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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549


FORM 10-KSB

(Mark One)

|     |  |                                                                                   
|---- |  | ----------------------------------------------------------------------------------
|[X]  |  | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|    
|     |  | For the fiscal year ended: December 31, 2002.                                     
|    
|[  ] |  | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|    
|     |  | For the transition period from         to         .                               
|    
|     |  | Commission file number 000-50081.                                                 

INVISA, INC.

(Name of Small Business Issuer in Its Charter)


|                                                              |  |                                     
|------------------------------------------------------------- |  | ------------------------------------
|NEVADA                                                        |  | 65-1005398                          
|                                                              |  |                                     
|(State of Other Jurisdiction of
Incorporation or Organization |  | (I.R.S. Employer Identification No.)
|                                                              |  |                                     
|4400 Independence Court, Sarasota, Florida                    |  | 34234                               
|                                                              |  |                                     
|(Address of Principal Executive Offices)                      |  | Zip Code                            
|                                                              |  |                                     
|941-355-9361
(Issuers Telephone Number)                      |  |                                     

Securities to be registered pursuant to Section 12(b) of the Exchange Act:
NONE

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

Common Stock, Par Value $.001 per share

(Title of Class)


Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that Invisa was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.

Yes [  ] No [X]

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. [X]

The Issuers revenues for its most recent fiscal year were $257,118.

The aggregate market value of the Issuers outstanding stock held as of June 4,
2003 by non-affiliates of the Issuer based upon the closing bid and asked price
of the Issuers common stock on that date is approximately $17,179,660. The
issuer does not have any non-voting stock

As of June 4, 2003, the Issuer had 16,898,971 shares of its $.001 par value
common stock issued and outstanding.





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TABLE OF CONTENTS



|                                                   |                                                                                                                        |  |  |  |  |  |  | 
|-------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                            
|                                                   | ITEM 1 DESCRIPTION OF BUSINESS                                                                                        
|                                                   | ITEM 2 DESCRIPTION OF PROPERTY                                                                                        
|                                                   | ITEM 3 LEGAL PROCEEDINGS                                                                                              
|                                                   | ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                            
|PART II                                           
|                                                   | ITEM 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                                                       
|                                                   | ITEM 6 MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS                                                     
|                                                   | ITEM 7 FINANCIAL STATEMENTS                                                                                           
|                                                   | ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                           
|PART III                                          
|                                                   | ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
|                                                   | ITEM 10 EXECUTIVE COMPENSATION                                                                                        
|                                                   | ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                                                
|                                                   | ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                                
|                                                   | ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K                                                                              
|                                                   | Item 14 CONTROLS AND PROCEDURES                                                                                       
|SIGNATURES                                        
|Report of Independent Certified Public Accountants
|                                                   | CONSOLIDATED BALANCE SHEETS                                                                                           
|                                                   | CONSOLIDATED STATEMENTS OF OPERATIONS                                                                                 
|                                                   | CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY                                                                        
|                                                   | CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                                 
|                                                   | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                            
|INDEX TO EXHIBITS                                 
|Ex-2.1 Agreement of Merger and Plan               
|Ex-3.1 Articles of Incorporation                  
|Ex-3.2 Bylaws of the Company                      
|Ex-4.1 Specimen of Invisa, Inc.                   
|Ex-10.1 Indemnity Agreement                       
|Ex-10.2 Form of Promissory Notes                  
|Ex-10.3 Form of Promissory Notes                  
|Ex-10.4 Consulting Agreement                      
|Ex-10.5 Contribution Agreement                    
|Ex-10.6 Promissory Note                           
|Ex-10.7 Promissory Note                           
|Ex-10.8 Distribution Agreement                    
|Ex-10.9 Employment Agreement                      
|Ex-10.10 Employment Agreement                     
|Ex-10.12 Employment Agreement                     
|Ex-10.13 Employment Agreement                     
|Ex-10.14 Employment Agreement                     
|Ex-10.15 Employment Agreement                     
|Ex-10.16 Office Lease                             
|Ex-10.17 Office Lease                             
|Ex-10.18 Quarterly Revenue Based Payment          
|Ex-10.19 Net Profit Royalty Letter Agreement      
|Ex-10.20 Agreement between Radio Metrix Inc.      
|Ex-10.21 Agreement and Related Security Agreement 
|Ex-10.22 Agreement between Radio Metrix and Wilson
|Ex-10.23 Closing Agreement                        
|Ex-10.24 Promissory Note to SDR Metro Inc.        
|Ex-10.25 Security Agreement                       
|Ex-10.26 Remedy upon Default Agreement            
|Ex-10.27 Consulting Agreement                     
|Ex-10.28 Original Equipment/Distribution License  
|Ex-10.29 Disbursement Request                     
|Ex-10.30 Promissory Note                          
|Ex-10.31 Stock Option Agreement                   
|Ex-10.32 SmartGate, Inc. Plan 2000                
|Ex-10.33 Form of Plan 2000 Option Agreement       
|Ex-10.34 Form of Plan 2000 Option Agreement       
|Ex-10.35 Form of Plan 2000 Option Agreement       
|Ex-10.36 Form of Plan 2000 Option Agreement       
|Ex-10.37 Form of Plan 2000 Option Agreement       
|Ex-10.38 Form of Plan 2000 Option Agreement       
|Ex-10.39 Form of Plan 2000 Option Agreement       
|Ex-10.40 SmartGate Inc. 2002 Incentive Plan       
|Ex-10.41 Form of Plan 2002 Option Agreements      
|Ex-10.42 Form of Plan 2002 Option Agreements      
|Ex-10.43 Form of Plan 2002 Option Agreements      
|Ex-10.44 Form of Promissory Note and Security Agmt
|Ex-10.45 Form of Modification Agreement           
|Ex-10.46 Form of Replacement Promissory Note      
|Ex-10.47 Registration Rights Agreement            
|Ex-10.48 Voluntary Resale Restriction Agreement   
|Ex-10.49 Stock Option Agreement                   
|Ex-10.50 Amended and Restated Stock Option        
|Ex-10.51 Form of Plan 2002 Option Agreement       
|Ex-10.52 Form of Plan 2002 Option Agreement       
|Ex-10.53 Delbrueck Bank Warrant #1                
|Ex-10.54 Delbrueck Bank Warrant #2                
|Ex-10.55 Form of Plan 2000 Option Agreement       
|Ex-10.56 Form of Plan 2000 Option Agreement       
|Ex-10.57 Invisa, Inc. 2003 Incentive Plan         
|Ex-10.58 Form of Plan 2003 Option Agreement       
|Ex-10.59 Consulting Agreement                     
|Ex-10.60 Agreement Dated April 24, 2003           
|Ex-10.61 Financing Agreement                      
|Ex-10.62 Series 2003A 7% Convertible Note         
|Ex-10.63 Investment Agreement                     
|Ex-10.64 Warrant to Purchase Shares Common Stock  
|Ex-10.65 Registration Rights Agreement            
|Ex-10.66 Broker-Dealer Placement Agent Agreement  
|Ex-14 Code of Business Conduct and Ethics         
|Ex-21 Subsidiaries                                
|Ex-99.1 Certification of Chief Executive Officer  
|Ex-99.2 Certification of Chief Financial Officer  

INVISA, INC.

2002 FORM 10-KSB ANNUAL REPORT
TABLE OF CONTENTS

|         |  |                                                                                                                 |  |         
|-------- |  | --------------------------------------------------------------------------------------------------------------- |  | --------
|         |  |                                                                                                                 |  | Page No.
|         |  |                                                                                                                 |  |         
|PART I   |  |                                                                                                                 |  |         
|Item 1   |  | Description of Business                                                                                         |  | 1       
|Item 2   |  | Description of Property                                                                                         |  | 7       
|Item 3   |  | Legal Proceedings                                                                                               |  | 7       
|Item 4   |  | Submission of Matters to Vote of Security Holders                                                               |  | 8       
|PART II  |  |                                                                                                                 |  |         
|Item 5   |  | Market for Common Equity and Related Stockholder Matters                                                        |  | 8       
|Item 6   |  | Managements Discussion and Analysis or Plan of Operations                                                      |  | 18      
|Item 7   |  | Financial Statements                                                                                            |  | 22      
|Item 8   |  | Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure                            |  | 22      
|PART III |  |                                                                                                                 |  |         
|Item 9   |  | Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act |  | 23      
|Item 10  |  | Executive Compensation                                                                                          |  | 27      
|Item 11  |  | Security Ownership of Certain Beneficial Owners and Management                                                  |  | 34      
|Item 12  |  | Certain Relationships and Related Transactions                                                                  |  | 37      
|Item 13  |  | Exhibits and Reports on Form 8-K                                                                                |  | 41      
|Item 14  |  | Controls and Procedures                                                                                         |  | 45      
|         |  | Signatures                                                                                                      |  | 45      





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PART I

Note regarding forward looking statements. Except for statements of
historical fact, certain information contained herein constitutes
forward-looking statements, including without limitation statements
containing the words believes, anticipates, intends, expects and words
of similar import, as well as all projections of future results. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results or achievements of Invisa,
Inc. to be materially different from any future results or achievements
expressed or implied by such forward-looking statements. Such factors include,
but are not limited to, the following: risks involved in our implementing our
business strategy; our ability to obtain financing on acceptable terms;
competition; our ability to manage growth; risks of technological change; our
dependence on key personnel; and our ability to protect our intellectual
property rights; risks of new technology and new products; and government
regulation.

ITEM 1 DESCRIPTION OF BUSINESS

INTRODUCTION

We are commercializing the patented InvisaShield presence sensing
technology through the development of a potentially broad range of safety and
security products. Presence sensing is the identification of people and
conductive objects in a dependable and controlled manner. Presence sensing is
commonly used in a wide range of industries such as safety, security, on and
off switches, counting, notification, etc.

The Companys principal business is the manufacture and marketing of
presence-sensing products for various applications. To date, the Companys
revenue has largely come from the sale of presence-sensing products to improve
the safety of powered parking gates. Powered parking gates are motorized
barriers used in parking and to control vehicle traffic. The Company
anticipates that next year its revenue will reflect the sale of additional
presence sensing products designed to improve the safety of various products
which may include industrial doors, commercial overhead doors, powered slide
and swing gates, and products designed to provide security sensing for various
markets including museums, retail, residential, commercial, governmental and
defense.

From inception (February 12, 1997) through December 31, 2002, we were
largely focused on technology and product development. The estimated dollar
amount spent during this period on company-sponsored research and development
was $2,266,144, including $660,844 for the year ended December 31, 2002 and
$452,482 for the year ended December 31, 2001. The Company is continuing to
engage in significant product development activities. Because of the Companys
losses which aggregate $8,963,815 from inception through December 31, 2002,
limited capital and ongoing product development expenses, footnote C of the
Companys financial statements and the accompanying Report of Independent
Certified Public Accountants discuss that substantial doubt exists regarding
the Companys ability to continue as a going concern.

PRODUCTS

Our current and planned products are divided into three market categories
as follows:

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Safety
Market Category - Many safety devices and safety functions are
dependent on presence sensing technology. We are seeking to develop a broad
range of presence sensing products for the safety market under our brand name
SmartGate®.

We believe that our safety products offer potential operational and
maintenance benefits to the powered closure industry. We plan to develop safety
products based upon our InvisaShield technology for a potentially broad base
of powered closure devices which may include parking gates, sliding gates,
swinging gates, vertical pivot gates, commercial overhead doors, residential
garage doors, elevator doors, automated doors, powered car window and van
doors, and manufacturing and industrial equipment.

To date, substantially all of our revenue, which has been limited, has
been derived from the sale of our SmartGate® presence sensing products designed
for powered parking barrier gates. See financial statements for revenues from
this product category. Powered parking barrier gates are commonly used for
traffic control and generally have a power operated barrier arm made of metal,
wood or PVC which moves vertically between an open and a closed position. Our
product places invisible presence sensing in front of and moving with the
potentially dangerous barrier arm to identify the presence of people and
vehicles. When an object is identified in the path of the moving barrier arm,
our product signals the powered operator system, which is manufactured by
nonaffiliated entities for its predetermined response, such as stopping and
reversing the barrier arm. During each of the last three fiscal years, an
excess of 90% of our revenue was attributable to customers domiciled in the
United States. In sales made to non-U.S. domiciled customers, the country to
which the most sales were attributed was the United Kingdom.

In 2003, we expect to sell a new SmartGate® presence sensing product
designed for powered sliding gates, and a similar new presence sensing product
designed for powered swinging gates. These powered gates are manufactured by a
significant number of nonaffiliated companies and are commonly used in
residential, commercial and industrial traffic control.

We have developed prototypes of additional presence sensing products
planned for the safety market. These planned products are being designed for
powered commercial overhead doors and powered industrial doors, which are used
in commercial, manufacturing, and industrial buildings, powered vertical pivot
gates used in residential, commercial and industrial traffic control, and
residential garage doors. We plan to develop a potentially broad range of
additional presence sensing products for the safety market.

In August 2001, we appointed H.S. Jackson & Son (Fencing) Limited as our
exclusive distributor for our parking and traffic control and fence and gate
products, including parking gate, slide gate and swing gate safety products,
for the U.K. We subsequently expanded this exclusive distributorship to include
33 European countries and to include our safety products for commercial
overhead doors.

In July 2002, we appointed Rytec Corporation as our exclusive licensee to
use our InvisaShield technology as original equipment in industrial doors in
North America. Rytec Corporation is believed to be the largest manufacturer of
industrial doors in North America. Industrial doors are high-speed powered
doors frequently used in manufacturing and industrial environments where air
conditioned, cooler and freezer areas are separated from warehouse or other
areas.

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Our average sale price for InvisaShield safety products is approximately
$510. We consider our average gross margin of profit to be acceptable and we
expect cost of goods to decline as we realize the economies of scale.

Security
Market Category - Security systems and security equipment
generally rely to varying degrees, on presence sensing technologies to identify
the presence of potential intruders and trespassers, or to provide surveillance
for valuable objects.

We have demonstrated production-ready prototypes of InvisaShield security
products for the museum, residential, industrial, commercial, defense and
governmental markets. We are designing these planned security products to place
an invisible presence sensing shield (in a fashion similar to our safety
sensing shield) around exposed perimeters, doors and windows and to provide an
invisible presence sensing shield dedicated to valuable objects such as safes,
locking cabinets, display cases, objects of art and jewelry.

Our planned security products are being developed as both easy to install,
stand alone security products for the do-it-yourself (DIY) market and as
components available to security professionals to provide additional functions
for new and installed security systems.

Our planned security products will compete with existing presence sensing
technologies currently used in the security market such as infrared motion
detectors, lasers, infrared beam systems and magnetic switches.

Other
Market Categories - We plan to develop presence sensing products for
a broad range of other markets and applications such as on and off switching
for bathroom fixtures, appliances and lamps, vehicular security systems,
various governmental applications such as container security and security for
military equipment, aircraft security, specifically engineered products for
commercial and industrial applications, etc. To date, limited proof of concept
prototypes have been developed for this planned sector of our business.

MARKETING

Our marketing efforts include sales of products to dealers, distributors,
manufacturers and end users. We are also seeking to grant exclusive licenses
for particular markets and particular products. We periodically participate in
various trade conferences in the security market and safety market where we
demonstrate our current and planned products and technology to potential
customers. We have historically concentrated marketing efforts on potential
customers which we believe are market leaders or otherwise high profile within
these markets in an effort to grow the acceptance of our products and
technology within targeted markets. Currently, we have targeted the market for
safety products for powered parking gates, industrial doors, commercial
overhead doors and powered slide and swing gates. Further, we plan to also
target the markets for additional powered closure devices and the museum,
retail, residential, governmental defense, and security markets for
InvisaShield security products.

We sell our safety products through dealers and distributors and in some
instances directly to larger customers. In 2003, we anticipate potential sales
to manufacturers for use of the InvisaShield technology as original equipment
in various door operators. While our exclusive European distributor, H.S.
Jackson & Son (Fencing) Limited currently represents our largest customer, we
believe we are not dependent upon any single customer, dealer, or distributor
in the safety market, or otherwise.

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We are currently seeking to develop channels of distribution for our
security products, which we believe, may include direct sales to do-it-yourself
customers and sales to and through dealers, distributors and manufacturers.
While products in this market category have not contributed to our historic
revenue, we believe that our planned security products may ultimately represent
a material portion of our business.

THE TECHNOLOGY

General - The InvisaShield technology is based upon electronic circuitry,
which emits and controls an invisible energy field. The field is based in part
upon low energy radiowaves, which oscillate within a controlled frequency
range. The field being monitored by our technology varies in size from between
approximately one meter to touch sensitive based upon the selected application.
The field is constantly monitored by electronic circuitry for the presence of
people, vehicles or other objects capable of conducting electricity (conductive
objects) that disturb the monitored field.

We believe that the InvisaShield technology is a novel and proprietary
way to provide presence sensing. At the core of the InvisaShield technology is
its ability to project a field or zone which is capable of detecting most
conductive objects that enter the field. The field is projected from a metallic
substance, referred to as an antenna, which may consist of wire, self-adhesive
metallic tape or other metallic items. The technology permits flexibility in
designing and locating the antenna, which may provide unique opportunities to
place presence-sensing fields where they can be more efficient or effective. We
believe that this flexibility enables the InvisaShield technology to perform
presence sensing tasks which may not be currently possible with competitive
technologies and to perform presence sensing tasks similar to those performed
by competitive technologies in a potentially more efficient, more effective,
and more reliable manner.

We believe that the InvisaShield technology has a number of operational
advantages. InvisaShield technology does not depend upon lenses, beams or
reflectors, which may require replacement, cleaning and aligning. Additionally,
we believe that the presence sensing capability of our technology is generally
not disrupted by its operating environment, including electronic noise,
mechanical noise, temperature, dust, frost, snow, ice or other operating
conditions. We believe that our technology may represent a new presence sensing
technology, which allows greater capability, flexibility and benefits. We
believe that, in many security applications, the technology may offer the
potential to reduce costly false alarms.

Competing
Technologies - The presence sensing business is highly
competitive, consisting of numerous manufacturers of presence sensing products
based on various technologies, including infrared, ultrasonic, laser,
microwave, and similar technologies. For the most part, these technologies are
older and in many cases, may not be proprietary.

We compete with manufacturers and marketers of various presence sensing
and other safety and security technology such as motion detectors, light beams,
light curtains, on and off switching mats and pads, tape switches, contact
edges, etc. There are many competitors, some of which are large and well
established, such as GE Interlogix Inc., Honeywell Inc., Pitway Inc., Ademco
Group Inc., Tyco International Inc., Simplex Technologies Inc. and Miller Edge
Inc. Many of the competitors have substantially greater financial, development,
technical, marketing and sales resources than we have. As a result of these
factors, our competitors and potential

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competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements or to devote greater
resources to the development, promotion and sale of their products and services
than we can. We believe that our ability to successfully compete depends, to a
large degree, upon the performance of our technology, our current and planned
presence sensing products and our ability to finance our development and
marketing efforts.

Patents
and Trademarks - We own Patent Number 5,337,039 issued by the U.S.
Patent Office on August 9, 1994 and we have six additional patent or
provisional patent applications filed with the U.S. Patent Office covering a
number of inventions improving the InvisaShield technology.

We have a trademark on our tradename SmartGate® which we use in our safety
products category. We have filed trademark applications for the following:
Invisa, InvisaShield, The Best Safety Sensing in the World!, Invisible
Safety Zone, Invisible Shield, Invisible Field, The Best Security Sensing
In The World, The Best Presence Sensing In The World, and Invisible Safety
Field.

We believe that our patent and trademark position will be important in our
efforts to seek to protect our perceived competitive advantages.

We have the following royalty obligations: (i) we are obligated to pay to
Carl Burnett, the inventor, a royalty of the smaller of $1.00 or 1% of the
amount collected from the sale of each finished product in which the technology
designed to eliminate or filter electronic or mechanical interference is
utilized. In instances where we license this technology independent of our
other technology, a royalty of 10% of the licensed fees or royalties received
is due. In instances where we license this invention as part of further
potential technology other than the InvisaShield, a royalty of 1% of the
licensed fees or royalties received is due. We currently utilize this invention
only in our safety products and we do not currently anticipate utilizing this
invention in other product categories; (ii) we are obligated to pay a royalty
equal to two percent of net profits from the sale of InvisaShield safety
products for parking gates, sliding gates and overhead doors to an independent
engineering consultant, Pete Lefferson. Based on further consulting from Mr.
Lefferson, we anticipate that we may extend this royalty obligation to
additional products or product categories; and (iii) we are obligated to pay a
7% royalty to affiliated parties with regard to all categories of our business,
other than the safety categories, including the security category. This
obligation arose from the consideration to be paid by us in the business
combination transaction with Radio Metrix Inc. and is described in Item 12
Certain Relationships and Related Transactions. This royalty-based payment
may be terminated by us at any time for a one-time payment in an amount to be
determined by appraisal.

MATERIALS AND MANUFACTURING

We believe that the materials required and the sources of such materials
will be similar for our various existing and planned product categories. All
components and parts are modified or manufactured by third parties to our
specifications or are otherwise generally available as off-the-shelf
materials. Our products have a number of components including proprietary
electronic circuitry manufactured by Singletec, Inc., Sanford, Florida, metal
housing manufactured by Southern Spring & Stamping, Inc., Venice, Florida, and
a standard power supply available in the marketplace. The antenna is standard
wire, tape or other metallic materials, which are generally purchased in bulk.
Whenever possible, we utilize fixed price manufacturing for our electronic
circuitry, placing the responsibility for component supply on the manufacturer.
We believe that there are multiple manufacturers and suppliers for each
component and that adequate

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components and materials will be available to support our planned growth.
We assemble and perform predetermined quality control procedures in our
facility.

GOVERNMENT REGULATION

The use of radio frequency (RF), such as that incorporated into our
safety products is regulated by the Federal Communication Commission. Radio
Metrix Inc. submitted its patented technology for required FCC testing and on
August 19, 1993 Radio Metrix Inc. received FCC Certification. We will endeavor
to continue satisfying all requirements of the FCC.

On March 1, 2001, a new safety standard was implemented by Underwriters
Laboratory (UL) for the powered gate, door and window industry. This
Underwriters Laboratory Rule, UL-325, while not a governmental regulation, is
considered an indication of reasonable safety for powered gates, doors and
windows, and is a requirement for UL certification for certain powered gate,
door and window operators. Gate and operator manufacturers which rely upon UL
certification or which consider UL certification important for components will,
most likely, require that our products be UL certified before incorporating our
products as original equipment. Likewise, the absence of UL certification for
our products may represent a sales or marketing barrier in certain market
categories and to certain customers. We plan to apply for UL certification for
certain of our safety products, which we believe, meet or exceed the current UL
325 standard. From time to time, we anticipate submitting additional products,
including safety and security products, for UL certification. Other markets may
have governmental or certification requirements.

WARRANTY

Our safety products are sold with a 90-day (upgradeable to one year)
limited warranty. A warranty policy for security products is currently being
developed.

EMPLOYEES

We have approximately 12 employees, of which one is part time. We had no
unions and we had not entered into any collective bargaining agreement with any
group of its employees. We believe that we have a good relationship with our
employees.

HISTORY

Invisa, Inc. (Invisa, Inc. together with its wholly owned subsidiaries
SmartGate, L.C. and Radio Metrix Inc. is referred to as the Company or
Invisa) is a development stage company that is commercializing patented
presence-sensing technology under the tradename InvisaShield. The Company was
incorporated in Nevada on July 9, 1998 to seek to provide computer analysis and
solutions in anticipation of potential date-related computer system failures
associated with the year 2000. Our original business plan was abandoned before
significant commercialization and on February 9, 2000, we acquired SmartGate,
L.C., in consideration for the issuance of 7,743,558 shares of our Common stock
representing approximately 74% of our capital stock then outstanding. As a
result, SmartGate, L.C., is a wholly owned subsidiary which markets our
InvisaShield safety products under the brand name SmartGate®. It is a
development stage company, which was organized in January 1997 to develop and
commercialize, pursuant to a license, patented presence-sensing technology for
safety applications in the powered closure market. From an accounting
perspective, SmartGate, L.C. is considered the acquirer in this transaction
and, as a result, the accompanying Financial Statements reflect the operations
of SmartGate, L.C. from inception. On February 26, 2002, we

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acquired Radio Metrix Inc. from affiliated parties. The consideration for
this acquisition is discussed in Item 12 Certain Relationships and Related
Transactions. Radio Metrix Inc. is a wholly owned subsidiary, which is
commercializing our InvisaShield security products. Radio Metrix Inc. is a
development stage company, which was incorporated in Florida on March 19, 1992.
Radio Metrix Inc. owns the patent and patent applications to the InvisaShield
technology and controlled the InvisaShield technology. As a result of this
acquisition, we have sole rights to commercialize the InvisaShield technology
in all markets worldwide and we own the issued patent and pending patent
applications to the InvisaShield technology.

REPORTS TO SECURITY HOLDERS

As a reporting company since January 8, 2003, we are required to file
annual reports on Form 10-KSB with the SEC, as well as other reports required
under the Securities Exchange Act of 1934. We intend to provide information to
our stockholders as required by applicable proxy rules and regulations. You may
read and copy any materials the Company files with the SEC at the SECs Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. Additionally, please note the Company files its SEC
reports electronically. The SEC maintains an Internet site that contains
reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC at http://www.sec.gov. The
Companys Internet address is http://www.Invisa.com.

ITEM 2 DESCRIPTION OF PROPERTY

We lease approximately 28,000 square feet of manufacturing, marketing,
development and office space in two buildings located in Northgate Business
Park, Sarasota, Florida. We believe that our leased facilities are adequate and
suitable for the implementation of our business plan. No zoning or other
governmental requirements are required for the continued use of our facilities.
One of the leases expires in March 2004, and the other lease expires in June
2004. The annual lease payments for the Companys facilities aggregate $200,400
plus taxes, which we believe to approximate the local market rate for such
facilities. The facilities are leased from non-affiliated parties. Each of the
leases provides an option to purchase the building; however, we have no current
plans to execute these options. With the exception of the potential exercise of
the options contained in the leases, we have adopted a policy pursuant to which
we do not invest in real estate, interest in real estate, real estate mortgages
or securities issued based upon real estate activities. We maintain lease
insurance that we believe is adequate.

ITEM 3 LEGAL PROCEEDINGS

On October 23, 2002, our wholly owned subsidiary, SmartGate, L.C. was
named as a party to litigation commenced by Maria and Alfred Mangano. The
litigation seeks damages arising from an alleged injury from a parking gate.
The lawsuit alleges that the parking gate was equipped with a SmartGate® safety
product and that SmartGate, L.C. was negligent, engaged in acts of product
liability, sold a defective product, and/or breached warranties. This lawsuit
is in the discovery phase, and we are in the process of gathering and assessing
information. The lawsuit is currently being defended under our products
liability insurance policy, which provides $4,000,000 of coverage per
occurrence and in the aggregate. Other than as described above, the Company is
not presently a party to any material litigation or to the knowledge of
management is any litigation threatened against the Company, which may
materially affect the Company.

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ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of the Companys security holders.

PART II

ITEM 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

Since July 26, 2000, our common stock has traded in the over the counter
market through Pink Sheet, LLC under the symbol INSA (previously SGTI). The
principal market for our common stock is in the Pink Sheets. The following
table sets forth the range of high and low bids to purchase our common stock
through March 31, 2003. Such prices represent quotations between dealers,
without dealer mark-up, markdown, or commissions, and may not represent actual
transactions.

|                    |  |          |       |         |  |  |       | 
|------------------- |  | -------- | ----- | ------- |  |  | ----- | 
|QUARTER             |  | HIGH BID |       | LOW BID
|                    |  |          |       |        
|First Quarter 2001  |  |          | 5.125 |         |  |  | 1.01  | 
|Second Quarter 2001 |  |          | 4.50  |         |  |  | 1.125 | 
|Third Quarter 2001  |  |          | 6.75  |         |  |  | 3.75  | 
|Fourth Quarter 2001 |  |          | 7.25  |         |  |  | 4.00  | 
|First Quarter 2002  |  |          | 7.00  |         |  |  | 3.00  | 
|Second Quarter 2002 |  |          | 5.80  |         |  |  | 3.75  | 
|Third Quarter 2002  |  |          | 5.55  |         |  |  | 2.50  | 
|Fourth Quarter 2002 |  |          | 4.05  |         |  |  | 1.95  | 
|First Quarter 2003  |  |          | 4.05  |         |  |  | 3.05  | 

On June 4, 2003, the closing bid and closing ask prices for shares of our
common stock in the over-the-counter market, as reported by Pink Sheets, LLC
were $2.25 and $2.54 per share respectively.

We believe that there are presently 11 market makers for our common stock.
When stock is traded in the public market, characteristics of depth, liquidity
and orderliness of the market may depend upon the existence of market makers as
well as the presence of willing buyers and sellers. We do not know if these or
other market makers will continue to make a market in our common stock.
Further, the trading volume in our common stock has historically been both
sporadic and light.

As of June 4, 2003, we had an aggregate of 410 shareholders of record as
reported by our transfer agent, Liberty Transfer Co. Certain shares are held in
the street names of securities broker dealers and we do not know the number
of shareholders which may be represented by such securities broker dealer
accounts.

DIVIDEND POLICY

The payment by the Company of dividends, if any, in the future, rests
within the sole discretion of its Board of Directors. The payment of dividends
will depend upon our earnings, its capital requirements and its financial
condition, as well as other relevant factors. The Company

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has not declared any cash dividends since its inception, and has no
present intention of paying any cash dividends on its common stock in the
foreseeable future.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS AS OF
THE END OF 2002

EQUITY COMPENSATION PLAN INFORMATION

|                                                           |  |                                       |           |                                    |  |                         |      |  |  |  |        | 
|---------------------------------------------------------- |  | ------------------------------------- | --------- | ---------------------------------- |  | ----------------------- | ---- |  |  |  | ------ | 
|                                                           |  | Number of securities to be issued     |           | Weighted average exercise price of |  | Number of securities   
|                                                           |  | upon
exercise of outstanding options, |           | outstanding options, warrants and  |  | remaining available for
|                                                           |  | warrants and rights                   |           | rights                             |  | future issuance        
|Plan category                                              |  | (a)                                   |           | (b)                                |  | (c)                    
|                                                           |  |                                       |           |                                    |  |                        
|Equity compensation
plans approved by
security holders     |  |                                       | 2,290,000 | (1)                                |  |                         | 3.57 |  |  |  | 10,000 | 
|Equity compensation
plans not approved
by security holders |  |                                       | 1,338,929 | (2)                                |  |                         | 2.47 |  |  |  | - 0 -  | 
|Total                                                      |  |                                       | 3,628,929 |                                    |  |                         | 3.16 |  |  |  | 10,000 | 

(1)   This total includes shares to be issued upon exercise of outstanding
options under two equity compensation plans that have been approved by the
Companys shareholders (i.e. - the 2000 Plan and the 2002 Plan) as described
below. This total does not include shares to be issued and those which may be
issued under the Companys 2003 Plan.

2000 EMPLOYEE, DIRECTOR, CONSULTANT AND ADVISOR STOCK COMPENSATION PLAN

In July 2000, the Companys Board of Directors adopted the Companys 2000
Employee, Director, Consultant and Advisor Stock Compensation Plan (2000
Plan) which provided for the granting of options to purchase the Companys
common stock to employees, directors, consultants and advisors who had rendered
or were rendering or expected to continue to render services to the Company.
The 2000 Plan was ratified by the Companys shareholders on January 3, 2003.
Pursuant to the 2000 Plan and the option agreements issued thereunder, the
exercise price was the average market price of the Companys common stock
during the ten-day period prior to the option grant date. All of the options
granted under the 2000 Plan are exercisable for a period of seven years from
the date of grant. The 2000 Plan provided for a maximum of 1,500,000 shares of
the Companys common stock to be issued.

In 2000, 1,080,000 options were issued under the 2000 Plan, ranging in
price from $3.00 to $4.96 per share; of these 9,998 were cancelled. In 2001,
120,000 options under the 2000 Plan were issued ranging in price from $4.27 to
$5.32. All of the options granted under the 2000 Plan are subject to a vesting
schedule as set forth in each individual option agreement. In the case of
880,000 of the options issued under the 2000 Plan, one-third of the shares
vested on the grant date; another one-third of the shares vested one year from
the grant date; and the final one-third of the shares vested (or will vest) two
years from the grant date, provided the holder remained (or remains) an
officer, director, consultant or employee of the Company on the vesting dates.
In the case of 320,000 of the options issued under the 2000 Plan, one-third of
the shares vested one year from the grant date; another one-third of the shares
vested two years from the grant date; and the final one-third of the shares
vest three years from the grant date, provided the holder remains an officer,
director, consultant or employee of the Company on the vesting dates.

The total number of shares that may be purchased pursuant to options
granted under the 2000 Plan is 1,200,000 shares (this includes 10,000
additional shares which may be issued to a

9



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consultant if certain performance
conditions are met), of which all are vested except for 153,333 which are not
yet vested. There will be no additional options granted under this 2000 Plan.

2002 INCENTIVE PLAN

On January 22, 2002, the Companys Board of Directors adopted the 2002
Incentive Plan (2002 Plan). The 2002 Plan was approved by the Companys
shareholders on January 3, 2003. Under the 2002 Plan, the Company reserved
1,500,000 shares of common stock to eligible current and prospective employees,
consultants and directors. The options granted were subject to a vesting
schedule as set forth in each individual option agreement. Pursuant to the 2002
Plan and the option agreements, the exercise price was the fair market value of
the Companys common stock on the date of grant. The 2002 Plan provided for
both qualified and non-qualified options.

On January 22, 2002, pursuant to the 2002 Plan, the Company issued
1,130,000 options to its officers, directors and employees, of these, 30,000
were cancelled. Both qualified and non-qualified options were issued on January
22, 2002. The exercise prices of the options issued on January 22, 2002 were
$3.85 and $3.50. All of the options issued on January 22, 2002 are exercisable
for a period of five years from the date of grant; provided however, the shares
which may be purchased are subject to vesting as follows: one-third of the
shares vest on the first anniversary of the grant date; another one-third of
the shares vests on the second anniversary of the grant date; and the final
one-third of the shares vests on the third anniversary of the grant date.

On June 13, 2002, an Option under the 2002 Plan to purchase 100,000 shares
was granted to a then new Company Director, Gregory J. Newell at an exercise
price of $5.10 per share (see Executive Compensation). This Option has a term
of seven years, and beginning September 30, 2002, vests quarterly over a period
of 20 quarters with 5,000 shares vesting at the end of each quarter, and, in
the event Mr. Newell terminates his service to the Company after June 13, 2005
for the primary purpose of returning to full-time government service, the
balance of the option will continue to vest as provided in the Option
Agreement.

On June 27, 2002, a then new Company Director, John E. Scates was granted
an option to purchase 20,000 shares at $5.15 per share (see Executive
Compensation). This Option has a term of seven years, and beginning September
30, 2002, vests quarterly over a period of 8 quarters with 2,500 shares vesting
at the end of each quarter.

The total number of shares that may be purchased pursuant to options
granted under the 2002 Plan (as set forth above) is 1,130,000 shares, of which
349,164 are vested and 750,836 are not vested. There will be no additional
options granted under the 2002 Plan.

2003 INCENTIVE PLAN

Not included in the table, is the Companys 2003 Incentive Plan (2003
Plan) which was adopted by the Companys Board of Directors on January 2,
2003, and approved by the Companys shareholders on January 3, 2003. Under the
2003 Plan, the Company has reserved 1,500,000 shares of its common stock to
eligible current and prospective employees, consultants and directors. The 2003
Plan provides for both qualified and non-qualified options. It is
anticipated that options which may be granted under the 2003 Plan will be
subject to vesting schedules. The exercise price of options granted under the
2003 Plan will be the fair market
10

value of the Companys common stock on the
date of grant. The 2003 Plan shall continue until the earlier of: (i) its
termination by the Companys Board of Directors; or (ii) the date on which all
shares of common stock available for issuance under the 2003 Plan have been
issued and all restrictions on such shares under the terms of the 2003 Plan and
the option agreements have lapsed; or (iii) ten years from the 2003 Plans
adoption date.

In May 2003, an Option under the 2003 Plan (not included in the table) to
purchase 80,000 shares was granted to new Company Director, Joseph Movizzo, at
an exercise price of $3.00 per share (see Executive Compensation). This Option
has a term of seven years, and beginning June 30, 2003, vests quarterly over a
period of 16 quarters with 5,000 shares vesting at the end of each quarter.

INDIVIDUAL COMPENSATION ARRANGEMENTS

(2)   This total includes shares to be issued under individual compensation
arrangements not submitted for approval by the Companys shareholders. These
individual arrangements have been approved by the Companys Board of Directors,
and are described below:

In March 1999, SmartGate, L.C. granted the H.R. Williams Family Limited
Partnership (HRW Partnership), a shareholder of the Company (see Item 11.
Security Ownership of Certain Beneficial Owners and Management) and (Item 12.
Certain Relationships and Related Transactions) an option to purchase 446,804
shares at a purchase price of $1.07 per share. This Option is fully vested. The
Option will remain exercisable until the last to occur of: (i) 245 days
following either the Companys payoff of a Credit Facility guaranteed by H.R.
Williams; (ii) the date Mr. Williams guarantee of the Credit Facility is
released; or (iii) one year following the date when certain shares owned by Mr.
William or HRW Partnership are free of transfer restrictions.

In December 1999, William Hyde, a financial consultant, was granted an
option from SmartGate, L.C. for providing consulting services related to
banking relationships and business development. The Option was for the purchase
of 14,074 shares of the Companys common stock at a purchase price of $1.07 per
share. The Option was exercised in December 2002 for the purchase of 12,198
shares. The Option terminated on December 31, 2002, and accordingly, the option
shares are not reflected in the numbers under (a) in the table.

In January 2002, Hawk Associates, Inc., the Companys domestic investor
relations representative was granted an option to purchase up to 50,000 shares
of the Companys common stock at a purchase price of $7.25 per share. The
Option is exercisable for a period of seven years, and is subject to a vesting
schedule over the initial 24-month period where 6,250 shares are released and
become eligible for purchase at the end of each quarterly period during the
24-month vesting term, provided the Engagement Agreement between the Company
and Hawk Associates, Inc. has remained in effect at the end of the quarterly
period then in effect.

Pursuant to international investor relations consultant arrangement, G.M.
Capital Partners, Ltd. was granted stock options to purchase 500,000 shares of
the Companys common stock at $3.50 per share, with certain registration rights
attached, in prepayment of the consulting fee for the year. The agreed value of
the stock option and the consulting services was established at $120,000. The
stock option is considered fully vested and will be exercisable until December
31,
2005. Provided that the shares which may be purchased upon the exercise of
the stock option have not been covered by a previous Registration Statement,
the holder may, commencing on
11

January 1, 2004 demand that the Company file and
exercise reasonable efforts to effect a Registration Statement covering 250,000
shares. Additionally, provided that all 500,000 shares which may be purchased
under the stock option have not been covered by a previous Registration
Statement, commencing on July 1, 2005 the holder may demand that the Company
file and exercise reasonable efforts to effect a Registration Statement
covering the remaining 250,000 shares which may be purchased upon the exercise
of the stock option. Both Registration Statements shall be at the cost of the
Company.

In connection with the Companys private placement of 83,750 Units in July
2002 (see Recent Sales of Unregistered Securities), the placement agents were
granted placement warrants to purchase an amount of shares equal to 10% (i.e. -
8,375 warrants) of the Units placed. The per-share exercise price of shares
which may be purchased under the placement warrant shall be $5.50. The
placement warrant shall have a term of 60 months and shall not be exercisable
during the initial 13 months following issuance. Following the 13-month
non-exercisable period, holders, acting in unison, shall have the right on one
occasion to demand that the Company file and exercise reasonable efforts to
effect a Registration Statement covering the shares which may be purchased upon
the exercise of the placement warrant. Such right to demand registration shall
terminate once the Company files a Registration Statement for registration of
the shares which may be purchased upon the exercise of the placement warrant.
Additionally, following the 13-month non-exercisable period, the holders,
acting in unison, shall have the right on one occasion to have the shares which
may be purchased upon the exercise of the warrants included in any other
Registration Statement filed by the Company provided that the inclusion of such
shares does not adversely affect the registration purpose or statement and
provided that the shares have not previously been registered by the Company.

In October 2002, Mr. H. R. Williams, one of the Companys principal
shareholders, (see Item 11. Security Ownership of Certain Beneficial Owners
and Management and Item 12. Certain Relationships and Related Transactions)
agreed to guarantee an additional $150,000 of credit in addition to the
$150,000 currently outstanding. We agreed to issue 5,000 shares to H. R.
Williams Family Limited Partnership (HRW Partnership) in consideration for
this additional guarantee. We further agreed that, to the extent we borrow any
funds under the extended guarantee (i.e.  in excess of the original $150,000
line of credit we will grant to HRW Partnership an option to purchase, at $2.50
per share, one share of our common stock for each dollar borrowed. To date, no
such additional credit facility has been established and the referenced shares
and additional options have not been issued under this arrangement, and we do
not anticipate that such credit facility will be established in the future or
such additional shares issued or options ultimately granted, and accordingly,
this option is not reflected in the numbers under (a) in the table above.

On October 28, 2002, we borrowed $200,000 from a non-affiliated party. The
loan bears interest at 15% per annum, payable in advance. We issued a four-year
Warrant, together with registration rights commencing after June 28, 2004 to
purchase 200,000 shares of our common stock at an exercise of $1.00 per share.
We pledged 500,000 shares of our common stock as collateral for the loan, which
will be returned to the Company upon loan repayment or delivered to the lender
as full loan repayment in the event of default. Pursuant to the terms of the
loan, the
date for repayment of all principal and interest was extended from
February 28, 2003 to April 28, 2003, and in connection with said extension, we
issued the lender, on February 28, 2003, a
12

thirty-eight month option to
purchase 50,000 shares of common stock at an exercise price of $1.00 per share,
with registration rights as described above. We borrowed an additional $100,000
from the non-affiliated party in 2003. The terms of this additional advance are
currently being negotiated, but are believed to be substantially similar to
those of the original $200,000 borrowing (additional options, if any, that may
be issued are not included in the table). Additionally, the parties are
negotiating an extension to the due date of the entire amount borrowed.

In May 2003, the Company entered into an agreement with BarBell Group,
Inc., a Panamanian corporation, pursuant to which the Company borrowed
$250,000. The Company will file a Registration Statement pursuant to which the
borrowing will be converted into common stock at a 25% discount from the then
prevailing market price. The Company has the right but not the obligation to
sell additional registered shares under the agreement under the same pricing
schedule. Pursuant to the Agreement, the Company issued a Warrant to purchase
75,000 shares of the Companys common stock at an exercise price of $2.76 per
share, of which 25,000 shares are vested and the balance will vest only in the
event the Company exercises its right to sell additional shares of stock to
BarBell Group, Inc. under the Agreement (this option is not included in the
table).

TRANSFER AGENT

The Transfer Agent for the common stock of the Company is Liberty Transfer
Co., 274B New York Avenue, Huntington, New York 11743.

RECENT SALES OF UNREGISTERED SECURITIES

In January 2002, Hawk Associates, Inc., the Companys domestic investor
relations representative was granted an option to purchase up to 50,000 shares
of the Companys common stock at a purchase price of $7.25 per share. The
Option is exercisable for a period of seven years, and is subject to a vesting
schedule over the initial 24-month period where 6,250 shares are released and
become eligible for purchase at the end of each quarterly period during the
24-month vesting term, provided the Engagement Agreement between the Company
and Hawk Associates, Inc. has remained in effect at the end of the quarterly
period then in effect. There were no underwriters involved in the issuance.
This Option was issued pursuant to Rule 701 of the Act.

In January 2002, the Company, pursuant to its 2002 Plan, which provides
for both qualified and non-qualified options, issued options to purchase a
total of 1,010,000 shares to a total of 17 persons consisting of officers,
directors, consultants or employees. The exercise price for 700,000 of the
shares is $3.85 per share, and for the remaining 310,000 shares is $3.50 per
share (of these options to purchase, 30,000 shares were cancelled). There were
no underwriters involved in the issuance. The Company issued the options under
the 2002 Plan pursuant to Rule 701 of the Act.

From January 2002 through April 2002, the Company sold 412,325 shares of
its common stock. Sales were limited to non-U.S. investors and there were no
underwriters involved in the sale. The shares were sold to 15 purchasers who
are suitable and sophisticated non-U.S. residents. The shares were sold for
cash at $3.50 per share at an aggregate offering price of $1,443,138. Aggregate
finders fees were paid of approximately $144,314 (with aggregate offering
expenses of approximately $43,294). The Company conducted the offering pursuant
to

13



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an exemption from registration for limited offerings provided by Rule 506
of Regulation D under the Act.

In February 2002, the Company issued 435,000 shares of its common stock as
part of the closing of an Agreement of Merger and Plan of Reorganization by and
among the Company, SmartGate/RadioMetrix Acquisition Corp. and Radio Metrix
Inc. (Merger). Pursuant to the Merger, additional shares were required to be
issued upon the satisfaction of certain performance criteria (the Earn-Out
Shares). All potential Earn-Out Shares were issued in April 2003, resulting in
an additional 3,250,000 shares being issued under the Merger. There were no
underwriters involved in the issuance. As the issuance of the shares to the
five RadioMetrix shareholders, pursuant to the Merger represented a transaction
by an issuer (i.e. - the Company) not involving any public offering, the shares
were issued pursuant to the private offering exemption set forth in Section
4(2) of the Act (see Item 7 Certain Relations and Related Transactions).

In May 2002 pursuant to an international investor relations consultant
arrangement with G.M. Capital Partners, Ltd., the Company issued a stock option
to G.M. Capital Partners, Ltd., which was amended and restated in November 2002
for the purchase of 500,000 shares at $3.50 per share. The stock option is
fully vested and exercisable until December 31, 2005. Provided that the shares
which may be purchased upon the exercise of the stock option have not been
covered by a previous Registration Statement, the holder may, commencing on
January 1, 2004 demand that the Company file and exercise reasonable efforts to
effect a Registration Statement covering 250,000 shares. Additionally, provided
that all 500,000 shares which may be purchased under the stock option have not
been covered by a previous Registration Statement, commencing on July 1, 2005
the holder may demand that the Company file and exercise reasonable efforts to
effect a Registration Statement covering the remaining 250,000 shares which may
be purchased upon the exercise of the stock option. Both Registration
Statements shall be at the cost of the Company. This Option was issued pursuant
to Rule 701 of the Act. In April 2003, the Company issued 500,000 shares of its
authorized but unissued common stock to GM Capital Partners, Ltd. in
recognition of its support in the Companys past and current access to capital
and matters related thereto. There were no underwriters involved in the
issuance. As the issuance represented a transaction by an issuer
(i.e. - the
Company) not involving any public offering, the shares were issued pursuant to
the private offering exemption set forth in Section 4(2) of the Act.

In June 2002, the Company, pursuant to its 2002 Plan, issued an option to
purchase 100,000 shares to Gregory Newell, a director of the Company. The
exercise price is $5.10 per share. There were no underwriters involved in the
issuance. This option was issued pursuant to Rule 701 of the Act.

In June 2002, the Company, pursuant to its 2002 Plan, issued an option to
purchase 20,000 shares to John E. Scates, a director of the Company. The
exercise price is $5.15 per share. There were no underwriters involved in the
issuance. This option was issued pursuant to Rule 701 of the Act.

From July 2002 through the date hereof, the Company sold 83,750 Units at
$4.00 per Unit, each Unit consists of one of the Companys common stock and one
Warrant to purchase one additional share. The exercise price of each Warrant is
$5.00 per share until August 15, 2003 (the Initial Warrant Year). From August
16, 2003 to August 15, 2004 (the Second Warrant Year) the exercise price is
the greater of: (i) the average closing trading price for the Companys

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common stock during the Initial Warrant Year, or (ii) $8.00 per share. The
Warrants are redeemable at the option of the Company at $0.10 per share upon 30
days notice to the holder. In order for the Company to exercise its right to
redeem: during the Initial Warrant Year the Companys common stock must have
traded for 20 consecutive trading days at a closing trading price above $10.00
per share, or during the Second Warrant Year the Companys common stock must
have traded for 20 consecutive trading days at a closing trading price above
$16.00 per share. Any Warrants not timely exercised or redeemed automatically
expire on August 15, 2004.

Shares acquired upon the exercise of the Warrant will not be registered
with the SEC, unless otherwise determined by the Company in its sole
discretion, and accordingly, will bear a restrictive legend as to transfer in
accordance with Rule 144 of the Act. In the event of a stock dividend or stock
split resulting in the number of outstanding of shares of the Company being
changed, the applicable exercise price and number of shares, as provided in the
Warrants, shall be proportionately adjusted. In the event of the merger,
consolidation, or combination of the Company into another company or entity
which survives that transaction, the shares which may be purchased under the
Warrants shall be converted into an equivalent number of shares of the
surviving entity. In the event of the sale of all or substantially all of the
assets of the Company, the shares which may be purchased upon the exercise of
the Warrants shall be treated in any distribution as if said shares are issued
and outstanding, with the exception that the exercise price under the Warrants
shall be deducted from the amount to be distributed on a per-share basis. The
holders of Warrants shall not be entitled to vote or exercise other rights of
stockholders unless and until the Warrants are exercised and the underlying
shares issued. In the event of redemption by the Company, each holder shall be
provided 30 days prior written notice of the Companys intent to redeem, during
which notice period the holder of the Warrant shall be entitled to exercise the
Warrant.

Sales were limited to non-US investors and there were no underwriters
involved in the sale of the Units. To date, the Units were sold to one
purchaser who is a suitable and sophisticated non-U.S. resident. The Units were
sold for cash at $4.00 per Unit (initially $5.00 per Unit and subsequently
reduced to $4.00) at an aggregate offering price to date of $335,000 and
aggregate finders fees of $33,500, with aggregate offering expenses of
$10,050. In addition, finders were granted placement warrants to purchase an
amount of shares equal to 10% of the Units placed (i.e. - 8,375 warrants). The
per-share exercise price of shares which may be purchased under the placement
warrant shall be $5.50. The placement warrant shall have a term of 60 months
and shall not be exercisable during the initial 13 months following issuance.
Following the 13-month non-exercisable period, holders, acting in unison, shall
have the right on one occasion to demand that the Company file and exercise
reasonable efforts to effect a Registration Statement covering the shares which
may be purchased upon the exercise of the placement warrant. Such right to
demand registration shall terminate once the Company files a Registration
Statement for registration of the shares which may be purchased upon the
exercise of the placement warrant. Additionally, following the 13-month
non-exercisable period, the holders, acting in unison, shall have the right on
one occasion to have the shares which may be purchased upon the exercise of the
warrants included in any other Registration Statement filed by the Company
provided that the inclusion of such shares does not adversely affect the
registration purpose or statement and provided that the shares have not
previously been registered by the Company.

15



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The Company conducted this Unit Offering pursuant to an exemption from
registration for limited offerings provided by Rule 506 of Regulation D under
the Act. No additional Units will be sold under this Offering.

From October 2002 through December 31, 2002, the Company sold 93,833
shares of its common stock, pursuant to an exemption from registration provided
by Regulation S under the Act. Sales were limited to non-U.S. investors and
there were no underwriters involved in the sale. The shares were sold to six
purchasers who are suitable and sophisticated non-U.S. residents. The shares
were sold for cash at $3.00 per share at an aggregate offering price of
$281,499. Aggregate finders fees were paid of approximately $28,150 (with
aggregate offering expenses of approximately $8,445).

In October 2002, Mr. H. R. Williams, one of the Companys principal
shareholders, (see Item 11. Security Ownership of Certain Beneficial Owners
and Management and Item 12. Certain Relationships and Related Transactions)
agreed to guarantee an additional $150,000 of credit in addition to the
$150,000 currently outstanding. We agreed to issue 5,000 shares to H. R.
Williams Family Limited Partnership (HRW Partnership) in consideration for
this additional guarantee. We further agreed that, to the extent we borrow any
funds under the extended guarantee (i.e. - in excess of the original $150,000
line of credit we will grant to HRW Partnership an option to purchase, at $2.50
per share, one share of our common stock for each dollar borrowed. To date, no
such additional credit facility has been established and the referenced shares
and additional options have not been issued under this arrangement, and we do
not anticipate that such credit facility will be established in the future or
such additional shares issued or options ultimately granted. As the proposed
issuance represents a transaction by an issuer (i.e. - the Company) not
involving any public offering, the shares and option would be issued pursuant
to the private offering exemption set forth in Section 4(2) of the Act.

On October 28, 2002, we borrowed $200,000 from a non-affiliated party. The
loan bears interest at 15% per annum, payable in advance. We issued a four-year
Warrant, together with registration rights commencing after June 28, 2004 to
purchase 200,000 shares of our common stock at an exercise price of $1.00 per
share. We pledged 500,000 shares of our common stock as collateral for the
loan, which will be returned to the Company upon loan repayment or delivered to
the lender as full loan repayment in the event of default. Pursuant to the
terms of the loan, the date for repayment of all principal and interest was
extended from February 28, 2003 to April 28, 2003, and in connection with said
extension, we issued the lender, on February 28, 2003, a thirty-eight month
option to purchase 50,000 shares of common stock at an exercise price of $1.00
per share, with registration rights as described above. There were no
underwriters involved in the issuance. As the issuance represented a
transaction by an issuer (i.e. - the Company) not involving any public
offering, the shares and option were issued pursuant to the private offering
exemption set forth in Section 4(2) of the Act. We borrowed an additional
$100,000 from the non-affiliated party in 2003. The terms of this additional
advance are currently being negotiated, but are believed to be substantially
similar to those of the original $200,000 borrowing. Additionally, the parties
are negotiating an extension to the due date of the entire amount borrowed.

In January 2003, pursuant to the exercise of an option granted in December
1999, the Company issued to one purchaser, 12,198 shares of the Companys
common stock for an aggregate exercise price of $13,000. There were no
underwriters involved in the sale. As the issuance represented a transaction by
an issuer (i.e. - the Company) not involving any public

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offering, the shares were issued pursuant to the private offering
exemption set forth in Section 4(2) of the Act.

From January 2003 to March 31, 2003, the Company sold 68,000 shares of its
common stock, pursuant to an exemption from registration provided by Regulation
S under the Act. Sales were limited to non-U.S. investors and there were no
underwriters involved in the sale. The shares were sold to seven purchasers who
are suitable and sophisticated non-U.S. residents. The shares were sold for
cash at $3 per share at an aggregate offering price of $204,000. Aggregate
finders fees were paid of approximately $20,400 (with aggregate offering
expenses of approximately $6,120).

In April 2003, the Company entered into an agreement with Mr. Alan
Feldman, a non-affiliated party. Under this Agreement, Mr. Feldman purchased
50,000 shares of the Companys authorized but unissued common stock at $3.00
per share. The Company has the right, but not the obligation, to sell
additional shares under the Agreement up to a maximum of an additional
$1,050,000 with such sales in monthly increments at a purchase price equal to
50% of the then current market price for the Companys common stock, but not
less than $3.00 per share. There were no underwriters involved in the sale. The
sale was made pursuant to an exemption from registration provided by Regulation
S under the Act.

In May 2003, the Company issued 14,285 shares of its authorized but
unissued common stock to Crescent Fund, Inc., pursuant to a Consulting
Agreement. The Company may issue additional shares of its common stock to
Crescent Fund, Inc. under this Consulting Agreement. There were no underwriters
involved in the issuance. As the issuance represented a transaction by an
issuer (i.e. - the Company) not involving any public offering, the shares were
issued pursuant to the private offering exemption set forth in Section 4(2) of
the Act.

In May 2003, the Company entered into an agreement with BarBell Group,
Inc., a Panamanian corporation, pursuant to which the Company borrowed
$250,000. The Company intends to file a Registration Statement. The borrowing
may be converted into common stock at a 25% discount from the then prevailing
market price. The Company has the right but not the obligation to sell
additional registered shares under the Agreement at a 25% discount from the
then prevailing market price to a maximum of an additional $750,000. Pursuant
to the Agreement, the Company issued a Warrant to purchase 75,000 shares of the
Companys common stock at an exercise price of $2.76 per share, of which 25,000
shares are vested and the balance will vest only in the event the Company
exercises its right to sell additional shares of registered stock under the
Agreement. There were no underwriters involved in the issuance. The Company
issued an aggregate of 6,000 shares to Crescent Fund, Inc. and Capstone
Partners, LP, which served as co-finders in the transaction. As the issuance
represented a transaction by an issuer (i.e. - the Company) not involving any
public offering, the shares were issued pursuant to the private offering
exemption set forth in Section 4(2) of the Act.

In May 2003, the Company granted, pursuant to its 2003 Plan, options to
purchase 80,000 shares to Joseph Movizzo, a director of the Company. The
exercise price is $3.00 per share. The option vests at the rate of 5,000 shares
per quarter. There were no underwriters involved in the issuance. As the
issuance represented a transaction by an issuer (i.e. - the Company) not
involving any public offering, the option was issued pursuant to the private
offering exemption set forth in Section 4(2) of the Act.

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Rule 701 allows companies not subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934 to sell securities
to their employees, directors, officers or consultants and advisors under
certain compensatory benefit plans or written agreements relating to
compensation. Rule 701 permits non-affiliates to sell their shares without
having to comply with the volume, holding periods or other limitations of Rule
144 and permits affiliates to sell their shares without having to comply with
the holding period limitation of Rule 144, in each case beginning 90 days after
we become a reporting Company.

ITEM 6 MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

The following discussion and analysis of our financial condition and plan
of operations should be read in conjunction with our consolidated financial
statements and related notes appearing elsewhere herein. This discussion and
analysis contains forward-looking statements including information about
possible or assumed results of our financial conditions, operations, plans,
objectives and performance that involve risk, uncertainties and assumptions.
The actual results may differ materially from those anticipated in such
forward-looking statements. For example, when we indicate that we expect to
increase our product sales and potentially establish additional license
relationships, these are forward-looking statements. The words expect,
anticipate, estimate or similar expressions are also used to indicate
forward-looking statements.

LIMITED OPERATING HISTORY; BACKGROUND OF OUR COMPANY

We are a development-stage company, and we expect to continue the
commercialization of our InvisaShield technology. For the twelve months ended
December 31, 2002, we had revenue from product sales of $257,118 primarily
representing sales of our product for powered parking gates and deferred
license revenue in the amount of $300,000 related to potential future sales of
our product designed for industrial doors. In addition to limited revenue,
these sales have provided field-testing of the reliability and market
acceptability of our technology and safety product, together with relationships
with customers, dealers, distributors and manufacturers.

The financing for our development activities to date has come from our
limited sales, the sale of common stock, short-term financing, and a license
payment. We expect to increase our product sales and potentially establish
additional license relationships. Further, we expect to complete the
development of additional safety and security products and bring them to
market.

We expect to fund our future development activities and operations largely
from the sale of common stock until such time that funds provided by operations
are sufficient to cover these activities.

Since we have had a limited history of operations, we anticipate that our
quarterly results of operations will fluctuate significantly for the
foreseeable future. We believe that period-to-period comparisons of our
operating results should not be relied upon as predictive of future
performance. Our prospects must be considered in light of the risks, expenses
and difficulties encountered by companies at an early stage of development,
particularly companies commercializing new and evolving technologies such as
InvisaShield.

On February 9, 2000 in connection with our acquisition of SmartGate, L.C.,
we acquired the license for the InvisaShield technology for safety products in
the powered closure industry. On February 26, 2002 we acquired Radio Metrix
Inc., the owner of the InvisaShield technology and patents from affiliated
parties. This acquisition resulted in our expanding our business to include the
development of presence sensing products for security, government and all other

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markets. At that time, we also changed our name from SmartGate Inc. to
Invisa, Inc. (see Item 12 Certain Relationships and Related Transactions).

LIQUIDITY AND CAPITAL RESOURCES

As previously mentioned, since inception, we have financed our operations
largely from the sale of common stock. From inception through December 31, 2002
we raised cash of $7,023,467 net of issuance costs, through private placements
of common stock financings. At December 31, 2002 we had cash and cash
equivalents totaling $98,410.

Since our inception through December 31, 2002 we have incurred
approximately $2,266,000 of direct research and development expenses. These
research and development costs were directed principally toward our
InvisaShield technology and safety products. Management estimates that sixty
(60%) percent was expended toward the development of our core presence sensing
technology, twenty (20%) percent was expended in the miniaturization of our
circuitry, fifteen (15%) percent was expended in the design and development of
safety products, and five (5%) percent was expended in the design and
development of additional products for the security sector of our business.

On February 9, 2000, we purchased SmartGate, L.C. The total purchase price
for SmartGate, L.C. was the issuance of 7,743,558 shares of Invisa, Inc. common
stock to the SmartGate, L.C. members, which represented approximately 74% of
our outstanding common stock at that date (see Item 12 Certain Relationships
and Related Transactions). SmartGate, L.C. was the acquirer for accounting
purposes and, as such, our operations reflect the operations of SmartGate, L.C.
since its inception.

On February 26, 2002 we acquired Radio Metrix Inc. (the Merger),
principally from affiliated parties, see Item 12 Certain Relationships and
Related Party Transactions for a discussion of the transaction. We paid the
following purchase price for RadioMetrix: (i) 3,685,000 shares of restricted
common stock; (ii) $1,300,000 payable by two promissory notes consisting of:
(a) a $500,000 promissory note, payable at 10% interest per annum until August
25, 2003, at which time the interest rate becomes 15%. This promissory note is
due in one installment on February 25, 2006; and (b) an $800,000 promissory
note payable at 15% interest due monthly, and all principal due in one
installment on February 25, 2004. Both promissory notes may be prepaid without
penalty. Neither promissory note is collateralized; and (iii) a 7% royalty on
all revenue earned from the sale of products based upon the RadioMetrix
technology other than safety products which constituted the Companys core
business prior to the Merger. The royalty may be terminated by the Company for
a one-time payment based upon appraisal. Additionally, Note B to the financial
statements details obligations of RadioMetrix, including approximately $175,000
in accrued compensation payable to stockholders of RadioMetrix that remained in
place and was assumed by the Company at the acquisition of RadioMetrix. We
believe the acquisition of RadioMetrix will affect our results of operations in
a number of respects including: (i) the potential business opportunity
represented by the assets acquired from RadioMetrix may result in additional
sales revenue in future periods; (ii) the 7% royalty required to be paid will
affect our results of operations as an expense; (iii) research and development
expenses which may be incurred in connection with the RadioMetrix technology
will affect our results of operations; (iv) we will recognize as an expense,
the amortization of the patent included in the purchase over an approximately
ten-year period (see Note B to our financial statements); and (v) we will
comply with SFAS 144, Accounting for the Impairment or

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Disposal of Long-Lived Assets and accordingly, in the event of an
impairment in the value of the assets acquired from RadioMetrix, we would
recognize an expense.

At December 31, 2002, we had a $150,000 bank line of credit, which was
personally guaranteed by a shareholder, Mr. H.R. Williams (see Item 12 Certain
Relationships and Related Transactions). The line of credit required the
payment of interest monthly at prime plus 1%, which was 5.75% on December 31,
2002. The line of credit was renewed on July 15, 2002 and matures on July 15,
2003. The current interest rate is prime plus 1%, which, at July 15, 2002, was
5.75%.

On October 28, 2002, we borrowed $200,000 from a non-affiliated party. The
loan bears interest at 15% per annum, payable in advance. We issued a four-year
Warrant, together with registration rights commencing after June 28, 2004 to
purchase 200,000 shares of our common stock at an exercise price of $1.00 per
share. We pledged 500,000 shares of our common stock as collateral for the
loan, which will be returned to the Company upon loan repayment or delivered to
the lender as full loan repayment in the event of default. Pursuant to the
terms of the loan, the date for repayment of all principal and interest was
extended from February 28, 2003 to April 28, 2003, and in connection with said
extension, we issued the lender on February 28, 2003, a four-year option to
purchase 50,000 shares of our common stock at an exercise price of $1.00 per
share, with registration rights as described above. We borrowed an additional
$100,000 from the non-affiliated party in 2003. The terms of this additional
advance are currently being negotiated, but are believed to be substantially
similar to those of the original $200,000 borrowing. Additionally, the parties
are negotiating an extension to the due date of the entire amount borrowed.

In April 2003, the Company entered into an agreement with Mr. Alan
Feldman, a non-affiliated party. Under this Agreement, Mr. Feldman purchased
50,000 shares of the Companys authorized but unissued common stock at $3.00
per share. The Company has the right, but not the obligation, to sell
additional shares under the Agreement up to a maximum of an additional
$1,050,000 with such sales in monthly increments at a purchase price equal to
50% of the then current market price for the Companys common stock, but not
less than $3.00 per share.

In May 2003, the Company entered into an agreement with BarBell Group,
Inc., a Panamanian corporation, pursuant to which the Company borrowed
$250,000. The Company intends to file a Registration Statement. The borrowing
may be converted into common stock at a 25% discount from the then prevailing
market price. The Company has the right but not the obligation to sell
additional registered shares under the Agreement at a 25% discount from the
then prevailing market price to a maximum of an additional $750,000. Pursuant
to the Agreement, the Company issued a Warrant to purchase 75,000 shares of the
Companys common stock at an exercise price of $2.76 per share, of which 25,000
shares are vested and the balance will vest only in the event the Company
exercises its right to sell additional shares of registered stock under the
Agreement. The Company issued an aggregate of 6,000 shares to Crescent Fund,
Inc. and Capstone Partners, LP, which served as co-finders in the transaction.

We have incurred significant net losses and negative cash flows from
operations since our inception. As of December 31, 2002 we had an accumulated
deficit of approximately $8,963,815 and a working capital deficit of $835,389.

We anticipate that cash used in product development and operations,
especially in the marketing, production and sale of our products, will increase
significantly in the future.

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In November 2002, we filed a listing application with the American Stock
Exchange (AMEX). We presently do not meet all of the AMEX listing criteria,
including the AMEX financial listing criteria. To facilitate the proposed AMEX
listing application and to provide additional growth and operating capital, the
Company anticipates seeking approximately $3,000,000 in private equity which,
if completed, could result in the issuance of shares of Common or Preferred
Stock.

The Company will be dependent upon our existing cash and cash equivalents,
together with anticipated net proceeds from private placements of common stock
and potential license fees, and sales of our products to finance our planned
operations through at least the next 12 months. Accordingly, we plan to access
additional cash from a variety of potential sources, which may include: public
equity financing, private equity financing, license fees, grants, and public or
private debt. The Report of Independent Certified Public Accountants included
elsewhere in this Form 10-SB includes a going concern modification.

Additional capital may not be available when required or on favorable
terms. If adequate funds are not available, we may be required to significantly
reduce or refocus our operations or to obtain funds through arrangements that
may require us to relinquish rights to certain or potential markets, either of
which could have a material adverse effect on our business, financial condition
and results of operations. To the extent that additional capital is raised
through the sale of equity or convertible debt securities, the issuance of such
securities would result in ownership dilution to our existing stockholders.

NEW ACCOUNTING PRONOUNCEMENTS

In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. This statement addresses financial
accounting and reporting for the impairment or disposal of long-lived assets
and supersedes FASB Statement No. 121, Accounting for the Impairment or
Disposal of Long-Lived Assets. The provisions of the statement are effective
for the year beginning January 1, 2002. The adoption of this standard did not
have a material impact on the Companys financial statements.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
CompensationTransition and Disclosurean amendment of FASB Statement No.
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
Statement 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
transition guidance and annual disclosure provisions of this statement are
effective for fiscal years ending after December 15, 2002, with earlier
application permitted in certain circumstances. The interim disclosure
provisions are effective for financial reports containing financial statements
for interim periods beginning after December 15, 2002. The Company does not
currently expect to adopt the fair value based method of accounting for
stock-based employee compensation.

FOR THE YEAR ENDED DECEMBER 31, 2002 COMPARED TO THE YEAR ENDED DECEMBER 31,
2001

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Net
Sales and Gross Profit - During the years ended December 31, 2001 and
2002, net sales totaled $167,111 and $257,118 respectively. The increase was
due to the increase in sales of safety products for powered parking gates. The
Companys sales to date have been limited. We had a gross profit of $74,345 for
the year ended December 31, 2001 and $81,218 for the year ended December 31,
2002.

Research and Development Expenses  During the years ended December 31,
2001 and 2002, research and development expenses totaled $452,482 and $660,844,
respectively. The increase of $208,362 was due principally to new product
applications. Two additional technicians were hired and the salary increased
for an engineer manager resulting in increases in salaries and wages and
payroll taxes; rent expense increased also as a result of adding facility
space.

Selling, General and Administrative Expenses  During the years ended
December 31, 2001 and 2002, selling, general and administrative expenses
totaled $2,315,055 and $2,813,897, respectively. The increase of $498,842 was
attributable principally to the following categories: increases were due to
patent amortization as a result of the patent acquisition at the end of
February 2002; advertising and marketing in connection with demonstrating
products at six tradeshows and hiring an outside advertising agency; salaries
and wages and payroll taxes related to the addition of two officers, executive
assistant, sales staff and other staff promotions; insurance expense, and
expanded office space and other expenses. Decreases were due to a lower level
of officer bonuses and related payroll taxes; and professional consulting fees.

Interest
Expense - Net - During the years ended December 31, 2001 and
December 31, 2002 net interest expense totaled $9,708 and $187,
663
respectively. The increase was due principally to additional interest expense
in connection with the RMI acquisition notes payable and the borrowings
incurred in October 2002.

CRITICAL ACCOUNTING ESTIMATES

Patents
and Trademarks - The recorded cost of the patent is based on the
fair value of consideration paid for it. The ultimate consideration was
originally based on a valuation performed by a third party and approved by
those Board Members with no affiliation with the seller. The patent costs are
amortized over the remaining life of the patent at the date of its acquisition.
The fair value of the patent is reviewed for recoverability whenever events or
changes in circumstances indicate that its recorded value may not be
recoverable. NO impairment has been recognized through December 31, 2002.

ITEM 7 FINANCIAL STATEMENTS

The Financial Statements of the Company and the accompanying notes
thereto, and the independent auditors report are included as part of this Form
10-KSB and immediately follow the Signatures and Certifications Pages of this
Form 10-KSB.

ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

There have been no disagreements with our independent accountants over any
item involving the Companys financial statements. Our independent accountants
are Grant Thornton LLP, 101 East Kennedy Blvd, Tampa, Florida 33602-5154.

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PART III



ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT


The Companys directors are elected at the annual meeting of stockholders
and hold office until their successors are elected and qualified. The Companys
officers are appointed annually by the Board of Directors and serve at the
pleasure of the Board. There are no family relationships between any of the
officers or directors of the Company.

The directors, executive officers, and significant employees of the
Company, are as follows:

|                    |  |     |    |                       |  |                                              
|------------------- |  | --- | -- | --------------------- |  | ---------------------------------------------
|                    |  |     |    |                       |  | Positions and Offices Presently              
|Name                |  | Age |    | Held with the Company
|                    |  |     |    |                      
|Stephen A. Michael  |  |     | 55 |                       |  | Director, President                          
|Edmund C. King      |  |     | 68 |                       |  | Director, Chief Financial Officer, Treasurer 
|Samuel S. Duffey    |  |     | 57 |                       |  | Director                                     
|Robert Knight       |  |     | 46 |                       |  | Director                                     
|Gregory J. Newell   |  |     | 53 |                       |  | Director                                     
|John E. Scates      |  |     | 46 |                       |  | Director                                     
|Joseph F. Movizzo   |  |     | 59 |                       |  | Director                                     
|William W. Dolan    |  |     | 55 |                       |  | Secretary, General Counsel & Industry Liaison
|Carl A. Parks       |  |     | 44 |                       |  | Vice President of Operations                 
|Robert T. Fergusson |  |     | 57 |                       |  | Engineering Manager                          
|Jeffrey L. Jones    |  |     | 46 |                       |  | Sales and Market Development Manager         

There are no family relationships among any directors, executive officers
or significant employees.

STEPHEN A. MICHAEL has served as our President and Director since February
9, 2000. Mr. Michael attended the School of Engineering at Ohio State
University. Upon returning from military service in Vietnam, he attended the
Schools of Business/Marketing at both Ohio State University and Franklin
University. Mr. Michael has also attended the University of Wisconsin School of
Engineering to acquire certification in the area of High Energy Surge
Suppression and New York University School of Engineering for Advanced Studies
in FRP (Fiber Reinforced Plastic) and Composites Engineering. Mr. Michael has
served as President and Director of SmartGate, L.C. since January 1997.
SmartGate, L.C. became one of our subsidiaries in February 2000. Additionally,
he has served as President and Director of SmartPlug, Inc. since January 1997
and President and Director of FlashPoint International, Inc. since October
2001. Mr. Michael has devoted a significant portion of his career to developing
functional products, including participating in the development and marketing
of the Panasonic Auto Sound-Car dealer system, the Fuzz Buster and the Sears
KingFisher Boat.

EDMUND C. KING has served as our Chief Financial Officer and Director
since February 9, 2000. Mr. King has had a distinguished career in accounting
and financial assistance to various industries. Until October 1, 1991, Mr. King
was a partner in Ernst & Young, an international accounting and consulting
firm. While at Ernst & Young, Mr. King was that firms Southern California
senior healthcare partner and prior to that directed the Southern California
healthcare practice for Arthur Young & Company, one of the predecessor firms of
Ernst & Young. During his 30 years with Ernst & Young, Mr. King counseled
clients in structuring acquisitions and divestitures; advised on the
development of strategic plans, resulting in implementation of successful
business strategies; directed the preparation of feasibility studies; assisted
with

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operational and financial restructuring; directed and supervised audits of
client financial statements; and provided expert witness testimony and
technical SEC consultation. Clients included leading corporations in various
industries with primary emphasis in health care. Mr. King assisted with various
financing transactions ranging in size from $5 million to over $800 million.
These transactions included public equity offerings, sale/leaseback and debt
placements. Commencing in 1999, Mr. King became a financial consultant to
SmartGate, L.C. that we acquired in February 2000. Mr. King has served as Chief
Financial Officer and Director of SmartPlug, Inc. since November 2000 and Chief
Financial Officer and Director of FlashPoint International, Inc. since October
2001. From January 1992, Mr. King has been a general partner of Trouver, an
investment banking and financial consulting partnership. Trouver has arranged
approximately one billion dollars in financing for various healthcare clients.
Mr. King is also a member of the Board of Directors of LTC Properties, Inc., a
NYSE listed real estate investment trust.

Mr. King is a graduate of Brigham Young University, having served on the
National Advisory Council of that schools Marriott School of Management, and
has completed a Harvard University management course sponsored by Ernst &
Young. Mr. King also has served as Chairman of the HFMAs Long-Term Care
Committee (Los Angeles Chapter) and is a past member of the National
Association of Corporate Directors. He holds CPA certificates in the states of
California and Utah and is a member of the American Institute of Certified
Public Accountants. Mr. King has lectured and written extensively on healthcare
industry financial matters.

SAMUEL S. DUFFEY has served as a Director since February 9, 2000. Mr.
Duffey has been named the Chairman (non-executive) of the Board of Directors
and as such, presides at meetings of directors. Mr. Duffey is an attorney and
consultant providing business and marketing support to various client companies
regarding domestic and international marketing and finance. For more than the
last five years, Mr. Duffey has served as President and Director of Duffey &
Dolan, P.A., a Sarasota, Florida consulting and legal firm. Mr. Duffey
graduated from Drake University with a degree in Business
Administration-Marketing and Drake University Law School with a Juris Doctor
Degree with honors. Mr. Duffey a prior staff trial attorney with the U.S.
Securities and Exchange Commission. Mr. Duffey has served as Chairman and
Director of SmartGate, L.C. since January 1997. SmartGate, L.C. became one of
our subsidiaries in February 2000. Additionally, he has served as Chairman and
Director of SmartPlug, Inc. since January 1997 and Chairman and Director of
FlashPoint International, Inc. since October 2001. Mr. Duffey has practiced
business law for more than 20 years assisting businesses in all aspects of
growth and has assisted numerous companies in conducting initial public
offerings (IPO).

ROBERT KNIGHT has served as a Director of the Company since July 1998. Mr.
Knight served as President and Secretary-Treasurer of the Company from 1998
until February 2000. Mr. Knight serves as Treasurer and Director of Advertain
On-Line Inc. a position he has held since March 14, 2000. From September 1,
1998 to June 23, 1999 he served as President, Secretary - Treasurer and
Director of Silverwing Systems Corporation. From September 1, 1998 Mr. Knight
served as President and Director of Centaur BioResearch, Inc. From November
1997 Mr. Knight has served as President and Director of Peregrine Mineral
Resources Group, Inc. From June 24, 1997 to February 1, 1999, he was the
President and Director of ANM Holdings Corporation. From March 24, 1997 to July
1, 1998, Mr. Knight was President and director of AFD Capital Group. From
November 12, 1996 to February 1, 1999, Mr. Knight was President and director of

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Biologistics, Inc. In November 1995 to September 1996 Mr. Knight was
President and Director of BioQuest, Inc. (formerly Victoria Enterprises, Inc.).
At the completion of the merger between Victoria Enterprises, Inc. and
BioQuest, Inc., Mr. Knight resigned as President, Secretary and Treasury but
remained a director until May 1998. Additionally, Mr. Knight has served as a
Director of FlashPoint International, Inc. since October 2001. Mr. Knight has
15 years of experience in the public company arena and corporate finance.

Mr. Knight completed a Masters in Business Administration, December 31,
1998 from Herriot-Watt University.

GREGORY J. NEWELL

Ambassador Gregory J. Newell has served as a Director of the Company since
June 13, 2002. Ambassador Newell is an international business development
strategist and former: U.S. Ambassador; U. S. Assistant Secretary of State; and
White House Commissioned Officer, having served under four U.S. Presidents.
From 1992 to the present, Ambassador Newell has served as President of
International Commerce Development Corporation in Provo, Utah, an international
business-consulting firm. From 1989 to 1991, Ambassador Newell served as
President and International Development Strategist of Dow, Lohnes & Albertson
International, a subsidiary of one of Washington, D.C.s oldest and largest law
firms. Ambassador Newell was U.S. Ambassador to Sweden from 1985 to 1989. Prior
to that he was U.S. Assistant Secretary of State for International
Organizational Affairs serving as the senior U.S. government official
responsible for the formulation and execution of U.S. multilateral foreign
policy in 96 international organizations including the United Nations, where he
served as senior advisor to the 37th, 38th, 39th and 40th United Nations
General Assemblies. He served as Director of Presidential Appointments and
Scheduling and Special Assistant to President Ronald Reagan and Staff Assistant
to President Gerald R. Ford. Ambassador Newell has also served on the boards of
the Landmark Legal Foundation, Sutherland Institute and the Swedish-American
Chamber of Commerce.

JOHN E. SCATES, a garage door industry engineer and consultant, was
appointed to the Companys Board of Directors on June 27, 2002. From June 1997
to the present, Mr. Scates has been President and Owner of Scates, Inc., a
product design and failure analysis consultancy in Carrollton, Texas. From May
1993 to May 1997, Mr. Scates served as Manager of Research and Development for
Windsor Door, Little Rock, Arkansas. From February 1985 to May 1993, Mr. Scates
served as Manager of Structures at Overhead Door R & D/engineering, Dallas,
Texas. Mr. Scates earned a BS Degree in Mechanical Engineering, Summa Cum Laude
from Texas A & M University in 1979. Mr. Scates is licensed as a Professional
Engineer in Texas, Florida and North Carolina.

JOSEPH F. MOVIZZO joined the Companys Board of Directors in May 2003.
From 1965 to 1998, Mr. Movizzo served in various positions at the IBM
Corporation. His positions included serving as a General Manager of IBM Global
Services Consulting Group, which he helped form, and creating and managing IBM
China/Hong Kong Corporation, which integrated the former IBM Japan/China
operations and the IBM Hong Kong subsidiary. From March 1998 to the present,
Mr. Movizzo has been self-employed primarily as a business consultant in
textiles, financial services, data services and government. From May 2000 to
the present, Mr. Movizzo has served as an independent Director of Managesoft
Corporation Ltd, Melbourne, Australia.

25



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He was elected non-executive Chairman of that entity in November 2002. Mr.
Movizzo holds BS and MS degrees in Nuclear Engineering from the University of
Wisconsin  Madison.

WILLIAM W. DOLAN has served as secretary, general counsel and industry
liaison of the Company since November 2000. Mr. Dolan is an attorney and a
member of the Florida Bar. For more than the last five years, Mr. Dolan has
been Vice President of Duffey & Dolan, P.A., a consulting and legal firm. Mr.
Dolan graduated from the University of Florida law school with honors and holds
a Masters Degree in social work as well as a Bachelor of Arts Degree in
political science from the St. Louis University. In his 12 years of corporate
specialization, Mr. Dolan has assisted numerous clients in many phases of
business law, including corporate organization, mergers and acquisitions, and
private and public offerings.

SIGNIFICANT EMPLOYEES

CARL A. PARKS has served as the Companys Vice President of Operations
since August 2001. Mr. Parks has had over 20 years experience in many phases of
electronic manufacturing including assembly methods, techniques, hiring
personnel, defining processes and selecting equipment. Prior to joining the
Company, in 2000 and 2001 Mr. Parks served as a Customer Development Manager at
ProTek Electronics in Sarasota, Florida where Mr. Parks had direct
responsibility for the location, qualification and booking of new business and
where he developed and managed the Quotation procedure and Costing model. In
1999 and part of 2000, Mr. Parks served as a Customer Development Manager at
MSI of Central Florida in Melbourne, Florida. At MSI, Mr. Parks directed all
manufacturing operations including hiring a core management team and had direct
responsibility for new business development. From 1994 to part of 1999, Mr.
Parks served as a customer service engineer at Genesis Manufacturing in
Oldsmar, Florida. At Genesis, Mr. Parks had direct responsibility for the
location and qualification of new customers. In addition, Mr. Parks provided
front-end engineering support for all new program start-ups and provided
component level sourcing support to all new programs. Mr. Parks received an
A.S. Business degree in 1983 from Manatee Junior College. He has also received
1,600 hours of special instructions in many phases of manufacturing technology.

ROBERT T. FERGUSSON joined the Company in November 2001. In his 30-year
career, Mr. Fergusson has been an electronic engineer with a background in
electronics, optical and mechanical design, as well as extensive experience in
engineering management. From 1973 until joining the Company, Mr. Fergusson
served in various engineering capacities at Barry Wehmiller Electronics f/k/a
Inex Vision Systems located in Clearwater, Florida and Denver, Colorado. During
his career, Mr. Fergusson has been involved in the design and development of
automatic on-line inspection equipment. Many of the pieces of equipment became
industry standards in the glass container industry. Mr. Fergusson also served
as Director of Engineering and Vice President of Engineering. Mr. Fergusson is
also experienced in analog and digital (including PLD) design. He designed
signal processing, interface and control circuits for various pieces of
equipment. In addition, Mr. Fergusson has a mechanical background and has
developed several innovative optical designs for improvement of inspection
processes. Mr. Fergusson has traveled extensively in the U.S., Europe and Latin
America to work with field service and sales in resolving technical problems
and developing new business opportunities. In 1971, Mr. Fergusson received a
Bachelors of Engineering Science in Electrical Engineering from Brigham Young
University in Provo, Utah and an Associate of Science degree in 1968 at the
College of Eastern Utah in Price, Utah.

26



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JEFFREY L. JONES joined the Company in July 2001 and became our Sales and
Market Development Manager in March 2002. Mr. Jones background is in
management and sales. In 2001, prior to joining the Company, Mr. Jones served
as a distribution manager at DeSears, a large appliance retailer located in
Sarasota, Florida. From mid 1997 through the end of 2000, Mr. Jones served as
an account manager at Old Dominion Freight Line in Tampa, Florida. From October
1996 to May 1997, Mr. Jones was the terminal manager at USF Duncan in Ft.
Myers, Florida. Mr. Jones attended Valencia Community College and has completed
a number of industry sales and management training courses.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Companys directors and executive officers to send reports of their
ownership of the equity securities of the Company and of changes in such
ownership to the SEC. SEC regulations also require the Company to identify in
this Annual Report on Form 10-KSB any person subject to this requirement who
failed to file any such report on a timely basis. As the Companys Form 10-SB
was not effective until January 8, 2003, no reports were due by our directors
and executive officers for the year 2002.

CODE OF ETHICS

The Companys Board of Directors has adopted a Code of Business Conduct
and Ethics and Compliance Program which is applicable to the Company and all
its directors, officers and employees, including the Companys principal
executive officer and principal financial officer, principal accounting officer
or comptroller, or other persons performing similar functions.

ITEM 10 EXECUTIVE COMPENSATION

The following table provides certain summary information concerning
compensation paid to our executive officers, directors and significant
employees for the years stated.

SUMMARY COMPENSATION TABLE(1)



|                               |  |      |      |     |  |                     |         |         |  |               |   |                  |        |              |        |            |         |                        |        |           |         |  |         | 
|------------------------------ |  | ---- | ---- | --- |  | ------------------- | ------- | ------- |  | ------------- | - | ---------------- | ------ | ------------ | ------ | ---------- | ------- | ---------------------- | ------ | --------- | ------- |  | ------- | 
|SUMMARY COMPENSATION TABLE (1)
|                              
|                               |  |      |      |     |  |                     |         |         |  |               |   |                  |        |              |        |            |         | Long Term Compensation
|                               |  |      |      |     |  |                     |         |        
|                               |  |      |      |     |  | Annual Compensation |         | Awards 
|                               |  |      |      |     |  |                     |         |        
|(a)                            |  | (b)  |      | (c) |  | (d)                 |         | (e)     |  | (f)           |   | (g)             
|                               |  |      |      |     |  |                     |         |         |  |               |   |                 
|                               |  |      |      |     |  |                     |         |         |  |               |   |                  |        | Other Annual |        | Restricted |         | Securities            
|Name and                       |  |      |      |     |  | Salary              |         | Bonus   |  | Compensation  |   | Stock            |        | Underlying  
|Principal Position             |  | Year |      | ($) |  | ($)                 |         | ($)     |  | Award(s) ($)  |   | Options/SARs (#)
|                               |  |      |      |     |  |                     |         |         |  |               |   |                 
|Stephen A. Michael,            |  |      | 2002 |     |  |                     | 120,000 | (2)(i)  |  | 43,050(2)(ii) |   |                  | 8,400  | (2)(iii)     |        |            |        |                        |        |           | 300,000 | 
|President and                  |  |      | 2001 |     |  |                     | 120,000 | (3)(i)  |  | 30,000(3)(ii) |   |                  | 65,444 | (3)(iii)     |        |            | 140,000 | (3)(iv)                |        |           |        | 
|Director                       |  |      | 2000 |     |  |                     | 105,000 | (4)(i)  |  | 21,000(4)(ii) |   |                  | 7,350  | (4)(iii)     |        |            |        |                        |        |           | 300,000 | 
|Samuel S. Duffey(5)            |  |      | 2002 |     |  |                     | 120,000 | (6)(i)  |  | 43,050(6)(ii) |   |                  | 8,400  | (6)(iii)     |        |            |        |                        |        |           | 300,000 | 
|Chairman and                   |  |      | 2001 |     |  |                     | 120,000 | (7)(i)  |  | 30,000(7)(ii) |   |                  | 68,400 | (7)(iii)     |        |            | 140,000 | (7)(iv)                |        |           |        | 
|Director                       |  |      | 2000 |     |  |                     | 105,000 | (8)(i)  |  | 21,000(8)(ii) |   |                  | 7,350  | (8)(iii)     |        |            |        |                        |        |           | 300,000 | 
|William W.                     |  |      | 2002 |     |  |                     | 120,000 | (9)(i)  |  | 10,000(9)(ii) |   |                  | 4,800  | (9)(iii)     |        |            |        |                        |        |           | 100,000 | 
|Dolan, Secretary,              |  |      | 2001 |     |  |                     | 63,750  | (10)    |  |               |  |                  |        |              | 17,461 | (10)(ii)   |         |                        | 35,000 | (10)(iii) |         |  |        | 
|General Counsel                |  |      | 2000 |     |  |                     | 7,500   | (11)    |  |               |  |                  |        |              | 4,500  | (11)       |         |                        |       |           |         |  | 20,000  | 
|and Industry Liaison           |  |      |      |     |  |                     |         |         |  |               |   |                  |        |              |        |            |         |                        |        |           |         |  |         | 
|Edmund C. King                 |  |      | 2002 |     |  |                     | 120,000 | (12)(i) |  |               |  |                  |        |              | 22,500 | (12)(ii)   |         |                        |       |           |         |  | 125,000 | 
|Chief Financial                |  |      | 2001 |     |  |                     |        |         |  |               |  |                  |        |              | 39,985 | (13)(i)    |         |                        | 17,500 | (13)(ii)  |         |  |        | 
|Officer, Treasurer             |  |      | 2000 |     |  |                     |        |         |  |               |  |                  |        |              | 27,500 | (13)(iii)  |         |                        |       |           |         |  | 200,000 | 
|and Director                   |  |      |      |     |  |                     |         |         |  |               |   |                  |        |              |        |            |         |                        |        |           |         |  |         | 

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                               |  |                        |        |              |  |  |         |        
|------------------------------ |  | ---------------------- | ------ | ------------ |  |  | ------- | -------
|SUMMARY COMPENSATION TABLE (1)
|                              
|                               |  | Long Term
Compensation |        |              |  | 
|                               |  |                        |        |              |  | 
|                               |  | Payouts                |        |              |  | 
|                               |  |                        |        |              |  | 
|(a)                            |  | (h)                    |        | (i)         
|                               |  |                        |        |             
|                               |  | LTIP                   |        | All Other   
|Name and                       |  | Payouts                |        | Compensation
|Principal Position             |  | ($)                    |        | ($)         
|                               |  |                        |        |             
|Stephen A. Michael,            |  |                        |       |              |  |  | 55,000  | (2)(iv)
|President and                  |  |                        | 30,000 | (3)(v)       |  |  |        |        
|Director                       |  |                        | 30,000 | (4)(iv)      |  |  | 100,000 | (4)(v) 
|Samuel S. Duffey(5)            |  |                        |       |              |  |  | 55,000  | (6)(iv)
|Chairman and                   |  |                        | 30,000 | (7)(v)       |  |  |        |        
|Director                       |  |                        | 30,000 | (8)(iv)      |  |  | 100,000 | (8)(v) 
|William W.                     |  |                        |       |              |  |  | 3,200   | (9)(iv)
|Dolan, Secretary,              |  |                        |       |              |  |  |        |        
|General Counsel                |  |                        |       |              |  |  |        |        
|and Industry Liaison           |  |                        |        |              |  |  |         |        
|Edmund C. King                 |  |                        |       |              |  |  |        |        
|Chief Financial                |  |                        |       |              |  |  |        |        
|Officer, Treasurer             |  |                        |       |              |  |  |        |        
|and Director                   |  |                        |        |              |  |  |         |        



27



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(1) For all individuals named in the foregoing table, compensation reflected is
the aggregate of compensation paid by both the Company and SmartGate, L.C. for
the period stated.

(2) During the year 2002, Mr. Michael was paid the following compensation: (i)
$80,000 of Mr. Michaels $120,000 base salary was paid in cash and $40,000 was
not paid and accrues; (ii) $16,000 of the bonus was paid in cash and $27,050
was not paid and accrues; (iii) other annual compensation consisted of a car
allowance of which $5,600 was paid in cash and $2,800 was not paid and accrues;
and (iv) all other compensation consisted of a cash payment of $25,000 in
previously unpaid bonuses that had accrued during prior years, and a cash
payment of $30,000 in previously unpaid back salary that had accrued during
prior years.

(3) During the year 2001, Mr. Michael was paid the following compensation: (i)
$120,000 base salary paid in cash; (ii) $30,000 bonus paid in cash; (iii) other
annual compensation paid in cash consisting of an $8,400 car allowance and
$57,044 as a cash reimbursement for the payment of taxes associated with the
restricted stock award granted to Mr. Michael during the year; (iv) 40,000
shares of stock pursuant to a restricted stock award issued in 2001 which was
valued at $3.50 per share on the date of grant; and (v) a long-term incentive
plan award of $30,000 in the form of accrued salary which will not be paid
until the Company has achieved adequate capitalization as determined by the
independent members of the Board of Directors (the Condition to Payment).

(4) During the year 2000, Mr. Michael was paid the following compensation: (i)
base salary of $105,000 paid in cash; (ii) a bonus of $21,000 paid in cash;
(iii) a car allowance of $7,350 paid in cash; (iv) a long-term incentive plan
award of $30,000 consisting of an accrued bonus which will not be paid until
the Condition to Payment has been satisfied; and (v) $100,000 paid in cash upon
the contribution of ownership of SmartGate, L.C. to the Company.

(5) The compensation paid to Mr. Duffey, as reflected in this table in years
2000 and 2001, was received by Duffey & Dolan, P.A. pursuant to Mr. Duffeys
employment arrangement with that entity. All compensation paid to either Mr.
Duffey or Duffey & Dolan, P.A. during the periods covered is reflected in this
table. For all periods subsequent to 2001, Duffey & Dolan, P.A. has provided no
legal services to the Company and all compensation earned by Mr. Duffey was
paid directly to Mr. Duffey.

(6) During the year 2002, Mr. Duffey was paid the following compensation: (i)
$80,000 of Mr. Duffeys $120,000 base salary was paid in cash and $40,000 was
not paid and accrues; (ii) $16,000 of the bonus was paid in cash and $27,050
was not paid and accrues; (iii) other annual compensation consisted of a car
allowance of which $5,600 was paid in cash and $2,800 was not paid and accrues;
and (iv) all other compensation consisted of a cash payment of $25,000 in
previously unpaid bonuses that had accrued during prior years, and a cash
payment of $30,000 in previously unpaid back salary that had accrued during
prior years.

(7) During the year 2001, Mr. Duffey was paid the following compensation: (i)
$120,000 base salary paid in cash; (ii) $30,000 bonus paid in cash; (iii) other
annual compensation paid in cash consisting of an $8,400 car allowance and
$60,000 as a cash reimbursement for the payment of taxes associated with the
restricted stock award granted to Mr. Duffey during the year; (iv) 40,000
shares of stock pursuant to a restricted stock award issued in 2001 which was
valued at

28



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$3.50 per share on the date of grant; and (v) a long-term incentive plan award
of $30,000 in the form of accrued salary which will not be paid until the
Condition to Payment has been satisfied.

(8) During the year 2000, Mr. Duffey was paid the following compensation: (i)
base salary of $105,000 paid in cash; (ii) a bonus of $21,000 paid in cash;
(iii) a car allowance of $7,350 paid in cash; (iv) a long-term incentive plan
award of $30,000 consisting of an accrued bonus which will not be paid until
the Condition to Payment has been satisfied; and (v) $100,000 paid in cash upon
the contribution of ownership of SmartGate, L.C. to the Company.

(9) During the year 2002, Mr. Dolan was paid the following compensation: (i)
$80,000 of Mr. Dolans $120,000 base salary was paid in cash and $40,000 was
not paid and accrues; (ii) this bonus was not paid and accrues; (iii) other
annual compensation consisted of a car allowance of which $3,200 was paid in
cash and $1,600 was unpaid and accrues; and (iv) all other annual compensation
consisted of a cash payment of $3,200 in unpaid car allowance which had accrued
from the prior year.

(10) During the year 2001, Mr. Dolan was paid the following compensation; (i)
$63,750 in base salary which was paid in cash; (ii) other annual compensation
consisting of $14,261 as a cash reimbursement for the payment of taxes
associated with the restricted stock award granted to Mr. Dolan during the
year, and a $3,200 car allowance which was accrued but paid in 2002; and (iii)
10,000 shares of stock pursuant to a restricted stock award which was issued in
2001 which was valued at $3.50 per share on the date of grant.

(11) During the year 2000, Mr. Dolan was paid a salary of $7,500 in cash and a
consulting fee of $4,500 in cash. The consulting fee was received by Duffey &
Dolan, P.A. pursuant to Mr. Dolans employment arrangement with that entity.

(12) During the year 2002, Mr. King was paid the following compensation: (i)
Commencing in October 2002, Mr. King went on full-time salary at the annual
base rate of $120,000, of which only $7,500 was paid in cash during the period
of its commencement in October 2002 through December 2002, and $22,500 of the
salary due during that three-month period was not paid and accrues. From
January 2002 through September 2002, Mr. Kings compensation was not paid in
salary, but was paid in the form of a monthly consulting fee at $2,500 per
month as further described in (ii) next: (ii) this represents the compensation
that Mr. King was paid in cash in the form of a monthly consulting fee at
$2,500 per month as described in (i) above for the months of January 2002
through September 2002. This compensation was paid to Mr. King through Teasdale
Corp., which is controlled by Mr. King and which provided consulting services
to the Company.

(13) During the year 2001 Mr. King was paid the following compensation: (i)
$9,985 as a cash reimbursement for the payment of taxes associated with the
restricted stock award granted to Mr. King during the year, and $30,000 paid in
cash for consulting services provided during 2001. This compensation for the
consulting services was paid to Mr. King through Teasdale Corp., which is
controlled by Mr. King and which provided consulting services to the Company;
and (ii) 5,000 shares of stock pursuant to a restricted stock award which was
issued in 2001 which was valued at $3.50 per share on the date of grant.

(14) During the year 2000, Mr. King was paid the following compensation: (i)
$27,500 paid in cash for consulting services provided during 2000. This
compensation for the consulting services

29



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was paid to Mr. King through Teasdale Corp., which is controlled by Mr. King
and which provided consulting services to the Company.

OPTIONS/SAR GRANTS IN LAST FISCAL YEAR 2002

|                   |  |                |         |              |  |              |      |                 |  |   |      |  |  |  |         | 
|------------------ |  | -------------- | ------- | ------------ |  | ------------ | ---- | --------------- |  | - | ---- |  |  |  | ------- | 
|                   |  |                |         |              |  | Percent of   |      |                 |  |   |      |  |  | 
|                   |  |                |         |              |  | Total        |      |                 |  |   |      |  |  | 
|                   |  |                |         |              |  | Options/SARs |      |                 |  |   |      |  |  | 
|                   |  |                |         |              |  | Granted to   |      |                 |  |   |      |  |  | 
|                   |  | No. of Options |         | Employees in |  | Exercise     |      |                 |  |  
|Name               |  | Granted        |         | Fiscal Year  |  | Price        |      | Expiration Date
|                   |  |                |         |              |  |              |      |                
|Stephen A. Michael |  |                | 300,000 |              |  |              | 26.5 | %               |  | $ | 3.85 |  |  |  | 1/21/07 | 
|Samuel S. Duffey   |  |                | 300,000 |              |  |              | 26.5 | %               |  | $ | 3.85 |  |  |  | 1/21/07 | 
|William W. Dolan   |  |                | 100,000 |              |  |              | 8.8  | %               |  | $ | 3.85 |  |  |  | 1/21/07 | 
|Edmund C. King     |  |                | 125,000 |              |  |              | 11.1 | %               |  |   | 3.50 |  |  |  | 1/21/07 | 

Aggregated option exercises in 2002 and 2002 year-end option values are as
follows:

|                                           |  |          |   |          |  |                                    |   |                                 |  |                      |         |                  |  |  |         |  |  |  |         |  |  |  |         | 
|------------------------------------------ |  | -------- | - | -------- |  | ---------------------------------- | - | ------------------------------- |  | -------------------- | ------- | ---------------- |  |  | ------- |  |  |  | ------- |  |  |  | ------- | 
|                                           |  | Shares   |   |          |  |                                    |   |                                 |  |                      |         |                  |  |  |         |  |  |  |         |  |  | 
|                                           |  | Acquired |   |          |  |                                    |   | Number of Securities Underlying |  | Value of Unexercised
|                                           |  | On       |   | Value    |  | Unexercised Options at Fiscal Year |   | In-the-Money Options at Fiscal 
|Name and                                   |  | Exercise |   | Realized |  | End (#)                            |   | Year End ($)(1)                
|Principal Position                         |  | (#)      |   | ($)      |  | Exercisable                        |   | Unexercisable                   |  | Exercisable          |         | Unexercisable(2)
|Stephen A. Michael,
President and
Director |  |          |  |          |  |                                    |  |                                 |  |                      | 300,000 |                  |  |  | 300,000 |  |  |  | 300,000 |  |  |  | 45,000  | 
|Samuel S. Duffey,
Chairman and
Director(2) |  |          |  |          |  |                                    |  |                                 |  |                      | 200,000 |                  |  |  | 400,000 |  |  |  | 200,000 |  |  |  | 145,000 | 
|William W. Dolan,
Secretary                |  |          |  |          |  |                                    |  |                                 |  |                      | 20,000  |                  |  |  | 100,000 |  |  |  |        |  |  |  | 15,000  | 
|Edmund C. King                             |  |          |  |          |  |                                    |  |                                 |  |                      | 200,000 |                  |  |  | 125,000 |  |  |  | 200,000 |  |  |  | 62,500  | 

(1) The fair market value is based upon the closing bid price of the
Companys common stock on December 31, 2002 at $4.00 per share, as reported by
Pink Sheets LLC.

(2) 300,000 of these options were issued to Duffey & Dolan, P.A., a
professional corporation controlled by Mr. Duffey that earned consulting fees
for providing services to the Company.

STOCK COMPENSATION PLAN - 2000

Pursuant to the Companys 2000 Plan, the below named directors, officers,
and significant employees were among the persons (or entities) who received
stock options for providing services to the Company. Pursuant to the 2000 Plan
and the Option Agreements, the exercise price is the average market price of
our stock during the ten-day period prior to the Option grant. All of the
below-described options with the exception of the options issued to Duffey &
Dolan, P.A. and John E. Scates are exercisable for a period of seven years from
the date of grant; provided however, the shares which may be purchased are
subject to vesting as follows: one-third of the shares vests on the grant date;
another one-third of the shares vest one year from the grant date; and the
final one-third of the shares vests two years from the grant date, provided the
consultant or employee remains an officer, director, consultant or employee of
the Company on the vesting dates. The options granted to Duffey & Dolan, P.A.
and John E. Scates vests as follows: one-third of the shares vest on the first
anniversary of the grant date; another one-third

30



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of the shares vests on the second anniversary of the grant date; and the
final one-third of the shares vests on the third anniversary of the grant date,
provided the holder remains an officer, director, consultant or employee of the
Company on the vesting dates.

On July 26, 2000, options were granted at an exercise price of $3.00 per
share as follows:

|                    |  |                |  | 
|------------------- |  | -------------- |  | 
|Stephen A. Michael  |  | 300,000 Shares
|Duffey & Dolan, P.A |  | 300,000 Shares
|Edmund C. King      |  | 200,000 Shares
|Robert Knight       |  | 150,000 Shares

On December 20, 2000, an Option under the 2000 Plan to purchase 20,000
shares was granted to William W. Dolan at an exercise price of $4.96 per share.

On May 17, 2001, an Option under the 2000 Plan to purchase 10,000 shares
was granted to John E. Scates at an exercise price of $4.27 per share.

On August 6, 2001, an Option under the 2000 Plan to purchase 100,000
shares was granted to Carl Parks at an exercise price of $5.32 per share.

The total number of shares that may be purchased pursuant to options
granted under the 2000 Plan, including those set forth above, is 1,200,000
shares (this includes 10,000 additional shares which may be issued to a
consultant if certain performance conditions are met), of which all are vested
except for 153,333 which are not yet vested. There will be no additional
options granted under this 2000 Plan.

STOCK COMPENSATION PLAN - 2002

On January 22, 2002, pursuant to the Companys 2002 Plan, the below named
directors, officers and significant employees were among the persons who
received stock options for providing services to the Company. Pursuant to the
2002 Plan and the Option Agreements, the exercise price was the fair market
value of the Companys common stock on the date of grant. The 2002 Plan
provided for both qualified and non-qualified options. All of the options that
were issued on January 22, 2002 are exercisable for a period of five years from
the date of grant; provided however, the shares which may be purchased are
subject to vesting as follows: one-third of the shares vest on the first
anniversary of the grant date; another one-third of the shares vests on the
second anniversary of the grant date; and the final one-third of the shares
vests on the third anniversary of the grant date.

The options granted on January 22, 2002 were at exercise prices of $3.85
and $3.50 per share as follows:

|                   |  |                |  |   |      |  |  | 
|------------------ |  | -------------- |  | - | ---- |  |  | 
|Stephen A. Michael |  | 300,000 shares |  | $ | 3.85 | 
|Samuel S. Duffey   |  | 300,000 shares |  | $ | 3.85 | 
|Edmund C. King     |  | 125,000 shares |  | $ | 3.50 | 
|Robert Knight      |  | 75,000 shares  |  | $ | 3.50 | 
|William W. Dolan   |  | 100,000 shares |  | $ | 3.85 | 
|Jeffrey Jones      |  | 25,000 shares  |  | $ | 3.50 | 
|Robert Fergusson   |  | 25,000 shares  |  | $ | 3.50 | 

On June 13, 2002, an Option under the 2002 Plan to purchase 100,000 shares
was granted to Gregory J. Newell at an exercise price of $5.10 per share. This
Option has a term of seven years, and beginning September 30, 2002, vests
quarterly over a period of 20 quarters with 5,000 shares

31



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vesting at the end of each quarter, and, in the event Mr. Newell
terminates his service to the Company after June 13, 2005 for the primary
purpose of returning to full-time government service, the balance of the option
will continue to vest as provided in the Option Agreement.

On June 27, 2002, Mr. Scates was granted an option under the 2002 Plan to
purchase 20,000 shares at $5.15 per share. This Option has a term of seven
years, and beginning September 30, 2002, vests quarterly over a period of 8
quarters with 2,500 shares vesting at the end of each quarter.

The total number of shares that may be purchased pursuant to options
granted under the 2002 Plan, including those set forth above, is 1,100,000
shares, of which 349,164 are vested and 750,836 are not vested. There will be
no additional options granted under this 2002 Plan.

STOCK COMPENSATION PLAN - 2003

For information regarding the Companys 2003 Plan, see Item 5 Equity
Compensation Plan Information. On May 13, 2003, Mr. Movizzo was granted an
option under the 2003 Plan to purchase 80,000 shares of the Companys common
stock at $3.00 per share. The option has a term of seven years, and beginning
June 30, 2003, vests in equal quarterly installments of 5,000 shares each over
16 quarters.

COMPENSATION OF DIRECTORS

The Company is currently establishing a formal plan for the compensation
of its Board of Directors. Currently, directors are reimbursed for actual
expenses incurred in connection with performing duties as directors and do not
receive compensation for attendance at meetings, except that
Messrs. Newell,
Scates and Movizzo are each entitled to be paid an annual directors fee of $10,000 which
has not yet been paid and accrues. Further, directors are, from time to time,
granted options under the Companys various stock option plans, as reflected
above in this Item 10.

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with the following
officers:

STEPHEN A. MICHAEL - Mr. Michaels Employment Agreement provides for an
annual base salary of $150,000 ($30,000 of which is currently accruing until
otherwise determined by the Board of Directors) plus an auto allowance of
$8,400 per annum. Base salary automatically increases to $180,000 once the
Company achieves three (3) consecutive months of profits from operations.
Annually the Board of Directors reviews the base salary for potential increases
based upon performance of the Company. Additionally, Mr. Michael is entitled to
receive a bonus, as determined from time to time, by the Companys Board of
Directors. The Agreement also provides for eight (8) weeks of paid vacation and
entitlement to participate in any group plans or programs maintained by the
Company, such as health insurance, etc. The contract is for a term of five (5)
years, which ends February 2005, and if the Company is profitable during the
12-month period immediately prior to the end of the term of the Agreement, the
Agreement shall automatically be renewed for an additional five (5) year term
under the same terms and provisions of the original contract. In the event of
early termination of the Agreement by the

32



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Company, Mr. Michael would receive a severance consisting of base salary,
bonuses and benefits that would have been due him during the five-year period
following the date of such termination, paid in the same intervals as paid
under the contract. Also, in the event of death, Mr. Michaels estate shall
receive an amount equal to the base salary for a period of five (5) years (from
the date of death) which may be payable at the same intervals as the
compensation would have been paid had the employment not been terminated by
death. As part of the Employment Agreement, Mr. Michael entered into a Covenant
Not to Compete and Confidentiality Agreement that are attached to the
Employment Agreement.

SAMUEL S. DUFFEY - Mr. Duffeys Employment Agreement provides for an
annual base salary of $150,000 ($30,000 of which is currently accruing until
otherwise determined by the Board of Directors) plus an auto allowance of
$8,400 per annum. Base salary automatically increases to $180,000 once the
Company achieves three (3) consecutive months of profits from operations.
Annually the Board of Directors reviews the base salary for potential increases
based upon performance of the Company. Additionally, Mr. Duffey is entitled to
receive a bonus, as determined from time to time, by the Companys Board of
Directors. The Agreement also provides for eight (8) weeks of paid vacation and
entitlement to participate in any group plans or programs maintained by the
Company, such as health insurance, etc. The contract is for a term of five (5)
years, which ends February 2005, and if the Company is profitable during the
12-month period immediately prior to the end of the term of the Agreement, the
Agreement shall automatically be renewed for an additional five (5) year term
under the same terms and provisions of the original contract. In the event of
early termination of the Agreement by the Company, Mr. Duffey would receive a
severance consisting of base salary, bonuses and benefits that would have been
due him during the five-year period following the date of such termination,
paid in the same intervals as paid under the contract. Also, in the event of
death, Mr. Duffeys estate shall receive an amount equal to the base salary for
a period of five (5) years (from the date of death) which may be payable at the
same intervals as the compensation would have been paid had the employment not
been terminated by death. As part of the Employment Agreement, Mr. Duffey
entered into a Covenant Not to Compete and Confidentiality Agreement that are
attached to the Employment Agreement.

WILLIAM
W. DOLAN - Mr. Dolans contract provides for an annual base salary
of $120,000 plus an auto allowance of $4,800 per annum. Annually the Board of
Directors reviews the base salary for potential increases based upon
performance of the Company. Additionally, Mr. Dolan is entitled to receive a
bonus, as determined from time to time, by the Companys Board of Directors.
The Agreement also provides for six (6) weeks of paid vacation and entitlement
to participate in any group plans or programs maintained by the Company, such
as health insurance, etc. The contact is for a term of five (5) years, which
ends May 2006, and if the Company is profitable during the 12-month period
immediately prior to the end of the term of the Agreement, the Agreement shall
automatically be renewed for an additional five (5) year term under the same
terms and provisions of the original contract. In the event of early
termination of the Agreement by the Company, Mr. Dolan would receive a
severance consisting of base salary, bonuses and benefits that would have been
due him during the five-year period following the date of such termination,
paid in the same intervals as paid under the contract. Also, in the event of
death, Mr. Dolans estate shall receive an amount equal to the base salary for
a period of five (5) years (from the date of death) which may be payable at the
same intervals as the compensation would have been paid had the employment not
been terminated by death. As part

33



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of the Employment Agreement, Mr. Dolan entered into a Covenant Not to Compete
and Confidentiality Agreement that are attached to the Employment Agreement.

EDMUND C. KING  Mr. Kings contract provides for an annual base salary of
$120,000. Annually the Board of Directors reviews the base salary for potential
increases based upon performance of the Company. Additionally, Mr. King is
entitled to receive a bonus, as determined from time to time, by the Companys
Board of Directors. The Agreement also provides for six (6) weeks of paid
vacation and entitlement to participate in any group plans or programs
maintained by the Company, such as health insurance, etc. The contract is for a
term of three (3) years, which ends in February 2006, In the event of early
termination of the Agreement by the Company, Mr. King would receive a severance
consisting of base salary, bonuses and benefits that would have been due him
during the remaining contract term following the date of such termination, paid
in the same intervals as paid under the contract. Also, in the event of death,
Mr. Kings estate shall receive an amount equal to the base salary for the
remaining term of the Agreement which may be payable at the same intervals as
the compensation would have been paid had the employment not been terminated by
death. As part of the Employment Agreement, Mr. King entered into a Covenant
Not to Compete and Confidentiality Agreement that are attached to the
Employment Agreement.

CARL A. PARKS  In August 2001 the Company entered into an Employment
Agreement with Mr. Parks for a term of three (3) years, which terminates in
August 2004, which provides for base salary of $70,000 per year and up to three
(3) weeks vacation. In the event of termination without cause, maximum
severance compensation is six months compensation. As part of the Employment
Agreement, Mr. Parks entered into a Covenant Not to Compete and Confidentiality
Agreement that are attached to the Employment Agreement.

ROBERT T. FERGUSSON  In November 2001 the Company entered into an
Employment Agreement with Mr. Fergusson for a term of three (3) years, which
terminates in August 2004, which provides for base salary of $70,000 per year
and up to three (3) weeks vacation. In the event of termination without cause,
maximum severance compensation is six months compensation. As part of the
Employment Agreement, Mr. Fergusson entered into a Covenant Not to Compete and
Confidentiality Agreement that are attached to the Employment Agreement.

ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the beneficial ownership of shares of our
common stock, as of June 4, 2003, of (i) each person known by us to
beneficially own 5% or more of such shares; (ii) each of our directors,
executive officers, and significant employees named in the Summary Compensation
Table; and (iii) all of our current executive officers, directors, and
significant employees as a group. Except as otherwise indicated, all shares are
beneficially owned, and the persons named as owners hold investment and voting
power.

|                       |  |                   |           |            |  |  |      |  
|---------------------- |  | ----------------- | --------- | ---------- |  |  | ---- | -
|                       |  | AMOUNT AND NATURE |           |            |  | 
|                       |  | OF SHARES         |           |            |  | 
|NAME AND ADDRESS       |  | BENEFICIALLY      |           | PERCENTAGE
|OF BENEFICIAL OWNER(1) |  | OWNED(2)          |           | OWNED(2)  
|                       |  |                   |           |           
|William W. Dolan(3)    |  |                   | 4,760,898 |            |  |  | 28.2 | %
|Stephen A. Michael(4)  |  |                   | 4,780,116 |            |  |  | 28.3 | %
|H.R. Williams(5)       |  |                   | 1,183,486 |            |  |  | 7    | %
|Samuel S. Duffey(6)    |  |                   | 749,572   |            |  |  | 4.4  | %

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|                                                                                                                     |  |                   |         |            |  |  |     |  
|-------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | ---------- |  |  | --- | -
|                                                                                                                     |  | AMOUNT AND NATURE |         |            |  | 
|                                                                                                                     |  | OF SHARES         |         |            |  | 
|NAME AND ADDRESS                                                                                                     |  | BENEFICIALLY      |         | PERCENTAGE
|OF BENEFICIAL OWNER(1)                                                                                               |  | OWNED(2)          |         | OWNED(2)  
|                                                                                                                     |  |                   |         |           
|Edmund C. King(7)                                                                                                    |  |                   | 443,706 |            |  |  | 2.6 | %
|Robert Knight(8)                                                                                                     |  |                   | 179,200 |            |  |  | 1   | %
|Carl Parks(9)                                                                                                        |  |                   | 66,666  |            |  |  | .4  | %
|Robert Fergusson(10)                                                                                                 |  |                   | 8,333   |            |  |  | .05 | %
|Jeffrey Jones(10)                                                                                                    |  |                   | 8,333   |            |  |  | .05 | %
|Gregory J. Newell(11)                                                                                                |  |                   | 20,000  |            |  |  | .1  | %
|John E. Scates(12)                                                                                                   |  |                   | 16,666  |            |  |  | .1  | %
|Joseph F. Movizzo(13)                                                                                                |  |                   | 102,286 |            |  |  | .6  | %
|G.M. Capital Partners, Ltd.(14)                                                                                      |  |                   | 880,000 |            |  |  | 5.2 | %
|All directors, executive
officers and significant
employees as a group (11
persons) 11,135,776 shares,
66% (approx.) |  |                   |         |            |  |  |     |  



|1. |  | The business address for Mr. Dolan, Mr. Duffey, Mr. Michael, Mr. Parks,
Mr. Fergusson and Mr. Jones is 4400 Independence Court, Sarasota, Florida
34234. Mr. Williams address is 7954 Royal Brikdale Circle,Bradenton, FL
34202. Mr. Kings address is 4153 North Dover Lane, Provo, Utah 84604. Mr.
Knights business address is 114 West Magnolia Street, Suite 446,
Bellingham, Washington 98225. Mr. Newells address is 777 Osmond Lane,
Provo, Utah 84604. Mr. Scates business address is 1411 LeMay, #205,
Carrollton, Texas 75007. Mr. Movizzos address is 442 Yacht Harbor Drive,
Osprey, Florida 34229-9744; and G.M. Capital Partners Ltd. business
address is 2755 Lougheed Highway, Suite 620, Port Coquitlam, B.C. V3B 5Y9,
Canada.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | The percentage calculations are based on 16,898,971 shares that were
outstanding as of June 4, 2003. Beneficial ownership is determined in
accordance with rules of the Securities and Exchange Commission and
includes voting power and/or investment power with respect to securities.
Shares of common stock subject to options or warrants currently
exercisable or exercisable within 60 days of June 4, 2003 are deemed
outstanding for computing the number and the percentage of outstanding
shares beneficially owned by the person holding such options but are not
deemed outstanding for computing the percentage beneficially owned by any
other person.                                                                               
|  
|3. |  | Includes: (i) 2,019,169 shares held by Mr. Dolan as Trustee of the
Spencer C. Duffey Irrevocable Trust, a Trust created by the Companys
Chairman and Director, Samuel S. Duffey, for his son; (ii) 2,019,169
shares held by Mr. Dolan as Trustee of the Elizabeth R.. Duffey
Irrevocable Trust, a Trust created by the Companys Chairman and Director,
Samuel S. Duffey, for his daughter; (iii) 117,286 shares held by Mr. Dolan
as Trustee of the Grace Duffey Irrevocable Trust, a Trust created by the
Companys Chairman and Director, Samuel S. Duffey, for his former spouse;
(iv) 551,941 shares owned by William W. Dolan; (v) Mr. Dolans options to
purchase 53,333 shares.                                                            
|  
|4. |  | Includes options to purchase 400,000 shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|5. |  | Includes 611,603 shares and options to purchase 446,804 shares held by
the H.R. Williams Family Limited Partnership (Partnership) and 125,079
shares held in the name of H.R. Williams individually                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|6. |  | Includes 234,572 shares owned by Mr. Duffeys spouse, 40,000 shares along
with options to purchase 300,000 shares held by Duffey & Dolan, P.A., an
entity controlled by Mr. Duffey, an option to purchase 100,000 shares
owned by Mr. Duffey, and 75,000 shares owned by the Pharis Duffey Family
Foundation (Foundation), a charitable entity controlled by Mr. Duffey
and his two adult children.. Mr. Duffey disclaims beneficial ownership of
the                                                                                                                                                                                                                                                                                             

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|    |  | Foundation and Trusts set forth in footnote number (3) above in which Mr.
Dolan serves as Trustee.                                                         
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|7.  |  | Includes 197,040 shares held in Mr. Kings name, 5,000 shares held in the
name of the King Family Trust, and Mr. Kings options to purchase 241,666
shares.
|   
|8.  |  | Includes 4, 200 shares and options to purchase 175,000 shares.                                                                                             
|   
|9.  |  | Represents options to purchase 66,666 shares.                                                                                                              
|   
|10. |  | Represents options to purchase 8,333 shares.                                                                                                               
|   
|11. |  | Includes options to purchase 20,000 shares.                                                                                                                
|   
|12. |  | Represents options to purchase 16,666 shares.                                                                                                              
|   
|13. |  | Includes 97,286 shares and options to purchase 5,000 shares.                                                                                               
|   
|14. |  | Includes 380,000 shares and options to purchase 500,000 shares.                                                                                            

ADVISORS

Set forth below are Advisors who have been engaged by the Company and a
description of the compensation arrangements with said Advisors.

INDUSTRY ADVISORY BOARD

The Company has established an Industry Advisory Board to consist of
industry experts and persons held in high regard within their industry. The
Advisory Board currently has two members who are available on a limited basis
to provide industry or market input as requested by the Companys officers and
directors. The Industry Advisory Board provides a consultive function and is
not part of the Companys Board of Directors, which is discussed elsewhere in
this document.

Advisory Board Member, Linda Kauffman, the former Chairman of the Board of
the International Parking Institute, provides the Company with expertise in the
parking and traffic control industry. Ms. Kauffman provides consulting services
on an as available basis and as compensation, was granted an Option in June
2001 to purchase 10,000 shares of the Companys common stock at $4.34 per
share. The Option vests over a period of three years with one-third of the
shares becoming eligible to purchase on each anniversary date of the grant,
provided Ms. Kauffman has remained a consultant with the Company on the
anniversary date. The Options term is seven years.

Advisory Board Member, Duane Cameron, is a member of the parking industry.
Mr. Cameron provides consulting services on an as available basis and as
compensation, was granted an option to purchase 10,000 shares of the Companys
common stock at $3.00 per share. The Option was granted in July 2000. The
Option is subject to vesting where one-third of the shares became eligible to
purchase on the grant date, the second one-third on the anniversary date of
grant, and the third one-third of the shares will become eligible for purchase
on the second anniversary date of grant, provided Mr. Cameron has remained a
consultant with the Company on the anniversary dates. Also in July 2000, Mr.
Cameron was granted the right to be issued an additional option for the
purchase of 10,000 shares at $3.00 per share if, as a result of the efforts of
Mr. Cameron, the Company enters into contractual relationships with certain
entities in the parking industry.

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OTHER ADVISORS

In January 2002, the Company engaged Hawk Associates, Inc. to provide
investor relations consultation and services pursuant to an Engagement

Agreement with an initial term of six and one-half months with an ongoing
relationship thereafter which can be terminated by either party upon 30 days
notice. Hawk Associates, Inc. is paid a fee of $6,600 per month and $400 per
month to cover routine costs. Additionally, in January 2002, Hawk Associates,
Inc. was granted an option to purchase up to 50,000 shares of the Companys
common stock at a purchase price of $7.25 per share. The Option is exercisable
for a period of seven years, and is subject to a vesting schedule over the
initial 24-month period where 6,250 shares are released and become eligible for
purchase at the end of each quarterly period during the 24-month vesting term,
provided the Engagement Agreement between the Company and Hawk Associates, Inc.
has remained in effect at the end of the quarterly period then in effect.

Also in 2002, the Company extended its international investor relations
consultant arrangement with G.M. Capital Partners, Ltd. to assist in investor
relations and capital formation from potential investors, which are neither
U.S. citizens nor U.S. residents (see Item 12  Certain Relationships and
Related Transactions for a description of compensation and related
transactions).

In December 1999, William Hyde, a financial consultant, was granted an
option from SmartGate, L.C. for providing consulting services related to
banking relationships and business development. The Option was for the purchase
of 14,074 shares of the Companys common stock at a purchase price of $1.07 per
share. The Option was partly exercised in December 2002 for the purchase of
12,198 shares, and the remaining shares were not exercised and the Option
expired at the end of December 2002.

In March 2003, the Company engaged Crescent Fund, Inc. as a financial
consultant to provide investor-related consulting services. Pursuant to this
Consulting Agreement, the Company has issued 14,285 shares of its authorized,
but unissued common stock, and may issue additional shares at the rate of
7,142.5 shares per month for the term that the Agreement continues. The Company
may terminate the Consulting Agreement upon ten days notice.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

For information regarding securities authorized for issuance under Equity
Compensation Plans, and the equity compensation plan information table see Item
5.

ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Pursuant to a Merger, on February 26, 2002, we acquired Radio Metrix Inc.,
a Florida corporation (RadioMetrix). RadioMetrix was formed in 1992 by
certain individuals who founded SmartGate, L.C. RadioMetrix became the
exclusive worldwide licensee of the InvisaShield technology in 1992. It began
research and development efforts following obtaining the exclusive worldwide
license and in 1997, granted a sublicense limited to powered closure
applications to SmartGate, L.C.. The assets of RadioMetrix were acquired more
than two years before its acquisition by Invisa, with the exception of a
patent. The patent was purchased by RadioMetrix on January 8, 2002 pursuant to
a Purchase Agreement dated October 9, 2000. The purchase price paid by
RadioMetrix for the patent was $1,200,000 of which $50,000 was paid by
RadioMetrix as a deposit against the purchase price. The RadioMetrix agreement
to purchase the patent required a closing, with payment, by January 8, 2002,
which was before the

37



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closing of the planned acquisition of RadioMetrix by Invisa. Accordingly,
as part of its acquisition of RadioMetrix, Invisa loaned approximately $550,000
to RadioMetrix to enable RadioMetrix to timely close its purchase of the patent
by paying the remaining $550,000 due at closing. In acquiring RadioMetrix,
Invisa acquired ownership of the patent and the $550,000 loan to RadioMetrix
became an intercompany debt. The purchase price paid by the Company for
RadioMetrix is discussed later in this section. Reference is made to Note B to
the financial statements for additional information regarding the Companys
$550,000 loan to RadioMetrix.

Pursuant to this acquisition, RadioMetrix was merged into a subsidiary,
which we incorporated specifically for this transaction. Because each of the
RadioMetrix shareholders had pre-existing relationships with us, the
transaction was approved by the Board Members having no affiliation, stock
ownership or other relationship with RadioMetrix (Independent Committee of
Directors). The Independent Committee of Directors was represented by legal
counsel. Additionally, it received advice as to the financial fairness of the
transaction from a national firm experienced in financial valuation and
consulting. The relationships of our officers, directors or substantial
shareholders with RadioMetrix at the date of the acquisition were:

|                     |  |                                                                                                                 |  |                                                |  |                   |      |                |  |  |       |  
|-------------------- |  | --------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------- |  | ----------------- | ---- | -------------- |  |  | ----- | -
|                     |  |                                                                                                                 |  |                                                |  | % Ownership in    |      | % Ownership in
|                     |  | Invisa, Inc.                                                                                                    |  | Radio Metrix Inc.                              |  | Radio Metrix Inc. |      | Invisa, Inc.  
|Stephen A. Michael   |  | Director, President,
and shareholder of
Invisa, Inc., and
founder, manager and
former member of
SmartGate, L.C. |  | Director, President,
and Principal
Shareholder |  |                   | 42.5 | %              |  |  | 22.82 | %
|                     |  |                                                                                                                 |  |                                                |  |                   |      |                |  |  |       |  
|Elizabeth Duffey     |  | Principal Shareholder                                                                                           |  | Principal Shareholder                          |  |                   | 21.3 | %              |  |  | 10.33 | %
|Irrevocable Trust(1) |  |                                                                                                                 |  |                                                |  |                   |      |                |  |  |       |  
|                     |  |                                                                                                                 |  |                                                |  |                   |      |                |  |  |       |  
|Spencer Duffey       |  | Principal Shareholder                                                                                           |  | Principal Shareholder                          |  |                   | 21.3 | %              |  |  | 10.33 | %
|Irrevocable Trust(1) |  |                                                                                                                 |  |                                                |  |                   |      |                |  |  |       |  
|                     |  |                                                                                                                 |  |                                                |  |                   |      |                |  |  |       |  
|Samuel S. Duffey(1)  |  | Chairman, Director,
and shareholder of
Invisa, Inc., and
founder, manager and
former member of
SmartGate, L.C.  |  | Officer and Director                           |  |                   |      |                |  |  | 1.90  | %
|                     |  |                                                                                                                 |  |                                                |  |                   |      |                |  |  |       |  
|Robert T. Roth       |  | Shareholder,
Director, and former
manager and member of
SmartGate, L.C.                                         |  | Director and
Shareholder                       |  |                   | 10.0 | %              |  |  | 5.22  | %
|                     |  |                                                                                                                 |  |                                                |  |                   |      |                |  |  |       |  
|William W. Dolan(2)  |  | Officer and
Shareholder, and
former member of
SmartGate, L.C.                                                   |  | Officer and
Shareholder                        |  |                   | 4.9  | %              |  |  | 3.02  | %

(1).These are family trusts created by Samuel S. Duffey for his adult
children who are the beneficiaries.

(2).Mr. Dolan is the Trustee of the family trusts created for Mr. Duffeys
adult children.

At the closing of Invisas purchase of RadioMetrix, the patent was subject
to a previous pledge as collateral for a twenty-four (24) month Promissory Note
in the principal amount of $600,000, which was made by RadioMetrix when it
purchased the patent. The party that sold the patent to RadioMetrix was not
affiliated with either the RadioMetrix shareholders or Invisa. As a further
result of the acquisition of RadioMetrix, the Company eliminated its obligation
to pay ongoing royalty fees in connection with its sale of powered closure
safety products based upon the InvisaShield technology while expanding its
access to all presence sensing market categories outside of safety, including
access to the security market and other markets (Technology Purchase from
RadioMetrix).

The aggregate consideration paid for the purchase of RadioMetrix through
the date hereof, is: (i) 3,685,000 shares of restricted common stock; (ii)
$1,300,000 (plus accrued and unpaid

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interest) payable by two promissory notes consisting of: (a) a $500,000
promissory note, payable at 10% interest per annum until August 25, 2003, at
which time the interest rate becomes 15%. This promissory note is due in one
installment on February 25, 2006; and (b) an $800,000 promissory note payable
at 15% interest due monthly, and all principal due in one installment on
February 25, 2004. Both promissory notes may be prepaid without penalty.
Neither promissory note is collateralized; and (iii) a 7% royalty on all
revenue earned from the sale of products based upon the RadioMetrix technology
other than safety products which constituted the Companys core business prior
to the Merger. The royalty may be terminated by the Company for a one-time
payment based upon appraisal. Additionally, Note B to the financial statements
details obligations of RadioMetrix, including approximately $175,000 in accrued
compensation payable to stockholders of RadioMetrix that remained in place and
was assumed by the Company at the acquisition of RadioMetrix. As a result of an
Amendment to the RadioMetrix Merger Agreement, no earn-out or other
consideration will be paid by the Company except as described above.

On February 9, 2000 we purchased SmartGate, L.C. principally from the same
group of related parties that previously owned RadioMetrix. As a result, on
February 9, 2000, we issued 7,743,558 shares of Invisa common stock to the
SmartGate, L.C. members which represented approximately 74% of our outstanding
capital stock at that date. As a result of this transaction, we agreed to
subsequently make loans to certain of the SmartGate, L.C. members should same
be required to fund IRS recapture tax obligations imposed as a result of this
transaction. As a result of this obligation, in October 2001, we loaned
approximately $74,384 to Mr. Michael, and approximately $71,810 to Mr. Duffey,
pursuant to unsecured five-year Promissory Notes.

Pursuant to an agreement made in 1992 between RadioMetrix and an
individual who introduced RadioMetrix to the inventors of the InvisaShield
technology, RadioMetrix was obligated to pay up to $200,000 contingent upon
sales. Under the Agreement, the obligation terminates when RadioMetrix has paid
an aggregate of $200,000. The obligation arose out of an introduction to the
inventors of the RadioMetrix Technology and the anticipation of future
assistance to be provided by the finder in connection with the
commercialization of the technology. In 1999, as a result of the unavailability
of the finder, and the lack of any ongoing support from the finder, RadioMetrix
asserted breach of the Agreement and provided notice of termination. The
termination has not been contested, and the Company has had no contact with the
finder following such termination.

We have the following royalty obligations:

(i) We are obligated to pay to Carl Burnett, the inventor, a royalty of
the smaller of $1.00 or 1% of the amount collected from the sale of each
finished product in which the technology designed to eliminate or filter
electronic interference is utilized. In instances where we license this
technology independent of our other technology, a royalty of 10% of the
licensed fees or royalties received is due. In instances where we license this
invention as part of further potential technology other than the InvisaShield,
a royalty of 1% of the licensed fees or royalties received is due. We currently
utilize this invention only in our safety products and we do not currently
anticipate utilizing this invention in other product categories;

(ii) We are obligated to pay a royalty equal to two percent of net profits
from the sale of InvisaShield safety products for parking gates, sliding gates
and overhead doors to an independent engineering consultant, Pete Lefferson.
Based on further consulting from Mr.
39

Lefferson, we anticipate that we may extend this royalty obligation to
additional products or product categories.; and

(iii) We are obligated to pay a royalty equal to 7% of revenue to
affiliated parties with regard to all categories of our business, other than
the safety category. This obligation arose from the consideration to be paid by
us in the business combination transaction with Radio Metrix Inc. which has
been previously discussed above in this Item 12. This royalty-based payment may
be terminated by us at any time for a one-time payment in an amount to be
determined by appraisal.

The following officers or directors entered into loan transactions
associated with the purchase of common stock with SmartGate, L.C. before it was
acquired by us and became a wholly owned subsidiary. As a result of these
pre-acquisition transactions, we have the following notes receivable: Stephen
A. Michael  $375,000, Samuel S. Duffey  $375,000 and Edmund C. King -
$210,000.

One of the Companys principal shareholders is H.R. Williams (Mr.
Williams) and his family limited partnership, the H.R. Williams Family Limited
Partnership (HRW Partnership). The Companys transactions with Mr. Williams
or the HRW Partnership are summarized below:



|1. |  | In March 1999, Mr. Williams subscribed for 446,804 shares of the
Companys wholly owned subsidiary, SmartGate, L.C. As part of the
subscription, Mr. Williams: (a) paid $59,523 in cash; (b) agreed to loan
the Company $25,000 pursuant to a Promissory Note with interest at prime
(the $25,000 Note); (c) agreed to sublease SmartGate, L.C. space to
conduct its operations in a building leased by the HRW Partnership; and
(d) agreed to guarantee a line of credit for SmartGate, L.C. at the
Regions Bank in Bradenton, Florida in the amount of $150,000 (Credit
Facility). As part of the Subscription Agreement, SmartGate, L.C. granted
the HRW Partnership (see Security Ownership of Certain Beneficial Owners
and Management) an option to purchase 446,804 shares at a purchase price
of $1.07 per share. The Option will remain exercisable until the last to
occur of: (i) 245 days following either the Companys payoff of a Credit
Facility guaranteed by H.R. Williams; (ii) the date Mr. Williams
guarantee of the Credit Facility is released; or (iii) one year following
the date when certain shares owned by Mr. Williams or HRW Partnership are
free of transfer restrictions.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | In May 2001, the Company issued 164,799 shares of its common stock to the
HRW Partnership as its landlord. Pursuant to the Sublease Agreement
entered into between SmartGate, L.C. and the HRW Partnership as landlord
in March 1999, SmartGate, L.C. was granted the right to pay its rent to
the HRW Partnership as landlord, either in cash or in stock, and if paid
in stock, it would be paid at the rate of one share for each $0.50 of rent
owed. For the period from the inception of the Lease in March 1999 through
August 2000, the Company elected to pay the approximate 19 months of rent
with stock resulting in this issuance of 164,799 shares to the HRW
Partnership as landlord. This Agreement has terminated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|3. |  | In March 2002, the Company repaid the $25,000 Note in full.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|4. |  | In October 2002, Mr. Williams agreed to guarantee an additional $150,000
of credit in addition to the $150,000 currently outstanding. We agreed to
issue 5,000 shares to HRW Partnership in consideration for this additional
guarantee. We further agreed that, to the extent we borrow any funds under
the extended guarantee (i.e.  in excess of the original $150,000 line of
credit) we will grant to HRW Partnership an option to purchase, at $2.50
per share, one share of our common stock for each dollar borrowed. To
date, no such additional credit facility                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

40



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##### 





| |  | has been established and the referenced shares and additional options have not
been issued under this arrangement, and we do not anticipate that such credit
facility will be established in the future or such additional shares issued or
options ultimately granted.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In 2001, the Company made a demand loan of $3,500 to significant employee,
Carl Parks, for a personal matter. The loan is shown as an interest free note
receivable on the Companys books.

In 2002, a stock option entitling G.M. Capital Partners, Ltd., a
consultant in international investor relations (see Item 11  Security
Ownership of Certain Beneficial Owners and Management  Other Advisors), to
purchase 500,000 shares of the Companys common stock at $3.50 per share, with
certain registration rights attached, was issued in prepayment of the
consulting fee for the year. The agreed value of the stock option and the
consulting services was established at $120,000. The stock option is considered
fully vested and will be exercisable until December 31, 2005. Provided that the
shares which may be purchased upon the exercise of the stock option have not
been covered by a previous Registration Statement, the holder may, commencing
on January 1, 2004 demand that the Company file and exercise reasonable efforts
to effect a Registration Statement covering 250,000 shares. Additionally,
provided that all 500,000 shares which may be purchased under the stock option
have not been covered by a previous Registration Statement, commencing on July
1, 2005 the holder may demand that the Company file and exercise reasonable
efforts to effect a Registration Statement covering the remaining 250,000
shares which may be purchased upon the exercise of the stock option. Both
Registration Statements shall be at the cost of the Company. In April 2003, the
Company issued 500,000 shares of its authorized but unissued common stock to GM
Capital Partners, Ltd. in recognition of its support in the Companys past and
current access to capital and matters related thereto.

Stephen A. Michael, Samuel S. Duffey and Robert T. Roth may be considered
founders or promoters of SmartGate, L.C. The consideration paid to these
individuals is discussed elsewhere herein. Bob Knight and G.M. Capital
Partners, Ltd. may be considered founders or promoters of the Company.
Discussion of the consideration received by them is discussed elsewhere in this
document.

ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K

(a)       Exhibits

INDEX TO EXHIBITS

|         |  |                                                                                                                                                                                                                           
|-------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ITEM NO. |  | DESCRIPTION                                                                                                                                                                                                               
|         |  |                                                                                                                                                                                                                           
|2.1      |  | Agreement of Merger and Plan of Reorganization dated 2/25/02 by
and among SmartGate Inc., SmartGate/RadioMetrix Acquisition Corp. and
Radio Metrix Inc., Letter of Clarification, and Amendment dated as of
April 24, 2003
|         |  |                                                                                                                                                                                                                           
|3(i)     |  | Articles of Incorporation, as amended                                                                                                                                                                                     
|         |  |                                                                                                                                                                                                                           
|3(ii)    |  | Bylaws of the Company                                                                                                                                                                                                     
|         |  |                                                                                                                                                                                                                           
|4.1      |  | Specimen of Invisa, Inc. Common Stock Certificate                                                                                                                                                                         

41



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##### 



|         |       |             |                                                                                                                                                                                                                                                                                                                                   
|-------- | ----- | ----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ITEM NO. |       | DESCRIPTION
|         |       |            
|         | 10.1  |             | Indemnity Agreement by and among the Company and Stephen A.
Michael, Spencer Charles Duffey Irrevocable Trust u/a/d July 29,
1998, Elizabeth Rosemary Duffey Irrevocable Trust u/a/d July 29,
1998, Robert T. Roth, William W. Dolan dated as of February 25, 2002                                                                
|         |       |             |                                                                                                                                                                                                                                                                                                                                   
|         | 10.2  |             | Form of Promissory Notes to Stephen A. Michael, Spencer Charles
Duffey Irrevocable Trust Under Agreement Dated 7/29/98, Elizabeth
Rosemary Duffey Irrevocable Trust Under Agreement Dated 7/29/98,
Robert T. Roth, and William W. Dolan   February 25, 2002                                                                      
|         |       |             |                                                                                                                                                                                                                                                                                                                                   
|         | 10.3  |             | Form of Promissory Notes to Stephen A. Michael, Spencer Charles
Duffey Irrevocable Trust Under Agreement Dated 7/29/98, Elizabeth
Rosemary Duffey Irrevocable Trust Under Agreement Dated 7/29/98,
Robert T. Roth, and William W. Dolan  February 25, 2002                                                                       
|         |       |             |                                                                                                                                                                                                                                                                                                                                   
|         | 10.4  |             | Consulting Agreement with Hawk Associates, Inc. dated January 16,
2002                                                                                                                                                                                                                                                            
|         |       |             |                                                                                                                                                                                                                                                                                                                                   
|         | 10.5  |             | Contribution Agreement dated 2/9/00 between SmartGate Inc. and
SmartGate, L.C.                                                                                                                                                                                                                                                    
|         |       |             |                                                                                                                                                                                                                                                                                                                                   
|         | 10.6  |             | Promissory Note from Stephen A. Michael to the Company  October
15, 2001                                                                                                                                                                                                                                                         
|         |       |             |                                                                                                                                                                                                                                                                                                                                   
|         | 10.7  |             | Promissory Note from Samuel S. Duffey to the Company  October
15, 2001                                                                                                                                                                                                                                                           
|         |       |             |                                                                                                                                                                                                                                                                                                                                   
|         | 10.8  |             | Distribution Agreement with H.S. Jackson & Son (Fencing) Limited
 August 23, 2001, and April 10, 2002 and March 31, 2003 Amendments
thereto                                                                                                                                                                                      
|         |       |             |                                                                                                                                                                                                                                                                                                                                   
|         | 10.9  |             | Employment Agreement with Stephen A. Michael                                                                                                                                                                                                                                                                                      
|         |       |             |                                                                                                                                                                                                                                                                                                                                   
|         | 10.10 |             | Employment Agreement with Samuel S. Duffey                                                                                                                                                                                                                                                                                        
|         |       |             |                                                                                                                                                                                                                                                                                                                                   
|         | 10.12 |             | Employment Agreement with Edmund C. King                                                                                                                                                                                                                                                                                          
|         |       |             |                                                                                                                                                                                                                                                                                                                                   
|         | 10.13 |             | Employment Agreement with William W. Dolan                                                                                                                                                                                                                                                                                        
|         |       |             |                                                                                                                                                                                                                                                                                                                                   
|         | 10.14 |             | Employment Agreement with Carl Parks                                                                                                                                                                                                                                                                                              
|         |       |             |                                                                                                                                                                                                                                                                                                                                   
|         | 10.15 |             | Employment Agreement with Bob Fergusson                                                                                                                                                                                                                                                                                           
|         |       |             |                                                                                                                                                                                                                                                                                                                                   
|         | 10.16 |             | Office Lease with DTS Commercial Interiors, Inc.                                                                                                                                                                                                                                                                                  
|         |       |             |                                                                                                                                                                                                                                                                                                                                   
|         | 10.17 |             | Office Lease with 4396 Independence Court, Inc.                                                                                                                                                                                                                                                                                   
|         |       |             |                                                                                                                                                                                                                                                                                                                                   
|         | 10.18 |             | Quarterly Revenue Based Payment Agreement by and among the
Company and Stephen A. Michael, Spencer Charles Duffey Irrevocable
Trust u/a/d July 29, 1998, Elizabeth Rosemary Duffey Irrevocable
Trust u/a/d July 29, 1998, Robert T. Roth, William W. Dolan dated as
of February 25, 2002; and Amendment dated as of April 24, 2003
|         |       |             |                                                                                                                                                                                                                                                                                                                                   
|         | 10.19 |             | Net Profit Royalty Letter Agreement between Radio Metrix Inc.
and Pete Lefferson dated September 23, 1993 as amended by Letter
Agreement dated December 1, 1994 (Lefferson Royalty Agreement)                                                                                                                                   
|         |       |             |                                                                                                                                                                                                                                                                                                                                   
|         | 10.20 |             | Agreement between Radio Metrix Inc. and Carl Burnett dated
October 13, 1996 (Burnett Agreement)                                                                                                                                                                                                                                 
|         |       |             |                                                                                                                                                                                                                                                                                                                                   
|         | 10.21 |             | The Agreement between Radio Metrix Inc. and Namaqua Limited
Partnership (Namaqua) dated December 13, 1993 (Namaqua
Agreement), and related Security Agreement (Namaqua Security
Agreement)                                                                                                                                  
|         |       |             |                                                                                                                                                                                                                                                                                                                                   
|         | 10.22 |             | Agreement between Radio Metrix Inc. and Robert Wilson dated
March 18, 1992 (Wilson Agreement)                                                                                                                                                                                                                                   
|         |       |             |                                                                                                                                                                                                                                                                                                                                   
|         | 10.23 |             | Closing Agreement between Radio Metrix Inc., SDR Metro Inc. and
Brent Simon dated January 8, 2002                                                                                                                                                                                                                                 
|         |       |             |                                                                                                                                                                                                                                                                                                                                   
|         | 10.24 |             | Promissory Note to SDR Metro Inc. dated January 8, 2002                                                                                                                                                                                                                                                                           

42



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##### 



|         |       |             |                                                                                                                                                                                                                                                                 
|-------- | ----- | ----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ITEM NO. |       | DESCRIPTION
|         |       |            
|         | 10.25 |             | Security Agreement between Radio Metrix Inc. and SDR Metro Inc.
dated January 8, 2002                                                                                                                                                                           
|         |       |             |                                                                                                                                                                                                                                                                 
|         | 10.26 |             | Remedy upon Default Agreement between Radio Metrix Inc. and SDR
Metro Inc. dated January 8, 2002                                                                                                                                                                
|         |       |             |                                                                                                                                                                                                                                                                 
|         | 10.27 |             | Consulting Agreement Memo re: Brent Simon dated August 28, 2000                                                                                                                                                                                                 
|         |       |             |                                                                                                                                                                                                                                                                 
|         | 10.28 |             | Original Equipment and Independent Distribution License
Agreement between the Company and Rytec Corporation                                                                                                                                                     
|         |       |             |                                                                                                                                                                                                                                                                 
|         | 10.29 |             | Disbursement Request and Authorization, Promissory Note, and
Business Loan Agreement with Regions Bank  July 15, 2002                                                                                                                                          
|         |       |             |                                                                                                                                                                                                                                                                 
|         | 10.30 |             | Promissory Note, Security Agreement, and Escrow Agreement  Re:                                                                                                                                                                                                 
|         |       |             | Daimler Capital Partners, Ltd.  loan and stock options; Stock Option
Agreement with Daimler Capital Partners, Ltd.  October 28, 2002; Stock
Option Agreement with Daimler Capital Partners, Ltd.  February 28,
2003                                          
|         |       |             |                                                                                                                                                                                                                                                                 
|         | 10.31 |             | Stock Option Agreement with H.R. Williams Family Limited
Partnership  February 9, 2000 and Amendment thereto                                                                                                                                                   
|         |       |             |                                                                                                                                                                                                                                                                 
|         | 10.32 |             | SmartGate, Inc. 2000 Employee, Director, Consultant and Advisor
Stock Compensation Plan (Plan 2000)                                                                                                                                                           
|         |       |             |                                                                                                                                                                                                                                                                 
|         | 10.33 |             | Form of Plan 2000 Option Agreement with Stephen A. Michael 
July 26, 2000 (including form of Letter of Investment Intent for
Stephen A. Michael, Robert Knight, Edmund C. King, and Duffey &

Dolan, P.A.)                                                     
|         |       |             |                                                                                                                                                                                                                                                                 
|         | 10.34 |             | Form of Plan 2000 Option Agreement with Robert Knight and Edmund
C. King  July 26, 2000                                                                                                                                                                        
|         |       |             |                                                                                                                                                                                                                                                                 
|         | 10.35 |             | Form of Plan 2000 Option Agreement with Duffey & Dolan, P.A. 
July 26, 2000                                                                                                                                                                                    
|         |       |             |                                                                                                                                                                                                                                                                 
|         | 10.36 |             | Form of Plan 2000 Option Agreements with employees/consultants 
July 26, 2000 and December 20, 2000 (including form of Letters of
Investment Intent) for these and the May 17, 2001, June 28, 2001, and
August 6, 2001 Plan 2000 Option Agreements listed below
|         |       |             |                                                                                                                                                                                                                                                                 
|         | 10.37 |             | Form of Plan 2000 Option Agreement with John E. Scates  May 17,
2001                                                                                                                                                                                           
|         |       |             |                                                                                                                                                                                                                                                                 
|         | 10.38 |             | Form of Plan 2000 Option Agreement with Linda L. Kauffman  June
28, 2001                                                                                                                                                                                       
|         |       |             |                                                                                                                                                                                                                                                                 
|         | 10.39 |             | Form of Plan 2000 Option Agreement with Carl Parks  August 6,
2001                                                                                                                                                                                             
|         |       |             |                                                                                                                                                                                                                                                                 
|         | 10.40 |             | SmartGate Inc. 2002 Incentive Plan (Plan 2002)                                                                                                                                                                                                                
|         |       |             |                                                                                                                                                                                                                                                                 
|         | 10.41 |             | Form of Plan 2002 Option Agreements with Stephen A. Michael,
Samuel S. Duffey and William W. Dolan  January 22, 2002 (including
form of Letters of Investment Intent for all Plan 2002 Option
Agreements)                                                      
|         |       |             |                                                                                                                                                                                                                                                                 
|         | 10.42 |             | Form of Plan 2002 Option Agreements with Robert Knight and
Edmund C. King  January 22, 2002                                                                                                                                                                    
|         |       |             |                                                                                                                                                                                                                                                                 
|         | 10.43 |             | Form of Plan 2002 Option Agreements with employees  January 22,
2002                                                                                                                                                                                           
|         |       |             |                                                                                                                                                                                                                                                                 
|         | 10.44 |             | Form of Promissory Note and Security Agreement re: Stephen A.
Michael, Edmund C. King, Scott Tannehill, Barbara Baker, Nicole A.
Longridge and Edward A. Berstling Option to Exercise/Stock Purchase
(also form of Security Agreement per Exhibit 10.46)        
|         |       |             |                                                                                                                                                                                                                                                                 
|         | 10.45 |             | Form of Modification Agreement re: Edmund C. King, Scott
Tannehill, Barbara J. Baker, and Nicole A. Longridge Promissory Notes
re: Option Exercise/Stock Purchase                                                                                               
|         |       |             |                                                                                                                                                                                                                                                                 
|         | 10.46 |             | Form of Replacement Promissory Note, Assignment and Security
Agreement re: Grace Duffey Irrevocable Trust u/a/d 1/26/00 and Debra
Finehout Option to                                                                                                            

43



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##### 



|         |       |             |                                                                                                                                                                                                                                                                             
|-------- | ----- | ----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ITEM NO. |       | DESCRIPTION
|         |       |            
|         |       |             | Exercise/Stock Purchase (for form of Security Agreement, see
Exhibit 10.44 above).                                                                                                                                                                                          
|         |       |             |                                                                                                                                                                                                                                                                             
|         | 10.47 |             | Registration Rights Agreement by and among the Company and
Stephen A. Michael, Spencer Charles Duffey Irrevocable Trust u/a/d
July 29, 1998, Elizabeth Rosemary Duffey Irrevocable Trust u/a/d July
29, 1998, Robert T. Roth, William W. Dolan dated as of February 25,
2002
|         |       |             |                                                                                                                                                                                                                                                                             
|         | 10.48 |             | Voluntary Resale Restriction Agreement with Robert T. Roth 
November 19, 2001                                                                                                                                                                                              
|         |       |             |                                                                                                                                                                                                                                                                             
|         | 10.49 |             | Stock Option Agreement with Hawk Associates, Inc.  January 16,
2002                                                                                                                                                                                                        
|         |       |             |                                                                                                                                                                                                                                                                             
|         | 10.50 |             | Amended and Restated Stock Option Agreement with G.M. Capital
Partners Limited L.P.  November 8, 2002                                                                                                                                                                      
|         |       |             |                                                                                                                                                                                                                                                                             
|         | 10.51 |             | Form of Plan 2002 Option Agreement with Gregory Newell  June 13, 2002                                                                                                                                                                                                      
|         |       |             |                                                                                                                                                                                                                                                                             
|         | 10.52 |             | Form of Plan 2002 Option Agreement with John E. Scates  June 27, 2002                                                                                                                                                                                                      
|         |       |             |                                                                                                                                                                                                                                                                             
|         | 10.53 |             | Delbrueck Bank Warrant #1                                                                                                                                                                                                                                                   
|         |       |             |                                                                                                                                                                                                                                                                             
|         | 10.54 |             | Delbrueck Bank Warrant #2                                                                                                                                                                                                                                                   
|         |       |             |                                                                                                                                                                                                                                                                             
|         | 10.55 |             | Form of Plan 2000 Option Agreement with Nicole A. Longridge                                                                                                                                                                                                                 
|         |       |             |                                                                                                                                                                                                                                                                             
|         | 10.56 |             | Form of Plan 2000 Option Agreement with Duane Cameron                                                                                                                                                                                                                       
|         |       |             |                                                                                                                                                                                                                                                                             
|         | 10.57 |             | Invisa, Inc. 2003 Incentive Plan                                                                                                                                                                                                                                            
|         |       |             |                                                                                                                                                                                                                                                                             
|         | 10.58 |             | Form of Plan 2003 Option Agreement with Joseph F. Movizzo  May
13, 2003 (including form of Letter of Investment Intent)                                                                                                                                                    
|         |       |             |                                                                                                                                                                                                                                                                             
|         | 10.59 |             | Consulting Agreement  March 2003 between Crescent Fund, Inc.
and the Company                                                                                                                                                                                               
|         |       |             |                                                                                                                                                                                                                                                                             
|         | 10.60 |             | Agreement dated as of April 24, 2003 between Alan A. Feldman and
the Company                                                                                                                                                                                                
|         |       |             |                                                                                                                                                                                                                                                                             
|         | 10.61 |             | Financing Agreement dated as of May 9, 2003 between BarBell
Group, Inc. and the Company                                                                                                                                                                                     
|         |       |             |                                                                                                                                                                                                                                                                             
|         | 10.62 |             | Series 2003A 7% Convertible Note Due June 9, 2004, dated May 9,
2003 from the Company to BarBell Group, Inc.                                                                                                                                                                
|         |       |             |                                                                                                                                                                                                                                                                             
|         | 10.63 |             | Investment Agreement dated as of May 9, 2003 between BarBell
Group, Inc. and the Company                                                                                                                                                                                    
|         |       |             |                                                                                                                                                                                                                                                                             
|         | 10.4  |             | Warrant to Purchase Shares of Common Stock dated as of May 9,
2003, issued by the Company to BarBell Group, Inc.                                                                                                                                                            
|         |       |             |                                                                                                                                                                                                                                                                             
|         | 10.65 |             | Registration Rights Agreement dated as of May 9, 2003 between
the Company and BarBell Group, Inc.                                                                                                                                                                           
|         |       |             |                                                                                                                                                                                                                                                                             
|         | 10.66 |             | Broker-Dealer Placement Agent Selling Agreement  May 2003
between Capstone Partners LC and the Company                                                                                                                                                                     
|         |       |             |                                                                                                                                                                                                                                                                             
|         | 14    |             | Code of Business Conduct and Ethics and Compliance Program                                                                                                                                                                                                                  
|         |       |             |                                                                                                                                                                                                                                                                             
|         | 21    |             | Subsidiaries of Registrant                                                                                                                                                                                                                                                  
|         |       |             |                                                                                                                                                                                                                                                                             
|         | 99.1  |             | Certification of Chief Executive Officer                                                                                                                                                                                                                                    
|         |       |             |                                                                                                                                                                                                                                                                             
|         | 99.2  |             | Certification of Chief Financial Officer                                                                                                                                                                                                                                    

(b)       8-K Reports

The Company has not filed any 8-K Reports.

44



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##### 



Item  14   CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the
participation of the Companys management, including the Chief Executive
Officer (CEO) and Chief Financial Officer (CFO) of the effectiveness of the
design and operation of the Companys disclosure controls and procedures within
90 days before the filing date of this quarterly report. Based on that
evaluation, the Companys management, including the CEO and CFO, concluded that
the Companys disclosure controls and procedures were effective. There have
been no significant changes in the Companys internal controls or in other
factors that could significantly affect internal controls subject to their
evaluation.

SIGNATURES

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

|                      |  |              |  |                                  
|--------------------- |  | ------------ |  | ---------------------------------
|                      |  | INVISA, INC.
|                      |  |              |  |                                  
|Dated: June  23, 2003 |  |              |  | /s/ Stephen A. Michael, President
|                      |  |             
|                      |  |              |  | Stephen A. Michael               
|                      |  |              |  | As its President                 

Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf
of Invisa and in the capacities and on the dates indicated.

|      |      |  |          |  |                                                     
|----- | ---- |  | -------- |  | ----------------------------------------------------
|Date: | June |  | 23, 2003 |  | /s/ Stephen A. Michael

Stephen A. Michael, Director
|      |      |  |          |  |                                                     
|Date: | June |  | 23, 2003 |  | /s/ Samuel S. Duffey

Samuel S. Duffey, Director    
|      |      |  |          |  |                                                     
|Date: | June |  | 23, 2003 |  | /s/ Edmund C. King

Edmund C. King, Director        
|      |      |  |          |  |                                                     
|Date: | June |  | 23, 2003 |  | /s/ Robert Knight

Robert Knight, Director          
|      |      |  |          |  |                                                     
|Date: | June |  | 23, 2003 |  | /s/ Gregory J. Newell

Gregory J. Newell, Director  
|      |      |  |          |  |                                                     
|Date: | June |  | 23, 2003 |  | /s/ John E. Scates

John E. Scates, Director        
|      |      |  |          |  |                                                     
|Date: | June |  | 23, 2003 |  | /s/ Joseph F. Movizzo

Joseph F. Movizzo, Director  

45



---



##### 



CERTIFICATIONS

I, Stephen A. Michael, certify that:

1.          I have reviewed this annual report on Form 10-KSB of Invisa, Inc.
(Invisa);

2.          Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.          Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
Invisa as of and for, the periods presented in this annual report;

4.          Invisas other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for Invisa and have:

a.     Designed such disclosure controls and procedures to ensure that
material information relating to Invisa, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

b.     Evaluated the effectiveness of Invisas disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the Evaluation Date); and

c.     Presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.          Invisas other certifying officers and I have disclosed, based on our
most recent evaluation, to Invisas auditors and the audit committee of
Invisas board of directors (or persons performing the equivalent functions):

a.     All significant deficiencies in the design or operation of internal
controls which could adversely affect Invisas ability to record, process,
summarize and report financial data and have identified for Invisas auditors
any material weaknesses in internal controls; and

b.     Any fraud, whether or not material, that involves management or other
employees who have a significant role in Invisas internal controls; and

6.          Invisas other certifying officers and I have indicated in this annual
report whether there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

|      |  |      |  |        |  |                                                      
|----- |  | ---- |  | ------ |  | -----------------------------------------------------
|Date: |  | June |  | , 2003 |  | /s/ Stephen A. Michael, President

Stephen A. Michael
|      |  |      |  |        |  | President                                            

46



---



##### 



I, Edmund C. King, certify that:

1.          I have reviewed this annual report on Form 10-KSB of Invisa, Inc;

2.          Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.          Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
Invisa as of and for, the periods presented in this annual report;

4.          Invisas other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for Invisa and have:

a.     Designed such disclosure controls and procedures to ensure that
material information relating to Invisa, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

b.     Evaluated the effectiveness of Invisas disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the Evaluation Date); and

c.     Presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.          Invisas other certifying officers and I have disclosed, based on our
most recent evaluation, to Invisas auditors and the audit committee of
registrants board of directors (or persons performing the equivalent
functions):

a.     All significant deficiencies in the design or operation of internal
controls which could adversely affect Invisas ability to record, process,
summarize and report financial data and have identified for Invisas auditors
any material weaknesses in internal controls; and

b.     Any fraud, whether or not material, that involves management or other
employees who have a significant role in Invisas internal controls; and

6.          Invisas other certifying officers and I have indicated in this annual
report whether there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

|      |  |      |  |        |  |                                   
|----- |  | ---- |  | ------ |  | ----------------------------------
|Date: |  | June |  | , 2003 |  | /s/ Edmund C. King

Edmund C. King
|      |  |      |  |        |  | Chief Financial Officer           

47



---



##### 



CONTENTS

|                                                   |                                                |  |      |     | 
|-------------------------------------------------- | ---------------------------------------------- |  | ---- | --- | 
|                                                   |                                                |  | Page
|                                                   |                                                |  |     
|REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS |                                                |  | F-2  |    
|CONSOLIDATED FINANCIAL STATEMENTS                  |                                                |  |      |    
|                                                   | Consolidated Balance Sheets                    |  |      | F-3 | 
|                                                   | Consolidated Statements of Operations          |  |      | F-4 | 
|                                                   | Consolidated Statement of Stockholders Equity |  |      | F-5 | 
|                                                   | Consolidated Statements of Cash Flows          |  |      | F-6 | 
|                                                   | Notes to Consolidated Financial Statements     |  |      | F-8 | 

F-1



---



##### 



Report of Independent Certified Public Accountants

Board of Directors and Stockholders
Invisa, Inc.

We have audited the consolidated balance sheets of Invisa, Inc. (a development
stage enterprise) as of December 31, 2001 and 2002 and the related consolidated
statements of operations, stockholders equity, and cash flows for the twelve
month periods then ended and the period February 12, 1997 (date of inception)
through December 31, 2002. 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 audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Invisa, Inc. as
of December 31, 2001 and 2002 and the consolidated results of operations and
cash flows for the twelve month periods then ended and the period February 12,
1997 (date of inception) through December 31, 2002, 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 C, The Company
incurred a net loss during the year ended December 31, 2002 of $3,581,186 and
for the period February 12, 1997 (date of inception) through December 31, 2002
of $8,963,815. These factors, among others as discussed in Note C to the
financial statements, raise substantial doubt about the Companys ability to
continue as a going concern. Managements plans in regard to these matters are
also described in Note C. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

/s/ Grant Thornton LLP

Tampa, Florida
May 30, 2003

F-2



---



##### 



Invisa, Inc.
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS

|                                       |                                                                                                                                     |                                            |         |            |           |              |           |              |           |  |  | 
|-------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ---------- | --------- | ------------ | --------- | ------------ | --------- |  |  | 
|                                       |                                                                                                                                     |                                            |         |            |           | December 31, |           | December 31,
|                                       |                                                                                                                                     |                                            |         |            |           | 2001         |           | 2002        
|                                       |                                                                                                                                     |                                            |         |            |           |              |           |             
|ASSETS                                 |                                                                                                                                     |                                            |         |            |           |              |           |             
|Current assets:                        |                                                                                                                                     |                                            |         |            |           |              |           |             
|                                       | Cash and cash equivalents                                                                                                           |                                            | $       | 1,612,524  |           |              | $         | 98,410       |          
|                                       | Accounts receivable                                                                                                                 |                                            |         | 37,179     |           |              |           | 73,180       |          
|                                       | Inventories                                                                                                                         |                                            |         | 88,892     |           |              |           | 296,608      |          
|                                       | Refundable deposits                                                                                                                 |                                            |         | 82,704     |           |              |           | 69,190       |          
|                                       |                                                                                                                                     |                                            |         |            |           |              |           |             
|                                       |                                                                                                                                     | Total current assets                       |         |            | 1,821,299 |              |           |              | 537,388   | 
|Note receivable  related party        |                                                                                                                                     |                                            | 152,094 |            |           |              | 160,898   |             
|Furniture, fixtures and equipment, net |                                                                                                                                     |                                            | 69,147  |            |           |              | 121,647   |             
|Patent, net                            |                                                                                                                                     |                                            |        |            |           |              | 3,641,375 |             
|Other assets                           |                                                                                                                                     |                                            | 9,784   |            |           |              | 5,008     |             
|                                       |                                                                                                                                     |                                            |         |            |           |              |           |             
|                                       |                                                                                                                                     | Total assets                               |         | $          | 2,052,324 |              |           | $            | 4,466,316 | 
|                                       |                                                                                                                                     |                                            |         |            |           |              |           |              |          
|LIABILITIES AND STOCKHOLDERS EQUITY   |                                                                                                                                     |                                            |         |            |           |              |           |             
|Current liabilities:                   |                                                                                                                                     |                                            |         |            |           |              |           |             
|                                       | Accounts payable, trade                                                                                                             |                                            | $       | 60,585     |           |              | $         | 294,082      |          
|                                       | Accrued expenses                                                                                                                    |                                            |         | 138,191    |           |              |           | 85,089       |          
|                                       | Current portion of notes payable                                                                                                    |                                            |         | 27,500     |           |              |           |             |          
|                                       | Line of credit                                                                                                                      |                                            |         | 98,403     |           |              |           | 123,402      |          
|                                       | Notes payable                                                                                                                       |                                            |         |           |           |              |           | 116,367      |          
|                                       | Due to related party                                                                                                                |                                            |         | 6,121      |           |              |           | 6,121        |          
|                                       | Due to shareholders and officers                                                                                                    |                                            |         | 355,074    |           |              |           | 747,716      |          
|                                       |                                                                                                                                     |                                            |         |            |           |              |           |             
|                                       |                                                                                                                                     | Total current liabilities                  |         |            | 685,874   |              |           |              | 1,372,777 | 
|Notes payable to related parties       |                                                                                                                                     |                                            | 330,500 |            |           |              | 1,300,000 |             
|Notes payable, less current portion    |                                                                                                                                     |                                            |        |            |           |              | 600,000   |             
|Deferred revenue                       |                                                                                                                                     |                                            |        |            |           |              | 300,000   |             
|Stockholders equity                   |                                                                                                                                     |                                            |         |            |           |              |           |             
|                                       | Preferred stock, 5,000,000 shares authorized
($.001 par value) no shares issued                                                     |                                            |         |           |           |              |           |             |          
|                                       | Common stock; 95,000,000 shares authorized
($.001 par value), 11,965,580 and 12,990,488
shares issued and outstanding, respectively |                                            |         | 11,965     |           |              |           | 12,990       |          
|                                       | Additional paid-in capital                                                                                                          |                                            |         | 7,509,814  |           |              |           | 11,006,664   |          
|                                       | Stock subscriptions receivable                                                                                                      |                                            |         | (1,103,200 | )         |              |           | (1,162,300   | )        
|                                       | Deficit accumulated during the development stage                                                                                    |                                            |         | (5,382,629 | )         |              |           | (8,963,815   | )        
|                                       |                                                                                                                                     |                                            |         |            |           |              |           |             
|                                       |                                                                                                                                     | Total stockholders equity                 |         |            | 1,035,950 |              |           |              | 893,539   | 
|                                       |                                                                                                                                     |                                            |         |            |           |              |           |             
|                                       |                                                                                                                                     | Total liabilities and stockholders equity |         | $          | 2,052,324 |              |           | $            | 4,466,316 | 
|                                       |                                                                                                                                     |                                            |         |            |           |              |           |              |          

The accompanying notes are an integral part of these statements.

F-3



---



##### 



Invisa, Inc.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                 |                   |          |                   |        |              |            |              |        |              |            |            |         |               |   | 
|------------------------------------------------ | ----------------- | -------- | ----------------- | ------ | ------------ | ---------- | ------------ | ------ | ------------ | ---------- | ---------- | ------- | ------------- | - | 
|                                                 |                   |          |                   |        |              |            |              |        |              |            |            |         | February 12, 
|                                                 |                   |          |                   |        |              |            |              |        |              |            |            |         | 1997 (Date of
|                                                 |                   |          |                   |        |              |            |              |        |              |            |            |         | inception)   
|                                                 |                   |          |                   |        | Year Ended   |            | Year Ended   |        | Through     
|                                                 |                   |          |                   |        | December 31, |            | December 31, |        | December 31,
|                                                 |                   |          |                   |        | 2001         |            | 2002         |        | 2002        
|                                                 |                   |          |                   |        |              |            |              |        |             
|Net sales                                        |                   | $        | 167,111           |        |              | $          | 257,118      |        |              | $          | 547,903    |        
|Cost of goods sold                               |                   |          | 92,766            |        |              |            | 175,900      |        |              |            | 342,742    |        
|                                                 |                   |          |                   |        |              |            |              |        |              |            |            |        
|                                                 | Gross profit      |          |                   | 74,345 |              |            |              | 81,218 |              |            |            | 205,161 |              
|Research and development costs                   |                   |          | 452,482           |        |              |            | 660,844      |        |              |            | 2,266,144  |        
|Selling, general and administrative expenses     |                   |          | 2,315,055         |        |              |            | 2,813,897    |        |              |            | 6,629,985  |        
|                                                 |                   |          |                   |        |              |            |              |        |              |            |            |        
|Loss from operations                             |                   |          | (2,693,192        | )      |              |            | (3,393,523   | )      |              |            | (8,690,968 | )      
|Interest expense, net                            |                   |          | 9,708             |        |              |            | 187,663      |        |              |            | 272,847    |        
|                                                 |                   |          |                   |        |              |            |              |        |              |            |            |        
|Loss before income tax                           |                   |          | (2,702,900        | )      |              |            | (3,581,186   | )      |              |            | (8,963,815 | )      
|Income tax                                       |                   |          |                  |        |              |            |             |        |              |            |           |        
|                                                 |                   |          |                   |        |              |            |              |        |              |            |            |        
|                                                 |                   | Net loss |                   | $      | (2,702,900   | )          |              | $      | (3,581,186   | )          |            | $       | (8,963,815    | )
|                                                 |                   |          |                   |        |              |            |              |        |              |            |            |        
|Net loss per common share:                       |                   |          |                   |        |              |            |              |        |              |            |            |        
|                                                 | Basic and diluted |          | $                 | (0.24  | )            |            | $            | (0.28  | )            |            |            |         |              
|                                                 |                   |          |                   |        |              |            |              |        |              |            |            |        
|Weighted average common stock shares
outstanding |                   |          |                   |        |              |            |              |        |              |            |            |        
|                                                 |                   |          | Basic and diluted |        |              | 11,234,610 |              |        |              | 12,754,832 |            |         |               |   | 
|                                                 |                   |          |                   |        |              |            |              |        |              |            |            |        

The accompanying notes are an integral part of these statements.

F-4



---



##### 



Invisa, Inc.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

|                                                                   |  |              |            |            |  |         |        |            |  |         |            |               |  |             |            |   |  |         |            |   |  |   |            |  
|------------------------------------------------------------------ |  | ------------ | ---------- | ---------- |  | ------- | ------ | ---------- |  | ------- | ---------- | ------------- |  | ----------- | ---------- | - |  | ------- | ---------- | - |  | - | ---------- | -
|                                                                   |  |              |            |            |  |         |        |            |  |         |            |               |  |             |            |   |  | Deficit |            |   |  |  
|                                                                   |  | COMMON STOCK |            |            |  |         |        |            |  |         |            | Accumulated   |  |             |            |  
|                                                                   |  |              |            | Additional |  | Stock   |        | During the |  |         |            |              
|                                                                   |  |              |            |            |  |         |        |            |  | Paid-In |            | Subscriptions |  | Development |            |   |  |        
|                                                                   |  | SHARES       |            | Amount     |  | Capital |        | Receivable |  | Stage   |            | Total        
|                                                                   |  |              |            |            |  |         |        |            |  |         |            |              
|FEBRUARY 12, 1997 (INCEPTION)                                      |  |              |           |            |  | $       |       |            |  | $       |           |               |  | $           |           |   |  | $       |           |   |  | $ |           |  
|Issuance of common stock to founders                               |  |              | 6,105,128  |            |  |         | 5,980  |            |  |         | (5,980     | )             |  |             |           |   |  |         |           |   |  |   |           |  
|Net loss                                                           |  |              |           |            |  |         |       |            |  |         |           |               |  |             |           |   |  |         | (351,207   | ) |  |   | (351,207   | )
|                                                                   |  |              |            |            |  |         |        |            |  |         |            |               |  |             |            |   |  |         |            |   |  |   |            |  
|BALANCE AT MARCH 31, 1998                                          |  |              | 6,105,128  |            |  |         | 5,980  |            |  |         | (5,980     | )             |  |             |           |   |  |         | (351,207   | ) |  |   | (351,207   | )
|Issuance of common stock for cash                                  |  |              | 690,759    |            |  |         | 691    |            |  |         | 233,199    |               |  |             |           |   |  |         |           |   |  |   | 233,890    |  
|Net loss                                                           |  |              |           |            |  |         |       |            |  |         |           |               |  |             |           |   |  |         | (249,612   | ) |  |   | (249,612   | )
|                                                                   |  |              |            |            |  |         |        |            |  |         |            |               |  |             |            |   |  |         |            |   |  |   |            |  
|BALANCE AT MARCH 31, 1999                                          |  |              | 6,795,887  |            |  |         | 6,671  |            |  |         | 227,219    |               |  |             |           |   |  |         | (600,819   | ) |  |   | (366,929   | )
|Common stock issuable for rent                                     |  |              | 125,079    |            |  |         | 125    |            |  |         | 64,743     |               |  |             |           |   |  |         |           |   |  |   | 64,868     |  
|Exercise of stock options                                          |  |              | 924,214    |            |  |         | 924    |            |  |         | 984,076    |               |  |             | (985,000   | ) |  |         |           |   |  |   |           |  
|Issuance of common stock related to
reorganization                 |  |              | 2,009,000  |            |  |         | 2,009  |            |  |         | 227,991    |               |  |             |           |   |  |         |           |   |  |   | 230,000    |  
|Issuance of common stock for cash                                  |  |              | 681,380    |            |  |         | 681    |            |  |         | 1,102,878  |               |  |             |           |   |  |         |           |   |  |   | 1,103,559  |  
|Net loss                                                           |  |              |           |            |  |         |       |            |  |         |           |               |  |             |           |   |  |         | (792,932   | ) |  |   | (792,932   | )
|                                                                   |  |              |            |            |  |         |        |            |  |         |            |               |  |             |            |   |  |         |            |   |  |   |            |  
|BALANCE AT MARCH 31, 2000                                          |  |              | 10,535,560 |            |  |         | 10,410 |            |  |         | 2,606,907  |               |  |             | (985,000   | ) |  |         | (1,393,751 | ) |  |   | 238,566    |  
|Common stock issuable for rent                                     |  |              | 39,720     |            |  |         | 165    |            |  |         | 23,341     |               |  |             |           |   |  |         |           |   |  |   | 23,506     |  
|Interest accrued on notes related to stock
subscription receivable |  |              |           |            |  |         |       |            |  |         | 59,100     |               |  |             | (59,100    | ) |  |         |           |   |  |   |           |  
|Issuance of common stock for cash                                  |  |              | 238,000    |            |  |         | 238    |            |  |         | 657,075    |               |  |             |           |   |  |         |           |   |  |   | 657,313    |  
|Issuance of common stock options for services                      |  |              |           |            |  |         |       |            |  |         | 248,102    |               |  |             |           |   |  |         |           |   |  |   | 248,102    |  
|Net loss                                                           |  |              |           |            |  |         |       |            |  |         |           |               |  |             |           |   |  |         | (1,285,978 | ) |  |   | (1,285,978 | )
|                                                                   |  |              |            |            |  |         |        |            |  |         |            |               |  |             |            |   |  |         |            |   |  |   |            |  
|BALANCE AT DECEMBER 31, 2000                                       |  |              | 10,813,280 |            |  |         | 10,813 |            |  |         | 3,594,525  |               |  |             | (1,044,100 | ) |  |         | (2,679,729 | ) |  |   | (118,491   | )
|Issuance of common stock for cash                                  |  |              | 1,057,300  |            |  |         | 1,057  |            |  |         | 3,280,504  |               |  |             |           |   |  |         |           |   |  |   | 3,281,561  |  
|Interest accrued on notes related to stock
subscription receivable |  |              |           |            |  |         |       |            |  |         | 59,100     |               |  |             | (59,100    | ) |  |         |           |   |  |   |           |  
|Issuance of common stock for services                              |  |              | 95,000     |            |  |         | 95     |            |  |         | 332,450    |               |  |             |           |   |  |         |           |   |  |   | 332,545    |  
|Issuance of common stock options for services                      |  |              |           |            |  |         |       |            |  |         | 243,235    |               |  |             |           |   |  |         |           |   |  |   | 243,235    |  
|Net loss                                                           |  |              |           |            |  |         |       |            |  |         |           |               |  |             |           |   |  |         | (2,702,900 | ) |  |   | (2,702,900 | )
|                                                                   |  |              |            |            |  |         |        |            |  |         |            |               |  |             |            |   |  |         |            |   |  |   |            |  
|BALANCE AT DECEMBER 31, 2001                                       |  |              | 11,965,580 |            |  |         | 11,965 |            |  |         | 7,509,814  |               |  |             | (1,103,200 | ) |  |         | (5,382,629 | ) |  |   | 1,035,950  |  
|Issuance of common stock and units for cash                        |  |              | 589,908    |            |  |         | 590    |            |  |         | 1,746,429  |               |  |             |           |   |  |         |           |   |  |   | 1,747,019  |  
|Issuance of common stock related to Radio
Metrix merger            |  |              | 435,000    |            |  |         | 435    |            |  |         | 1,522,065  |               |  |             |           |   |  |         |           |   |  |   | 1,522,500  |  
|Interest accrued on notes related to stock
subscription receivable |  |              |           |            |  |         |       |            |  |         | 59,100     |               |  |             | (59,100    | ) |  |         |           |   |  |   |           |  
|Issuance of common stock options for services                      |  |              |           |            |  |         |       |            |  |         | 25,256     |               |  |             |           |   |  |         |           |   |  |   | 25,256     |  
|Original issue discount                                            |  |              |           |            |  |         |       |            |  |         | 144,000    |               |  |             |           |   |  |         |           |   |  |   | 144,000    |  
|Net loss                                                           |  |              |           |            |  |         |       |            |  |         |           |               |  |             |           |   |  |         | (3,581,186 | ) |  |   | (3,581,186 | )
|                                                                   |  |              |            |            |  |         |        |            |  |         |            |               |  |             |            |   |  |         |            |   |  |   |            |  
|BALANCE AT DECEMBER 31, 2002                                       |  |              | 12,990,488 |            |  | $       | 12,990 |            |  | $       | 11,006,664 |               |  | $           | (1,162,300 | ) |  | $       | (8,963,815 | ) |  | $ | 893,539    |  
|                                                                   |  |              |            |            |  |         |        |            |  |         |            |               |  |             |            |   |  |         |            |   |  |   |            |  

The accompanying notes are an integral part of this statement.

F-5



---



##### 



Invisa, Inc.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                      |                                                                             |                                                 |                                           |                                           |         |              |            |              |         |              |            |            |         |               |            |  
|------------------------------------- | --------------------------------------------------------------------------- | ----------------------------------------------- | ----------------------------------------- | ----------------------------------------- | ------- | ------------ | ---------- | ------------ | ------- | ------------ | ---------- | ---------- | ------- | ------------- | ---------- | -
|                                      |                                                                             |                                                 |                                           |                                           |         |              |            |              |         |              |            |            |         | February 12, 
|                                      |                                                                             |                                                 |                                           |                                           |         |              |            |              |         |              |            |            |         | 1997 (Date of
|                                      |                                                                             |                                                 |                                           |                                           |         |              |            |              |         |              |            |            |         | inception)   
|                                      |                                                                             |                                                 |                                           |                                           |         | Year Ended   |            | Year Ended   |         | Through     
|                                      |                                                                             |                                                 |                                           |                                           |         | December 31, |            | December 31, |         | December 31,
|                                      |                                                                             |                                                 |                                           |                                           |         | 2001         |            | 2002         |         | 2002        
|                                      |                                                                             |                                                 |                                           |                                           |         |              |            |              |         |             
|Cash flows from operating activities: |                                                                             |                                                 |                                           |                                           |         |              |            |              |         |              |            |           
|                                      | Net loss                                                                    |                                                 | $                                         | (2,702,900                                | )       |              | $          | (3,581,186   | )       |              | $          | (8,963,815 | )      
|                                      | Adjustments to reconcile net loss to net cash used in operating activities: |                                                 |                                           |                                           |         |              |            |              |         |              |            |            |        
|                                      |                                                                             | Depreciation and amortization                   |                                           |                                           | 9,000   |              |            |              | 407,701 |              |            |            | 435,061 |              
|                                      |                                                                             | Stock options issued for employee services      |                                           |                                           | 243,235 |              |            |              |        |              |            |            | 516,593 |              
|                                      |                                                                             | Common stock and options exchanged for services |                                           |                                           | 332,545 |              |            |              | 25,256  |              |            |            | 420,794 |              
|                                      |                                                                             | Changes in operating assets and liabilities:    |                                           |                                           |         |              |            |              |         |              |            |            |         |              
|                                      |                                                                             |                                                 | Accounts and notes receivable             |                                           |         | (170,618     | )          |              |         | (44,805      | )          |            |         | (234,078      | )         
|                                      |                                                                             |                                                 | Inventories                               |                                           |         | 54,643       |            |              |         | (207,716     | )          |            |         | (296,608      | )         
|                                      |                                                                             |                                                 | Refundable deposits and other assets      |                                           |         | (82,479      | )          |              |         | 18,290       |            |            |         | (74,199       | )         
|                                      |                                                                             |                                                 | Accounts payable, trade                   |                                           |         | 41,534       |            |              |         | 233,497      |            |            |         | 294,082       |           
|                                      |                                                                             |                                                 | Accrued expenses                          |                                           |         | 155,911      |            |              |         | (217,526     | )          |            |         | 35,089        |           
|                                      |                                                                             |                                                 | Deferred revenue                          |                                           |         |             |            |              |         | 300,000      |            |            |         | 300,000       |           
|                                      |                                                                             |                                                 | Due to employees and related parties, net |                                           |         | (10,000      | )          |              |         | 332,066      |            |            |         | 578,837       |           
|                                      |                                                                             |                                                 |                                           |                                           |         |              |            |              |         |              |            |            |        
|                                      |                                                                             |                                                 |                                           | Net cash used in operating activities     |         |              | (2,129,129 | )            |         |              | (2,734,423 | )          |         |               | (6,988,244 | )
|                                      |                                                                             |                                                 |                                           |                                           |         |              |            |              |         |              |            |            |        
|Cash flows from investing activities: |                                                                             |                                                 |                                           |                                           |         |              |            |              |         |              |            |           
|                                      | Patent acquisition                                                          |                                                 |                                           |                                          |         |              |            | (550,000     | )       |              |            | (550,000   | )      
|                                      | Transaction costs in connection
with RMI business combination               |                                                 |                                           |                                          |         |              |            | (121,475     | )       |              |            | (121,475   | )      
|                                      | Purchases of furniture, fixtures and equipment                              |                                                 |                                           | (19,711                                   | )       |              |            | (82,601      | )       |              |            | (179,107   | )      
|                                      |                                                                             |                                                 |                                           |                                           |         |              |            |              |         |              |            |            |        
|                                      |                                                                             |                                                 |                                           | Net cash used in investing activities     |         |              | (19,711    | )            |         |              | (754,076   | )          |         |               | (850,582   | )
|                                      |                                                                             |                                                 |                                           |                                           |         |              |            |              |         |              |            |            |        
|Cash flows from financing activities: |                                                                             |                                                 |                                           |                                           |         |              |            |              |         |              |            |           
|                                      | Net change in line of credit                                                |                                                 |                                           | (37,124                                   | )       |              |            | 24,999       |         |              |            | 123,401    |        
|                                      | Proceeds from (payment of) notes payable                                    |                                                 |                                           |                                          |         |              |            |             |         |              |            | 358,001    |        
|                                      | Proceeds from note payable                                                  |                                                 |                                           |                                          |         |              |            | 202,367      |         |              |            | 202,367    |        
|                                      | Proceeds from sale of common stock, net                                     |                                                 |                                           | 3,281,561                                 |         |              |            | 1,747,019    |         |              |            | 7,023,467  |        
|                                      | Cash received with combination transaction                                  |                                                 |                                           |                                          |         |              |            |             |         |              |            | 230,000    |        
|                                      |                                                                             |                                                 |                                           |                                           |         |              |            |              |         |              |            |            |        
|                                      |                                                                             |                                                 |                                           | Net cash provided by financing activities |         |              | 3,244,437  |              |         |              | 1,974,385  |            |         |               | 7,937,236  |  
|                                      |                                                                             |                                                 |                                           |                                           |         |              |            |              |         |              |            |            |        
|Net increase (decrease) in cash       |                                                                             |                                                 | 1,095,597                                 |                                           |         |              | (1,514,114 | )            |         |              | 98,410     |           
|Cash at beginning of period           |                                                                             |                                                 | 516,927                                   |                                           |         |              | 1,612,524  |              |         |              |           |           
|                                      |                                                                             |                                                 |                                           |                                           |         |              |            |              |         |              |            |            |        
|Cash at end of period                 |                                                                             | $                                               | 1,612,524                                 |                                           |         | $            | 98,410     |              |         | $            | 98,410     |           
|                                      |                                                                             |                                                 |                                           |                                           |         |              |            |              |         |              |            |            |        

F-6



---



##### 



Invisa, Inc.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS  CONTINUED

|                                                               |                                          |                                                                            |   |              |   |              |         |              |           |   |         |               |           | 
|-------------------------------------------------------------- | ---------------------------------------- | -------------------------------------------------------------------------- | - | ------------ | - | ------------ | ------- | ------------ | --------- | - | ------- | ------------- | --------- | 
|                                                               |                                          |                                                                            |   |              |   |              |         |              |           |   |         | February 12, 
|                                                               |                                          |                                                                            |   |              |   |              |         |              |           |   |         | 1997 (Date of
|                                                               |                                          |                                                                            |   |              |   |              |         |              |           |   |         | inception)   
|                                                               |                                          |                                                                            |   | Year Ended   |   | Year Ended   |         | Through     
|                                                               |                                          |                                                                            |   | December 31, |   | December 31, |         | December 31,
|                                                               |                                          |                                                                            |   | 2001         |   | 2002         |         | 2002        
|                                                               |                                          |                                                                            |   |              |   |              |         |             
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION               |                                          |                                                                            |   |              |   |              |         |              |           |   |         |              
|                                                               | Cash paid during the period for interest |                                                                            | $ | 58,704       |   |              | $       | 53,667       |           |   | $       | 134,237       |          
|                                                               |                                          |                                                                            |   |              |   |              |         |              |           |   |         |               |          
|Notes payable incurred during the period:                      |                                          |                                                                            |   |              |   |              |         |              |           |   |         |              
|                                                               |                                          | In connection with merger transactions                                     |   | $            |  |              |         | $            | 1,300,000 |   |         | $             | 1,300,000 | 
|                                                               |                                          |                                                                            |   |              |   |              |         |              |           |   |         |               |          
|                                                               |                                          | Notes payable canceled in connection with merger transaction               |   | $            |  |              |         | $            | 337,489   |   |         | $             | 337,489   | 
|                                                               |                                          |                                                                            |   |              |   |              |         |              |           |   |         |               |          
|                                                               |                                          | Common stock issued in connection with merger transaction
(435,000 shares) |   | $            |  |              |         | $            | 1,522,500 |   |         | $             | 1,522,500 | 
|                                                               |                                          |                                                                            |   |              |   |              |         |              |           |   |         |               |          
|Due to employees assumed in connection with merger transaction |                                          | $                                                                          |  |              |   | $            | 175,000 |              |           | $ | 175,000 |              
|                                                               |                                          |                                                                            |   |              |   |              |         |              |           |   |         |               |          
|Accrued expenses assumed in connection with merger transaction |                                          | $                                                                          |  |              |   | $            | 50,000  |              |           | $ | 50,000  |              
|                                                               |                                          |                                                                            |   |              |   |              |         |              |           |   |         |               |          
|Common stock (164,799 shares) exchanged for rent               |                                          | $                                                                          |  |              |   | $            |        |              |           | $ | 88,374  |              
|                                                               |                                          |                                                                            |   |              |   |              |         |              |           |   |         |               |          

The accompanying notes are an integral part of these statements.

F-7



---



##### 



Invisa, Inc.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A  DESCRIPTION OF ORGANIZATION AND BUSINESS

Invisa, Inc. (formerly known as SmartGate, Inc.) (the Company or Invisa)
is a development stage enterprise that incorporates safety system technology
and products into automated closure devices, such as parking gates, sliding
gates, overhead garage doors and commercial overhead doors. The Company has
not fully implemented its sales and marketing plan and has, therefore, not
emerged from the development stage.

For the years ended December 31, 2001 and 2002, the Company was related through
common ownership to Radio Metrix, Inc. (RMI), which since 1992 has owned the
licensing rights to the underlying technology used by Invisa and since 2000 has
owned the right to purchase the underlying patent from an unrelated party. The
patent was purchased by RMI in January 2002 for $1.2 million consisting of
$600,000 in cash, which was principally borrowed from the Company, and a
$600,000 note. The Company purchased RMI in February 2002 (see Note B).

NOTE B  BUSINESS COMBINATIONS

Purchase of SmartGate L.C.

Effective February 9, 2000, the Company acquired all of the membership units of
SmartGate L.C. in exchange (the Exchange) for approximately 7,744,000 shares of
common stock, representing 74% of the Companys common stock outstanding at
that time. Prior to the Exchange, Invisa, Inc. (a privately held company
formed in February 1997) had substantially no operations. For accounting
purposes, the Exchange was recorded as a reverse acquisition, with SmartGate
L.C. as the accounting acquirer. As a result, the historical financial
information presented prior to the Exchange is solely that of SmartGate L.C.
The operating results of Invisa, Inc. are combined with those of SmartGate L.C.
following the Exchange.

The stockholders equity presented prior to the exchange represents the number
of the Companys shares of common stock exchanged for shares of SmartGate L.C.
in connection with the exchange. The Companys net assets were recognized as
of the exchange date at historical cost.

Purchase of RMI

In February 2002, the Company purchased 100% of the outstanding capital stock
of RMI, a company owned by the principal shareholders of Invisa, Inc. RMI had
virtually no operations since its inception and, therefore, the Company has
determined that by acquiring RMI, the Company acquired an asset (a patent) and
not a business. At closing, the Company issued two promissory notes totaling
$1,300,000 ($500,000 is payable in one installment 48 months from the closing
with interest payable monthly, and $800,000 is payable in one installment 14
months from the closing with interest payable monthly) and issued 435,000
shares of Invisa common stock. The $800,000 note maturity date was
subsequently amended to April 25, 2004. The Company also agreed to pay
royalties of 7% of all revenue generated from the RMI technology (exclusive of
safety applications), which will be recognized as expense when
incurred. The revenue agreement is effective until terminated by
mutual agreement of the respective parties. Additionally, contingent
consideration to be paid by the Company was as follows prior to amendment:



| |  |  | Upon the emergence from the development stage of the product line
incorporating RMI security technology,
| | - |  | --------------------------------------------------------------------------------------------------------



| | (a) |  | a $4,500,000 promissory note payable in one installment due 60
months from the first commercial sale with accrued interest. While
outstanding, the promissory note may, at the discretion of the holder,
be converted into shares of Invisa, Inc. common stock at the
conversion ratio of one share of Invisa, Inc. common stock for each
$5.00 of principal and interest.
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | 1,125,000 shares of Invisa common stock, which may be increased
by the Board of Directors of Invisa, Inc. in order that the aggregate
market value of the shares issued is at least $4,500,000 on the
issuance date.                                                                                                                                                      

F-8



---



##### 



Invisa, Inc.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE B  BUSINESS COMBINATIONS  Continued



| |  |  | 3,750,000 shares of Invisa, Inc. common stock, upon the first to
occur (i) $25,000,000 in revenue from RMI technology (security
technology), (ii) $4,000,000 in pre-tax profits from RMI technology
(security technology) and earned royalties, (iii) any 30-day period
during which Invisas common stock has an average closing price which
exceeds $15.00 per share, or (iv) a change in control.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Invisa recorded the cost of the patent, which consists of the consideration
paid, the liabilities assumed and the fair value of the stock issued (based on
a $3.50 per share offering price) as follows:

|                                  |  |   |           | 
|--------------------------------- |  | - | --------- | 
|Promissory notes issued           |  | $ | 1,300,000 | 
|Stock issued                      |  |   | 1,522,500 | 
|Liabilities assumed (1)           |  |   | 1,018,257 | 
|Costs relating to the acquisition |  |   | 120,218   | 
|                                  |  |   |           | 
|                                  |  | $ | 3,960,975 | 
|                                  |  |   |           | 

(1)     Liabilities assumed includes $600,000 note payable to the original owner
of the patent, $550,000 note payable to the Company, $357,000 receivable from
the Company, $175,000 payable to the shareholders of RMI and $50,000 of other
liabilities.

The Company has obtained a third-party valuation of RMI, which supports the
initial purchase price plus the contingent consideration referred to above.

During April 2003, through an amendment to the agreement, the Company agreed to
issue 3,250,000 shares of its common stock for full satisfaction of the above
contingent consideration. These shares were recorded at the fair value at that
date of $3.00 per share and, as a result, patent cost was increased by
$9,750,000 with a corresponding increase in additional paid-in capital during
April 2003.

Amortization expense will be adjusted for the remaining life of the patent to
reflect the additional patent costs. The Company follows the methodology
presented in SFAS 144 to measure for impairment of the patent. The Company
will continue to monitor its actual and forecasted results of operations and
will consider them in its future impairment analyses.

NOTE C  OPERATING MATTERS

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. For the twelve months ended December
31, 2002 and since the date of inception, the Company has had a net loss of
$3,581,186 and $8,963,815, respectively. As of December 31, 2002, the Company
has not emerged from the development stage and has negative working capital of
approximately $835,000. In view of these matters, recoverability of recorded
property and equipment, intangible assets and other asset amounts shown in the
accompanying financial statements is dependent upon continued operation of the
Company, which in turn is dependent upon the Company improving its overall
level of profitability. Since inception, the Company has financed its
operations principally from the sale of equity securities, as the Company has
not generated significant revenues from the sales of its products. The Company
intends on financing its future development activities and its working capital
needs largely from the sale of equity securities with some additional funding
from other traditional financing sources, including increasing the available
line of credit, term notes and proceeds from licensing agreements until such
time that funds provided by operations are sufficient to fund working capital
requirements. Currently, the Company is in the process of offering up
to 2,000,000
shares of common stock at a purchase price of $3.00 per share. In
2003, the Company has sold 68,000 shares pursuant to the Offering. During April 2003, the
Company entered into a stock subscription agreement that requires the
subscriber to purchase $1,200,000 of common stock over the course of one year.
The price of common stock under this agreement is the greater of $3.00 per
share or one half of the then current market price. The shares issued are
redeemable at the option of the holder, payable in the form of a promissory
note with a 13-month maturity. Subsequent to December 31, 2002, the Company
has received firm commitments to sell, or has sold, common stock totaling
$330,320. Additionally, subsequent to December 31, 2002, the Company has
increased its note payable funding and related obligation payable to a third
party from $200,000 to $300,000 which is payable during 2003. The sole
recourse to the holder of this

F-9



---



##### 



Invisa, Inc.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE C  OPERATING MATTERS  Continued

note upon default, is limited to recovery of 500,000 shares of common stock
currently held in escrow. In addition, the Company is in licensing fee
discussions with potential distributors of the Companys future security
products. While there can be no assurance that such sources will provide
adequate funding for the Companys operations, management believes such sources
will be available to the Company.

NOTE D  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements as of December 31, 2001 include the
accounts of Invisa, Inc. and its wholly owned subsidiary, SmartGate L.C. The
consolidated financial statements as of December 31, 2002, include the accounts
of Invisa and its wholly owned subsidiaries, SmartGate, L.C. and RMI. All
intercompany balances and transactions have been eliminated.

Use of Estimates

In preparing the consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America,
management makes estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements, as well as the reported amounts of
revenues and expense during the reporting period. Actual results could differ
from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.

Accounts Receivable

Accounts receivable are due primarily from companies in the gate manufacturing
industry located throughout the United States and the United Kingdom. Credit
is extended based on an evaluation of the customers financial condition and,
generally, collateral is not required. Bad debts have not been significant.
For the year ended December 31, 2002, a customer located in the United Kingdom
accounted for 30% of total Company sales.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.

Furniture, Fixtures and Equipment

Furniture, fixtures, and equipment are depreciated on a straight-line basis
over their estimated useful lives, principally five years. Leasehold
improvements are amortized over the term of the lease or the estimated useful
lives, whichever is shorter. Accumulated depreciation and amortization was
$27,360 and $57,460 at December 31, 2001 and 2002, respectively. Accelerated
methods are used for tax depreciation.

Patent

The patent for the Companys underlying technology is amortized on a
straight-line method over 10 years, which represents the remaining life of the
patent. Accumulated amortization at December 31, 2002 approximates $319,600.

Revenue

Sales under fixed price arrangements are recognized as revenue upon shipment of
product (when title transfers to the purchaser) and collectibility is assured.

F-10



---



##### 



Invisa, Inc.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE D  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  Continued

In July of 2002, the Company entered into a five-year agreement with Rytec
Corporation, whereby Rytec became the exclusive licensee in North America for
certain industrial doors. Under the agreement, Rytec paid the Company $300,000
which represents an advance payment to be applied towards the purchase of the
first 3,000 units by Rytec. As of December 31, 2002, no sales transactions had
occurred under the agreement.

Research and Development Costs

Research and development costs consist of direct and indirect costs that are
associated with the development of the Companys technology. These costs are
expensed as incurred.

Advertising Costs

The Company expenses advertising costs as incurred. During the years ended
December 31, 2001 and 2002, advertising expense was $87,866 and $267,532,
respectively.

Warranty Costs

Estimated warranty costs are recognized in the period product is shipped.
However, there have been no significant warranty costs incurred through
December 31, 2002, nor are any significant amounts expected to occur
subsequently. Accordingly, no warranty liability has been recognized for any
period presented.

Income Taxes

The Company elected to be taxed as a partnership under the Internal Revenue
Code for periods prior to the Exchange. Therefore, the stockholders reported
income, deductions, and certain credits on their individual income tax returns.
Following the Exchange, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 109, Accounting for Income Taxes.

Financial Instruments

The Companys financial instruments include cash and cash equivalents, accounts
receivable and accounts payable. The carrying amounts of these financial
instruments approximate their fair value, due to the short-term nature of these
items. The carrying amounts of the line of credit and notes payable
approximate their fair value due to the use of market rates of interest.

Impairment of Long-Lived Assets

The Company evaluates the recoverability of its long-lived assets or asset
groups, including patents, whenever adverse events or changes in business
climate indicate that the expected undiscounted future cash flows from the
related asset may be less than previously anticipated. If the net book value
of the related asset exceeds the undiscounted future cash flows of the asset,
the carrying amount would be reduced to the present value of its expected
future cash flows and an impairment loss would be recognized. The value of the
patent is particularly sensitive to the achievement of forecasted revenue. As
a result, management will compare its actual to budgeted results during 2003
and will consider unfavorable variances in future impairment analyses. There
have been no impairment losses in any of the periods presented.

Earnings Per Common Share

Basic and diluted earnings per share are computed based on the weighted average
number of common stock outstanding during the period. Common stock equivalents
are not considered in the calculation of diluted earnings per share for the
periods presented because their effect would be anti-dilutive.

F-11



---



##### 



Invisa, Inc.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE D  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  Continued

Stock Based Compensation

The Company follows Statement of Financial Accounting Standards (SFAS) No. 123,
Accounting for Stock-Based Compensation(SFAS 123), which establishes a fair
value based method of accounting for stock-based employee compensation plans;
however, the Company has elected to account for its employee stock compensation
plans using the intrinsic value method under Accounting Principles Board
Opinion No. 25, with pro forma disclosures of net earnings and earnings per
share as if the fair value based method of accounting defined in SFAS 123 had
been applied. The Company amortizes compensation costs related to the pro
forma disclosure using the straight-line method over the vesting period of the
employees common stock options.

Had compensation cost for the Companys stock option plan been determined on
the fair value at the grant dates for stock-based employee compensation
arrangements consistent with the method required by SFAS 123, the Companys net
loss and net loss per common share would have been the pro forma amounts
indicated below (see also Note M):

|                                                                                                           |             |   |              |      |              |   |            |      |  
|---------------------------------------------------------------------------------------------------------- | ----------- | - | ------------ | ---- | ------------ | - | ---------- | ---- | -
|                                                                                                           |             |   | Year Ended   |      | Year Ended  
|                                                                                                           |             |   | December 31, |      | December 31,
|                                                                                                           |             |   | 2001         |      | 2002        
|                                                                                                           |             |   |              |      |             
|Net loss, as reported                                                                                      |             | $ | (2,702,900   | )    |              | $ | (3,581,186 | )   
|Less: stock-based employee compensation cost under the
fair value based method, net of related tax effects |             |   | (303,683     | )    |              |   | (367,746   | )   
|                                                                                                           |             |   |              |      |              |   |            |     
|Pro forma net loss                                                                                         |             | $ | (3,006,583   | )    |              | $ | (3,948,932 | )   
|                                                                                                           |             |   |              |      |              |   |            |     
|Net loss per common share-basic and diluted:                                                               |             |   |              |      |              |   |            |     
|                                                                                                           | as reported |   | $            | (.24 | )            |   | $          | (.28 | )
|                                                                                                           |             |   |              |      |              |   |            |     
|                                                                                                           | pro forma   |   | $            | (.27 | )            |   | $          | (.31 | )
|                                                                                                           |             |   |              |      |              |   |            |     

Also included in net loss in 2001 is
243,235 of employee stock based compensation recognized as a variable
stock award.

New Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS 141,
Business Combinations,and SFAS 142, Goodwill and Other Intangible Assets.
SFAS 141 is effective for all business combinations completed after June 30,
2001. SFAS 142 is effective for the year beginning January 1, 2002; however
certain provisions of this Statement apply to goodwill and other intangible
assets acquired between July 1, 2001, and the effective date of SFAS 142. The
adoption of these standards did not have a material impact on the Companys
financial statements.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. This statement addresses financial accounting
and reporting for the impairment or disposal of long-lived assets and
supersedes FASB Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of. The provisions of this
statement are effective for the year beginning January 1, 2002. The adoption
of this standard did not have a material impact on the Companys financial
statements.

In June 2002, the FASB issued Statement 146, Accounting for Costs Associated
with Exit or Disposal Activities. This statement requires entities to
recognize costs associated with exit or disposal activities when liabilities
are incurred rather than when the entity commits to an exit or disposal plan,
as currently required. Examples of costs covered by this guidance include
one-time employee termination benefits, costs to terminate contracts other than
capital leases, costs to consolidate facilities or relocate employees, and
certain other exit or disposal activities. This statement is effective for
fiscal years beginning after December 31, 2002, and will impact any exit or
disposal activities the Company initiates after that date.

F-12



---



##### 



Invisa, Inc.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE D  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  Continued

In December 2002, the FASB issued Statement 148 (SFAS 148), Accounting for
Stock-Based Compensation  Transition and Disclosure: an amendment of FASB
Statement 123(SFAS 123), to provide alternative transition methods for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS 148 amends the disclosure
requirements of SFAS 123 to require prominent disclosures in annual financial
statements about the method of accounting for stock-based employee compensation
and the pro forma effect on reported results of applying the fair value based
method for entities that use the intrinsic value method of accounting. The pro
forma effect disclosures are also required to be prominently disclosed in
interim period financial statements. This statement is effective for financial
statements for fiscal years ending after December 15, 2002 and is effective for
financial reports containing condensed financial statements for interim periods
beginning after December 15, 2002, with earlier application permitted. The
Company does not plan a change to the fair value based method of accounting for
stock-based employee compensation and has included the disclosure requirements
of SFAS 148 in the accompanying financial statements.

In May 2003, FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. This
statement addresses the accounting for certain financial instruments that,
under previous guidance, could be accounted for as equity. SFAS 150 requires
that those instruments be classified as liabilities in the statement of financial
position. In addition, SFAS 150 also requires disclosures about alternative
ways of settling the instruments and the capital structure of certain entities.
Most of the guidance in SFAS 150 is effective for all financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15,
2003. Management has not fully evaluated the effect of adopting this
standard.

In November 2002, the FASB issued FASB Interpretation No. 45, Guarantors
Accounting and Disclosure Requirement for Guarantors, including Indirect
Guarantors of Indebtedness to Others(FIN 45). FIN 45 creates new disclosure
and liability recognition requirements for certain guarantees, including
obligations to stand ready to perform. The initial recognition and measurement
requirements of FIN 45 are effective prospectively for guarantees issued or
modified after December 31, 2002, and the disclosure requirements are effective
for financial statement periods ending after December 15, 2002.

NOTE E  INVENTORIES

Inventories consist of the following:

|               |  |              |        |      |  |   |         | 
|-------------- |  | ------------ | ------ | ---- |  | - | ------- | 
|               |  | December 31,
|               |  |             
|               |  | 2001         |        | 2002
|               |  |              |        |     
|Finished goods |  | $            | 16,973 |      |  | $ | 80,701  | 
|Raw materials  |  |              | 71,919 |      |  |   | 215,907 | 
|               |  |              |        |      |  |   |         | 
|               |  | $            | 88,892 |      |  | $ | 296,608 | 
|               |  |              |        |      |  |   |         | 

NOTE F  ACCRUED EXPENSES

Accrued expenses consist of the following:

|                       |  |              |         |      |  |   |        | 
|---------------------- |  | ------------ | ------- | ---- |  | - | ------ | 
|                       |  | December 31,
|                       |  |             
|                       |  | 2001         |         | 2002
|                       |  |              |         |     
|Accrued compensation   |  | $            | 101,426 |      |  | $ | 10,268 | 
|Accrued interest       |  |              | 23,530  |      |  |   | 7,953  | 
|Other accrued expenses |  |              | 13,235  |      |  |   | 66,868 | 
|                       |  |              |         |      |  |   |        | 
|                       |  | $            | 138,191 |      |  | $ | 85,089 | 
|                       |  |              |         |      |  |   |        | 

F-13



---



##### 



Invisa, Inc.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE G  LINE OF CREDIT

The line of credit at December 31, 2001 and 2002, consists of a $150,000
secured working capital line of credit with a bank. This line of credit was
renewed and matures in July 2003. Interest is payable monthly at prime plus
one percent, or approximately 5.75% at December 31, 2002. Approximately
$26,000 is available for borrowing under the line of credit as of December 31,
2002. The line of credit may be used to finance short term operating capital
and all inventories are pledged as security. There are no financial covenants
associated with this line of credit. A shareholder guarantees the line of
credit.

In October 2002, one of the Companys principal shareholders agreed to
guarantee an additional $150,000 of credit in addition to the $150,000
currently available on the line of credit. The Company has agreed to issue
5,000 shares to the shareholder in consideration for this agreement. The
Company further agreed that, to the extent they borrow any funds under the
extended guarantee (i.e.  in excess of the original $150,000 line of credit)
they will grant to the shareholder an option to purchase, at $2.50 per share,
one share of common stock for each dollar borrowed. An agreement with a lender
has not been executed with regard to this additional guaranteed
amount and, the Company does not anticipate that such an agreement
with a lender will be entered into in the future.

NOTE H  NOTES PAYABLE TO RELATED PARTIES AND NOTES PAYABLE

Notes payable consist of the following:

|                     |                                                                                                                                                                                                 |                                                                                            |         |              |   |      |           |          |         | 
|-------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | ------- | ------------ | - | ---- | --------- | -------- | ------- | 
|                     |                                                                                                                                                                                                 |                                                                                            |         | December 31,
|                     |                                                                                                                                                                                                 |                                                                                            |         |             
|                     |                                                                                                                                                                                                 |                                                                                            |         | 2001         |   | 2002
|                     |                                                                                                                                                                                                 |                                                                                            |         |              |   |     
|Related parties:     |                                                                                                                                                                                                 |                                                                                            |         |              |   |      |           |         
|                     | Notes payable to RMI, due in installments from February 21,
2007 through March 11, 2008, together with interest at 6%,
compounded annually (Satisfied with the RMI acquisition in
2002.)        |                                                                                            | $       | 330,500      |   |      | $         |         |        
|                     | Note payable, due March 31, 2002, together with interest at
prime, compounded annually                                                                                                          |                                                                                            |         | 27,500       |   |      |           |         |        
|                     | Notes payable to principal shareholders and others in
connection with RMI acquisition:                                                                                                          |                                                                                            |         |              |   |      |           |          |        
|                     |                                                                                                                                                                                                 | Due February 25, 2006; interest at 10% for first 180
days, 15%
thereafter, payable monthly |         |              |  |      |           |          | 500,000 | 
|                     |                                                                                                                                                                                                 | Due April 25, 2004, as amended; interest at 15% payable
monthly                            |         |              |  |      |           |          | 800,000 | 
|Other Notes Payable: |                                                                                                                                                                                                 |                                                                                            |         |              |   |      |           |         
|                     | Note payable issued in connection with acquisition of
patent, due
January 8, 2004; interest at 8% payable quarterly; secured
by underlying patent                                               |                                                                                            |         |             |   |      |           | 600,000  |        
|                     | Note payable, net of unamortized original issue discount of
$83,633, principal of $200,000, due October 28, 2003, as
amended; interest at 15% secured by 500,000 shares of
Company common stock |                                                                                            |         |             |   |      |           | 116,367  |        
|                     |                                                                                                                                                                                                 |                                                                                            |         |              |   |      |           |         
|                     |                                                                                                                                                                                                 |                                                                                            | 358,000 |              |   |      | 2,016,367 |         
|                     | Less current maturities                                                                                                                                                                         |                                                                                            |         | (27,500      | ) |      |           | (116,367 | )      
|                     |                                                                                                                                                                                                 |                                                                                            |         |              |   |      |           |         
|                     |                                                                                                                                                                                                 | $                                                                                          | 330,500 |              |   | $    | 1,900,000 |         
|                     |                                                                                                                                                                                                 |                                                                                            |         |              |   |      |           |         

F-14



---



##### 



Invisa, Inc.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE H  NOTES PAYABLE TO RELATED PARTIES AND NOTES PAYABLE  Continued

At December 31, 2002, aggregate maturities of notes payable are as follows:

|                         |  |   |           | 
|------------------------ |  | - | --------- | 
|Year ending December 31, |  |   |           | 
|2003                     |  | $ | 116,367   | 
|2004                     |  |   | 1,400,000 | 
|2005                     |  |   |          | 
|2006                     |  |   | 500,000   | 
|                         |  |   |           | 
|                         |  | $ | 2,016,367 | 
|                         |  |   |           | 

In October 2002, the Company borrowed $200,000 from a non-affiliated party.
The loan bears interest at 15% per annum, payable in advance. The Company
issued a four-year warrant, together with registration rights commencing after
June 28, 2004, to purchase 200,000 shares of common stock at an exercise price
varying from $1.00 to $3.00 per share depending upon the date of loan
repayment. Based on the unpaid status of the notes, the exercise price of the
warrant is $1.00 per share. As a result of this transaction, the Company
recognized an original issue discount of $144,000. Included in interest
expense is $58,000 arising from the amortization of the original issue
discount. The Company pledged 500,000 shares of common stock as collateral for
the loan, which will be returned to the Company upon loan repayment or
delivered to the lender as full loan repayment in the event of default. Those
shares are not recognized as issued and outstanding. All principal and
interest are payable on February 28, 2003, subject to extension to April 28,
2003, upon the issuance of a four-year option to purchase an additional 50,000
shares at $1.00 per share. The loan was subsequently increased to $300,000. Management has not finalized all terms associated
with this modification.

NOTE I  DUE TO SHAREHOLDERS AND OFFICERS

Due to shareholders and officers consists principally of deferred payments of
base compensation, bonuses and interest payable to two principal shareholders.
The amounts payable are non-interest bearing.

NOTE J  ACQUIRED INTANGIBLE ASSETS

The following summarizes the carrying amounts of acquired intangible assets and
related amortization.

|                                |                         |  |                         |           |              |  |   |         | 
|------------------------------- | ----------------------- |  | ----------------------- | --------- | ------------ |  | - | ------- | 
|                                |                         |  | As of December 31, 2002
|                                |                         |  |                        
|                                |                         |  | Gross                   |           |              |  |  
|                                |                         |  | Carrying                |           | Accumulated 
|                                |                         |  | Amount                  |           | Amortization
|                                |                         |  |                         |           |             
|                                | Amortized Patents       |  | $                       | 3,960,975 |              |  | $ | 319,600 | 
|Amortization expense:           |                         |  |                         |           |              |  |   |        
|                                | For year ended 12/31/02 |  | $                       | 319,600   |              |  |   |         | 
|Estimated amortization expense: |                         |  |                         |           |              |  |   |        
|                                | For year ended 12/31/03 |  | $                       | 396,098   |              |  |   |         | 
|                                | For year ended 12/31/04 |  | $                       | 396,098   |              |  |   |         | 
|                                | For year ended 12/31/05 |  | $                       | 396,098   |              |  |   |         | 
|                                | For year ended 12/31/06 |  | $                       | 396,098   |              |  |   |         | 
|                                | For year ended 12/31/07 |  | $                       | 396,098   |              |  |   |         | 

As more fully discussed in Note B, during 2002, the Company acquired a patent
which cost totals $3,960,975. The Company is amortizing the cost of
the patent over a ten-year period, which is the remaining life of the patent.

F-15



---



##### 



Invisa, Inc.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE K  LOSS PER SHARE

The following table sets forth the computation of basic and diluted net loss
per share:

|                                              |                                                    |   |              |            |      |   |       |            |  
|--------------------------------------------- | -------------------------------------------------- | - | ------------ | ---------- | ---- | - | ----- | ---------- | -
|                                              |                                                    |   | December 31,
|                                              |                                                    |   |             
|                                              |                                                    |   | 2001         |            | 2002
|                                              |                                                    |   |              |            |     
|Numerator:                                    |                                                    |   |              |            |      |   |       |           
|                                              | Net loss                                           |   | $            | (2,702,900 | )    |   | $     | (3,581,186 | )
|                                              |                                                    |   |              |            |      |   |       |           
|Denominator:                                  |                                                    |   |              |            |      |   |       |           
|                                              | For basic loss per share  weighted average shares |   |              | 11,234,610 |      |   |       | 12,754,832 |  
|                                              | Effect of dilutive securities  stock options      |   |              |           |      |   |       |           |  
|                                              |                                                    |   |              |            |      |   |       |           
|                                              | For diluted loss per share                         |   |              | 11,234,610 |      |   |       | 12,754,832 |  
|                                              |                                                    |   |              |            |      |   |       |           
|Net loss per common share  basic and diluted |                                                    | $ | (0.24        | )          |      | $ | (0.28 | )         
|                                              |                                                    |   |              |            |      |   |       |           

Options and warrants to purchase 1,650,880 and 3,621,129 shares of common stock
as of December 31, 2001 and 2002 are not considered in the calculation of
diluted loss per share because the effect would be anti-dilutive.
Additionally, common stock issuable as contingent consideration in connection
with the patent purchase (Note B) is not considered in the calculation of basic
or diluted loss per share.

NOTE L  COMMON STOCK

In March 2001, the Company authorized a private common stock offering of up to
1,500,000 shares at $3.50 per share (the March 2001 Offering). Related to
the March 2001 Offering, the Company issued 412,325 shares of common stock and
realized proceeds of $1,210,749 during 2002 (net of $232,389 in offering
costs). In April 2002, the March 2001 Offering was terminated and in May 2002,
the Company commenced a new offering consisting of up to 3,000,000 shares of
common stock at $5.00 per share (the May 2002 Offering). The May 2002
Offering was amended to comprise only 1,000,000 units at a purchase price of
$5.00 per unit (the Unit Offering). Each unit consists of one share of the
Companys common stock, and one warrant to purchase one additional share (the
Unit). The exercise price of each warrant shall be $5.00 per share until
August 15, 2003 (the Initial Warrant Year), and from August 16, 2003 through
August 15, 2004 the exercise price is the greater of the average closing
trading price for the Companys common stock during the initial warrant year or
$8.00, whichever is greater. As part of the Unit Offering, the Company has
committed to issue to brokers/dealers warrants to purchase common stock at
$5.50 per share equal to 10% of the units placed. The Unit Offering was
amended to reflect an effective unit price of $4.00 per share in May 2002.
Under the Unit Offering, during the year ended December 31, 2002, the Company
issued 83,750 units and realized proceeds of $271,450 (net of $63,550 in cash
offering costs). In 2002, the Company also issued 93,833 shares of common
stock and realized proceeds of $244,820 (net of $36,680 in offering costs).

In December 2001, the Company issued 95,000 shares of common stock to
shareholders/management in exchange for services rendered. The shares were
valued at $3.50 based on recent selling prices.

On January 3, 2003, the Companys shareholders approved an increase in the
Companys authorized stock to 100,000,000 shares, consisting of 95,000,000
Common and 5,000,000 Preferred shares; rights and preferences of the Preferred
are to be set by the Board of Directors. This authorization is reflected in
the Companys financial statements at December 31, 2002.

F-16



---



##### 



Invisa, Inc.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE M  STOCK OPTIONS

In July 2000, the Company established a stock compensation plan (the 2000
Plan), which provides for the granting of options to purchase the Companys
common stock to employees, directors, consultants and advisors who have
rendered, are rendering, or expected to continue to render services to the
Company. The options granted are subject to a vesting schedule as set forth in
each individual option agreement. The 2000 Plan provides for a maximum of
1,500,000 shares of Common Stock of the Company to be issued. The 2000 Plan
shall terminate upon the earlier of (i) September 1, 2010, or (ii) the date on
which all shares available for issuance under the 2000 Plan shall have been
issued. Options totaling 1,080,000 were issued in 2000 under the Plan ranging
in price from $3.00 to $4.96 per share; of these 9,998 were cancelled. Under
the Plan, 120,000 options were issued in 2001, ranging in price from $4.27 to
$5.32. In December 2001, the Companys Board closed the 2000 Plan.

In 2002, the Company adopted a stock compensation plan (the 2002 Plan).
Under the 2002 Plan, the Company has reserved an additional 1,500,000 shares of
common stock eligible for current and prospective employees, consultants, and
directors. The options granted are subject to a vesting schedule as set forth
in each individual option agreement. During the year ended December 31, 2002,
the Company granted 1,130,000 common stock options under the 2002 Plan. The
2002 Plan shall continue until the earlier of (i) its termination by the Board;
or (ii) the date on which all shares of common stock available for issuance
under the 2002 Plan have been issued and all restrictions on such shares under
the terms of the 2002 Plan and the agreements evidencing options granted under
the 2002 Plan have lapsed; or (iii) ten years from its effective date. In
January 2003, the Companys Board closed the 2002 Plan.

During the year ended December 31, 2002, the Company granted 842,125 common
stock options that were outside the above plans. At the grant date, the
exercise price of the options was equal to the market price, except for an
option for 200,000 shares, which was below market.

During 1999, the Company granted 985,000 common stock options to certain
employees and officers. In December 1999, all the options were exercised with
notes payable to the Company, which notes included terms requiring variable
plan accounting for certain of these shareholders. These terms allowed for
early repayment and for settlement by tendering common stock of the Company.
As a result of this transaction, for the period ended December 31, 2001, the Company recognized approximately $243,000, in compensation expense that is included in the consolidated statement of
operations in selling, general and administrative expenses. Effective January
1, 2002, the terms of the notes were modified to fix the price of the
in-substance options. Specifically, the notes were modified such that both the
number of shares and the price per share became fixed. This was accomplished
by requiring a fixed amount of interest to be paid regardless of the date
principal is paid and by removing the ability to satisfy the notes with the
tendering of common stock. Accordingly, fixed plan accounting was subsequently
recognized for these stock awards.

Activity with respect to all stock options is summarized as follows, including
83,750 warrants associated with the $4.00 unit offering:

|                             |                   |  |                     |           |                 |   |           |           |              |   |           |      | 
|---------------------------- | ----------------- |  | ------------------- | --------- | --------------- | - | --------- | --------- | ------------ | - | --------- | ---- | 
|                             |                   |  | Options Outstanding
|                             |                   |  |                    
|                             |                   |  |                     |           |                 |   |           |           |              |   | Weighted-
|                             |                   |  |                     |           |                 |   |           |           |              |   | average  
|                             |                   |  |                     |           |                 |   | Range of  |           | Option price
|                             |                   |  | Shares              |           | Exercise Prices |   | per share
|                             |                   |  |                     |           |                 |   |          
|Balance at December 31, 2000 |                   |  | 1,530,880           |           |                 | $ | 1.07-4.96 |           |              | $ | 2.45      |     
|                             | Options granted   |  |                     | 120,000   |                 |   |           | 4.27-5.32 |              |   |           | 5.15 | 
|                             | Options exercised |  |                     |          |                 |   |           |          |              |   |           |     | 
|                             | Options canceled  |  |                     |          |                 |   |           |          |              |   |           |     | 
|                             |                   |  |                     |           |                 |   |           |           |              |   |           |     
|Balance at December 31, 2001 |                   |  | 1,650,880           |           |                 |   | 1.07-5.32 |           |              |   | 2.65      |     
|                             | Options granted   |  |                     | 1,972,125 |                 |   |           | 1.00-7.25 |              |   |           | 3.64 | 
|                             | Options canceled  |  |                     | (1,876    | )               |   |           | 1.07      |              |   |           | 1.07 | 
|                             |                   |  |                     |           |                 |   |           |           |              |   |           |     
|Balance at December 31, 2002 |                   |  | 3,621,129           |           |                 | $ | 1.00-7.25 |           |              |   | 3.19      |     
|                             |                   |  |                     |           |                 |   |           |           |              |   |           |     

F-17



---



##### 



Invisa, Inc.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE M  STOCK OPTIONS  Continued

The range of exercise prices, shares, weighted-average remaining contractual
life and weighted-average exercise price for the options outstanding at
December 31, 2002 is presented below:

|                |  |        |           |                  |  |                  |  |                  |      |  |  | 
|--------------- |  | ------ | --------- | ---------------- |  | ---------------- |  | ---------------- | ---- |  |  | 
|                |  |        |           |                  |  | Weighted-average |  |                  |      | 
|Range of        |  |        |           |                  |  | Remaining        |  | Weighted-average
|Exercise prices |  | Shares |           | Contractual life |  | Exercise price  
|                |  |        |           |                  |  |                 
|$1.00-1.07      |  |        | 659,002   |                  |  | 2.1 years        |  | $                | 1.05 | 
|$3.00-3.85      |  |        | 2,554,168 |                  |  | 4.0 years        |  | $                | 3.39 | 
|$4.27-7.25      |  |        | 407,959   |                  |  | 5.5 years        |  | $                | 5.38 | 

The range of exercise prices, shares and weighted-average exercise price for
the options exercisable at December 31, 2002 are presented below:

|                |  |        |           |                |  |          |      | 
|--------------- |  | ------ | --------- | -------------- |  | -------- | ---- | 
|                |  |        |           |                |  | Weighted
|Range of        |  |        |           |                |  | average 
|Exercise prices |  | Shares |           | Exercise price
|                |  |        |           |               
|$1.00-1.07      |  |        | 659,002   |                |  | $        | 1.05 | 
|$3.00-3.50      |  |        | 1,446,918 |                |  | $        | 3.17 | 
|$4.27-7.25      |  |        | 218,332   |                |  | $        | 5.27 | 

For pro forma disclosure purposes (see Note D), the fair value of the options
granted in 2001 and 2002 was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions for the above years:

|                         |  |         |       |         |  |  |       |  
|------------------------ |  | ------- | ----- | ------- |  |  | ----- | -
|                         |  | 2001    |       | 2002   
|                         |  |         |       |        
|Dividend yield           |  |         | 0.00  | %       |  |  | 0.00  | %
|Expected volatility      |  |         | 31.00 | %       |  |  | 31.00 | %
|Risk free interest rates |  |         | 5.5   | %       |  |  | 3.0   | %
|Expected lives           |  | 3 years |       | 3 years

The weighted-average grant date fair value for options granted during 2001 and
2002 was approximately $.47 and $.46, respectively.

NOTE N  COMMITMENTS AND CONTINGENCIES

Operating Leases

Prior to June 2002, the Company subleased its manufacturing and office space
under an operating sublease agreement from a shareholder. In June 2002, the
Company entered into a new two-year lease for its existing facility at an
annual lease payment of $103,200 (New Lease). This New Lease is with an
unrelated party. The lease has an option to purchase the premise during the
term at $836,000. In March 2002, the Company entered into a two-year lease for
additional facilities at an approximate annual lease payment of $97,200. The
lease has an option to purchase the premise at $698,000 during year one and
$750,000 during year two.

Future minimum lease payments are as follows:

|     |  |   |         | 
|---- |  | - | ------- | 
|2003 |  | $ | 200,400 | 
|2004 |  |   | 75,900  | 
|     |  |   |         | 
|     |  | $ | 276,300 | 
|     |  |   |         | 

Total related party rent expense for the years ended December 31, 2001 and 2002
amounted to $60,598 and $57,800, respectively. Total rent expense for the
years ended December 31, 2001 and 2002 amounted to $60,598 and $172,960,
respectively.

F-18



---



##### 



Invisa, Inc.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE N  COMMITMENTS AND CONTINGENCIES  Continued

Royalty Obligations

In addition to royalties as disclosed in Note B, the Company is obligated to
pay the lesser of $1.00 or 1% of each sale for products incorporating certain
electronic or mechanical interference related technology. The royalty amount
is 10% where the Company licenses the technology to third parties. The Company
is also obligated to pay a royalty to a consultant; an amount equal to 2% of
net profits arising from sales of certain safety products. There are no
significant royalty obligations for any period presented.

Legal and Other Matters

The Company is, from time to time, subject to litigation related to claims
arising out of its operations in the ordinary course of business. The Company
believes that no such claims should have a material adverse impact on its
financial condition or results of operations.

NOTE O  RELATED PARTY TRANSACTIONS

At December 31, 2001 and 2002, advances to an affiliated company were
approximately $6,100.

Patent License

Prior to February 2002, the Company was party to a sublicense agreement with
RMI for the proprietary safety technology used in the Companys products. The
sublicense agreement contained the same financial terms and conditions included
in the primary license agreement between RMI and an unrelated third-party
entity. Those terms provided for the payment of royalties calculated based on
an adjusted earnings amount. Due to the losses incurred since inception of the
Company, no payments have been required under the license agreement (see Note
B).

The Company has two promissory notes and related interest receivable from
shareholders totaling approximately $152,000 and $161,000 at December 31, 2001
and 2002, respectively. The notes pay interest at 4.59% and all principal and
interest are due at February 9, 2005.

On January 8, 2002, the Company, in anticipation of its business combination
with RMI, loaned RMI $550,000 in the form of a promissory note, payable in full
on January 7, 2003. The loan proceeds were used by RMI to make the initial
payment of acquiring the patent used in the Companys and RMIs products and
applications. The note bears interest at 9% per annum and is collateralized by
certain patents and license agreements of RMI. As part of this transaction,
prior primary and sub-license agreements are no longer in effect. As a result
of the business combination with RMI, which was completed on February 26, 2002,
the Company assumed the RMI note, which is now eliminated in the accompanying
consolidated financial statements.

Employment Agreements

Effective February 2000, the Company entered into five-year employment
agreements with two of its principal shareholders. Each of these agreements
provides for the payment of an annual salary of $150,000 ($30,000 of which is
deferred), bonuses (including an ongoing monthly bonus of $2,000 effective
February 2000), an annual car allowance of $8,400 and other fringe benefits,
subject to increases based upon certain operating goals. The 2001 and
2002 amounts expensed
(exclusive of the deferred portion of $30,000 and bonus payable of $30,000)
totaled approximately $152,400 in each year under each of these agreements.

Legal and Consulting Expenses

The Company incurred legal and consulting fees totaling approximately $465,377
and $312,435 for the year ended December 31, 2001 and 2002, respectively, to a
law firm of which one of the partners is a principal shareholder of the
Company.

F-19



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##### 



Invisa, Inc.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE P  INCOME TAXES

Deferred taxes are recorded for all existing temporary differences in the
Companys assets and liabilities for income tax and financial reporting
purposes. Due to the valuation allowance for deferred tax assets, as noted
below, there was no net deferred tax benefit or expense for the years ended
December 31, 2001 or 2002.

Reconciliation of the federal statutory income tax rate of 34.0% to the
effective income tax rate is as follows:

|                                               |  |              |       |              |  |  |       |   
|---------------------------------------------- |  | ------------ | ----- | ------------ |  |  | ----- | --
|                                               |  | Year Ended   |       | Year Ended  
|                                               |  | December 31, |       | December 31,
|                                               |  | 2001         |       | 2002        
|                                               |  |              |       |             
|Federal statutory income tax rate              |  |              | (34.0 | )%           |  |  | (34.0 | )%
|State income taxes, net of federal tax benefit |  |              | (3.5  | )            |  |  | (3.5  | ) 
|Deferred tax asset valuation allowance         |  |              | 37.5  |              |  |  | 37.5  |   
|                                               |  |              |       |              |  |  |       |   
|                                               |  |              |      | %            |  |  |      | % 
|                                               |  |              |       |              |  |  |       |   

Deferred tax asset and liability components were as follows:

|                          |                           |                        |            |              |         |              |            |           |         | 
|------------------------- | ------------------------- | ---------------------- | ---------- | ------------ | ------- | ------------ | ---------- | --------- | ------- | 
|                          |                           |                        |            | December 31, |         | December 31,
|                          |                           |                        |            | 2001         |         | 2002        
|                          |                           |                        |            |              |         |             
|Deferred tax assets:      |                           |                        |            |              |         |              |            |          
|                          | Compensation payable      |                        | $          | 90,244       |         |              | $          | 224,614   |        
|                          | Net operating loss        |                        |            | 1,451,171    |         |              |            | 2,643,885 |        
|                          | Basis difference for C    |                        |            |              |         |              |            |           |        
|                          |                           | Corporation conversion |            |              | 203,513 |              |            |           | 188,153 | 
|                          | Other                     |                        |            |             |         |              |            | 21,750    |        
|                          |                           |                        |            |              |         |              |            |           |        
|                          |                           |                        | 1,744,928  |              |         |              | 3,078,402  |          
|Deferred tax liabilities: |                           |                        |            |              |         |              |            |          
|                          | Patent                    |                        |            |             |         |              |            | 915,515   |        
|                          |                           |                        |            |              |         |              |            |           |        
|                          | Net deferred tax assets   |                        |            | 1,744,928    |         |              |            | 2,162,887 |        
|Less valuation allowance  |                           |                        | (1,744,928 | )            |         |              | (2,162,887 | )        
|                          |                           |                        |            |              |         |              |            |           |        
|                          | Net deferred income taxes |                        | $          |             |         |              | $          |          |        
|                          |                           |                        |            |              |         |              |            |           |        

The deferred tax valuation allowance was determined based on the development
stage status of the Company and the historical losses incurred since inception.

As of December 31, 2002, the Company had net operating loss carryforwards for
Federal and State income tax purposes totaling $7,050,000, which expire
beginning in 2019.

NOTE Q  SUBSEQUENT EVENTS (UNAUDITED)

In January 2003, the Company adopted a stock compensation plan (the 2003
Plan). Under the 2003 Plan, the Company has reserved up to 1,500,000 shares
of the Companys common stock. The 2003 Plan retained all provisions of the
2002 Plan (see Note M).

In March 2003, the Company entered into a six-month consulting agreement with
Crescent Fund, Inc. The agreement calls for Crescent to provide
management-consulting, public relations and to act as an investment-banking
liaison for the Company. The Company will issue to Crescent 28,569 shares of
restricted common stock over the term of the agreement.

F-20



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##### 



Invisa, Inc.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE Q  SUBSEQUENT EVENTS (UNAUDITED)  Continued

In April 2003, the Company entered into a twelve-month agreement with an
investor, whereby the investor will provide the Company $1,200,000 in cash from
May 2003 to April 2004, in monthly payments ranging from $50,000 to $150,000.
The Company received $150,000 on May 1, 2003, related to this arrangement. In
return, the Company will issue to the investor the requisite number of common
shares by dividing the above monthly payment amounts by $3.00 per share or 50%
of the closing price (whichever is greater). The investor has the right to
require the Company to re-purchase all of the common shares issued to the
investor during the duration of the agreement. The re-purchase price paid by
the Company will equal the per share investment paid by the investor, as
described above, and will be paid by the Company in the form of a promissory
note payable in one installment 13 months from the date of the promissory note.

In April 2003, the Company approved the issuance of 500,000 shares of common
stock to an investment advisor. The shares were granted in recognition of past
performance associated with common stock private placement offerings and in
contemplation of continued involvement by this advisor in future fundraising
activities.

In May 2003, the Company entered into an agreement pursuant to which the
Company borrowed $250,000. The borrowing may be converted into common stock at
a 25% discount from the then prevailing market price. The Company has the
right, but not the obligation, to sell additional registered shares under the
Agreement at a 25% discount from the then prevailing market price to a maximum
of an additional $750,000. Pursuant to the Agreement, the Company issued a
Warrant to purchase 75,000 shares of the Companys common stock at an exercise
price of $2.76 per share, of which 25,000 shares are vested and the balance
will vest only in the event the Company exercises its right to sell additional
shares of registered stock under the Agreement.

F-21



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##### 



INDEX TO EXHIBITS

|      |  |                                                                                                                                                                                                                                                                                                                                   
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ITEM  |  |                                                                                                                                                                                                                                                                                                                                   
|NO.   |  | DESCRIPTION                                                                                                                                                                                                                                                                                                                       
|     
|2.1   |  | Agreement of Merger and Plan of Reorganization dated 2/25/02 by
and among SmartGate Inc., SmartGate/RadioMetrix Acquisition Corp. and
Radio Metrix Inc., Letter of Clarification, and Amendment dated as of
April 24, 2003                                                                                                        
|3(i)  |  | Articles of Incorporation, as amended                                                                                                                                                                                                                                                                                             
|3(ii) |  | Bylaws of the Company                                                                                                                                                                                                                                                                                                             
|4.1   |  | Specimen of Invisa, Inc. Common Stock Certificate                                                                                                                                                                                                                                                                                 
|10.1  |  | Indemnity Agreement by and among the Company and Stephen A.
Michael, Spencer Charles Duffey Irrevocable Trust u/a/d July 29,
1998, Elizabeth Rosemary Duffey Irrevocable Trust u/a/d July 29,
1998, Robert T. Roth, William W. Dolan dated as of February 25, 2002                                                                
|10.2  |  | Form of Promissory Notes to Stephen A. Michael, Spencer Charles
Duffey Irrevocable Trust Under Agreement Dated 7/29/98, Elizabeth
Rosemary Duffey Irrevocable Trust Under Agreement Dated 7/29/98,
Robert T. Roth, and William W. Dolan   February 25, 2002                                                                      
|10.3  |  | Form of Promissory Notes to Stephen A. Michael, Spencer Charles
Duffey Irrevocable Trust Under Agreement Dated 7/29/98, Elizabeth
Rosemary Duffey Irrevocable Trust Under Agreement Dated 7/29/98,
Robert T. Roth, and William W. Dolan   February 25, 2002                                                                      
|10.4  |  | Consulting Agreement with Hawk Associates, Inc. dated January 16,
2002                                                                                                                                                                                                                                                            
|10.5  |  | Contribution Agreement dated 2/9/00 between SmartGate Inc. and
SmartGate, L.C.                                                                                                                                                                                                                                                    
|10.6  |  | Promissory Note from Stephen A. Michael to the Company  October
15, 2001                                                                                                                                                                                                                                                         
|10.7  |  | Promissory Note from Samuel S. Duffey to the Company  October
15, 2001                                                                                                                                                                                                                                                           
|10.8  |  | Distribution Agreement with H.S. Jackson & Son (Fencing) Limited
 August 23, 2001, and April 10, 2002 and March 31, 2003 Amendments
thereto                                                                                                                                                                                      
|10.9  |  | Employment Agreement with Stephen A. Michael                                                                                                                                                                                                                                                                                      
|10.10 |  | Employment Agreement with Samuel S. Duffey                                                                                                                                                                                                                                                                                        
|10.12 |  | Employment Agreement with Edmund C. King                                                                                                                                                                                                                                                                                          
|10.13 |  | Employment Agreement with William W. Dolan                                                                                                                                                                                                                                                                                        
|10.14 |  | Employment Agreement with Carl Parks                                                                                                                                                                                                                                                                                              
|10.15 |  | Employment Agreement with Bob Fergusson                                                                                                                                                                                                                                                                                           
|10.16 |  | Office Lease with DTS Commercial Interiors, Inc.                                                                                                                                                                                                                                                                                  
|10.17 |  | Office Lease with 4396 Independence Court, Inc.                                                                                                                                                                                                                                                                                   
|10.18 |  | Quarterly Revenue Based Payment Agreement by and among the
Company and Stephen A. Michael, Spencer Charles Duffey Irrevocable
Trust u/a/d July 29, 1998, Elizabeth Rosemary Duffey Irrevocable
Trust u/a/d July 29, 1998, Robert T. Roth, William W. Dolan dated as
of February 25, 2002; and Amendment dated as of April 24, 2003
|10.19 |  | Net Profit Royalty Letter Agreement between Radio Metrix Inc.
and Pete Lefferson dated September 23, 1993 as amended by Letter
Agreement dated December 1, 1994 (Lefferson Royalty Agreement)                                                                                                                                   
|10.20 |  | Agreement between Radio Metrix Inc. and Carl Burnett dated
October 13, 1996 (Burnett Agreement)                                                                                                                                                                                                                                 





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##### 



|      |  |                                                                                                                                                                                                                                                                                       
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.21 |  | The Agreement between Radio Metrix Inc. and Namaqua Limited
Partnership (Namaqua) dated December 13, 1993 (Namaqua
Agreement), and related Security Agreement (Namaqua Security
Agreement)                                                                                      
|10.22 |  | Agreement between Radio Metrix Inc. and Robert Wilson dated
March 18, 1992 (Wilson Agreement)                                                                                                                                                                                       
|10.23 |  | Closing Agreement between Radio Metrix Inc., SDR Metro Inc. and
Brent Simon dated January 8, 2002                                                                                                                                                                                     
|10.24 |  | Promissory Note to SDR Metro Inc. dated January 8, 2002                                                                                                                                                                                                                               
|10.25 |  | Security Agreement between Radio Metrix Inc. and SDR Metro Inc.
dated January 8, 2002                                                                                                                                                                                                 
|10.26 |  | Remedy upon Default Agreement between Radio Metrix Inc. and SDR
Metro Inc. dated January 8, 2002                                                                                                                                                                                      
|10.27 |  | Consulting Agreement Memo re: Brent Simon dated August 28, 2000                                                                                                                                                                                                                       
|10.28 |  | Original Equipment and Independent Distribution License
Agreement between the Company and Rytec Corporation                                                                                                                                                                           
|10.29 |  | Disbursement Request and Authorization, Promissory Note, and
Business Loan Agreement with Regions Bank  July 15, 2002                                                                                                                                                                
|10.30 |  | Promissory Note, Security Agreement, and Escrow Agreement  Re: Daimler Capital Partners, Ltd.  loan and stock options; Stock Option
Agreement with Daimler Capital Partners, Ltd.  October 28, 2002; Stock
Option Agreement with Daimler Capital Partners, Ltd.  February 28,
2003
|10.31 |  | Stock Option Agreement with H.R. Williams Family Limited
Partnership  February 9, 2000 and Amendment thereto                                                                                                                                                                         
|10.32 |  | SmartGate, Inc. 2000 Employee, Director, Consultant and Advisor
Stock Compensation Plan (Plan 2000)                                                                                                                                                                                 
|10.33 |  | Form of Plan 2000 Option Agreement with Stephen A. Michael 
July 26, 2000 (including form of Letter of Investment Intent for
Stephen A. Michael, Robert Knight, Edmund C. King, and Duffey &
Dolan, P.A.)                                                                            
|10.34 |  | Form of Plan 2000 Option Agreement with Robert Knight and Edmund
C. King  July 26, 2000                                                                                                                                                                                              
|10.35 |  | Form of Plan 2000 Option Agreement with Duffey & Dolan, P.A.

July 26, 2000                                                                                                                                                                                                          
|10.36 |  | Form of Plan 2000 Option Agreements with employees/consultants 
July 26, 2000 and December 20, 2000 (including form of Letters of
Investment Intent) for these and the May 17, 2001, June 28, 2001, and
August 6, 2001 Plan 2000 Option Agreements listed below                      
|10.37 |  | Form of Plan 2000 Option Agreement with John E. Scates  May 17,
2001                                                                                                                                                                                                                 
|10.38 |  | Form of Plan 2000 Option Agreement with Linda L. Kauffman  June
28, 2001                                                                                                                                                                                                             
|10.39 |  | Form of Plan 2000 Option Agreement with Carl Parks  August 6,
2001                                                                                                                                                                                                                   
|10.40 |  | SmartGate Inc. 2002 Incentive Plan (Plan 2002)                                                                                                                                                                                                                                      
|10.41 |  | Form of Plan 2002 Option Agreements with Stephen A. Michael,
Samuel S. Duffey and William W. Dolan  January 22, 2002 (including
form of Letters of Investment Intent for all Plan 2002 Option
Agreements)                                                                            
|10.42 |  | Form of Plan 2002 Option Agreements with Robert Knight and
Edmund C. King  January 22, 2002                                                                                                                                                                                          
|10.43 |  | Form of Plan 2002 Option Agreements with employees  January 22,
2002                                                                                                                                                                                                                 





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##### 



|      |  |                                                                                                                                                                                                                                                                             
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.44 |  | Form of Promissory Note and Security Agreement re: Stephen A.
Michael, Edmund C. King, Scott Tannehill, Barbara Baker, Nicole A.
Longridge and Edward A. Berstling Option to Exercise/Stock Purchase
(also form of Security Agreement per Exhibit 10.46)                    
|10.45 |  | Form of Modification Agreement re: Edmund C. King, Scott
Tannehill, Barbara J. Baker, and Nicole A. Longridge Promissory Notes
re: Option Exercise/Stock Purchase                                                                                                           
|10.46 |  | Form of Replacement Promissory Note, Assignment and Security
Agreement re: Grace Duffey Irrevocable Trust u/a/d 1/26/00 and Debra
Finehout Option to Exercise/Stock Purchase (for form of Security
Agreement, see Exhibit 10.44 above).                                     
|10.47 |  | Registration Rights Agreement by and among the Company and
Stephen A. Michael, Spencer Charles Duffey Irrevocable Trust u/a/d
July 29, 1998, Elizabeth Rosemary Duffey Irrevocable Trust u/a/d July
29, 1998, Robert T. Roth, William W. Dolan dated as of February 25,
2002
|10.48 |  | Voluntary Resale Restriction Agreement with Robert T. Roth -
November 19, 2001                                                                                                                                                                                              
|10.49 |  | Stock Option Agreement with Hawk Associates, Inc.  January 16,
2002                                                                                                                                                                                                        
|10.50 |  | Amended and Restated Stock Option Agreement with G.M. Capital
Partners Limited L.P.  November 8, 2002                                                                                                                                                                      
|10.51 |  | Form of Plan 2002 Option Agreement with Gregory Newell  June 13, 2002                                                                                                                                                                                                      
|10.52 |  | Form of Plan 2002 Option Agreement with John E. Scates  June 27, 2002                                                                                                                                                                                                      
|10.53 |  | Delbrueck Bank Warrant #1                                                                                                                                                                                                                                                   
|10.54 |  | Delbrueck Bank Warrant #2                                                                                                                                                                                                                                                   
|10.55 |  | Form of Plan 2000 Option Agreement with Nicole A. Longridge                                                                                                                                                                                                                 
|10.56 |  | Form of Plan 2000 Option Agreement with Duane Cameron                                                                                                                                                                                                                       
|10.57 |  | Invisa, Inc. 2003 Incentive Plan                                                                                                                                                                                                                                            
|10.58 |  | Form of Plan 2003 Option Agreement with Joseph F. Movizzo  May
13, 2003 (including form of Letter of Investment Intent)                                                                                                                                                    
|10.59 |  | Consulting Agreement  March 2003 between Crescent Fund, Inc.
and the Company                                                                                                                                                                                               
|10.60 |  | Agreement dated as of April 24, 2003 between Alan A. Feldman and
the Company                                                                                                                                                                                                
|10.61 |  | Financing Agreement dated as of May 9, 2003 between BarBell
Group, Inc. and the Company                                                                                                                                                                                     
|10.62 |  | Series 2003A 7% Convertible Note Due June 9, 2004, dated May 9,
2003 from the Company to BarBell Group, Inc.                                                                                                                                                                
|10.63 |  | Investment Agreement dated as of May 9, 2003 between BarBell
Group, Inc. and the Company                                                                                                                                                                                    
|10.64 |  | Warrant to Purchase Shares of Common Stock dated as of May 9,
2003, issued by the Company to BarBell Group, Inc.                                                                                                                                                            
|10.65 |  | Registration Rights Agreement dated as of May 9, 2003 between
the Company and BarBell Group, Inc.                                                                                                                                                                           
|10.66 |  | Broker-Dealer Placement Agent Selling Agreement  May 2003
between Capstone Partners LC and the Company                                                                                                                                                                     





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##### 



|     |  |                                                           
|---- |  | ----------------------------------------------------------
|14   |  | Code of Business Conduct and Ethics and Compliance Program
|21   |  | Subsidiaries of Registrant                                
|99.1 |  | Certification of Chief Executive Officer                  
|99.2 |  | Certification of Chief Financial Officer