and the subsequent interim period through July 20, 2004,
        there were no disagreements with Paritz regarding any matters of accounting
        principles or practices, financial statement disclosure or auditing scope
        or
        procedure, which disagreements, if not resolved to the satisfaction of Paritz,
        would have caused Paritz to make reference to the subject matter of the Paritz,
        would have caused Paritz to make reference to the subject matter of the disagreements
        in connection with its report.





**ITEM
      8A - CONTROLS AND PROCEDURES**




Disclosure
        controls and procedures are controls and other procedures that are designed
        to ensure that information required to be disclosed by us in the reports
        that we file or submit under the Exchange Act is recorded, processed, summarized
        and reported, within the time periods specified in the Securities and Exchange
        Commission's rules and forms. Disclosure controls and procedures include,
        without limitation, controls and procedures designed to ensure that information
        required to be disclosed by us in the reports that we file under the Exchange
        Act is accumulated and communicated to our management, including our principal
        executive and financial officers, as appropriate to allow timely decisions
        regarding required disclosure.




**Evaluation
      of Disclosure Controls and
      Procedures**




As
      of February 28, 2005, the Company’s management
      carried out an evaluation, under the supervision of the Company’s Chief
      Executive Officer and the Chief Financial Officer, of the effectiveness of
      the
      design and operation of the Company’s system of disclosure controls and
      procedures pursuant to the Securities and Exchange Act , Rule 13a-15(d) and
      15d-15(d) under the Exchange Act. Based on their evaluation, our Chief
      Executive Officer and Chief Financial Officer concluded that our disclosure
      controls and procedures need improvement and were not adequately
      effective as of Februrary 28, 2005 to ensure timely reporting with theSecurities
      and Exchange Commission. Our management is in the process ofidentifying
      deficiencies with respect to our disclosure controls and proceduresand
      implementing corrective measures, which includes the establishment of newinternal
      policies related to financial reporting.




**Changes
      in Internal Control over Financial Reporting**




As
      required by Rule 13a-15(d), IGIA management, including the Chief Executive
      Officer and Chief Financial Officer, respectively also conducted an evaluation
      of IGIA’s internal controls over financial reporting to determine whether any
      changes occurred during the fourth fiscal quarter that have materially affected,
      or are reasonably likely to materially affect, IGIA’s internal control over
      financial reporting. During the preparation of the Company’s financial
      statements as of and for the year ended February 28, 2005, the Company has
      concluded that the current system of disclosure controls and procedures was
      not
      effective because of the internal control weaknesses identified below. As a
      result of this conclusion, the Company has initiated the changes in internal
      control also described below. It should be noted that any system of controls,
      however well designed and operated, can provide only reasonable, and not
      absolute, assurance that the objectives of the system will be met. In addition,
      the design of any control system is based in part upon certain assumptions
      about
      the likelihood of future events.




**Deficiencies
      and Corrective Actions Relating to the Company’s Internal Controls over
      Financial Reporting**





During
      the course of the audit of the Company’s February 28, 2005 financial statements,
      the Company’s registered independent public accounting firm identified certain
      material weaknesses relating to the Company’s internal controls and procedures
      within the areas of revenue recognition, accounts payable, cash disbursements,
      inventory accounting and document retention. Certain of these internal control
      deficiencies may also constitute deficiencies in the Company’s disclosure
      controls.





In
      order
      to review the financial condition and prepare the financial disclosures in
      this
      document, the Company’s officers have been responding to recommendations from
      the Company’s auditors to properly and accurately account for the financial
      information contained in this Form 10-KSB. Detailed validation work
      was
      done by internal personnel with respect to all consolidated balance sheet
      account balances to substantiate the financial information that is contained
      in
      this Form 10-KSB. Additional analysis was performed on consolidated
      income
      statement amounts and compared to prior period (both year over year and
      consecutive period) amounts for reasonableness. Management is in the process
      of
      implementing a more effective system of controls, procedures and other changes
      in the areas of revenue recognition, cash disbursements, account reconciliation
      and document control to insure that information required to be disclosed in
      this
      annual report on Form 10-KSB has been recorded, processed, summarized
      and
      reported accurately. Our management acknowledges the existence of this problem,
      and has developed procedures to address them to the extent possible given
      limitations in financial and manpower resources Among the changes being
      implemented are:




Revenue
      recognition


·
            Criteria
                and procedures established defining approved customer
                contracts


·
            Control
                function established to review and monitor compliance to new
                procedures


·
            Improved
                document control and file check out
                procedures





Cash
      Disbursements and liability recognition


·
            Document
                control system established and monitored for
                compliance


·
            Cut
                off procedures formalized and consistently
                applied


·
            Centralized
                departmental budgets and accountability
                established


·
            Purchasing
                procedures have been formalized and implementation has
                begun


Account
      Reconciliations


·
            Procedures
                established and personnel assigned to reconcile key accounts on a
                timely
                basis


·
            Control
                function added to review
                reconciliations




The
      Company's officers have been working with the Board of Directors to address
      recommendations from the Company's registered independent public accounting
      firm
      regarding deficiencies in the disclosure controls and procedures. The Company
      is
      currently engaged in the implementation of a new internal software system and
      associated new internal control procedures. Management expects that this system
      along with new associated procedures, once implemented, will correct the
      deficiencies and will result in disclosure controls and procedures pursuant
      to
      Rule 13a-14 of the Exchange Act, that will timely alert the Chief Executive
      Officer and Chief Financial Officer  to material information relating
      to
      the Company required to be included in the Company's Exchange Act
      filings.





**ITEM
      9 - DIRECTORS AND OFFICERS OF THE REGISTRANT**





Our
      executive officers and directors and their respective ages and positions as
      of the
      date
      hereof are as
      follows:





**Names**
            
            **Ages**
            
            **Position**Avi
                Sivan
            
            42
            
            Chairman
                of the Board and Chief Executive OfficerPrem
                Ramchandani
            
            57
            
            President,
                Treasurer and DirectorKurt
                Streams
            
            43
            
            Chief
                Financial Officer and Assistant SecretaryPaul
                Greenfield
            
            60
            
            Secretary
                and General Counsel





**Avi
      Sivan** ,
      Chairman of the Board of Directors and Chief Executive Officer since June 11,
      2004, founded Tactica International, Inc., currently our wholly owned operating
      subsidiary, and has been its Chief Executive Officer since March 2000. From
      1997
      to March 2000, Mr. Sivan served as the Chief Executive Officer of Tactical
      International, LLC. Mr. Sivan is a driving force in making us a player in the
      Direct Response Television (DRTV) industry.   Mr. Sivan is the
      creator
      of the IGIA® brand of products.





**Prem
      Ramchandani,** President,
      Treasurer and a Director since June 11, 2004, he has served as Tactica’s
      President, Treasurer and Director since March 2000. From 1997 until March 2000,
      he served as Chief Operating Officer of Tactica International, LLC. From 1983
      until 1994, Mr. Ramchandani served as President of Investment Planning Group,
      a
      private firm providing investment analysis and financing for real estate
      transactions. In 1975, he was a founder of the Urban Academy for Management,
      a
      privately held consulting firm that provided financial management and technical
      assistance services. Mr. Ramchandani received an MBA in finance in 1972 from
      Columbia University in New York, and in 1970 a BTech degree in Chemical
      Engineering from the Indian Institute of Technology.





**Kurt
      Streams,** Chief
      Financial Officer and Assistant Secretary since June 11, 2004, he has served
      as
      Tactica’s Chief Financial Officer since January 2004.  Mr. Streams was
      Chief Financial Officer of The Deal LLC, a privately held financial news
      publishing company, from March 2000 through January 2004.  From September
      1995 to March 2000 Mr. Streams was Chief Financial Officer for Norland Medical
      Systems, Inc., a public medical device manufacturing company.  From
      1989
      through 1995 he was an auditor with Deloitte & Touche LLP and was promoted
      to Senior Audit Manager following a 27-month posting in Europe.  Mr.
      Streams received a B.A. in Economics in 1983 from the University of
      Massachusetts at Amherst.





**Paul
      Greenfield** ,
      Secretary and General Counsel since June 11, 2004, he has served as Tactica’s
      General Counsel since August 2002. From 1989 through August 2002, Mr. Greenfield
      was in private practice as a partner at the law firm Crupain & Greenfield
      where he focused on general litigation with emphasis on products liability,
      intellectual property and trial work. Mr. Greenfield received a JD from Brooklyn
      Law School in 1969.




22


**Board
      of Directors**





All
      of
      our directors hold office until the next annual meeting of stockholders and
      the
      election and qualification of their successors. Our executive officers are
      elected annually by the Board of Directors to hold office until the first
      meeting of the Board following the next annual meeting of stockholders and
      until
      their successors are chosen and qualified.





**Section
      16(a) Beneficial Ownership Reporting Compliance**







Section
      16(a) of the Securities Exchange Act of 1934 requires our directors and
      executive officers and persons who beneficially own more than ten percent of
      a
      registered class of our equity securities to file with the SEC initial reports
      of ownership and reports of change in ownership of common stock and other equity
      securities of our company. Officers, directors and greater than ten percent
      stockholders are required by SEC regulations to furnish us with copies of all
      Section 16(a) forms they file. Based solely upon a review of Forms 3 and 4
      and
      amendments thereto furnished to us under Rule 16a-3(e) during the fiscal year
      ended February 28, 2005, and Forms 5 and amendments thereto furnished to us
      with
      respect to the fiscal year ended February 28, 2005, we believe that during
      the
      fiscal year ended February 28, 2005, our executive officers, directors and
      all
      persons who own more than ten percent of a registered class of our equity
      securities complied with all Section 16(a) filing requirements, except as
      follows: (1) Avi Sivan failed to report one transaction; (2) Prem
      Ramchandani failed to report one transaction; (3) Avraham Ovadia, a
      greater
      than ten percent stockholder, failed to report one transaction and (4) Shai
      Bar-Lavi, a greater than ten percent stockholder, failed to report one
      transaction. In each instance, the transaction not reported was the contribution
      of certain of their Series E preferred shares to Tactica’s vendors along with
      the Company’s issuance of Series E shares in settlement of amounts Tactica owed
      to its vendors.





**Code
      of Ethics**




Because
      we are an early-development stage company with limited resources, we have not
      yet adopted a "code of ethics", as defined by the SEC, that applies to our
      Chief
      Executive Officer, Chief Financial Officer, principal accounting officer or
      controller and persons performing similar functions. We are in the process
      of
      drafting and adopting a Code of Ethics.





**ITEM
      10. EXECUTIVE COMPENSATION**





The
      following table sets forth the annual and long-term compensation for services
      in
      all capacities to Tactica for Tactica’s fiscal years ended February 28, 2005,
      February 29, 2004 and February 28, 2003 paid to our Chief Executive Officer
      and
      the other executive officers who earned more than $100,000 per year at the
      end
      of the last completed fiscal year. We refer to all of these officers
      collectively as our "named executive officers."





Summary
      Compensation Table


**Long
                Term Compensation****Annual
                Compensation**
            **Awards**
            **Payouts**Name
                And
              Principal
              Position
            Year
            Salary
              ($)
            Bonus
              ($)
            Other
              Annual
              Award(s)
              ($)
            Restricted
              Stock
              Compensation
              ($)
            Securities
              Under-
              Lying
              Options/
              SARs
                (#)
            LTIP
              Payouts
              ($)
            All Other
              Compensation
              ($)Avi
              Sivan
            2005
            514,539
            0
            31,798
            --
            --
            --
            --Chief
                Executive
            2004
            503,201
            0
            39,100
            --
            --
            --
            --Officer
            2003
            499,996
            0
            18,550
            --
            --
            --
            --Prem
            2005
            514,539
            0
            44,056
            --
            --
            --
            --Ramchandani,
            2004
            503,201
            0
            42,728
            --
            --
            --
            --President
            2003
            499,996
            0
            38,322
            --
            --
            --
            --Kurt
                Streams,
            2005
            200,000
            0
            0
            --
            --
            --
            --Chief
                Financial
            2004
            192,308
            0
            0
            --
            --
            --
            --Officer
            2003
            0
            0
            0
            --
            --
            --
            --Paul
                Greenfield,
            2005
            200,000
            0
            0
            --
            --
            --
            --Secretary
                and
            2004
            201,282
            0
            0
            --
            --
            --
            --General
                Counsel
            2003
            200,000
            0
            0
            --
            --
            --
            --




23


**Options
      Grants**





During
      our fiscal year ended February 28, 2005 no stock options were granted
      to
      the named executive officers. As of the date hereof no options to purchase
      shares of our common stock are outstanding.





**Employment
      Agreements with Executive Officers**





Tactica,
      our wholly owned subsidiary, entered into an employment agreement dated April
      29, 2004, with Avi Sivan. Pursuant to the employment agreement, Mr. Sivan is
      to
      serve as our Chief Executive Officer for a base compensation of at least
      $600,000 per year. The contract, which is for a five-year period, automatically
      extends by one day, every day, unless terminated earlier us or Mr. Sivan by
      written notice (“Non-renewal Notice”). Mr. Sivan is eligible for incentive
      compensation expressed as 10% of EBITDA for the fiscal year then ended. On
      July
      1, 2004, Mr. Sivan’s employment agreement was amended by oral agreement such
      that, effective August 1, 2004, (i) Mr. Sivan will receive a base compensation
      of $490,000, (ii) Mr. Sivan is eligible for incentive compensation expressed
      as
      8% of EBITDA for the fiscal year then ended, and (iii) Mr. Sivan’s incentive
      compensation is subject to cap of $400,000 per year.




In
      addition, Mr. Sivan is entitled to participate in our standard executive benefit
      program, including group health insurance; death and disability benefits
      provided for under our applicable insurance policy. If after death or twenty-six
      weeks of continuous disability (“Disability”), Mr. Sivan’s employment agreement
      will be terminated, and he, or his estate will be entitled to severance pay,
      calculated as a one time multiple of his total average compensation over the
      preceding three years, in the event that a Non-renewal Notice has been given
      by
      us prior to his death or Disability, in lieu of the one times (1x) multiple,
      the
      multiple shall be the remaining number of years between the date of his death
      or
      Disability and the third (3rd) anniversary of the date of the Non-renewal
      Notice, but in no event less than one (1) year. Upon death, his estate will
      be
      entitled to any accrued benefits, not yet paid, including pro-rata incentive
      payments payable upon termination of employment for other than death, disability
      or cause are provided for as follows: If terminated by resignation for “good
      reason” or by us other than for “cause” (as such terms are defined in the
      employment agreement) or a result of Non-renewal Notice, Mr. Sivan will be
      entitled to receive all salary, benefits and incentive compensation for two
      years after the date of termination of employment and all stock options
      previously grated to Mr. Sivan will immediately vest. If Mr. Sivan's employment
      is terminated for good reason due to a “change of control” (as such term is
      defined in the employment agreement), Mr. Sivan will be entitled to receive,
      within 30 days after providing notice of election to terminate his employment
      due to a change in control, a lump sum payment equal to the net present value
      of
      the sum of five times Mr. Sivan's then current base salary plus five times
      the
      sum of Mr. Sivan's highest annualized bonus compensation during the three year
      period prior to the change of control.




We
      have
      identical employment agreements and amendments thereto with Mr. Prem
      Ramchandani, pursuant to which Mr. Ramchandani is employed as President of
      Tactica.





Tactica,
      our wholly owned subsidiary, entered into an employment agreement dated January
      19, 2004, with Kurt Streams. Pursuant to the employment agreement, Mr. Streams
      is to serve as our Chief Financial Officer for a base compensation of at least
      $200,000 per year. Mr. Streams is eligible for bonus compensation of between
      10%
      and 20% of his annual salary. In the event of termination, except for cause
      or
      upon the failure to give required notice, Mr. Streams shall receive a lump-sum
      severance payment equal to four months salary plus any bonus which is payable.





**Director
      Compensation**





Non-employee
      directors receive $1,000 for each meeting of the Board of Directors attended,
      as
      well as reimbursement of reasonable out of pocket expenses incurred in
      connection with the attendance of meetings of the Board of
      Directors.





24


**ITEM
      11- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
      AND**


**RELATED
      STOCKHOLDER MATTERS**





The
      following table sets forth information regarding the beneficial ownership of
      our
      common stock (assuming conversion of all of the issued and outstanding shares
      of
      Series E Preferred Stock) as of April 14, 2005 and as adjusted to reflect the
      maximum number of shares of our common stock which may issued upon conversion
      of
      the Convertible Preferred Stock by:





·
            each
                person known by us to be the beneficial owner of more than 5% of
                our
                Common Stock;


·
            each
                of our directors;


·
            each
                of our executive officers; and


·
            our
                executive officers and directors as a group.





Beneficial
      ownership is determined in accordance with the rules of the SEC and includes
      voting and investment power. Under SEC rules, a person is deemed to be the
      beneficial owner of securities which may be acquired by such person upon the
      exercise of options and warrants or the conversion of convertible securities
      within 60 days from the date on which beneficial ownership is to be determined.
      Each beneficial owner’s percentage ownership is determined by dividing the
      number of shares beneficially owned by that person by the base number of
      outstanding shares, increased to reflect the beneficially-owned shares
      underlying options, warrants or other convertible securities included in that
      person’s holdings, but not those underlying shares held by any other
      person.





**Title
                  of Class**
              
              **Name
                  of Beneficial Owner**
              
              **Amount
                  and Natureof Beneficial Owner**
              
              **Percent
                  of Class**Common
                  Stock
              
              Avi
                  Sivan(3)
              
              9,947,500
              (1)
              
              22.6%Common
                  Stock
              
              Prem
                  Ramchandani(3)
              
              9,947,500
              (1)
              
              22.6%Common
                  Stock
              
              Avraham
                  Ovadia
              
              9,947,500
              (1)
              
              22.6%Common
                  Stock
              
              Shai
                  Bar-Lavi
              
              5,007,500
              (2)
              
              11.4%Common
                  Stock
              
              Kurt
                  Streams
              
              0
              
              
              0.0%Common
                  Stock
              
              Paul
                  Greenfield
              
              0
              
              
              0.0%Common
                  Stock
              
              All
                  directors and named executive officers as a group
              
              19,895,000
              shares
              
              45.1%


(1)  Includes
      7,101,250 shares of common stock issuable upon conversion of 71,012.5 shares
      of
      Series E Convertible Preferred Stock.




(2)  Includes
      3,396,250 shares of common stock issuable upon conversion of 33,962.5 shares
      of
      Series E Convertible Preferred Stock.




(3)  Avi
      Sivan
      and Prem Ramchandani each pledged all of their equity to  New
      Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC, AJW Offshore,
      Ltd. and AJW Partners, LLC in connection with the sale of an aggregate of
      $3,000,000 principal amount of callable secured convertible notes.




**Title
                  of Class**
              
              **Name
                  of Beneficial Owner**
              
              **Amount
                  and Natureof Beneficial Owner**
              
              **Percent
                  of Class**Series
                  G Preferred
              
              Avi
                  Sivan(2)
              
              25,000
              (1)
              
              50.0%Series
                  G Preferred
              
              Prem
                  Ramchandani(2)
              
              25,000
              (1)
              
              50.0%
  (1)  Shares
      of
      Series G Preferred Stock are not convertible to common stock and have no
      liquidation preference. The holders of the Series G Preferred Stock are entitled
      to 10,000 votes per share.




(2)  Avi
      Sivan
      and Prem Ramchandani each pledged all of their equity to New Millennium Capital
      Partners II, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and AJW
      Partners, LLC in connection with the sale of an aggregate of $3,000,000
      principal amount of callable secured convertible notes.




25


**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**





Avraham
      Ovadia, a 22% stockholder, serves as the exclusive distributor of Tactica’s
      products in South Africa. During fiscal 2003, Tactica sold an immaterial amount
      of goods to Mr. Ovadia’s company, Home Mark (Pty) Ltd. In the past Mr. Ovadia
      also has produced infomercials for Tactica.




Mr.
      Sivan
      and Mr. Ramchandani have an ownership interest in Prime Time Media, a company
      which has pre-petition accounts payable from us in the amount of
      $455,734.





We
      have
      an agreement with Brass Logistics, a company in which Messrs. Sivan and
      Ramchandani have an ownership interest, pursuant to which Brass Logistics acts
      as our non-exclusive fulfillment center of our Singer vacuum products and our
      personal care products in the United States and Canada.





In
      connection with Tactica’s former sublease of office space in New York City, an
      affiliate of HoT issued a $389,000 standby letter of credit which the third
      party lessor is drawing upon in satisfaction of rent not paid by Tactica.





On
      December 8, 2004, Tactica entered into a Credit Agreement with Tactica Funding
      1, LLC. Mr. Sivan is a member and Mr. Ramchandani is a manager and a member
      of
      Tactica Funding 1, LLC. Under the Credit Agreement Tactica Funding 1, LLC agreed
      to provide Tactica with a secured loan of up to an aggregate principal amount
      of
      $300,000, to provide funds for Tactica’s continued ordinary course operations
      and working capital needs, as evidenced by a promissory note. The loan bears
      interest at a rate of 9% per annum and is payable monthly. Notwithstanding
      the
      foregoing, the Loan bears a default rate of interest of 16% per annum. The
      entire principal is due and payable. As security for the loan, Tactica granted
      to Tactica Funding 1, LLC a first priority security interest in substantially
      all of the assets of Tactica, except as to permitted liens for which the Tactica
      Funding security interest is junior and subordinate, including Innotrac
      Corporation, certain carve out expenses that Tactica incurs for professional
      fees and other bankruptcy case matters. Pursuant to the Credit Agreement,
      Tactica’s default of the Stipulation is an event of default on the Loan. Tactica
      and Tactica Funding are discussing the default and potential for a forbearance
      agreement.




We
      issued
      25,000 shares of Series G Preferred Stock to each of Mr. Sivan and Mr.
      Ramchandani. The Series G Preferred Stock was issued to Mr. Sivan and Mr.
      Ramchandani in consideration of the fact that in connection with the financing
      we obtained from New Millennium Capital Partners II, LLC, AJW Qualified
      Partners, LLC, AJW Offshore, Ltd. and AJW Partners, LLC in the form of a sale
      of
      (i) $3,000,000 in callable secured convertible notes and (ii) stock purchase
      warrants to buy 6,000,000 shares of our common stock, Mr. Sivan and Mr.
      Ramchandani agreed to pledge all of their equity ownership in us to the
      investors to secure our obligations. Without such pledge of equity, including
      a
      pledge of the Series G Preferred Stock, by Mr. Sivan and Mr. Ramchandani the
      investors would not have entered into the financing transaction.





We
      believe that the terms of all of the above transactions are commercially
      reasonable and no less favorable to us than we could have obtained from an
      unaffiliated third party on an arm’s length basis. Our policy requires that all
      related parties recuse themselves from negotiating and voting on behalf of
      our
      company in connection with related party transactions.




26


**ITEM
      13. EXHIBITS.**





***Exhibits:***





Exhibit
                Number
              
              Description2.1
                  (1)
              
              Securities
                  Purchase Agreement and Plan of Reorganization, dated June 11, 2004,
                  by and
                  among IGIA, Inc., Tactica International, Inc. and its
                  shareholders.3.1
                  (2)
              
              Articles
                  of Incorporation.3.2
                  (1)
              
              Certificate
                  of Amendment, dated May 27, 2004.3.3
                  (2)
              
              By-Laws.4.1
                  (5)
              
              Certificate
                  of Designations for Series E Convertible Preferred Stock, filed
                  on June 8,
                  2004.4.2
                  (3)
              
              Amended
                  and Restated Certificate of Designations for Series G Preferred
                  Stock,
                  filed on April 1, 2005.4.3
              
              Specimen
                  Certificate of Common Stock.4.4
                  (4)
              
              Securities
                  Purchase Agreement dated March 23, 2005 by and among the Company
                  and New
                  Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC,
                  AJW
                  Offshore, Ltd. and AJW Partners, LLC.4.5
                  (4)
              
              Callable
                  Secured Convertible Note in the name of New Millennium Capital
                  Partners
                  II, LLC dated March 23, 2005.4.6
                  (4)
              
              Callable
                  Secured Convertible Note in the name of AJW Qualified Partners,
                  LLC dated
                  March 23, 2005.4.7
                  (4)
              
              Callable
                  Secured Convertible Note in the name of AJW Offshore, Ltd. dated
                  March 23,
                  2005.4.8
                  (4)
              
              Callable
                  Secured Convertible Note in the name of AJW Partners, LLC dated
                  March 23,
                  2005.4.9
                  (4)
              
              Stock
                  Purchase Warrant in the name of New Millennium Capital Partners
                  II, LLC
                  dated March 23, 2005.4.10
                  (4)
              
              Stock
                  Purchase Warrant in the name of AJW Qualified Partners, LLC dated
                  March
                  23, 2005.4.11
                  (4)
              
              Stock
                  Purchase Warrant in the name of AJW Offshore, Ltd. dated March
                  23,
                  2005.4.12
                  (4)
              
              Stock
                  Purchase Warrant in the name of AJW Partners, LLC dated March 23,
                  2005.4.13
                  (4)
              
              Registration
                  Rights Agreement dated March 23, 2005 by and among the Company
                  and New
                  Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC,
                  AJW
                  Offshore, Ltd. and AJW Partners, LLC.4.14
                  (4)
              
              Security
                  Agreement dated March 23, 2005 by and among the Company and New
                  Millennium
                  Capital Partners II, LLC, AJW Qualified Partners, LLC, AJW Offshore,
                  Ltd.
                  and AJW Partners, LLC.4.15
                  (4)
              
              Intellectual
                  Property Security Agreement dated March 23, 2005 by and among the
                  Company
                  and New Millennium Capital Partners II, LLC, AJW Qualified Partners,
                  LLC,
                  AJW Offshore, Ltd. and AJW Partners, LLC.10.1
                  (5)
              
              Executive
                  Employment Agreement by and between Tactica International, Inc.
                  and Avi
                  Sivan, dated April 29, 2004.10.2
                  (5)
              
              Executive
                  Employment Agreement by and between Tactica International, Inc.
                  and Prem
                  Ramchandani, dated April 29, 2004.10.3
                  (5)
              
              Employment
                  Agreement by and between Tactica International, Inc. and Kurt Streams,
                  dated January 19, 2004.10.4
                  (5)
              
              Service
                  Agreement by and between Brass Logistics, LLC and IGIA,
                  Inc..21.1
              
              Subsidiaries23.1
              
              Consent
                of KPMG LLP (filed herewith).31.1
              
              Certification
                  of Chief Executive Officer pursuant to Item 601(b)(31) of Regulation
                  S-B,
                  as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002.31.2
              
              Certification
                  of Chief Financial Officer pursuant to Item 601(b)(31) of Regulation
                  S-B,
                  as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002.32.1
              
              Certification
                  of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as
                  adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002.32.1
              
              Certification
                  of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as
                  adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002.
  ___________________________________________





(1)
      Incorporated herein by reference to the exhibit to Registrant's Current Report
      on Form 8-K dated June18, 2004.


(2)
      Incorporated by reference to the exhibit of same number filed with the Company's
      Registration Statement on Form 10-SB.


(3)
      Incorporated herein by reference to the exhibit to Registrant's Current Report
      on Form 8-K dated April 1, 2005.


(4)
      Incorporated herein by reference to the exhibits to Registrant's Current Report
      on Form 8-K dated March 28, 2005.


(5)
      Incorporated herein by reference to the exhibits to Registrant's Registration
      Statement on Form SB-2 dated April 14, 2005.




27


**ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**








Audit
      Fees. The aggregate fees billed by our auditors, for professional services
      rendered for the audit of our annual financial statements for the years ended
      February 28, 2005 and February 29, 2004, and for the reviews of the financial
      statements included in our Quarterly Reports on Form 10-QSB during that fiscal
      year were $57,375 and approximately $85,100, respectively.





Audit
      Related Fees. The Company incurred fees to auditors of $60,000 and $85,100,
      respectively for audit related fees during the fiscal years ended February
      28,
      2005 and February 29, 2004.





Tax
      Fees.
      The Company incurred fees to auditors of $0 and $0 respectively for tax
      compliance, tax advice or tax compliance services during the fiscal years ended
      February 28, 2005 and February 29, 2004.





All
      Other
      Fees. The Company did not incur any other fees billed by auditors for services
      rendered to the Company, other than the services covered in "Audit Fees" for
      the
      fiscal years ended February 28, 2005 and February 29, 2004.





The
      Board
      of Directors has considered whether the provision of non-audit services is
      compatible with maintaining the principal accountant's
      independence.




POLICY
        ON
        AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES
        OF
        INDEPENDENT AUDITORS
 
 The
        Company currently does not have a designated Audit Committee, and accordingly,
        the Company's Board of Directors' policy is to pre-approve all audit
        and
        permissible non-audit services provided by the independent auditors. These
        services may include audit services, audit-related services, tax services and
        other
        services. Pre-approval is generally provided for up to one year and any
        pre-approval is detailed as to the particular service or category of services
        and is generally subject to a specific budget. The independent auditors and
        management are required to periodically report to the Company's Board of Directors
        regarding the extent of services provided by the independent auditors in
        accordance with this pre-approval, and the fees for the services performed
        to date.
        The
        Board of Directors may also pre-approve particular services on a case-by-case
        basis.





28


**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15 (d) of the Securities Exchange Act
      of
      1934, the Registrant has duly caused this Report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.




**IGIA,
                INC.***By:*
              /s/ *Avi
                Sivan**Avi
                SivanChief Executive Officer and Chairman of the
                Board*


In
      accordance with the requirements of the Securities Act of 1933, this report
      was
      signed by the following persons in the capacities and on the dates stated.




SIGNATURE
            
            TITLE
            
            DATE/s/
              Avi Sivan
            
            Chief
              Executive Officer and Chairman of the Board
            
            June
              17, 2005Avi Sivan/s/
              Prem Ramchandani
            
            President,
              Treasurer and Director
            
            June
              17,
              2005Prem Ramchandani/s/
              Kurt Streams
            
            Chief
              Financial Officer and Assistant Secretary
            
            June
              17,
              2005Kurt
              Streams







29