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, 2003

|_|    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)
<TABLE>
<CAPTION>
<S>                                                    <C>
              NEVADA                                          65-1005398
   -----------------------------                       ---------------------------------
   (State of Other Jurisdiction of                    (I.R.S. Employer Identification No.)
   Incorporation or Organization

   4400 Independence Court, Sarasota, Florida                                34234
   ------------------------------------------                              ----------
    (Address of Principal Executive Offices)                                Zip Code

                     941-355-9361
               -------------------------
              (Issuer's Telephone Number)
</TABLE>

     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 the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.

|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 $212,679.

The aggregate  market value of the Issuer's voting stock held as of December 31,
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  $32,924,000.  The Issuer does not
have any non-voting stock.

<PAGE>


                                  INVISA, INC.

                         2003 FORM 10-KSB ANNUAL REPORT
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                              PAGE NO.
<S>               <C>                                                                         <C>
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                               7
PART II
    Item 5        Market for Common Equity and Related Stockholder Matters                        7
    Item 6        Management's Discussion and Analysis or Plan of Operations                     13
    Item 7        Financial Statements                                                           24
    Item 8        Changes in and Disagreements with Accountants on Accounting                    24
                  and Financial Disclosure

    Item 8a       Controls and Procedures                                                        25
PART III
    Item 9        Directors, Executive Officers, Promoters and Control Persons;                  25
                      Compliance with Section 16(a) of the Exchange Act
    Item 10       Executive Compensation                                                         29
    Item 11       Security Ownership of Certain Beneficial Owners and Management                 36
    Item 12       Certain Relationships and Related Transactions                                 39
    Item 13       Exhibits and Reports on Form 8-K                                               43
    Item 14       Principal Accountant Fees and Services                                         49
                  Signatures                                                                     50
                  Certifications                                                                 51
</TABLE>


<PAGE>


                                     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 develop, manufacture, market and license the rights to produce and sell
sensor  systems  that  incorporate  the  Company's   patented   InvisaShield(TM)
presence-sensing  design  and  technology.  Presence-sensing  is  the  reliable,
repeatable detection of people and conductive objects. With InvisaShield,  it is
detection at a close distance (typically less than one meter).

      InvisaShield   technology  is  used  today  in  the   Company's   line  of
SmartGate(R)  sensors: life and property safety mechanisms for powered closures,
including parking gates, slide gates, swing gates,  vertical pivot gates and the
like.  In a  security  application,  first  generation  security  sensors  using
InvisaShield technology are in operation at a major museum in New England.

      To date, revenue for the Company has been derived largely from the sale of
SmartGate  sensors for powered parking gates and slide gates.  Parking and slide
gates are motorized  barriers used to control parking  garage,  parking lot, and
vehicle  traffic.  The  Company  anticipates  that,  during  the next two years,
revenues 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,  vertical pivot gates,
and products  designed to provide security sensing for various markets including
museums.

      From  inception  (February  12, 1997)  through  December 31, 2003, we were
largely  focused on technology  and product  development.  The estimated  dollar
amount spent during this period on  company-sponsored  research and  development
was  $2,824,421,  including  $558,277  for the year ended  December 31, 2003 and
$660,844 for the year ended December 31, 2002.  The Company  continues to engage
in significant product development  activities.  Because of the Company's losses
(which aggregate  $20,701,920 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 two market categories as
follows:


                                       1
<PAGE>


      SAFETY MARKET CATEGORY - Many safety devices and safety  functions  depend
upon   presence-sensing   technology.   We   continue  to  develop  a  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.  Today we offer  safety
products for powered  parking  gates,  sliding  gates,  single swing gates,  and
vertical pivot gates.

      We also have developed prototypes of presence-sensing  products for use in
powered commercial  overhead doors,  powered industrial doors (which are used in
commercial,  manufacturing,  and industrial  buildings) and  residential  garage
doors. We believe that there may be other applications for our  presence-sensing
technology in the safety market.  Ultimately,  we plan to offer safety  products
based upon our InvisaShield  technology to be incorporated  into a broad base of
powered closure devices produced by other companies.

      To date,  substantially  all of our revenue  (which has been  limited) has
been derived from the sale of our  SmartGate  presence-sensing  products.  These
products are designed to be  incorporated  into powered  parking  barrier gates.
Powered  parking  barrier  gates  are  commonly  used for  traffic  control  and
generally have a power operated barrier arm typically 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. See the
financial statements for revenues from this product category.

      During each of the last three fiscal  years,  more than 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 July 2002, we appointed Rytec Corporation as our exclusive  licensee to
use our  InvisaShield  technology  as original  equipment  used with  high-speed
industrial doors in the North American market. We believe that Rytec Corporation
is the largest  manufacturer  of high-speed  industrial  doors in North America.
These doors are frequently  used in  manufacturing  and industrial  environments
where air conditioned, cooler, and freezer areas are separated within warehouses
or other buildings.

      Our average  sale price for  InvisaShield  safety  products  is  currently
approximately  $440.  We  consider  our  average  gross  margin  of profit to be
acceptable  and we expect  cost of goods to decline as we realize  economies  of
scale.

      As further  described below, we believe that the  InvisaShield  technology
can  perform  non-contact  presence-sensing  tasks  that  may not  currently  be
possible with competing technologies.

      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
of valuable objects.

      We have  demonstrated  prototypes of  InvisaShield  security  products for
museum, retail, industrial,  commercial,  defense and governmental applications.
These  security  products  can place an invisible  presence-sensing  field (in a
fashion similar to our safety sensing shield) around exposed  perimeters,  doors


                                       2
<PAGE>


and  windows - or around  valuable  objects  such as  safes,  locking  cabinets,
display cases, objects of art, and jewelry.

      Our planned security products are being developed as components  available
to security professionals.  These products would provide additional features and
functions for new and/or existing security systems.  They will compete with and,
in some applications, complement existing presence-sensing technologies that are
used in the security  market today - such as infrared  and/or  microwave  motion
detectors, lasers, light beam systems and magnetic contacts or switches.

MARKETING

      We will continue to focus our marketing  efforts in the development of OEM
(Original  Equipment  Manufacturer)  licensing  of our  technology  as  well  as
building  and  supporting  the  distribution  channel and dealer  network of our
SmartGate systems.  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
whom we believe to be market leaders or otherwise  high profile within  specific
markets.  Currently, we target the market for safety products applied to powered
parking gates, industrial doors, commercial overhead doors, powered slide gates,
swing gates and vertical pivot gates.

      We sell our safety products to OEMs and through  dealers and  distributors
and in some  instances  directly to targeted  customers.  In 2004, we anticipate
potential  sales to  manufacturers  for use of the  InvisaShield  technology  as
original equipment in various door operators.

      H.S.  Jackson & Son  (Fencing)  Limited in the UK currently is our largest
customer.  We believe we are not dependent upon any single customer,  dealer, or
distributor in the safety market, or otherwise.

      We are currently  evaluating channels of distribution for planned security
products.  Distribution would include sales to and through dealers, distributors
and  manufacturers.  While products in this market category have not contributed
to our revenue in the past,  we believe that our planned  security  products may
ultimately  represent  a material  portion of our  business.  We plan to further
investigate the potential for  InvisaShield-based  security  products in markets
that include museums, retail, residential, governmental, and defense, as well as
other sectors.

THE TECHNOLOGY

      The  InvisaShield   technology  uses  electronic   circuitry  that  emits,
controls,  and senses changes in an invisible  energy field. The field is based,
in part, upon low energy radio waves oscillating  within a controlled  frequency
range.   The  field   monitored   ranges   from  a  distance  of  one  meter  to
touch-sensitive,  based upon the selected  application and circuitry  constantly
checks  the  field  to test  for the  presence  of  people,  vehicles  or  other
conductive  objects  (objects that conduct  electricity)  that would 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  technology  is the ability to
project a field or zone 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


                                       3
<PAGE>


metallic items. The technology permits flexibility in designing and locating the
antenna. This may provide unique opportunities to place presence-sensing  fields
where they can be used more  efficiently  or  effectively.  We believe that this
flexibility   enables  the  InvisaShield   technology  to  perform   non-contact
presence-sensing  tasks  that  may not  currently  be  possible  with  competing
technologies and to perform presence-sensing tasks similar to those performed by
competing technologies in a potentially more efficient,  effective, and reliable
manner.

      We believe that the  InvisaShield  technology  has a number of operational
advantages.  The  technology  does not depend upon lenses,  beams or  reflectors
which may require replacement,  cleaning and aligning.  We also believe that the
non-intrusive,  non-contact  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   InvisaShield   technology   may   be  a  new
presence-sensing  technology  that gives  greater  capability,  flexibility  and
benefits than non-contact sensing.

      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 have been in use
for a number of years and, in many cases, may not be proprietary.

      Our competitors provide a variety of presence-sensing and other safety and
security  alternatives such as motion detectors,  CCTV-based  movement detection
systems,  infrared and visible  light beam  detectors,  light  curtains,  on/off
switching mats and pads, tape switches, contact edges, as well as others.

      In the safety  and/or  security  sectors we compete  with  companies  that
include  MillerEdge,  Stanley,  Optex,  Napco,  Pelco, and DMP, along with other
large and  well-established  firms such as Honeywell,  Tyco,  General  Electric,
Bosch, and Siemens.

      Many of our competitors have substantially greater development, technical,
marketing,  sales and  financial  resources  than we have.  As a result of these
factors,  competitors  and  potential  competitors  may be able to respond  more
quickly to new or emerging  technologies  and  changes in customer  requirements
and/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, marketing and distribution efforts.

      PATENTS  AND  TRADEMARKS  - We own  Patent  #5,337,039  issued by the U.S.
Patent  Office  on  August  9,  1994.  In  addition,  we have  five PCTs and one
provisional patent application filed that cover improvements to the InvisaShield
technology.

      We have a  trademark  on our trade  name  "SmartGate"  which we use in our
safety  products  category.  We  have  filed  trademark   applications  for  the
following: "Invisa", "InvisaShield" and the tagline "Safe. Secure. No Question."
We believe  that our patent and  trademark  position  will be  important  in our
efforts to protect our perceived competitive advantages.


                                       4
<PAGE>


      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 use this invention  only in our safety  products and we do
            not  currently  anticipate  using this  invention  in other  product
            categories;

      (ii)  We are  obligated  to pay a royalty  equal to 2% 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  total  royalty  of 7% of net  sales  to
            affiliated  parties  (Mr.  Stephen  A.  Michael,  Samuel  S.  Duffey
            (including three family trusts), Mr. Robert T. Roth, and Mr. William
            Dolan) with  regard to all revenue  earned from the sale of products
            based on Radio  Metrics,  Inc.  technology,  other  than the  safety
            products. 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 to our specifications by third party manufacturers 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  use  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  components  and  materials  will be  available to
support our planned  growth.  We perform some final  assembly and  predetermined
quality control procedures in our facility.

GOVERNMENT REGULATION

      The use of radio  frequency or "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, in
August of 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


                                       5
<PAGE>


windows,  and is a requirement  for UL  certification  for certain powered gate,
door and window  operators.  Gate and operator  manufacturers  that rely upon UL
certification or 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
(those 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 nine  employees,  of whom one is part time. As of the date of this
filing,  we had no unions and we had not entered into any collective  bargaining
agreement  with  any  group  of  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 trade name  InvisaShield.  The Company was incorporated in
Nevada  on  July  9,  1998  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 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 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.


                                       6
<PAGE>


ITEM 2 DESCRIPTION OF PROPERTY

      We lease  approximately  15,200 square feet of  manufacturing,  marketing,
development and office space in one building located in Northgate Business Park,
Sarasota, Florida. No zoning or other governmental requirements are required for
the continued use of our facilities. Our lease expires June 30, 2004. The annual
lease payments for the Company's facilities aggregate $112,872 plus taxes, which
we  believe  to  approximate  the local  market  rate for such  facilities.  The
facilities are leased from a non-affiliated party.

      The lease provides an option to purchase the building; however, we have no
current  plans to  execute  the  option.  With the  exception  of the  potential
exercise  of the  options  contained  in the  lease,  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.  We  are  currently
evaluating  whether or not to renew our current lease, as our needs are evolving
and there  may be  attractive  alternatives  for  office  and  production  space
available in the local market that would be well suited to our needs.

ITEM 3 LEGAL PROCEEDINGS

      On October 23, 2002,  our wholly  owned  subsidiary,  SmartGate,  L.C. was
named as one of the parties to litigation commenced by Maria and Alfred Mangano.
The litigation seeks damages arising from an alleged injury from a parking gate.
The lawsuit was settled in December  2003 with the Company's  insurance  carrier
paying $40,000.

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

      Our common stock has traded in the  over-the-counter  market  through Pink
Sheet, LLC under the symbol INSA (previously SGTI) from July 26, 2000 until July
7, 2003.  From July 7, 2003 to date, our common stock has traded on the NASD OTC
BB which is the principal  market for our common stock. The following table sets
forth the range of high and low bids to purchase our common stock  through March
31, 2004.  Such prices  represent  quotations  between  dealers,  without dealer
markup, markdown, or commissions, and may not represent actual transactions.



<TABLE>
<CAPTION>
           QUARTER                       HIGH BID          LOW BID
      -----------------------         -------------     ------------
<S>                                   <C>               <C>
      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
      Second Quarter 2003                   4.00            1.70
      Third Quarter 2003                    2.80            1.00
      Fourth Quarter 2003                   4.05            1.55
      First Quarter 2004                    4.05            2.90
</TABLE>


                                       7
<PAGE>


      On March 31,  2004,  the  closing bid and closing ask prices for shares of
our common stock in the over-the-counter market, as reported by NASD OTC BB were
$2.90 and $3.10 per share respectively.

      We believe that there are presently 17 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 December 31, 2003, we had an aggregate of 413 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 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 2003

                      EQUITY COMPENSATION PLAN INFORMATION


<TABLE>
<CAPTION>
                              Number of securities to be issued         Weighted average exercise price of    Number of securities
                              upon exercise or outstanding options      outstanding options, warrants and     remaining available
                               warrant and rights                                 rights                       for future issuance
Plan category                                (a)                                      (b)                                 (c)
-------------------------    -------------------------------------      ---------------------------------     --------------------
<S>                                      <C>                                         <C>                             <C>
Equity compensation plans                4,749,336(1)                                3.47                            30,000
approved by security holders
Equity compensation plans                2,489,595(2)                                2.47                              -0-
not approved by security holders
Total                                    7,238,931                                   3.14                            30,000
</TABLE>

(1) This total includes shares to be issued upon exercise of outstanding options
under four equity  compensation  plans that have been  approved by the Company's
shareholders  (i.e.  - the 2000  Plan and the 2002  Plan,  the 2003 Plan and the
2003-A Plan).

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

INDIVIDUAL COMPENSATION ARRANGEMENTS

     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


                                       8
<PAGE>


released;  or (iii) one year following the date when certain shares owned by Mr.
William or HRW Partnership are free of transfer restrictions.

      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. This Agreement was terminated in August 2003.

      Pursuant to an 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 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
(consisting  of one share of common  stock  and one  warrant)  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 is $5.50. The placement  warrant has a
term of 60 months and was not exercisable during the initial 13 months following
issuance.  Following the 13-month  non-exercisable  period,  holders,  acting in
unison,  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 will be purchased
upon the exercise of the placement warrant. Additionally, following the 13-month
non-exercisable  period,  the holders,  acting in unison,  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


                                       9
<PAGE>


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 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 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.  The initial  borrowing
of $200,000  was  subsequently  paid in October  2003 by issuance of the 500,000
shares of common stock.

      In May 2003,  the Company  entered  into an Equity Line of Credit  ("ELC")
agreement  pursuant to which the Company  borrowed  $250,000.  The borrowing was
convertible into common stock at a 25% discount from the then prevailing  market
price.  The Company had 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  $1,000,000,  including  the  $250,000  amount if
converted.  The agreement  required a minimum stock price of $2.50 per share and
minimum trading volume requirements,  both as defined in the agreement. Pursuant
to the  Agreement,  the  Company  agreed to issue 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 would vest only in the event the
Company  exercises its right to sell additional shares of registered stock under
the  Agreement.  Related to the ELC,  in July 2003,  the Company  issued  91,638
shares of common  stock.  In July 2003,  the note  payable  was  converted  into
135,022 registered shares of its common stock. The Company  recognized  original
issue discount of approximately  $202,000  associated with the value of warrants
and the  contingent  beneficial  conversion  feature  of the note  payable.  The
Company also recognized  deferred costs of approximately  $66,000.  The discount
and loan costs were  amortized  over the term of the loan and were  subsequently
fully expensed in July 2003 upon the conversion  into common stock.  In November
2003, the Company issued an additional 104,167 shares of common stock at a price
of $2.40 per share.  The Company  filed a  registration  statement  which became
effective July 7, 2003 but withdrew the Registration  Statement in December 2003
since no additional shares will be sold under the ELC.

TRANSFER AGENT

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



                                       10
<PAGE>


RECENT SALES OF UNREGISTERED SECURITIES

      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
Radio Metrix Inc. 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.

      From July 2002 through December 31, 2002, 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  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.

      Sales of shares of stock 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


                                       11
<PAGE>


$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  a number 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 is $5.50.  The placement  warrant has a term of 60 months
and  is not  exercisable  during  the  initial  13  months  following  issuance.
Following the 13-month  non-exercisable  period, holders, acting in unison, 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  terminates 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, 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.

      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 that commence 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,
to 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.  Subsequent to April 2003, the $200,000 loan was paid in exchange for
the 500,000 shares of stock held as collateral.

      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  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).


                                       12
<PAGE>


      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.  This
agreement was  terminated in August 2003 and the Company issued 50,000 shares of
common stock in connection with such termination.

      In May and July 2003,  the Company  issued 28,569 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  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.

      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, 2003,  we had revenue  from product  sales of $212,679  principally
representing  sales of our  product for powered  parking  gates.  In addition to
limited  revenue,  these sales have  continued to provide  field-testing  of the


                                       13
<PAGE>


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

      In February 2004, the Company negotiated a revision to its patent payment,
reducing it from $600,000 to $250,000,  due as follows:  $100,000 by February 8,
2004;  $75,000 by March 8, 2004; and $78,600  (including  interest of $3,600) by
April 22, 2004. All of such payments have been made except for the $78,600 which
we expect to pay by its due date.

LIQUIDITY AND CAPITAL RESOURCES

      Since inception,  we have financed our operations largely from the sale of
common  stock.  From  inception  through  December  31,  2003 we raised  cash of
approximately  $9,036,000 net of issuance costs,  through private  placements of
common stock  financings.  At December 31, 2003 we had cash and cash equivalents
totaling $260,536.

      Since  our  inception   through   December  31,  2003,  we  have  incurred
approximately  $2,824,421 of direct  research and  development  expenses.  These
research and development costs were directed principally toward our InvisaShield
technology and safety products,  and to a lesser extent,  our security 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


                                       14
<PAGE>


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  Radio  Metrix  Inc.:  (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 Radio
Metrix  Inc.  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 Radio Metrix Inc.  including
approximately  $175,000 in accrued compensation payable to stockholders of Radio
Metrix  Inc.  that  remained  in place and was  assumed  by the  Company  at the
acquisition of Radio Metrix Inc. We believe the acquisition of Radio Metrix Inc.
will affect our results of operations in a number of respects including: (i) the
potential  business  opportunity  represented by the assets  acquired from Radio
Metrix Inc. 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 Radio  Metrix  Inc.  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 Disposal of Long-Lived Assets" and, accordingly,  as part of a
third-party  evaluation  of the patent as of  December  31,  2003,  the  Company
recorded an impairment  charge of  approximately  $5,518,000 that is included in
the  consolidated  statement  of  operations.  During  April  2003,  through  an
amendment to the 2002 Radio Metrix, Inc. purchase agreement,  the Company agreed
to issue  3,250,000  shares of its common stock for full  satisfaction of future
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  stockholders'  equity during April
2003.

      In November of 2003, the Company and Messrs. Stephen A. Michael and Samuel
S. Duffey, two principal  shareholders/officers,  entered into new agreements to
modify  such  individuals'  responsibilities  to the  Company and to forgive and
restructure  certain notes receivable,  certain stock  subscriptions and related
interest receivables,  notes and related interest payable in connection with the
Radio  Metrix  Inc.  transaction  and  other  amounts  due  these  shareholders.
Subsequently,  in January of 2004,  the Company  entered into another  agreement
with Stephen A. Michael, which superseded his November agreement with respect to
certain of the issues addressed in his November  agreement.  The principal terms
of these new agreements are described as follows:

      STEPHEN A. MICHAEL - Mr.  Michael will  continue to serve on the Company's
Board  of  Directors  and  as an  independent  consultant  to the  Company.  Mr.
Michael's  employment  with the Company  terminated  January 31, 2004 and he was
paid his annual  salary at the rate of $12,500  per month  through  January  31,


                                       15
<PAGE>


2004.  Mr.  Michael's  existing  Covenant  Not to  Compete  and  Confidentiality
Agreements remained in place.

    Pursuant to the new agreements,  beginning January 31, 2004, Mr. Michael, as
the Company's  technology advisor,  entered into a one-year Consulting Agreement
with the Company,  which he will provide consulting  services as assigned by the
Board of Directors from time to time to seek out and identify new  opportunities
for integration,  application,  licensing and sales of InvisaShield  technology.
Mr. Michael's  compensation under the Consulting  Agreement will be per day $550
plus  reimbursement of customary  expenses.  Mr. Michael will be available under
this arrangement for 15 days per month.

      As part of the new agreements, Mr. Michael will:

      o     Forgive  any  obligation  for the  Company  to pay his five years of
            severance and related employee benefits; and

      o     Forgive  notes and  interest due him as a result of the Radio Metrix
            Inc. merger transaction approximating $600,000.

      Under the new agreements, the Company will:

      o     Pay accrued salaries totaling $303,607  currently due Mr. Michael in
            installments  at amounts  based on  specified  levels of cash equity
            funding  raised by the Company,  as follows:  $65,000 in January and
            February  2004,  $56,170 when the Company has raised  $2,000.000  in
            total from all sources in the  aggregate;  $84,261  when the Company
            has raised  $3,000,000  in total from all sources in the  aggregate;
            $98,172  when the  Company has raised  $4,000,000  in total from all
            sources in the aggregate;

      o     Forgive,  when due, the note  receivable  from Mr. Michael  totaling
            $74,500  and pay  resulting  income  taxes that would be owed by Mr.
            Michael;

      o     Forgive,  when due, the note  receivable  from Mr. Michael  totaling
            $375,000 plus accrued  interest of  approximately  $86,000,  and pay
            resulting income taxes that would be owed by Mr. Michael;

      o     Fully vest the 200,000 unvested options granted to Mr. Michael under
            the  Company's  2002 Plan.  In addition,  the Company will amend the
            2002  Plan  (or  Mr.  Michael's  Option  Agreement   thereunder)  as
            appropriate to eliminate the  requirement  to exercise  within three
            months of termination; and

      o     Include in a Registration Statement, as same is eligible, the shares
            of common stock underlying the 300,000 options issued Mr. Michael in
            July 2000 under the 2000 Plan.

      SAMUEL S. DUFFEY - Mr. Duffey resigned from his positions as non-executive
chairman  and  director  of the  Company  and began a leave of absence  from his
employment  with the Company on September  15, 2003.  On November 13, 2003,  Mr.
Duffey  agreed to the terms of a new  agreement.  Under the new  agreement,  all
provisions of Mr.  Duffey's  existing  Employment  Agreement are  superseded and
replaced by the new agreement.

      Pursuant to the new agreements, Mr. Duffey agreed to:

      o     Forgive  any  obligation  for the  Company  to pay his five years of
            severance and related employee benefits; and


                                       16
<PAGE>


      o     Forgive  notes and  interest  due Mr.  Duffey's  family  trusts as a
            result of the Radio  Metrix Inc.  merger  transaction  approximating
            $635,000; and

      o     Forgive all accrued compensation approximating $400,000.

      Under the new agreements, the Company has agreed to:

      o     Pay Mr. Duffey $150,000 in three installments as follows: $50,000 in
            December  2003;  $50,000 when the Company has raised  $1,000,000  in
            capital,  following  November 13, 2003; and $50,000 when the Company
            has raised an additional $500,000 in capital, following November 13,
            2003;

      o     Pay all accrued expenses owed to Mr. Duffey;

      o     Forgive,  when due, the note  receivable  from Mr.  Duffey  totaling
            $71,810  and pay  resulting  income  taxes that would be owed by Mr.
            Duffey related thereto;

      o     Forgive,  when due, the note  receivable  from Mr.  Duffey  totaling
            $375,000 plus accrued  interest of  approximately  $86,000,  and pay
            resulting  income  taxes  that would be owed by Mr.  Duffey  related
            thereto; and

      o     Fully vest the 200,000  unvested options granted to Mr. Duffey under
            the  Company's  2002 Plan.  In addition,  the Company will amend the
            2002  Plan  (or  Mr.  Duffey's  Option   Agreement   thereunder)  as
            appropriate:  to eliminate the provisions  relating to the Company's
            repurchase  and right of first refusal  rights with regard to shares
            issued  to Mr.  Duffey  following  exercise,  and to  eliminate  the
            requirement to exercise within three months of termination. Also, as
            part of the new agreements, Mr. Duffey's Covenant Not to Compete and
            Confidentiality  Agreements  were updated  superseding and replacing
            those attached to his Employment Agreement.

      At December 31,  2003,  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,
2003. At December 31, 2003, the line of credit was substantially all drawn upon.
The line of credit was renewed on July 15, 2003 and matures on July 15, 2004.

      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  under  discussion,  but are believed to be  substantially  similar to
those of the original $200,000 borrowing.  The initial borrowing of $200,000 was
subsequently  paid in October  2003 by issuance of the 500,000  shares of common
stock.


                                       17
<PAGE>


      For the period of January  through  March 2004,  the  Company  sold 80,198
shares  of  common  stock at  prices  ranging  from  $1.07 to  $3.00  per  share
aggregating $190,379, net of transaction costs.

      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 had 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 August 2003, this Agreement was terminated in connection with the issuance by
the Company of 50,000 shares of common stock.

      In May 2003,  the Company  entered  into an Equity Line of Credit  ("ELC")
agreement  pursuant to which the Company  borrowed  $250,000.  The borrowing was
convertible into common stock at a 25% discount from the then prevailing  market
price.  The Company had 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  $1,000,000,  including  the  $250,000  amount if
converted.  The agreement  required a minimum stock price of $2.50 per share and
minimum trading volume requirements,  both as defined in the agreement. Pursuant
to the  Agreement,  the  Company  agreed to issue 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 would vest only in the event the
Company  exercises its right to sell additional shares of registered stock under
the  Agreement.  Related to the ELC,  in July 2003,  the Company  issued  91,638
shares of common  stock.  In July 2003,  the note  payable  was  converted  into
135,022 registered shares of its common stock. The Company  recognized  original
issue discount of approximately  $202,000  associated with the value of warrants
and the  contingent  beneficial  conversion  feature  of the note  payable.  The
Company also recognized  deferred costs of approximately  $66,000.  The discount
and loan costs were  amortized  over the term of the loan and were  subsequently
fully expensed in July 2003 upon the conversion  into common stock.  In November
2003, the Company issued an additional 104,167 shares of common stock at a price
of $2.40 per share.  The Company  filed a  registration  statement  which became
effective July 7, 2003 but withdrew the Registration  Statement in December 2003
since no additional shares will be sold under the ELC.

      In June and July 2003,  the Company sold 350,500  Units at $2.00 per Unit,
each Unit consisting of one share of the Company's  common stock and one warrant
to purchase one additional  share at an exercise  price of $2.00 per share,  one
additional  share at an exercise  price of $3.00 per share,  and one  additional
share at an exercise  price of $4.00 per share.  The  warrants  are  exercisable
until June 30, 2005.  As payment of the  placement  fee, the Company  issued the
placement  agent 45,500 of its $2.00  Units.  The  placement  agent was also the
purchaser of 50,500 of the $2.00 Units. In August 2003, the Company also granted
an option to purchase  100,000  shares of common  stock at an exercise  price of
$3.00 to the placement  agent.  The options were granted in  recognition  of the
successful fund raising activities and are exercisable until August 2006.

      In September  2003,  the Company  issued  20,000 shares of common stock to
Fusion  Capital Fund II, LLC  ("Fusion")  as  compensation  for expected  future
capital  raising  activities.  The Company also  entered into an agreement  with
Fusion under which Fusion would provide an Equity Line of Credit  subject to the
Company filing a Registration Statement. The agreement also required the Company
to issue  200,000  shares of the  Company's  common  stock to Fusion,  as a fee,


                                       18
<PAGE>


subject to a holding  period before Fusion can sell the shares.  The Company has
recorded   the   issuance  of  this  stock  at  $2.77  per  share  and  included
approximately  $554,000 as expense  during 2003.  In January  2004,  the Company
terminated this agreement.

      During 2003,  the Company  issued 327,698 shares of common stock at prices
ranging from $1.07 to $3.00 per share upon the exercise of common stock options.
In October 2002, the Company borrowed $200,000 from a non-affiliated  party. All
principal and interest  were 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,  which was  recorded  as original
issue  discount  in 2002.  The  extension  option  was  issued  and the loan was
extended to April 2003.  The maturity of the loan was  extended  further and, in
May 2003,  the loan was  increased by  $100,000.  In October  2003,  the Company
issued  500,000  shares  of  common  stock to  Daimler  Capital  Partners,  Ltd.
("Daimler").  These shares were  collateralizing the note payable to Daimler and
were issued in repayment of $200,000 of this note.

      We have  incurred  significant  net  losses and  negative  cash flows from
operations  since our  inception.  As of December 31, 2003 we had an accumulated
deficit  of   approximately   $20,701,920  and  a  working  capital  deficit  of
$1,961,329.

      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.

      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-KSB 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.

      In February 2004, the Company negotiated a revision to its patent payment,
reducing it from $600,000 to $250,000,  due as follows:  $100,000 by February 8,
2004;  $75,000 by March 8,  2004;  and  $75,000  by April 8,  2004.  All of such
payments have been made.

      NEW ACCOUNTING  PRONOUNCEMENTS  In January 2003, FASB  Interpretation  46,
Consolidation  of Variable  Interest  Entities an  Interpretation  of ARB No. 51
("FIN  46")  was  issued.  This  Interpretation  clarifies  the  application  of
Accounting Research Bulletin ("ARB") No. 51, Consolidated  Financial Statements,
to certain entities in which equity investors do not have the characteristics of
a controlling  financial  interest or do not have sufficient  equity at risk for
the entity to finance its activities without additional  subordinated  financial
support  from  other  parties.  Application  of  the  majority  voting  interest
requirement  in ARB 51 to certain  types of entities  may not identify the party
with a controlling financial interest because the controlling financial interest
may be achieved through  arrangements that do not involve voting interests.  All
enterprises with variable  interests in variable interest entities created after
January 31, 2003,  shall apply the  provisions of this  Interpretation  to those


                                       19
<PAGE>


entities  immediately.  A public  entity with a variable  interest in a variable
interest entity created before  February 1, 2003,  shall apply the provisions of
this  Interpretation   (other  than  the  transition  disclosure  provisions  in
paragraph 26) to that entity no later than the beginning of the first interim or
annual reporting period beginning after June 15, 2003. A nonpublic entity with a
variable interest in a variable interest entity created before February 1, 2003,
shall apply the  provisions of this  Interpretation  (other than the  transition
disclosure  provisions  in paragraph 26) to that entity no later than the end of
the first annual reporting period beginning after June 15, 2003.

      In  December  2003,  a revision  to FIN 46 ("FIN  46R") was  published  to
clarify some of the  provisions of FIN 46 and exempt  certain  entities from its
requirements.  Under FIN46R,  a legal entity is  considered a variable  interest
entity of "VIE",  with some exceptions if specific  criteria are met, if it does
not have sufficient equity at risk to finance it own activities  without relying
on financial support from other parties.  Additional criteria must be applied to
determine if this condition is met or if the equity  holders,  as a group,  lack
any one of three stipulated characteristics of a controlling financial interest.
If the legal entity is a VIE,  then the  reporting  entity  determined to be the
primary beneficiary of the VIE must consolidate it. Even if the reporting entity
is not obligated to consolidate the VIE, then certain  disclosures  must be made
about the VIE if the reporting entity has a significant  variable interest.  The
effective  date of the  interpretation  was modified  under FIN 46R. A reporting
entity  is  required  to  apply  the  provisions  of FIN  46R to all  VIEs  that
previously were subject to certain  previously issued special purpose entity, or
SPE,  accounting  pronouncements for all reporting periods ending after December
14,  2003.  For all other  VIEs,  a  reporting  entity is  required to adopt the
provisions of FIN 46R for all reporting  periods after May 15, 2004. The Company
does not  believe it has  ownership  in any  variable  interest  entities  as of
December  31,  2003.  The Company  will apply the  consolidation  or  disclosure
requirements  of this  interpretation  in future  periods  if it should  own any
interest deemed to be a variable interest entity.

                                       20
<PAGE>



YEAR ENDED DECEMBER 31, 2003 COMPARED TO THE YEAR ENDED DECEMBER 31, 2002

     Net Sales and Gross  Profit - During the years ended  December 31, 2002 and
2003, net sales totaled  $257,118 and $212,679  respectively.  The decrease was
due to the decrease in sales of safety products for powered  parking gates.  The
Company's sales to date have been limited and constrained by lack of capital. We
had a gross  profit of $81,218 for the year ended  December 31, 2002 and $83,708
for the year ended December 31, 2003.

     Research  and  Development  Expenses - During the years ended  December 31,
2002 and 2003, research and development  expenses totaled $660,844 and $558,277,
respectively.  The  decrease of $102,607 was due  principally  to a reduction in
work force  resulting  in  decreases  in salaries  and wages and payroll  taxes;
partially  offsetting  these  decreases  was rent expense  which  increased as a
result of adding facility space in the second half of 2002.

     Administrative  Expenses - During the years  ended  December  31, 2002 and
2003,  these  expenses  totaled  $2,813,897  and  $5,179,864  respectively.  The
increase of $2,365,967 was attributable to the following  categories:  increases
were due substantially to patent amortization,  and related legal expenses; fees
related to a cancelled  equity funding line;  consultation  fees and expenses in
connection with investor relations; consultation fees in connection with new CEO
and office and insurance expenses.  Decreases were due to reduction of officer's
salaries in  connection  with  restructuring  and severance  settlements;  lower
marketing,  advertising  and tradeshow  activities;  and reduction in work force
resulting in decreases in compensation expense.

     Impairment  of Patent - During the year 2003,  the  Company  decreased  the
carrying  amount of its patent costs by  $5,517,808 to reflect the fair value as
determined by a third-party valuation. The patent impairment results principally
from  perceived  shifts in  markets  requiring  us to rely  more on our  patents
applied for and less on the original patent.

     Interest  Expense - Net - During  the years  ended  December  31,  2002 and
December  31,  2003,  net  interest   expense  totaled   $187,663  and  $565,864
respectively. The increase was due principally to additional interest expense in
connection  with  the  RMI  acquisition  notes  payable  and  certain  financing
transactions occurring in 2003.

     Net Loss and Net Loss Per  Common  Share - The  Company's  net loss and net
loss per common share increased from $3,581,186 or $.28 per share to $11,738,105
or $.73 per share,  respectively,  as a result of the matters  explained  above,
including the $5,517,808 write down of the patent.


                                       21
<PAGE>


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.  At December 31, 2003 the carrying amount of the patent was reduced
as described above to reflect its fair value.

                                  RISK FACTORS

      Our  business,  financial  condition,  or results or  operations  could be
materially adversely affected, should any of the following risks occur.

      WE HAVE A LIMITED  OPERATING  HISTORY WITH  SIGNIFICANT  LOSSES AND EXPECT
LOSSES TO CONTINUE FOR THE FORESEEABLE FUTURE

      We have yet to establish  any history of  profitable  operations.  We have
incurred annual  operating  losses of $3,581,186 and  $11,738,105  respectively,
during the past two fiscal years of operation. As a result, at December 31, 2003
we had an  accumulated  deficit  of  $20,701,920.  Our  revenues  have  not been
sufficient  to sustain our  operations.  We expect that our revenues will not be
sufficient to sustain our operations for the near term future. Our profitability
will  require  the   successful   commercialization   of  our   presence-sensing
technology. No assurances can be given when this will occur or that we will ever
be profitable.


      WE WILL REQUIRE ADDITIONAL FINANCING TO SUSTAIN OUR OPERATIONS AND WITHOUT
IT WE WILL NOT BE ABLE TO CONTINUE OPERATIONS

      At December 31, 2003 we had a working capital  deficit of $1,961,329.  The
independent  auditor's report for the year ended December 31, 2003,  includes an
explanatory  paragraph to their audit opinion stating that our recurring  losses
from operations and working capital deficiency raise substantial doubt about our
ability to continue as a going  concern.  We have an operating cash flow deficit
for the year ended  December 31, 2003 of  $2,218,523.  We do not currently  have
sufficient   financial  resources  to  fund  our  operations  or  those  of  our
subsidiaries. Therefore, we need additional funds to continue these operations.

      WE ARE A DEVELOPMENT STAGE COMPANY AND HAVE A LIMITED OPERATING HISTORY

      We have had a limited operating history and have had only limited revenue.
We are a development stage company, and accordingly,  we anticipate that we will
encounter  many  difficulties  and  risks  associated  with our  early  stage of
development  which  includes,  but is not  limited to, the  introduction  of new
products,  the  search  for and  hiring of new  personnel,  access  to  required
capital,  management  issues,  ramping  up  manufacturing  capacity,  and  other
important business aspects.


                                       22
<PAGE>


      WE WILL BE REQUIRED TO COMPETE WITH LARGER AND WELL-ESTABLISHED  COMPANIES
WHICH ARE BETTER FINANCED.

      There are a number of  well-established  companies which are well known in
the manufacture and/or distribution of products for the security and life-safety
markets.  Such companies include Honeywell,  General Electric,  Bosch, Tyco, and
others.  Accordingly,  we are subject to the difficult  challenge of introducing
and  commercializing  our new  technology  and  products in a market  place in a
strong competitive  environment.  In addition, our technology and products based
thereon will have to compete with other  technologies  such as passive  infrared
and various types of motion detection which are well known and well accepted.

      WE ARE COMMERCIALIZING A NEW TECHNOLOGY WHICH WILL INVOLVE UNCERTAINTY AND
RISKS RELATED TO MARKET ACCEPTANCE.

      We are  commercializing a new technology with which we seek to gain market
acceptance and to demonstrate competitive advantages.  Our success depends, to a
large degree, upon our ability to fully develop and commercialize our technology
and gain industry acceptance of our products, based upon this new technology and
its perceived competitive advantages.

      WE MAY  NOT BE ABLE  TO  EFFECTIVELY  PROTECT  OUR  INTELLECTUAL  PROPERTY
RIGHTS, THE FOUNDATION OF OUR BUSINESS,  WHICH COULD HARM OUR BUSINESS BY MAKING
IT EASIER FOR OUR COMPETITORS TO DUPLICATE OUR SERVICES

      We  regard  certain  aspects  of our  products,  processes,  services  and
technology  as  proprietary.  We have taken steps to protect them with  patents,
copyrights,  trademarks,  restrictions on disclosure and other methods.  Despite
these precautions,  we cannot be certain that third parties will not infringe or
misappropriate   our   proprietary   rights  or  that  third  parties  will  not
independently   develop  similar   products,   services  and   technology.   Any
infringement,  misappropriation  or  independent  development  could cause us to
cease operations.

      We have an issued  patent  and have  filed six  patent  applications  with
respect to various  aspects of our technology.  The pending patent  applications
may not be  issued  to us,  and if  issued,  may not  protect  our  intellectual
property from competition  which could seek to design around or invalidate these
patents.  Our  failure  to  adequately  protect  our  proprietary  rights in our
products,  services and  technology  could harm our business by making it easier
for our competitors to duplicate our services.

      We may have to resort to litigation to enforce our  intellectual  property
rights,  protect our trade  secrets,  determine  the  validity  and scope of the
proprietary  rights of others,  or defend ourselves from claims of infringement,
invalidity or unenforceability. Litigation may be expensive and divert resources
even if we win. This could adversely  affect our business,  financial  condition
and operating results such that it could cause us to reduce or cease operations.

      OTHER  PARTIES  MAY  ASSERT  THAT  OUR   TECHNOLOGY   INFRINGES  ON  THEIR
INTELLECTUAL  PROPERTY RIGHTS,  WHICH COULD DIVERT MANAGEMENT TIME AND RESOURCES
AND POSSIBLY FORCE OUR COMPANY TO REDESIGN OUR TECHNOLOGY


                                       23
<PAGE>


      Technology-based companies, such as ours, have the potential of litigation
based on allegations of patent  infringement.  From time to time,  third parties
may  assert  patent,   copyright  and  other  intellectual  property  rights  to
technologies  that are important to us. While there currently are no outstanding
infringement  claims  pending by or against us, we cannot  assure you that third
parties  will not assert  infringement  claims  against us in the  future,  that
assertion  by such parties  will not result in costly  litigation,  or that they
will not prevail in any such litigation.  In addition, we cannot assure you that
we will be able to license any valid and infringed patents from third parties on
commercially reasonable terms or, alternatively, be able to redesign products on
a cost-effective  basis to avoid  infringement.  Any infringement claim or other
litigation against or by us could have a material adverse effect on us and could
cause us to reduce or cease operations.

      WE MAY NOT BE ABLE TO KEEP  UP WITH  RAPID  TECHNOLOGICAL  CHANGES,  WHICH
COULD RENDER OUR PRODUCTS LESS COMPETITIVE OR OBSOLETE

      Changes in technology,  changes in customer  requirements and preferences,
introduction  of products and services  embodying new or different  technologies
and the  emergence  of new industry  standards  and  practices  could render our
existing  technology  and products  less  competitive  or  obsolete.  Our future
success  will depend on our  ability to enhance and improve the  responsiveness,
functionality,  accessibility  and features of our technology  and products.  We
expect  that we will  need  to  develop  extensive  technological  upgrades  and
enhancements  to  accommodate  many of the new  products  and  services  that we
anticipate will be required by our customers.  We cannot assure you that we will
be able to expand and  upgrade  our  technology  and  systems,  or  successfully
integrate new  technologies or systems we develop in the future,  to accommodate
such increases in a timely manner.

      WE MAY NOT EFFECTIVELY MANAGE THE GROWTH NECESSARY TO EXECUTE OUR BUSINESS
PLAN, WHICH COULD ADVERSELY AFFECT THE QUALITY OF OUR OPERATIONS AND OUR COSTS

      In order to successfully  execute our business plan, we must significantly
increase the number of strategic partners,  manufactures,  dealers, distributors
and customers that use our products.  This growth will place significant  strain
on our personnel, systems and resources. We also expect that we will continue to
hire employees, including technical, management-level employees, and sales staff
for the foreseeable  future.  This growth will require us to improve management,
technical,  information and accounting systems,  controls and procedures. We may
not be able to  maintain  the  quality  of our  operations,  control  our costs,
continue  complying  with all  applicable  regulations  and expand our  internal
management, technical information and accounting systems in order to support our
desired  growth.  We cannot be sure that we will manage our growth  effectively,
and our failure to do so could cause us to reduce or cease operations.

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 Page of this Form 10-KSB.


                                       24
<PAGE>


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.

ITEM 8(A) 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 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.

      The nature of the business and the size of the Company have  prevented the
Company from being able to employ  sufficient  resources to enable it to have an
adequate  segregation  of  duties  within  its  internal  control  system.  This
condition is considered a reportable  condition and has been  discussed with the
audit  committee.  The Company will continue to monitor and assess the costs and
benefits of additional staffing in the accounting area.

                                    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:

<TABLE>
<CAPTION>
                                                         Positions and Offices Presently
     Name                         Age                        Held with the Company
-----------------------         -------               -----------------------------------------------
<S>                               <C>                  <C>
Joseph F. Movizzo                 60                   Director
Herbert M. Lustig                 51                   Director, President & CEO
Edmund C. King                    69                   Director, Chief Financial Officer, Secretary
                                                       And Treasurer
Robert Knight                     47                   Director
Stephen A. Michael                56                   Director  and Chairman
Gregory J. Newell                 54                   Director
John E. Scates                    47                   Director
Charles A. Yanak                  47                   Vice President Marketing, Sales, &
                                                       Business Development
</TABLE>

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


                                       25
<PAGE>


      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.  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 also served as an  independent  Director  non-executive  Chairman of
ManageSoft  Corporation  headquarted in Boston, MA. 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.

      HERBERT  M.  LUSTIG  joined  the  Company  in  November  of 2003 as  Chief
Operating  Officer.  In December of 2003 he joined the Invisa Board of Directors
and on January 1, 2004, he was  appointed the Company's  President and CEO. From
November 2002 to October 2003,  Mr.  Lustig was principal at Techmark  Group,  a
consultancy   providing   technology  and  market  development   assistance  for
corporations.  From June 2000 to November 2002 he served as President and CEO of
Expanse Networks, an ePrivacy software developer. From June 1996 to May 2000, he
was Vice President,  then Sr. Vice President of Marketing & Business Development
within the Security and Fire  Solutions  manufacturing  businesses  of Honeywell
International.  Prior to that,  Mr. Lustig held  executive  positions at General
Instrument  Corporation,  Booz  Allen  Hamilton,  and  Communications  Satellite
Corporation  (COMSAT).  Mr.  Lustig holds an MBA from the Wharton  School of the
University  of  Pennsylvania  and a BS in  Biochemistry  from the  University of
Massachusetts at Amherst.

     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 operational and
financial  restructuring;  directed and  supervised  audits of client  financial
statements;   and  provided   expert   witness   testimony   and  technical  SEC
consultation.  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.  Mr. King is also a
member of the Board of Directors of LTC  Properties,  Inc.,  an 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. Mr.
King has lectured  and written  extensively  on  healthcare  industry  financial
matters.


                                       26
<PAGE>


      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 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 Treasurer 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.

      STEPHEN A. MICHAEL has served as a Director  since February 9, 2000 and as
President from that date through  November 6, 2003.  Subsequent to that date Mr.
Michael had served as Chairman.  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.

      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


                                       27
<PAGE>


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.

      CHARLES A.  YANAK  joined  the  Company  in March  2004 as Vice  President
Marketing and Sales. From January 2002 to March 2004 he was VP Sales & Marketing
for BioLink  Technologies,  a small enterprise  security company in "turnaround"
mode.  From 1997 to December 2001,  Mr. Yanak was Director of Product  Marketing
and  Business  Development  for  Iridian,  Inc.,  a  leading  biometric  company
specializing in iris recognition technology. Mr. Yanak has more than 25 years of
experience  leading the  successful  development,  commercialization,  sales and
licensing of systems and  technology  for security,  electronics  and industrial
companies.  In addition to Iridian, Mr. Yanak has held executive level sales and
marketing    positions    at    organizations    such   as   SOUTHCO   Inc.   (a
developer/manufacturer of engineered access solutions), Avery Dennison (a global
supplier of barcode systems), and Mars Electronics.

      Mr. Yanak earned his M.B.A. in Marketing at Temple University,  as well as
an M.S. in Systems Engineering and a B.S. in Mechanical  Engineering from Drexel
University. Mr. Yanak is a co-inventor on one U.S. patent awarded.

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.

      The form 3's to be filed by the persons and entities listed below were due
      January 2, 2003 and were filed later in January, 2003.

      Samuel S. Duffey         Stephen A. Michael      Spencer Charles Duffey
      Edmund C. King           Robert Knight             Irrevocable Trust
      John E. Scates           Gregory J. Newell       Elizabeth Rosemary Duffey
                                                             Irrevocable Trust

      A Form 4 to be  filed by  Gregory  J.  Newell  by July 2,  2003 to  report
      vesting of an option was filed on September 18, 2003.

      Form 4's to be filed by John F.  Scates by May 19,  2003 and July 2, 2003,
      respectively, to report vesting of options were filed by July 16, 2003.


                                       28
<PAGE>


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.





                                       29
<PAGE>


<TABLE>
<CAPTION>
                          SUMMARY COMPENSATION TABLE(1)
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                             LONG TERM COMPENSATION
                         ANNUAL COMPENSATION                                                         AWARDS

           (A)                 (B)              (C)               (D)              (E)               (F)               (G)

        NAME AND                                                               OTHER ANNUAL                        SECURITIES
   PRINCIPAL POSITION          YEAR                              BONUS         COMPENSATION      RESTRICTED        UNDERLYING
                                               SALARY                                                               OPTIONS/
                                                                  ($)              ($)              STOCK              (#)
                                                ($)                                               AWARD(S)
                                                                                                     ($)
-----------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>           <C>                <C>             <C>              <C>                <C>
Herbert M. Lustig              2003          32,500(2)          -------           ------           ------           1,400,000
President & CEO
Stephen A. Michael             2003          120,000(3)         -------         43,050(4)          8,400(3)          ------------
Director                       2002          120,000(4)        30,000(9)         8,400(4)          ------            300,000
                               2001          120,000(9)                         65,444(9)        140,000(9)          ------
William W. Dolan               2003          120,000(5)         -------          4,800(5)          ------            200,000
                               2002         120,000 (6)        10,000(6)         4,800(6)          ------            100,000
                               2001           63,750(10)        -------         17,461(10)       35,000(10)         --------
Edmund C. King                 2003          120,000(7)         -------         ---------          ------            200,000
Secretary, CFO,                2002          120,000(8)         -------         22,500(8)          ------            125,000
Treasurer & Director           2001           -------           -------         39,985(11)       17,500(11)          ------
</TABLE>


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


<TABLE>
<CAPTION>
                           SUMMARY COMPENSATION TABLE
--------------------------------------------------------------------------------
       (A)                             (B)                            (C)
---------------------             -------------                -----------------
                                       LTIP                        ALL OTHER
    NAME AND                         PAYOUTS                     COMPENSATION
PRINCIPAL POSITION                     ($)                            ($)
---------------------             -------------                -----------------
<S>                               <C>                          <C>
Herbert M. Lustig                    -------                       -------
President, CEO and
Director

Stephen A. Michael                   30,000                        -------
Director

William W. Dolan                     -------                       3,200

Edmund C. King                       -------                       -------
Secretary, CFO,
Treasurer and
Director
</TABLE>


(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) Mr. Lustig commenced employment in November 2003. Salary paid to him totaled
$32,500 in 2003. He is currently being paid at an annual rate of $195,000.

(3) During the year 2003, Mr. Michael earned a base salary of $120,000,  none of
which was paid in cash; other annual compensation comprised a car allowance paid
in cash.

(4) 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


                                       30
<PAGE>


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.

(5) During the year 2003,  Mr.  Dolan  earned a base salary of $120,000 of which
$30,000 was paid and the remainder accrues;  other annual compensation comprised
a car allowance paid in cash.

(6) 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) the bonus of $10,000  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.

(7) During the year 2003,  Mr.  King  earned a base  salary of $120,000 of which
$30,000  was  paid in cash in the  form of a  consulting  fee  through  Teasdale
Corporation, which is controlled by Mr. King; and the remainder accrues.

(8) 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  Corporation,  which is
controlled by Mr. King and which provided consulting services to the Company.

(9) 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").

(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 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


                                       31
<PAGE>


consulting services was paid to Mr. King through Teasdale Corporation,  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.


                   OPTIONS/SAR GRANTS IN LAST FISCAL YEAR 2003

<TABLE>
<CAPTION>
                                                PERCENT OF TOTAL
                                                OPTIONS/SARS
                                                GRANTED TO
                         NO. OF OPTIONS         EMPLOYEES IN                     EXPIRATION DATE
NAME                        GRANTED             FISCAL YEAR        EXERCISE          PRICE
---------------------------------------------------------------------------------------------------
<S>                           <C>                    <C>             <C>            <C>   <C>
William W. Dolan              200,000                8.1             3.35           10/15/13
Edmund C. King                200,000                8.1             3.35           10/15/13
Herbert M. Lustig           1,400,000               56.5             3.41           11/05/13
</TABLE>

Aggregated  option  exercises  in 2003 and 2003  year-end  option  values are as
follows:


<TABLE>
<CAPTION>
                       SHARES                 NUMBER OF SECURITIES UNDERLYING
                      ACQUIRED                  OPTIONS AT FISCAL YEAR END    VALUE OF UNEXERCISED IN-THE-MONEY
      NAME AND           ON         VALUE                   (#)                       OPTIONS AT FISCAL
PRINCIPAL POSITION    EXERCISE     REALIZED                                            YEAR END ($)(1)
-----------------------------------------------------------------------------------------------------------------
                         (#)         ($)         Exercisable    Unexercisable    Exercisable
<S>                     <C>         <C>          <C>            <C>              <C>                <C>
Unexercisable
Stephen A. Michael,
Director and            -----       -----         600,000          -----          165,000           -----
Chairman

 Samuel S. Duffey,
  Former Chairman
and Director(2)         -----       -----         600,000          -----          165,000           -----
William W. Dolan
                        -----       -----         253,333          66,667         40,000            -----
Edmund C. King,
Director                -----       -----         483,333          41,667         154,167           2,083
and CFO

Herbert M. Lustig,
Director and
President               -----       -----          -----        1,400,000                          196,000
</TABLE>

(1) The fair market  value is based upon the closing bid price of the  Company's
common  stock on December  31, 2003 at $3.55 per share,  as reported by NASD OTC
BB.

(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,



                                       32
<PAGE>

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  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 6,666 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.


                                       33
<PAGE>



      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  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  1,205,000
shares, of which 972,499 are vested and 232,501 are not vested. There will be no
additional options granted under this 2002 Plan.

STOCK COMPENSATION PLAN - 2003

      The  Company's  Board of Directors  adopted a 2003  Incentive  Plan ("2003
Plan") on January 2, 2003 and which was 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 for  awarding  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  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.

      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.  On November 6,
2003,  Mr.  Lustig was granted an option  under the Plan to  purchase  1,400,000
shares of the  Company's  common stock at $3.41 per share,  which vests  233,340
shares on June 30, 2004 and  116,666  shares on  September  30, 2004 and on each
quarter  thereafter.  This option has a term of ten years and is not forfeitable
during this term. The terms of Mr.  Lustig's  options were negotiated as part of
his employment contract.


                                       34
<PAGE>


STOCK COMPENSATION PLAN - 2003 - A

      In October  2003,  the  Company's  Board of  Directors  adopted its 2003-A
Incentive Plan. Under the Plan, the Company has reserved 1,000,000 shares of its
common stock to issue to eligible current  employees of the Company.  On October
15, 2003  employees  were granted  options under the Plan to purchase  1,000,000
shares of the Company's common stock at $3.35 per share. The options have a term
of ten years and vested fully at January 1, 2004.

COMPENSATION OF DIRECTORS

      The Company is currently  establishing a formal plan for  compensating 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,  from time to time,  directors  are
granted  options  under the Company's  various stock option plans,  as reflected
above in Item 10.

         EMPLOYMENT AGREEMENTS

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

      HERBERT M. LUSTIG - Mr.  Lustig's  Employment  Agreement  provides  for an
annual base salary of $195,000 and,  within 90 days of executing the Agreement a
$15,000 lump sum moving  allowance.  The  Agreement  also  provides for four (4)
weeks of paid  vacation and  entitlement  to  participate  in any group plans or
programs maintained by the Company,  such as health insurance,  etc. The term of
the  contract is 38 months,  which ends  January 5, 2007.  In the event of early
termination  of the  Agreement  by the  Company,  Mr.  Lustig  would  receive  a
severance  consisting of base salary,  bonuses and benefits that otherwise would
have  been  due him  during  the 12  month  period  following  the  date of such
termination, paid in a lump sum. As part of the Employment Agreement, Mr. Lustig
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.  Mr. King is currently  receiving $30,000 per year and the balance is
being accrued by the Company.

      CHARLES A. YANAK - Mr. Yanak's Employment Agreement provides for an annual
base salary of $150,000 and, for the first 12 months of the  Agreement,  a $1500
per month living  allowance.  The Agreement also provides for three (3) weeks of


                                       35
<PAGE>


paid  vacation and  entitlement  to  participate  in any group plans or programs
maintained  by the  Company,  such as  health  insurance,  etc.  The term of the
contract  is 36  months,  which  ends  March  24,  2007.  In the  event of early
termination of the Agreement by the Company, Mr. Yanak would receive a severance
consisting of base salary,  bonuses and benefits that otherwise  would have been
due him during the 6 month period following the date of such  termination,  paid
in a lump sum. As part of the  Employment  Agreement,  Mr. Yanak  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  December  31,  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.

<TABLE>
<CAPTION>
 NAME AND ADDRESS OF       AMOUNT AND NATURE OF SHARES
 BENEFICIAL OWNER(1)         BENEFICIALLY OWNED(2)           PERCENTAGE OWNED(2)
<S>                        <C>                               <C>
William W. Dolan(3)                      4,819,228                    25.4%
Stephen A. Michael(4)                    4,858,446                    25.1%
H.R. Williams(5)                         1,183,486                     6.2%
Samuel S. Duffey(6)                        949,572                     4.9%
Edmund C. King(7)                          685,373                     3.6%
Robert Knight(8)                           300,000                     1.6%
Gregory J. Newell(9)                       105,000                      .6%
John E. Scates(10)                          96,666                      .5%
Joseph F. Movizzo(11)                      187,286                     1.0%
G.M. Capital Partners, Ltd.(12)          1,223,000                     6.2%
</TABLE>


     All directors, executive officers and significant employees as a group (10)
     persons) 14,408,058 shares, 64% (approx.)

(1). The business address for Mr. Dolan is 3440 Gulf of Mexico Drive,  Sarasota,
     Florida 34228; for Mr. Michael, 4400 Independence Court, Sarasota,  Florida
     34234;  for  Mr.  Williams,  7954  Royal  Brikdale  Circle,  Bradenton,  FL
     34202;and for G.M. Capital Partners Ltd., 2755 Lougheed Highway, Suite 620,
     Port Coquitlam, B.C. V3B 5Y9, Canada.

(2). The  percentage  calculations  are  based on  18,767,582  shares  that were
     outstanding as of December 31, 2003 plus the respective  beneficial shares.
     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 December 31, 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.


                                       36
<PAGE>


(3). Includes:  (i) 1,958,334 shares held by Mr. Dolan as Trustee of the Spencer
     C. Duffey  Irrevocable  Trust, a Trust created by Samuel S. Duffey, for his
     son; (ii) 1,958,334 shares held by Mr. Dolan as Trustee of the Elizabeth R.
     Duffey  Irrevocable  Trust,  a Trust  created by 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 Samuel S. Duffey,  for his
     former spouse; (iv) 551,941 shares owned by William W. Dolan; (v) Mr. Dolan
     s options to purchase 213,333 shares.

(4). Includes options to purchase 600,000 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 300,000 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
     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  483,333
     shares.

(8). Includes 4,200 shares and options to purchase 300,000 shares.

(9). Includes options to purchase 105,000 shares.

(10) Represents options to purchase 96,666 shares.

(11) Includes 97,286 shares and options to purchase 90,000 shares.

(12) Includes 335,000 shares and options to purchase 888,000 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 consultative  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.


                                       37
<PAGE>


      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.

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.  The  Company
terminated this Agreement in August 2003.

      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,  who 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 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
terminated this engagement in August 2003.

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.


                                       38
<PAGE>


ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Pursuant to a Merger, on February 26, 2002, we acquired Radio Metrix Inc.,
a  Florida  corporation.  Radio  Metrix  Inc.  was  formed  in 1992  by  certain
individuals who founded  SmartGate,  L.C. Radio Metrix Inc. 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 Radio Metrix Inc.  were  acquired  more than two years before
its  acquisition  by  Invisa,  with the  exception  of a patent.  The patent was
purchased  by Radio  Metrix  Inc.  on  January  8, 2002  pursuant  to a Purchase
Agreement  dated October 9, 2000.  The purchase  price paid by Radio Metrix Inc.
for the patent was  $1,200,000 of which $50,000 was paid by Radio Metrix Inc. as
a deposit  against  the  purchase  price.  The Radio  Metrix Inc.  agreement  to
purchase the patent required a closing,  with payment, by January 8, 2002, which
was before the  closing of the  planned  acquisition  of Radio  Metrix  Inc.  by
Invisa.  Accordingly,  as part of its  acquisition of Radio Metrix Inc.,  Invisa
loaned  approximately  $550,000 to Radio Metrix Inc. to enable Radio Metrix Inc.
to timely close its purchase of the patent by paying the remaining  $550,000 due
at closing.  In acquiring Radio Metrix Inc.,  Invisa  acquired  ownership of the
patent and the $550,000 loan to Radio Metrix Inc. became an  intercompany  debt.
The purchase price paid by the Company for Radio Metrix Inc. 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 Radio Metrix
Inc.

      Pursuant  to  this  acquisition,  Radio  Metrix  Inc.  was  merged  into a
subsidiary,  which we incorporated  specifically for this  transaction.  Because
each of the Radio Metrix Inc.  shareholders had pre-existing  relationships with
us, the  transaction  was approved by the Board Members  having no  affiliation,
stock ownership or other  relationship  with Radio Metrix Inc. (the "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 Radio Metrix Inc. at the date of the acquisition were:



                                       39
<PAGE>




<TABLE>
<CAPTION>
                                                                            % OWNERSHIP IN         % OWNERSHIP IN
                        INVISA, INC.                RADIO METRIX INC.       RADIO METRIX INC.        INVISA, INC.
<S>                     <C>                         <C>                     <C>                    <C>
Stephen A. Michael      Director, Chairman and      Director, President,                42.5%                  22.82%
                        Shareholder                 and Principal
                                                    Shareholder
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)     Shareholder of Invisa,      Officer and Director                                        1.90%
                        Inc. and founder,
                        manager and former
                        member of SmartGate,
                        L.C.

Robert T. Roth          Shareholder and former      Director and Shareholder            10.0%                   5.22%
                        manager and member of
                        SmartGate, L.C.

William W. Dolan(2)     Shareholder and former      Officer and Shareholder              4.9%                   3.02%
                        member of SmartGate,
                        L.C.
</TABLE>


(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 Radio Metrix Inc.,  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 Radio
Metrix Inc.  when it  purchased  the  patent.  The party that sold the patent to
Radio  Metrix  Inc.  was not  affiliated  with  either  the  Radio  Metrix  Inc.
shareholders  or Invisa.  As a further result of the acquisition of Radio Metrix
Inc.,  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 Radio Metrix Inc.).

      The  aggregate  consideration  paid for the  purchase of Radio Metrix Inc.
through December 2003 was: (i) 3,685,000 shares of restricted common stock; (ii)
$1,300,000  (plus accrued and unpaid  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


                                       40
<PAGE>


7% royalty on all revenue  earned from the sale of products based upon the Radio
Metrix  Inc.  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 Radio Metrix Inc.,  including
approximately  $175,000 in accrued compensation payable to stockholders of Radio
Metrix  Inc.  that  remained  in place and was  assumed  by the  Company  at the
acquisition of Radio Metrix Inc. As a result of an Amendment to the Radio Metrix
Inc. Merger Agreement,  no earn-out or other  consideration  will be paid by the
Company except as described above.

In November  2003, the Company and two principal  shareholders  entered into new
agreements  to  forgive  and  restructure  certain  notes  receivable  and notes
payable,  including those in connection with the Radio Metrix Inc.  transaction.
(See Item 6  "Management's  Discussion  and  Analysis  for Plan of  Operations -
Liquidity and Capital Resources").

      Pursuant to an  agreement  made in 1992  between  Radio Metrix Inc. and an
individual who introduced Radio Metrix Inc. to the inventors of the InvisaShield
technology,  Radio  Metrix Inc. was  obligated to pay up to $200,000  contingent
upon sales.  Under the Agreement,  the obligation  terminates  when Radio Metrix
Inc.  has  paid  an  aggregate  of  $200,000.  The  obligation  arose  out of an
introduction  to the  inventors  of the Radio  Metrix  Inc.  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,  Radio Metrix Inc.  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.

      On February 9, 2000 we purchased SmartGate, L.C. principally from the same
group of related parties that  previously  owned Radio Metrix Inc.. 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.

      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 used. 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  using
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,  and all other  authorized  products  using the  technology
worked on by an independent engineering consultant, Pete Lefferson.


                                       41
<PAGE>


     (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.
The  notes  with  Messrs.  Michael  and  Duffey  were  waived  as  part  of  the
restructuring and severance agreements. (See Item 6 "Management's Discussion and
Analysis or Plan of Operations")

      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. At December  31, 2003,  the Company had a $150,000  bank line of credit
(which is substantially  all drawn upon)  guaranteed by a shareholder,  Mr. H.R.
Williams.  The line of credit requires the payment of interest  monthly at prime
plus 1% which was 5.75% at December 31, 2003.  The line of credit was renewed on


                                       42
<PAGE>


July 15, 2003 and matures on July 15, 2004. 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 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  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

      1  Previously  filed on June 23,  2003 with  Invisa's  Form 10-KSB for the
         fiscal year ended December 31, 2002 and are incorporated by reference.

      2  Previously  filed on August 1, 2003 with  Invisa's  Form 10-QSB for the
         quarter period ended June 30, 2003 and are incorporated by reference.

      3  Previously  filed  on  September  17,  2003  with  Invisa's  Form  8-KA
         (Amendment  No.  1) dated  September  9,  2003 and is  incorporated  by
         reference.

      4  Previously  filed on  November  14, 2003 with  Invisa's  Form 8-K dated
         November 6, 2003 and are incorporated by reference.

      5  Filed Herewith INDEX TO EXHIBITS


                                       43
<PAGE>


ITEM NO.                                DESCRIPTION

2.1(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)(1)  Articles of Incorporation, as amended

3(ii)(1) Bylaws of the Company

4.1(1)   Specimen of Invisa, Inc. Common Stock Certificate

10.1(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(1)  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(1)  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(1)  Consulting Agreement with Hawk Associates, Inc. dated January 16, 2002

10.5(1)  Contribution   Agreement  dated  2/9/00  between   SmartGate  Inc.  and
         SmartGate, L.C.

10.6(1)  Promissory  Note from  Stephen A.  Michael to the Company - October 15,
         2001

10.7(1)  Promissory Note from Samuel S. Duffey to the Company - October 15, 2001

10.8(1)  Distribution  Agreement  with H.S.  Jackson & Son  (Fencing)  Limited -
         August  23,  2001,  and April 10,  2002 and March 31,  2003  Amendments
         thereto

10.9(1)  Employment Agreement with Stephen A. Michael

10.10(1) Employment Agreement with Samuel S. Duffey

10.12(1) Employment Agreement with Edmund C. King

10.13(1) Employment Agreement with William W. Dolan

10.14(1) Employment  Agreement with Carl Parks 10.151 Employment  Agreement with
         Bob Fergusson

10.16(1) Office Lease with DTS Commercial Interiors, Inc.

10.17(1) Office Lease with 4396 Independence Court, Inc.

10.18(1) 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


                                       44
<PAGE>


10.19(1) 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(1) Agreement  between Radio Metrix Inc. and Carl Burnett dated October 13,
         1996 ("Burnett Agreement")

10.21(1) 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(1) Agreement  between  Radio Metrix Inc. and Robert Wilson dated March 18,
         1992 ("Wilson Agreement")

10.23(1) Closing  Agreement  between Radio Metrix Inc., SDR Metro Inc. and Brent
         Simon dated January 8, 2002

10.24(1) Promissory Note to SDR Metro Inc. dated January 8, 2002

10.25(1) Security  Agreement  between Radio Metrix Inc. and SDR Metro Inc. dated
         January 8, 2002

10.26(1) Remedy upon Default  Agreement  between Radio Metrix Inc. and SDR Metro
         Inc. dated January 8, 2002

10.27(1) Consulting Agreement Memo re: Brent Simon dated August 28, 2000

10.28(1) Original  Equipment  and  Independent  Distribution  License  Agreement
         between the Company and Rytec Corporation

10.29(1) Disbursement  Request and Authorization,  Promissory Note, and Business
         Loan Agreement with Regions Bank - July 15, 2002

10.30(1) 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(1) Stock Option Agreement with H.R. Williams Family Limited  Partnership -
         February 9, 2000 and Amendment thereto

10.32(1) SmartGate, Inc. 2000 Employee,  Director,  Consultant and Advisor Stock
         Compensation Plan (Plan 2000)

10.33(1) 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(1) Form of Plan 2000 Option  Agreement  with  Robert  Knight and Edmund C.
         King - July 26, 2000

10.35(1) Form of Plan 2000 Option Agreement with Duffey & Dolan, P.A. - July 26,
         2000

10.36(1) 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


                                       45
<PAGE>


10.37(1) Form of Plan 2000 Option Agreement with John E. Scates - May 17, 2001

10.38(1) Form of Plan 2000 Option  Agreement  with Linda L.  Kauffman - June 28,
         2001

10.39(1) Form of Plan 2000 Option Agreement with Carl Parks - August 6, 2001

10.40(1) SmartGate Inc. 2002 Incentive Plan (Plan 2002)

10.41(1) 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(1) Form of Plan 2002 Option  Agreements  with Robert  Knight and Edmund C.
         King - January 22, 2002

10.43(1) Form of Plan 2002 Option Agreements with employees - January 22, 2002

10.44(1) 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(1) 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(1) 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(1) 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(1) Voluntary Resale  Restriction  Agreement with Robert T. Roth - November
         19, 2001

10.49(1) Stock Option Agreement with Hawk Associates, Inc. - January 16, 2002

10.50(1) Amended and Restated Stock Option  Agreement with G.M. Capital Partners
         Limited L.P. - November 8, 2002

10.51(1) Form of Plan 2002 Option Agreement with Gregory Newell - June 13, 2002

10.52(1) Form of Plan 2002 Option Agreement with John E. Scates - June 27, 2002

10.53(1) Delbrueck Bank Warrant #1

10.54(1) Delbrueck Bank Warrant #2

10.55(1) Form of Plan 2000 Option Agreement with Nicole A. Longridge

10.56(1)  Form of Plan 2000 Option Agreement with Duane Cameron

10.57(1) Invisa, Inc. 2003 Incentive Plan


                                       46
<PAGE>


10.58(1) Form of Plan 2003 Option  Agreement  with  Joseph F.  Movizzo - May 13,
         2003 (including form of Letter of Investment Intent)

10.59(1) Consulting  Agreement - March 2003 between  Crescent Fund, Inc. and the
         Company

10.60(1) Agreement  dated as of April 24, 2003  between  Alan A. Feldman and the
         Company

10.61(1) Financing Agreement dated as of May 9, 2003 between BarBell Group, Inc.
         and the Company

10.62(1) Series 2003A 7%  Convertible  Note Due June 9, 2004,  dated May 9, 2003
         from the Company to BarBell Group, Inc.

10.63(1) Investment  Agreement  dated as of May 9, 2003 between  BarBell  Group,
         Inc. and the Company

10.64(1) Warrant to  Purchase  Shares of Common  Stock  dated as of May 9, 2003,
         issued by the Company to BarBell Group, Inc.

10.65(1) Registration  Rights  Agreement  dated as of May 9,  2003  between  the
         Company and BarBell Group, Inc.

10.66(1) Broker-Dealer  Placement  Agent  Selling  Agreement - May 2003  between
         Capstone Partners LC and the Company

10.67(2) Amended and  Restated  Regulation S  Subscription  Agreement - July 22,
         2003 between Capstone Partners LC and the Company

10.68(2) Amended and  Restated  Regulation S  Subscription  Agreement - July 22,
         2003 executed by Nautilus Technologies,  Ltd. - subscribing for 125,000
         Units

10.69(2) Amended and  Restated  Regulation S  Subscription  Agreement - July 22,
         2003 executed by GM Capital  Partners,  Ltd. -  subscribing  for 50,500
         Units

10.70(2) Amended and  Restated  Regulation S  Subscription  Agreement - July 22,
         2003  executed by Kallur  Enterprises,  Ltd. -  subscribing  for 50,000
         Units

10.71(2) Publicity  Agreement - July 2003 between Capital  Financial Media, Inc.
         and the Company

10.72(2) Consulting   Agreement   -  July  2003   between   National   Financial
         Communications Corp. and the Company

10.73(2) Agreement - July 2003 between Brooks  Houghton & Company,  Inc. and the
         Company

10.74(2) Non-Exclusive  Financial  Advisor  Agreement - July 2003 between Source
         Capital Group, Inc. and the Company

10.75(2) Consulting Agreement - July 2003 between Patrick W.H. Garrard d/b/a The
         Garrard Group of West Redding, CT and the Company

10.76(2) Investment  Agreement  Modification  I dated as of July 21, 2003 by and
         among Invisa, Inc. and BarBell Group, Inc.


                                       47
<PAGE>


10.77(2) Joint Development Agreement - July 2003 between Dominator International
         Ltd. And SmartGate, L.C.

10.78(3) Engagement  Agreement  dated  September 9, 2003  between  G.M.  Capital
         Partners, Ltd and Invisa, Inc.

10.79(4) Employment  Agreement  dated  November 6, 2003  between Herb Lustig and
         Invisa, Inc.

10.80(4) Severance  Agreement  dated  November 13, 2003 between Samuel S. Duffey
         and Invisa, Inc.

10.81(4) Agreement dated November 13, 2003 between  Invisa,  Inc. and the Duffey
         related shareholders

10.82(5) SDR Metro Inc. letter extension agreement

10.83(5) SDR Metro Inc. confirmation letter agreement

10.84(5) Severance  Agreement  dated January 26, 2004 between Stephen A. Michael
         and Invisa, Inc.

10.85(5) Consulting  Agreement dated January 26, 2004 between Stephen A. Michael
         and Invisa, Inc.

10.86(5) Severance  Agreement  dated December 31, 2003 between  William W. Dolan
         and Invisa, Inc.

10.87(5) Agreement  dated  February 11, 2004 between The Video Agency,  Inc. and
         Invisa, Inc.

10.88(5) Employment Agreement dated March 2003 between Charles Yanak and Invisa,
         Inc.

10.89(5) 2003-A Employee,  Director,  Consultant and Advisor Stock  Compensation
         Plan.



10.90(5) First  Amendment  to  Invisa,  Inc.,  2003  Incentive  Plan  Date As of
         November 6, 2003

10.91(5) Stock Option Agreement for Herb M. Lustig dated November 6, 2003

14(1)    Code of Business Conduct and Ethics and Compliance Program

21(1)    Subsidiaries  of Registrant 315 Chief Executive  Officer  Certification
         Pursuant to Securities  Exchange Act Rules 13a-14 and 15d-14 as Adopted
         Pursuant to the Section 302 of the Sarbanes-Oxley Act of 2002.

31.1(5)  Chief Executive Officer  Certification  Pursuant to Securities Exchange
         Act Rules  13a-14 and 15d-14 as Adopted  Pursuant to the Section 302 of
         the Sarbanes-Oxley Act of 2002.

31.2(5)  Chief Financial Officer  Certification  Pursuant to Securities Exchange
         Act Rules  13a-14 and 15d-14 as Adopted  Pursuant to the Section 302 of
         the Sarbanes-Oxley Act of 2002.

32.1(5)  Certification of the Company's Chief Executive Officer pursuant to
         18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
         the Sarbanes-Oxley Act of 2002.


32.2(5)  Certification of the Company's Chief Financial Officer pursuant to
         18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
         the Sarbanes-Oxley Act of 2002.


(b)      8-K Reports

         On September  17, 2003,  the  registrant  filed a Form 8-K under Item 5
"Other  Events  and  Regulation  FD  Disclosure",  stating  that the  registrant
expanded its  relationship  with G.M. Capital  Partners,  Ltd., as the Company's
exclusive placement agent and financial  consultant,  and on September 15, 2003,


                                       48
<PAGE>


Samuel S. Duffey  resigned as a director and  non-executive  chairman of Invisa,
Inc.

         On September 17, 2003, the registrant filed a Form 8-K/A, Amendment No.
1 to include  Exhibit 10.78,  the Engagement  Agreement  dated September 9, 2003
between G.M. Capital Partners, Ltd. and Invisa, Inc. which was referenced in the
Form  8-K  as an  exhibit  thereto  and  inadvertently  omitted  and  not  filed
therewith.

         On November  14,  2003,  the  registrant  filed a Form 8-K under Item 5
"Other Events and  Regulation FD  Disclosure",  stating that the Company hired a
new Chief Operating Officer, Mr. Herbert M. Lustig. Mr. Lustig would move to the
position of Chief Executive Officer  commencing  January 1, 2004, and Stephen A.
Michael,  the Company's  co-founder,  then current President and Chief Executive
Officer, agreed to modify his role to Chief Technology Officer effective January
1, 2004 to facilitate the recruitment.  Beginning January 31, 2004, Mr. Michael,
as the  Company's  technology  advisor,  would enter into a one-year  Consulting
Agreement  with  Invisa,  Inc  and  the  existing  Employment   Agreement  would
terminate.  On November  13, 2003,  with a view to  facilitating  the  Company's
access to capital and improving the Company's financial position, Mr. Duffey and
the Company agreed to the terms of a severance arrangement.

         On January 9, 2004, the registrant filed a Form 8-K under Item 5 "Other
Events and  Regulation  FD  Disclosure",  stating  that the  Company  reached an
agreement  with SDR  Metro,  Inc.  for a  reduction  of the  amount and a 30-day
extension  of the due date for the  Company's  delivery  of the  final  purchase
payment on a key patent covering the Company's presence-sensing  technology. The
final payment of $600,000 was due on February 9, 2004 and would be discounted to
$250,000 if the payment would be made prior to February 8, 2004.

         On February  13,  2004,  the  registrant  filed a Form 8-K under Item 5
"Other  Events and  Regulation FD  Disclosure",  stating that  information  in a
promotional report would be distributed to a select number of individuals.

         On February  17,  2004,  the  registrant  filed a Form 8-K under Item 5
"Other  Events and  Regulation FD  Disclosure",  stating new terms of the patent
payments to SDR Metro, Inc. as negotiated on February 8, 2004.

ITEM 14  PRINCIPAL ACCOUNTANT FEES AND SERVICES

Fees for the Year ended December 31, 2003 were:

         Audit fees                                       $122,000
         Audit related fees                                $43,000
         Tax fees                                           $8,000



                                       49
<PAGE>

                                   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.


<TABLE>
<CAPTION>
<S>                                                           <C>
Dated: April 12, 2004                                         /s/ Herbert M. Lustig
                                                              ---------------------
                                                              Herbert M. Lustig
                                                              As its President

Dated: April 12, 2004                                         /s/ Edmund C. King
                                                              ------------------
                                                              Edmund C. King
                                                              As its Chief Financial Officer

     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.

Dated: April 12, 2004                                         /s/ Herbert M. Lustig
                                                              ---------------------
                                                              Herbert M. Lustig, Director


Dated: April 12, 2004                                         /s/ Edmund C. King
                                                              ------------------
                                                              Edmund C. King, Director


Dated: April 12, 2004                                         /s/ Robert Knight
                                                              -----------------
                                                              Robert Knight, Director

Dated: April 12, 2004                                         /s/ Stephen A. Michael
                                                              ----------------------
                                                              Director and Chairman of the Board


Dated: April 12, 2004                                         /s/ Gregory J. Newell
                                                              ---------------------
                                                              Gregory J. Newell, Director


Dated: April 12, 2004                                         /s/ John E. Scates
                                                              ------------------
                                                              John E. Scates, Director


Dated: April 12, 2004                                         /s/ Joseph F. Movizzo
                                                              ---------------------
                                                              Joseph F. Movizzo, Director
</TABLE>



                                       50

<PAGE>


                                    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
<PAGE>

               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, 2002 and 2003 and the related  consolidated
statements of  operations,  stockholders'  equity,  and cash flows for the years
then ended and the period February 12, 1997 (date of inception) through December
31, 2003.  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, 2002 and 2003 and the  consolidated  results of operations and cash
flows for the years  then  ended  and the  period  February  12,  1997  (date of
inception)  through December 31, 2003, 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, 2003 of  $11,738,105  and
for the period February 12, 1997 (date of inception)  through  December 31, 2003
of  $20,701,920.  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
April 9, 2004



                                      F-2
<PAGE>


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

<TABLE>
<CAPTION>
                                                                                              DECEMBER 31,
                                                                                     ----------------------------
                                                                                          2002             2003
                                                                                     ------------    ------------
<S>                                                                                  <C>             <C>
                                         ASSETS
Current assets:
   Cash and cash equivalents                                                         $     98,410    $    260,536
   Accounts receivable                                                                     73,180          26,906
   Inventories                                                                            296,608         232,537
   Refundable deposits and other                                                           69,190          26,846
                                                                                     ------------    ------------
     Total current assets                                                                 537,388         546,825

Note receivable - related party                                                           160,898             555
Furniture, fixtures and equipment, net                                                    121,647          89,480
Patent, net                                                                             3,641,375       6,700,000
Other assets
                                                                                            5,008              --
                                                                                     ------------    ------------
     Total assets                                                                    $  4,466,316    $  7,336,860
                                                                                     ============    ============

                          LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable, trade                                                           $    294,082    $    259,664
   Accrued expenses                                                                        85,089         128,032
   Line of credit                                                                         123,402         149,402
   Current portion of notes payable                                                            --         700,000
   Current portion of notes payable to related party                                      116,367          80,535
   Due to related party                                                                     6,121          64,960
   Due to shareholders and officers                                                       747,716       1,125,561
                                                                                     ------------    ------------
     Total current liabilities                                                          1,372,777       2,508,154

Notes payable to related parties                                                        1,300,000          50,334
Notes payable, less current portion                                                       600,000              --
Deferred revenue                                                                          300,000         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), 12,990,488 and
     18,767,582 shares issued and outstanding, respectively
                                                                                           12,990          18,768
   Additional paid-in capital                                                          11,006,664      25,452,928
   Stock subscriptions receivable                                                      (1,162,300)       (291,404)
   Deficit accumulated during the development stage                                    (8,963,815)    (20,701,920)
                                                                                     ------------    ------------

     Total stockholders' equity                                                           893,539       4,478,372
                                                                                     ------------    ------------

     Total liabilities and stockholders' equity                                      $  4,466,316    $  7,336,860
                                                                                     ============    ============
</TABLE>

                 The accompanying notes are an integral part of
                         these consolidated statements.


                                      F-3
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                   FEBRUARY 12,
                                                                                   1997 (DATE OF
                                                                                    INCEPTION)
                                                      YEARS ENDED DECEMBER 31,       THROUGH
                                                   ----------------------------    DECEMBER 31,
                                                       2002            2003            2003
                                                   ------------    ------------    ------------
<S>                                                <C>             <C>             <C>
Net sales                                          $    257,118    $    212,679    $    760,582
Cost of goods sold                                      175,900         128,971         471,713
                                                   ------------    ------------    ------------
  Gross profit                                           81,218          83,708         288,869

Research and development costs                          660,844         558,277       2,824,421
Selling, general and administrative expenses          2,813,897       5,179,864      11,809,849
Impairment of patent                                         --       5,517,808       5,517,808
                                                   ------------    ------------    ------------

Loss from operations                                 (3,393,523)    (11,172,241)    (19,863,209)
Interest expense, net                                   187,663         565,864         838,711

Loss before income tax                               (3,581,186)    (11,738,105)    (20,701,920)
Income tax
                                                             --              --              --
                                                   ------------    ------------    ------------

     Net loss                                      $ (3,581,186)   $(11,738,105)   $(20,701,920)
                                                   ============    ============    ============

Net loss per common share:
  Basic and diluted                                $      (0.28)   $      (0.73)
                                                   ============    ============

Weighted average common stock shares outstanding
  Basic and diluted                                  12,754,832      16,173,841
                                                   ============    ============
</TABLE>



                 The accompanying notes are an integral part of
                         these consolidated statements.


                                      F-4
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                     DEFICIT
                                                                                                   ACCUMULATED
                                                 COMMON STOCK           ADDITIONAL      STOCK       DURING THE
                                           ------------------------      PAID-IN    SUBSCRIPTIONS  DEVELOPMENT
                                             SHARES         AMOUNT       CAPITAL     RECEIVABLE       STAGE           TOTAL
                                           ----------       -------    -----------  ------------   ------------   -------------
<S>                                        <C>              <C>          <C>           <C>           <C>             <C>
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 JUNE 30, 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 JUNE 30, 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 JUNE 30, 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
Issuance of common stock for cash           1,000,003         1,000      2,011,619            --             --       2,012,619
Offering costs                                500,000           500        637,436            --             --         637,936
Conversion of notes payable                   635,022           635        449,365            --             --         450,000
Original issue discount on notes
  payable                                          --            --        201,519            --             --         201,519
Issuance of common stock for services         392,069           393        802,949            --             --         803,342
Issuance of common stock related to
  Radio Metrix merger                       3,250,000         3,250      9,746,750            --             --       9,750,000
Interest accrued on notes related to
  stock subscriptions receivable                   --            --         52,536       (52,536)            --              --
Settlement of accounts in connection
  with severance agreements                        --            --        544,090       923,432             --       1,467,522
Net loss                                           --            --             --            --    (11,738,105)    (11,738,105)
                                           ----------       -------    -----------  ------------   ------------   -------------
BALANCE AT DECEMBER 31, 2003               18,767,582       $18,768    $25,452,928  $   (291,404)  $(20,701,920)  $   4,478,372
                                           ==========       =======    ===========  ============   ============   =============
</TABLE>

                 The accompanying notes are an integral part of
                          this consolidated statement.

                                      F-5
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                        FEBRUARY 12,
                                                                                                       1997 (DATE OF
                                                                                                         INCEPTION)
                                                                        YEARS ENDED DECEMBER 31,         THROUGH
                                                                     -----------------------------      DECEMBER 31,
                                                                         2002             2003             2003
                                                                     ------------     ------------     ------------
<S>                                                                  <C>              <C>              <C>
Cash flows from operating activities:
  Net loss                                                           $ (3,581,186)    $(11,738,105)    $(20,701,920)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
    Patent impairment                                                          --        5,517,808        5,517,808
    Depreciation and amortization                                         407,701        1,498,925        1,936,283
    Common stock and options exchanged for services                        25,256        1,441,278        2,378,271
    Changes in operating assets and liabilities:
      Accounts and notes receivable                                       (44,805)          60,023         (174,055)
      Inventories                                                        (207,716)          64,071         (232,537)
      Refundable deposits and other assets                                 18,290           47,352          (26,846)
      Accounts payable, trade                                             233,497          (34,418)         259,664
      Accrued expenses                                                   (217,526)          42,943           78,032
      Deferred revenue                                                    300,000               --          300,000
      Change in accounts with employees and related parties, net          332,066          881,600        1,460,437
                                                                     ------------     ------------     ------------
               Net cash used in operating activities                   (2,734,423)      (2,218,523)      (9,204,863)
                                                                     ------------     ------------     ------------
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                          (82,601)          (7,970)        (187,078)
                                                                     ------------     ------------     ------------
              Net cash used in investing activities                      (754,076)          (7,970)        (858,553)
                                                                     ------------     ------------     ------------
Cash flows from financing activities:
  Net change in line of credit                                             24,999           26,000          149,472
  Proceeds from notes payable and redeemable common stock, net            202,367          350,000          908,000
  Proceeds from sale of common stock, net                               1,747,019        2,012,619        9,036,480
  Cash received with combination transaction                                   --               --          230,000
                                                                     ------------     ------------     ------------
               Net cash provided by financing activities                1,974,385        2,388,619       10,323,952
                                                                     ------------     ------------     ------------

Net increase (decrease) in cash                                        (1,514,114)         162,126          260,536
Cash at beginning of period                                             1,612,524           98,410               --
                                                                     ------------     ------------     ------------

Cash at end of period                                                $     98,410     $    260,536     $    260,536
                                                                     ============     ============     ============
</TABLE>



                                      F-6
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                    FEBRUARY 12,
                                                                                                   1997 (DATE OF
                                                                                                     INCEPTION)
                                                                        YEARS ENDED DECEMBER 31,     THROUGH
                                                                       -------------------------    DECEMBER 31,
                                                                           2002          2003          2003
                                                                       -----------   -----------    -----------
<S>                                                                    <C>           <C>            <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Cash paid during the period for interest                             $    80,819   $    55,686    $   220,287
                                                                       ===========   ===========    ===========

  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 and 3,250,000 shares in 2002 and 2003, respectively)    $ 1,522,500   $ 9,750,000    $11,272,500
                                                                       ===========   ===========    ===========

  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 issued representing stock offering commitment
    (200,000 shares)                                                   $        --   $   554,000    $   554,000
                                                                       ===========   ===========    ===========
</TABLE>



See Notes L and O for non-cash transactions related to common stock
and related parties.



                 The accompanying notes are an integral part of
                         these consolidated statements.



                                      F-7
<PAGE>

                                  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.   Invisa  has  also
demonstrated production-ready prototypes of security products for the museum and
other  markets.  The Company has not fully  implemented  its sales and marketing
plan and has, therefore, not emerged from the development stage.

For the year ended  December 31, 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 AND PATENT IMPAIRMENT

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 75% 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 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  intangible  assets
(patents and patents  under  development)  and not a business.  At closing,  the
Company issued two promissory notes totaling $1,300,000 ($500,000 payable in one
installment  48 months from the  closing  with  interest  payable  monthly,  and
$800,000  payable in one  installment  14 months from the closing with  interest
payable  monthly;  see Note O for  restructuring)  and issued  435,000 shares of
Invisa common stock. The $800,000 note maturity date was subsequently amended to
mature  on April  25,  2004.  The  Company  also  agreed  to pay to the  sellers
royalties of 7% of all revenue  generated from the RMI technology  (exclusive of
safety  applications).  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:

      o     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
<PAGE>

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


NOTE B - BUSINESS COMBINATIONS AND PATENT IMPAIRMENT - Continued

      o     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 (435,000
shares of common stock 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 (see Note Q) 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 as of acquisition date,
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.

The  Company  follows  the  methodology  presented  in SFAS 144 to  measure  for
impairment  of the  patent.  At  December  31,  2003,  the  Company  recorded an
impairment charge of approximately $5,518,000 based upon a third-party valuation
of the patent.  The valuation was based  principally upon discounted  forecasted
cash flows. The change in estimated future cash flows that resulted in the lower
patent  value is  associated  with  increased  reliance on  distributor  license
arrangements in place of a portion of previously  forecasted  direct sales.  The
asset  group value  includes  the patent  acquired  in  February  2002 and other
patents under  development.  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 year ended December 31, 2003
and since the date of inception,  the Company has had a net loss of  $11,738,105
and  $20,701,920,  respectively.  As of December 31,  2003,  the Company has not
emerged  from  the  development  stage  and  has  negative  working  capital  of
approximately $1,961,329.  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.  Subsequent to December 31, 2003,  the Company sold 435,750 shares
ofcommon stock totaling approximately $992,000 (principally from the exercise of
warrants) through March 31, 2004.


                                      F-9
<PAGE>

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


NOTE C - OPERATING MATTERS - Continued

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  that 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, 2002 and 2003, 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.  Account  balances are  evaluated  for
collectibility  based  on  the  condition  of  the  customers  credit  including
repayment history and trends and relative economic and business conditions.  Bad
debts have not been significant. For the years ended December 31, 2002 and 2003,
a customer located in the United Kingdom accounted for 0% and 16%, respectively,
of total Company sales.

Inventories

Inventories are stated at the lower of cost or market.  Cost is determined using
a method, which approximates 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 $57,460 and $97,597 at
December 31, 2002 and 2003,  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 at its  purchase  date in  February  2002.  Accumulated  amortization  at
December 31, 2002 and 2003 totaled  $319,600 and  $1,493,659,  respectively.  At
December 31, 2003, the Company  recorded an impairment  charge of  approximately
$5,518,000 that is included in the consolidated statement of operations.


                                      F-10
<PAGE>

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


NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Revenue

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

In July of 2002,  the  Company  entered  into a five-year  agreement  with Rytec
Corporation, whereby Rytec became the exclusive licensee in North America to use
the  Company's  safety  technology  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, 2003, 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, 2002 and 2003,  advertising  expense  was  $267,532  and  $62,901,
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,  2003,  nor are any  significant  amounts  expected  to occur  subsequently.
Accordingly, no warranty liability has been recognized for any period presented.

Income Taxes

The Company applies 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 or other  measure  of fair  value and an  impairment  loss  would be
recognized.  At December 31, 2003, the Company recorded an impairment  charge of
approximately  $5,518,000,  which  was  based on the  results  of a  third-party
valuation of the patent and patents under  development.  The value of the patent
and patents under  development  will continue to be sensitive to the achievement
of  forecasted  revenue and related  cash flows.  Accordingly,  management  will
continue to compare its actual to budgeted results during 2004 and will consider
unfavorable variances in future impairment analyses.


                                      F-11
<PAGE>

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


NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

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.

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 K):

                                                     YEAR ENDED DECEMBER 31,
                                                  -----------------------------
                                                      2002             2003
                                                  ------------     ------------
Net loss, as reported                             $ (3,581,186)    $(11,738,105)

Less:  stock-based employee compensation cost
  under the fair value based method, net of
  related tax effects                                 (367,746)      (1,379,343)

Pro forma net loss                                $ (3,948,932)    $(13,117,448)
                                                  ============     ============

Net loss per common share-basic and diluted:
  as reported                                     $       (.28)    $       (.73)
                                                  ============     ============
  pro forma                                       $       (.31)    $       (.81)
                                                  ============     ============

New Accounting Pronouncements

In January 2003, FASB  Interpretation  46,  Consolidation  of Variable  Interest
Entities  an  Interpretation  of  ARB  No.  51  ("FIN  46")  was  issued.   This
Interpretation clarified the application of Accounting Research Bulletin ("ARB")
No. 51, Consolidated  Financial Statements,  to certain entities in which equity
investors do not have the characteristics of a controlling financial interest or
do not have  sufficient  equity at risk for the entity to finance its activities
without   additional   subordinated   financial   support  from  other  parties.
Application  of the majority  voting  interest  requirement in ARB 51 to certain
types of  entities  may not  identify  the party  with a  controlling  financial
interest  because the  controlling  financial  interest may be achieved  through
arrangements that do not involve voting interests. All enterprises with variable
interests in variable  interest  entities  created after January 31, 2003, shall
apply the provisions of this  Interpretation  to those entities  immediately.  A
public entity with a variable  interest in a variable  interest  entity  created
before  February 1, 2003,  shall  apply the  provisions  of this  Interpretation
(other than the transition disclosure provisions in paragraph 26) to that entity
no later than the  beginning  of the first  interim or annual  reporting  period
beginning after June 15, 2003. A nonpublic entity with a variable  interest in a
variable  interest  entity  created  before  February  1, 2003,  shall apply the
provisions  of  this  Interpretation   (other  than  the  transition  disclosure
provisions  in  paragraph  26) to that entity no later than the end of the first
annual reporting period beginning after June 15, 2003.


                                      F-12
<PAGE>

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


NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

In December 2003, a revision to FIN 46 ("FIN 46R") was published to clarify some
of the provisions of FIN 46 and exempt certain  entities from its  requirements.
Under FIN 46R, a legal entity is considered a variable interest entity of "VIE",
with  some  exceptions  if  specific  criteria  are  met,  if it does  not  have
sufficient  equity at risk to  finance  its own  activities  without  relying on
financial  support from other  parties.  Additional  criteria must be applied to
determine if this condition is met or if the equity  holders,  as a group,  lack
any one of three stipulated characteristics of a controlling financial interest.
If the legal entity is a VIE,  then the  reporting  entity  determined to be the
primary beneficiary of the VIE must consolidate it. Even if the reporting entity
is not obligated to consolidate the VIE, then certain  disclosures  must be made
about the VIE if the reporting entity has a significant  variable interest.  The
effective  date of the  interpretation  was modified  under FIN 46R. A reporting
entity  is  required  to  apply  the  provisions  of FIN  46R to all  VIEs  that
previously were subject to certain  previously issued special purpose entity, of
SPE,  accounting  pronouncements for all reporting periods ending after December
14,  2003.  For all other  VIEs,  a  reporting  entity is  required to adopt the
provisions of FIN 46R for all reporting  periods after May 15, 2004. The Company
does not  believe it has  ownership  in any  variable  interest  entities  as of
December  31,  2003.  The Company  will apply the  consolidation  or  disclosure
requirements  of this  interpretation  in future  periods  if it should  own any
interest deemed to be a variable interest entity.


NOTE E - INVENTORIES

Inventories consist of the following:

                                                        DECEMBER 31,
                                                    --------------------
                                                      2002        2003
                                                    --------    --------
         Finished goods                             $ 80,701    $ 12,936
         Raw materials                               215,907     219,601
                                                    --------    --------
                                                    $296,608    $232,537
                                                    ========    ========

NOTE F - ACCRUED EXPENSES

Accrued expenses consist of the following:

                                                        DECEMBER 31,
                                                    --------------------
                                                      2002        2003
                                                    --------    --------
         Accrued compensation and related taxes     $ 10,268    $ 13,933
         Accrued interest                              7,953      33,141
         Other accrued expenses                       66,868      80,958
                                                    --------    --------
                                                    $ 85,089    $128,032
                                                    ========    ========



                                      F-13
<PAGE>

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


NOTE G - LINE OF CREDIT

The line of credit at December 31, 2002 and 2003, consists of a $150,000 secured
working  capital line of credit with a bank. This line of credit matures in July
2004.  Interest is payable monthly at prime plus one percent,  or  approximately
5.75% at December 31, 2003.  Approximately $600 is available for borrowing under
the line of credit as of December  31,  2003.  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.


NOTE H - NOTES PAYABLE TO RELATED PARTIES AND NOTES PAYABLE

Notes payable consist of the following:

                                                             DECEMBER 31,
                                                      -------------------------
                                                         2002          2003
                                                      ----------   ------------
Related parties:
  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   (1)  $50,334

      Due April 25, 2004, as amended; interest
         at 15% payable monthly                          800,000   (1)   80,535

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 (see Note Q)            600,000        600,000

  Note payable, net of unamortized original
    issue discount of $83,633 at December 31,
    2002, principal of $200,000, due October
    28, 2003, as amended; interest at 15% secured
    by 500,000 shares of Company common stock            116,367             --

Other note payable, unsecured                                 --        100,000
                                                      ----------   ------------
                                                       2,016,367        830,869
  Less current maturities                               (116,367)      (780,535)
                                                      ----------   ------------
                                                      $1,900,000   $     50,334
                                                      ==========   ============

(1) During 2003, $1,169,131 of these notes were forgiven (see Note O).


At December 31, 2003, aggregate maturities of notes payable are as follows:

      YEAR ENDING DECEMBER 31,
               2004                        $780,535
               2005                              --
               2006                          50,334
                                           --------
                                           $830,869
                                           ========



                                      F-14
<PAGE>

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


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

In October 2002, the Company borrowed $200,000 from a non-affiliated  party. The
loan bore 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 are $58,000 and $86,000
arising from the  amortization  of the original issue discount in 2002 and 2003,
respectively.  The Company  pledged 500,000 shares of common stock as collateral
for the loan,  which was to be returned to the Company  upon loan  repayment  or
delivered to the lender as full loan  repayment  in the event of default.  Those
shares were not  recognized as issued and  outstanding at December 31, 2002. All
principal and interest were initially  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.  During 2003,  the $200,000 loan was paid in exchange for
the  500,000  shares of common  stock  held as  collateral.  Management  has not
finalized the terms associated with the remaining $100,000.


NOTE I - DUE TO SHAREHOLDERS AND OFFICERS

Due to shareholders and officers  consists  principally of deferred  payments of
base compensation and severance  amounts payable to two principal  shareholders.
The amounts payable are non-interest bearing (see Note O).


NOTE J - ACQUIRED INTANGIBLE ASSETS

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

<TABLE>
<CAPTION>
                                                        Gross
                                                       Carrying        Accumulated
                                                        Amount         Amortization        Net
                                                      -----------      ------------    -----------
<S>                                                   <C>               <C>            <C>
       Initial acquisition of patent during 2002      $ 3,960,975       $       --     $ 3,960,975
       Amortization expense for the year ended
         December 31, 2002                                     --          319,600         319,600
                                                      -----------       ----------     -----------

       Balance, December 31, 2002                       3,960,975          319,600       3,641,375

       Additional patent costs in April 2003 from
         issuance of 3,250,000 shares                   9,750,492               --       9,750,492
       Amortization expense for the year ended
         December 31, 2003                                     --        1,174,059       1,174,059
       Impairment charge                               (5,517,808)              --      (5,517,808)
                                                      -----------       ----------     -----------

       Balance, December 31, 2003                     $ 8,193,659       $1,493,659     $ 6,700,000
                                                      ===========       ==========     ===========
</TABLE>

The Company is amortizing the cost of the patent over a ten-year  period,  which
was the  remaining  life of the  patent at the  acquisition  date.  Amortization
expense  for each of the five years  ending  December  31, 2008 will be $812,121
annually.  As described in Note D, the Company recorded an impairment  charge to
the patent of approximately $5,518,000 during the fourth quarter of 2003.



                                      F-15
<PAGE>

                                  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:

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                        ----------------------------
                                                            2002            2003
                                                        ------------    ------------
<S>                                                     <C>             <C>
Numerator:
  Net loss                                              $ (3,581,186)   $(11,738,105)
                                                        ============    ============

Denominator:
  For basic loss per share - weighted average shares      12,754,832      16,173,841
  Effect of dilutive securities - stock options                   --              --
                                                        ------------    ------------
  For diluted loss per share                              12,754,832      16,173,841
                                                        ============    ============

Net loss per common share - basic and diluted           $      (0.28)   $      (0.73)
                                                        ============    ============
</TABLE>

Options and warrants to purchase  3,621,129 and 7,238,931 shares of common stock
as of  December  31,  2002 and 2003 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) was not considered in the calculation of basic or diluted loss
per share in 2002.


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).

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 was reflected in the
Company's financial statements at December 31, 2003.

During the year 2003,  the Company  entered into the  following  equity  related
transactions:

For the period January through  December 2003, the Company sold 1,000,003 shares
of common  stock at prices  ranging  from  $1.07 to $3.00 per share  aggregating
$2,012,619 in cash,  net of  transaction  costs.  These  transactions  and other
non-cash equity transactions are discussed below.

For the period  January  through March 2003, the Company issued 68,000 shares of
common  stock at  prices  ranging  from  $1.07 to $3.00 per  share,  aggregating
$192,086 in cash, net of transaction costs.



                                      F-16
<PAGE>

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


NOTE L - COMMON STOCK - Continued

In April  2003,  the  Company  entered  into a  twelve-month  agreement  with an
investor, whereby the investor would 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 issued 50,000 shares of common stock at $3.00 per share and received
$139,940  (net of costs) on May 1, 2003.  In August  2003,  this  agreement  was
terminated, and the Company issued the investor 50,000 shares of common stock at
$2.00 per share as part of this  termination.  The Company has no  obligation to
repurchase any shares issued to the investor as part of this agreement.  No cash
proceeds were received related to the shares issued for this transaction.

In April 2003,  the Company  approved the  issuance of 500,000  shares of common
stock  to a  third  party.  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 fund raising
activities.  A total value of $1,500,000  was  recognized as additional  paid in
capital  associated with this issuance of common stock. Based on expected future
proceeds from common stock  offerings,  the Company recorded  deferred  offering
costs of $937,000,  as a reduction to stockholders' equity associated with these
shares.  The  deferred  offering  costs were being  amortized  as a reduction to
additional  paid-in  capital based on capital raised in respective  periods.  At
December 31, 2003,  the deferred  offering  cost balance of $637,936 was written
off to expense,  as the amount of capital  raised during 2003 was  significantly
less than  anticipated.  In August 2003, the Company  reduced the exercise price
from $3.50 per share to $2.00 per share for 500,000  options to purchase  common
stock granted to the third party. The revaluation of these options had no impact
on  the  Company's  financial  statements,   as  the  options  were  granted  in
recognition of past performance  associated with common stock private  placement
offerings.  No  cash  proceeds  were  received  for  this  transaction.  Of  the
$1,500,000, approximately $638,000 is included as expense in 2003. The remaining
$862,000 is included as offering costs in 2003.

In October 2002, the Company  borrowed  $200,000 from Daimler  Capital  Partners
("Daimler").  All  principal  and  interest  were  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,  which was recorded
as original issue discount in 2002. The extension option was issued and the loan
was extended to April 2003.  The maturity of the loan was extended  further and,
in May 2003,  the loan was increased by $100,000.  In October 2003,  the Company
issued   500,000   shares  of  common  stock  to  Daimler.   These  shares  were
collateralizing  the note  payable to Daimler  and were issued in  repayment  of
$200,000  of  this  note.  No  cash  proceeds  were  received  related  to  this
transaction.

During April 2003, through an amendment to the 2002 Radio Metrix,  Inc. purchase
agreement,  the Company agreed to issue 3,250,000 shares of its common stock for
full satisfaction of future 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  stockholders'
equity  during  April  2003.  No cash  proceeds  were  received  related to this
transaction.

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.  These
shares were recorded at a fair value of $3.00 per share and included in selling,
general,  and  administrative  expenses.  In July 2003,  the  Company  issued an
additional 14,284 shares of its authorized but unissued common stock to Crescent
Fund,  Inc.,  pursuant  to this  Consulting  Agreement.  The  Company  may issue
additional  shares  of its  common  stock to  Crescent  Fund,  Inc.  under  this
Consulting   Agreement.   No  cash  proceeds  were  received   related  to  this
transaction.



                                      F-17
<PAGE>

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


NOTE L - COMMON STOCK - Continued

In May 2003, the Company entered into an Equity Line of Credit ("ELC") agreement
pursuant to which the Company borrowed  $250,000.  The borrowing was convertible
into common stock at a 25% discount from the then prevailing  market price.  The
Company had 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  $1,000,000,  including the $250,000  amount if converted.
The  agreement  required a minimum  stock  price of $2.50 per share and  minimum
trading volume requirements,  both as defined in the agreement.  Pursuant to the
Agreement,  the Company  agreed to issue 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  would  vest only in the event the
Company  exercises its right to sell additional shares of registered stock under
the Agreement. Related to the ELC, in July 2003 the Company issued 91,638 shares
of common stock and received cash proceeds of $99,908, net of transaction costs.
In July 2003, the note payable was converted into 135,022  registered  shares of
common stock.  The Company  recognized  original issue discount of approximately
$202,000  associated  with the value of warrants and the  contingent  beneficial
conversion  feature of the notes payable.  The Company also recognized  deferred
costs of approximately  $66,000. The discount and loan costs were amortized over
the term of the loan and were subsequently  fully expensed in July 2003 upon the
conversion into common stock. In November 2003, the Company issued an additional
104,167  shares of common stock at a price of $2.40 per share and received  cash
proceeds of $217,396, net of transaction costs.

In June and July 2003,  the Company sold 350,500  Units at $2.00 per Unit,  each
Unit  consisting of one share of the  Company's  common stock and one warrant to
purchase  one  additional  share at an  exercise  price of $2.00 per share,  one
additional  share at an exercise  price of $3.00 per share,  and one  additional
share at an  exercise  price of $4.00  per  share.  The  Company  received  cash
proceeds of $700,503,  net of  transaction  costs related to this unit offering.
The warrants are  exercisable  until Jun 30, 2005.  As payment of the  placement
fee,  the Company  issued a placement  agent 45,500 of its $2.00 Units with each
unit containing the same number of warrants at exercise  prices of $2.00,  $3.00
and $4.00 per share,  respectively.  No cash proceeds  were received  related to
this  transaction.  The placement  agent was also the purchaser of 50,500 of the
$2.00  Units,  of which the  Company  received  cash  proceeds of $99,985 net of
transaction  costs.  In August  2003,  the  Company  also  granted  an option to
purchase  100,000  shares of common  stock at an exercise  price of $3.00 to the
placement  agent. The options were granted in recognition of the successful fund
raising activities and are exercisable until August 2006.

In July 2003,  the Company  engaged  Source  Capital  Group,  Inc.,  as Invisa's
non-exclusive   financial  advisor,   primarily  to  assist  Invisa  in  raising
additional capital. Invisa issued 5,000 shares of common stock to Source Capital
Group,  Inc. as a retainer.  The Company  also issued  6,000 shares to two other
parties in connection with assisting the Company in raising additional  capital.
The  Company  expensed  the value of the  shares  at $2.00 and $3.00 per  share,
respectively,  for financial reporting purposes.  No cash proceeds were received
related to this transaction.

In July  2003,  the  Company  agreed  to issue  to Hawk  Associates,  Inc.,  the
Company's  domestic investor relations  representative,  37,000 shares of common
stock in payment of $75,000  cash fees,  which had accrued  under the  Company's
agreement with Hawk  Associates,  Inc. No cash proceeds were received related to
this transaction. This agreement was terminated in August 2003.

In September  2003,  the Company  issued 20,000 shares of common stock to Fusion
Capital Fund II, LLC  ("Fusion") as  compensation  for expected  future  capital
raising activities. The Company also entered into an agreement with Fusion under
which  Fusion  would  provide an equity  line of credit  subject to the  Company
filing a  registration  statement.  The  agreement  also required the Company to
issue 200,000 shares of the Company's  common stock to Fusion as a fee,  subject
to a holding period before Fusion can sell the shares.  The Company has recorded
the  issuance of this stock at $2.77 per share and  charged the total  amount to
expense.  In December  2003,  the Company  terminated  this  agreement.  No cash
proceeds were received related to these transactions.

During 2003, the Company issued 327,698 shares of common stock at prices ranging
from $1.07 to $3.00 per share  related to the exercise of common stock  options.
The Company received cash proceeds of $662,786.



                                      F-18
<PAGE>

                                  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  1,200,000 were issued under the Plan ranging in price
from $3.00 to $5.32 per share.  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.

In January 2003,  the Company  adopted a stock  compensation  plan (the "January
2003 Plan") with  contractual life and vesting terms identical to its 2002 Plan,
which provides for a maximum of 1,500,000 shares of common stock to be issued.

In  connection  with the  issuance of 396,000  shares in June and July 2003 (see
Note L), the Company granted warrants to acquire 396,000 common shares at $2.00,
$3.00,  and $4.00 per  share.  The  1,188,000  warrants  are  fully  vested  and
exercisable until August 2006.

In July 2003,  the Company  entered into a Consultant  Agreement  with  National
Financial Communications Corporation, also referred to as OTC Financial Network,
a  Massachusetts  corporation,  to assist the  Company in public  relations  and
shareholder  communications.  Under this  Consulting  Agreement,  Invisa granted
National Financial  Consulting  Corporation options to purchase 25,000 shares of
Invisa common stock at $3.00 per share,  25,000 shares of Invisa common stock at
$3.50 per share,  25,000 shares of Invisa  common stock at $4.00 per share,  and
25,000 shares of Invisa common stock at $4.50 per share, all of which are vested
at December 31, 2003.  The options may be exercised  for a period of three years
following the termination of the Agreement.  The Agreement has a six-month term,
which may be extended for an  additional  three  months if the Company  approves
such extension. Either party, upon 15 days' notice, may terminate the Agreement.

In October 2003, the Company adopted a  non-qualified  stock  compensation  plan
(the "October 2003 Plan").  The Plan provides for a maximum of 1,000,000  shares
of common stock of the Company to be issued. On October 15, 2003, related to the
Plan, the Company granted  1,000,000  options to purchase shares of common stock
at $3.35 per  share.  The  options  are fully  vested at January 1, 2004 and are
exercisable until October 15, 2013.

In August 2003, the Company granted an option to its placement agent to purchase
100,000 shares of common stock at $3.00 per share (see Note L).

In February  2003, the Company  granted an option to Daimler to purchase  50,000
shares of common stock at $1.00 per share (see Note L).



                                      F-19
<PAGE>

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


NOTE M - STOCK OPTIONS - Continued

In May 2003, the Company granted,  under an Equity Line of Credit agreement,  an
option to purchase  75,000  shares of common  stock at $2.76 per share (see Note
L).

Activity with respect to all stock  options is summarized as follows,  including
warrants issued to lenders, equity investors, and consultants.

                                                OPTIONS OUTSTANDING
                                      ---------------------------------------
                                                                   WEIGHTED-
                                                     RANGE OF      AVERAGE
                                                     EXERCISE    OPTION PRICE
                                       SHARES         PRICES      PER SHARE
                                      ---------     ----------   ------------
     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

       Options granted                3,993,000     $1.00-4.50       3.22
       Options exercised               (327,698)    $1.07-3.00       2.07
       Options canceled                 (47,500)    $3.50-7.25       4.49
                                     ----------

     Balance at December 31, 2003     7,238,931     $1.00-7.25      $3.14
                                     ==========

The range of exercise prices,  shares,  weighted-average  remaining  contractual
life and weighted-average exercise price for the options outstanding at December
31, 2003 is presented below:

                                     WEIGHTED-AVERAGE
         RANGE OF                       REMAINING      WEIGHTED-AVERAGE
     EXERCISE PRICES     SHARES      CONTRACTUAL LIFE   EXERCISE PRICE
     ---------------   ---------     ----------------  ----------------
        $1.00-1.07       696,804       1.61 years           $1.04
        $2.00-4.00     6,146,668       5.60 years           $3.24
        $4.27-7.25       395,459       4.48 years           $5.30

The range of exercise prices, shares and weighted-average exercise price for the
options exercisable at December 31, 2003 are presented below:

                                                 WEIGHTED
                      RANGE OF                    AVERAGE
                  EXERCISE PRICES     SHARES   EXERCISE PRICE
                  ---------------   ---------  --------------
                     $1.00-1.07       696,804      $1.04
                     $2.00-4.00     3,483,668      $3.13
                     $4.27-7.25       283,792      $5.39

For pro forma  disclosure  purposes  (see Note D), the fair value of the options
granted to employees and directors in 2002 and 2003 was estimated on the date of
grant using the Black-Scholes  option-pricing  model with the following weighted
average assumptions for the above years:

                                              2002           2003
                                             -------       -------
          Dividend yield                      0.00%         0.00%
          Expected volatility                31.00%        50.00%
          Risk free interest rates            3.00%         3.00%
          Expected lives                     3 years       3 years

The  weighted-average  grant date fair value for options granted during 2002 and
2003 was approximately $0.46 and $1.21.



                                      F-20
<PAGE>

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


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  property  at $698,000  during year one and
$750,000 during year two.  During 2003, the Company  abandoned this facility and
has accrued for the remaining lease payment at December 31, 2003. Future minimum
lease payments are $56,900 in 2004.

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

Restructuring

In  November   2003,   the  Company  and  two   principal   shareholder/officers
("Shareholders')   entered  into  agreements   ("Agreements")   to  forgive  and
restructure  certain notes receivable,  certain stock  subscriptions and related
interest  receivable,  notes and related interest payable, and other amounts due
the shareholders. Under the agreements, the following occurred:

         Forgiveness by the Company of two notes  receivable  from  Shareholders
         totaling $146,310 ($161,000 at December 31, 2002).

         Forgiveness  by the  Company  of  stock  subscriptions  receivable  and
         accrued interest from the Shareholders  totaling $923,432  ($885,000 at
         December 31, 2002).

         Forgiveness  by the  Shareholders  of notes payable of  $1,169,131  and
         accrued interest of $130,601 by the Company.

         Forgiveness by the Shareholders of certain compensation amounts owed to
         them totaling $416,963.

In connection with these Agreements,  the Company recognized  additional paid in
capital of approximately $544,000 during the fourth quarter of 2003. In addition
to the amounts forgiven, the shareholders agreed to allow approximately $338,000
of their accrued  compensation  to be paid on a contingent  basis,  as described
below.



                                      F-21
<PAGE>

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


NOTE O - RELATED PARTY TRANSACTIONS - Continued

Effective  February  2000,  the Company had entered  into  five-year  employment
agreements with the two Shareholders, which provided for each of them to receive
an annual salary of $150,000 ($30,000 of which was deferred), an ongoing monthly
bonus of $2,000,  an annual car allowance of $8,500,  and other fringe benefits.
The  amounts  charged to expense in total for the two  shareholders  under these
employment agreements  approximated $305,000 in 2002 and $286,000 in 2003. Under
the restructuring Agreements, compensation for one of the Shareholders ceased as
of September 30, 2003 and, as of January 31, 2004 for the other Shareholder. The
employment agreements also terminated on those respective dates.

At December 31, 2003, the Company owed the Shareholders  approximately  $454,000
of accrued  compensation.  Approximately  $338,000 of this  compensation will be
paid to the  shareholders  depending  on the Company  achieving  certain  equity
funding amounts  ranging from $500,000 to $4,000,000.  The Company has agreed to
pay  certain tax  liabilities,  if any,  which may be incurred by the  principal
shareholders  in  connection  with these  transactions.  At December  31,  2003,
included in accrued  expenses is the above  $454,000,  as well as  approximately
$250,000 in accrued payroll.

The Company  incurred legal and consulting  fees of  approximately  $312,000 and
$-0- for the years ended December 31, 2002 and 2003, respectively, to a law firm
of which one of the partners is one of the Shareholders.


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, 2002 or 2003.

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,
                                                      2002          2003
                                                  ------------  ------------
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,
                                               2002              2003
                                           ------------     ------------
        Deferred tax assets:
          Compensation payable             $    224,614     $    263,853
          Net operating loss                  2,643,885        4,404,294
          Basis difference for C
            Corporation conversion              188,153          172,794
          Other                                  21,750          129,750
                                           ------------     ------------
                                              3,078,402        4,970,691

        Deferred tax liabilities:
          Patent                                915,515        1,942,875
                                           ------------     ------------
          Net deferred tax assets             2,162,887        3,027,816
        Less valuation allowance             (2,162,887)      (3,027,816)
                                           ------------     ------------

          Net deferred income taxes        $         --     $         --
                                           ============     ============



                                      F-22
<PAGE>

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


NOTE P - INCOME TAXES - Continued

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, 2003,  the Company had net operating loss  carryforwards  for
Federal  and State  income  tax  purposes  totaling  $11,745,000,  which  expire
beginning in 2019.


NOTE Q - SUBSEQUENT EVENTS (UNAUDITED)

Subsequent  to December 31, 2003 and through  March 31,  2004,  the Company sold
435,750  shares of common stock at prices  ranging from $2.60 to $3.25 per share
aggregating $992,000, net of transaction costs.

Subsequent  to December  31,  2003,  the Company  negotiated  a reduction in its
liability  to SDR Metro  from  $600,000  at  December  31,  2003 (see Note H) to
$250,000,  of which  $175,000  has been paid and the  remainder is due April 22,
2004.





                                      F-23