**United
        States**
 **Securities
        and Exchange Commission**
 **Washington,
        D.C. 20549**
 
 **Form
        10-KSB**
 
 x Annual Report pursuant
        to Section 13 or 15(d) of The Securities Exchange Act of 1934:
 **For
        the fiscal year ended: December 31, 2006**
 
  ̈
              Transition
                  report pursuant to Section 13 or 15(d) of The Securities Exchange
                  Act of
                  1934:**For
                  the transition period
                  from:**
 000-50081
 (Commission
        File Number)
 
 **Invisa,
        Inc.**
 (Exact
        name of small business issuer as specified in its charter)
 
 **Nevada**
 (State
        or
        other jurisdiction of incorporation or organization)
 
 **65-1005398**
 (I.R.S.
        employer identification number)
 
 **6935
        15** **th** **Street East, Suite** **120**
 **Sarasota,
        Florida 34243**
 (Address
        of principal executive offices)
 
 **(941)
        355-9361**
 (Issuer’s
        telephone number)
 
 Securities
        to be registered pursuant to Section 12(b) of the Exchange Act:
        NONE
 Securities
        to be registered pursuant to Section 12(g) of the Exchange Act:
 Common
        Stock, Par Value $.001 per share
  
  (Title
        of
        Class)
  
  
 Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or for such shorter
        period
        that the registrant was required to file such reports), and (2) has been
        subject
        to such filing requirements for the past 90 days. x Yes  ̈ No
 
 Check
        if
        there is no disclosure of delinquent filers in response to Item 405 of
        Regulation S-B contained in this form, and no disclosure will be contained,
        to
        the best of registrant’s knowledge, in definitive proxy or information
        statements incorporated by reference in Part III of this Form 10-KSB or any
        amendment to this Form 10-KSB. x Yes  ̈ No
 
 Indicate
        by a check mark whether issuer is a shell Company (as defined in Rule 12b-2
        of
        the Exchange Act).  ̈ Yes x No
 
 The
        Issuer’s revenues for its most recent fiscal year were $136,980.
 
 Indicate
        by check mark whether Invisa is an accelerated filer as defined in the Exchange
        Act Rule 126-2.  ̈ Yes x No
 
 The
        aggregate market value of the Issuer’s voting stock held as of December 31, 2006
        by non-affiliates of the Issuer based upon the closing bid and asked price
        of
        the Issuer’s Common Stock on that date is $0.05. The Issuer does not have any
        non-voting stock.
 
 On
        December 31, 2006, 25,497,738 shares of Invisa Common Stock, $0.001 par value,
        were outstanding.
  
  **TABLE
        OF CONTENTS**
  Page**Part
                  I**
              1Item
                  1
              Description
                  of Business
              1Item
                  2
              Description
                  Properties
              6Item
                  3
              Legal
                  Proceedings
              7Item
                  4
              Submission
                  of Matters to Vote of Security Holders
              7**Part
                  II**
              7Item
                  5
              Market
                  for Common Equity and Related Stockholder Matters
              7Item
                  6
              Managements
                  Discussion and Analysis or Plan of Operations
              9Item
                  7
              Financial
                  Statements
              18Item
                  8
              Changes
                  in and Disagreements with Accountants on Accounting
              18Item
                  8a
              Controls
                  and Procedures
              18Item
                  8b
              Other
                  Information**Part
                  III**
              18Item
                  9
              Directors
                  and Executive Officers of the Registrant
              18Item
                  10
              Executive
                  Compensation
              24Item
                  11
              Security
                  Ownership of Certain Beneficial Owners and Management
              28Item
                  12
              Certain
                  Relationships and Related Transactions
              30Item
                  13
              Exhibits
                  and Reports on Form 8-K
              31Item
                  14
              Auditor
                  Fees
              34**Financial
                  Statements**Report
                  of Aidman, Piser & Company, P.A.
              F-1Consolidated
                  Balance Sheet at December 31, 2006
              F-2Consolidated
                  Statements of Operations for the years ended December 31, 2005
                  and
                  2006.
              F-3Consolidated
                  Statements of Stockholders’ Equity for the years ended  December 31,
                  2005 and 2006
              F-4Consolidated
                  Statements of Cash Flows for the years ended
                December
                  31, 2005 and 2006.
              F-5Notes
                  to Consolidated Financial Statements.
              F-7**Signature
                  Page****Index
                  to Exhibits**
   
   **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**
 
 **History**
 
 Invisa,
        Inc. is a development stage company that is commercializing patented
        presence-sensing technology under the InvisaShieldTM trade name. The Company was
        incorporated in Nevada in 1998. In 2000, we acquired SmartGate, L.C.
        (“SmartGate”), before it had achieved any significant revenues. SmartGate had
        developed presence-sensing technology for safety applications in the powered
        closure market, such as powered overhead doors and parking barrier gates.
        Subsequently, at the end of 2004, it was merged into Invisa. From an accounting
        perspective, SmartGate was the acquirer in this transaction and the accompanying
        Financial Statements reflect the operations of SmartGate from
        inception.
 
 In
        February of 2002, the Company purchased 100% of the outstanding capital stock
        of
        Radio Metrix Inc. (“RMI”), a company owned by the principal shareholders of
        Invisa, Inc. RMI had virtually no operations since its inception and, therefore,
        the Company has determined that by acquiring RMI, the Company acquired an
        asset
        (a patent) and not a business. RMI, formed to commercialize InvisaShield
        security sensors for applications such as zone and perimeter protection,
        was
        merged into Invisa at the end of 2004. With that merger, Invisa now owns
        the
        patent and patent applications, as well as the sole rights to the InvisaShield
        technology in all markets worldwide.
 
 RMI
        was
        owned principally by Steve Michael and Sam Duffey. At the time both were
        significant shareholders of RMI and significant shareholders and officers
        of the
        Company. At the time both Messrs. Michael and Duffey were also Directors
        of the
        Company but refrained from voting on the RMI transaction. RMI had acquired
        the
        patent from the inventor who is not a related party.
 
 In
        April
        2003, the RMI Purchase Agreement was amended whereby the Company agreed to
        issue
        3,250,000 shares of its Common Stock for full satisfaction of the future
        contingent consideration. In November 2003, the Purchase Agreement was further
        amended whereby the $1,300,000 notes payable were forgiven. In August 2004,
        we
        negotiated the cancellation of the 7% royalty agreement in exchange for 400,000
        warrants to purchase Common Stock. As a part of this latter amendment, certain
        compensation owed to affiliated parties was forgiven.
  In
        December 2004, both of these wholly-owned subsidiaries (SmartGate, L.C. and
        RMI)
        were merged into Invisa.
 
 Our
        offices are located at 6935 15 th Street
        East, Suite 120, Sarasota, FL 34243, telephone (941) 355-9361. In the second
        quarter 2007, we plan to relocate our offices to suite 110 in the same facility
        located at 6935 15 th Street
        E, Sarasota FL 34243. Our telephone number will remain the same.
 
 **Overview**
 
 Invisa
        develops, manufactures, markets and licenses the rights to produce and sell
        sensors that use the Company’s patented InvisaShield presence-sensing design and
        technology. Presence-sensing is the reliable, repeatable detection of people
        and
        conductive objects. InvisaShield technology detects objects at a distance
        of
        typically less than one meter.
 
 There
        are
        two markets in which the InvisaShield technology is used: the *Safety
        Market* and the *Security
        Market* .
 
 In
        the
        safety market, the Company sells a line of SmartGate ® brand
        safety sensors. These sensors are life and property safety devices used in
        or
        with powered closures - mechanisms that include parking gates, slide gates,
        overhead doors and the like.
 
 In
        the
        security market, the Company has installed first generation security ** sensors
        at a major New England museum. These devices create invisible presence-sensing
        fields around displays and exhibits. The InvisaShield sensors detect any
        person
        who tries to enter the monitored zone, preventing vandalism or inadvertent
        damage. This installation has been in operation at the museum since the summer
        of 2003.
 
  1
  We
        believe that the security market offers significant promise and we plan
        additional investment to further develop sensors for museum exhibit/display
        and
        other security-related applications.
 
 To
        date,
        our revenues have been derived mostly from the sale of SmartGate safety sensors
        which are incorporated into powered parking gates and slide gates. Parking
        and
        slide gates are motorized barriers used to control the flow of vehicular
        traffic, such as at parking facilities, vehicle storage facilities, toll
        booths,
        and metered entry points for highways.
 
 **Applications**
 
 *Safety
        Market* - Many
        safety devices and safety functions depend upon presence-sensing technology.
        While we have historically been developing a range of presence-sensing devices
        for the safety market under our brand name SmartGate, we are currently primarily
        focused on safety products used in the parking gate market.
 
 We
        believe that our safety sensors offer potential operational and maintenance
        benefits for the powered closure industry. Today, we sell SmartGate safety
        sensors for use primarily with powered parking gates.
 
 We
        also
        have developed pre-production versions of presence-sensing devices for use
        in
        powered slide-gates, commercial overhead doors, powered industrial doors
        (which
        are used in commercial, manufacturing and industrial facilities) 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 sensors based upon our InvisaShield technology to be used with a broad
        range of powered closure products manufactured by other companies.
  To
        date,
        substantially all revenue has been derived from the sale of SmartGate safety
        sensors used with powered parking barrier gates. These gates are commonly
        used
        for traffic control and typically have a power-operated barrier arm made
        of
        metal, wood or PVC. This arm moves vertically between an open and a closed
        position. Our device places an invisible presence-sensing field that precedes
        and moves with the potentially dangerous barrier arm to detect people and
        vehicles in its path. Our device signals the powered gate to trigger a
        predetermined response, such as stopping and reversing the barrier
        arm.
 
 Another
        application of InvisaShield technology is with vertical powered doors. In
        July
        2002, we granted Rytec Corporation a license to use our safety devices as
        original equipment on high-speed industrial doors in North America. In 2005,
        the
        license agreement was converted into a joint development agreement. These
        doors
        are frequently used in manufacturing and industrial environments where
        air-conditioned, cooler, and freezer areas are separated within warehouses
        and
        other buildings. We anticipate that in the future we may explore this or
        other
        opportunities in the high-speed industrial door market.
 
 Our
        selling price for InvisaShield safety sensors allows us an acceptable gross
        profit margin and we expect that our cost of goods will continue to decline
        as
        we realize economies of scale.
 
 *Security
        Market* -
        Security systems and security equipment generally rely, to varying degrees,
        on
        presence-sensing technologies to detect the presence of potential intruders
        and
        trespassers, or to provide surveillance of valuable objects. We currently
        have a
        limited number of first-generation security sensors in operation, a limited
        number of second generation sensors under field evaluation we anticipate
        further
        development which we anticipate may be followed by
        commercialization.
 
 Our
        security sensors are components that provide added features and functions
        for
        new and/or existing security systems. In the future, we plan for these sensors
        to compete with and, in some applications, complement existing presence-sensing
        technologies used in the security market today. Examples of products using
        these
        technologies are infrared and/or microwave sensors, motion detectors, lasers,
        light beam systems and magnetic contacts.
 
 In
        addition to our first-generation sensors for museum applications, we have
        demonstrated prototypes of InvisaShield security sensors for retail, industrial,
        commercial, defense and government applications. As with our museum security
        sensors, these devices place a monitoring field around objects needing
        protection. Examples of applications that we have demonstrated include safes,
        locking cabinets, display cases, objects of art and jewelry and or exposed
        perimeters (doors, windows, fences etc.). When the detection field is entered,
        the InvisaShield sensor signals the security system. The security system
        then
        responds with a warning or alarm.
 
 **Marketing**
 
 Historically
        we have concentrated our marketing efforts on those prospective customers
        whom
        we believe to be market leaders or who are well known within specific market
        segments. We sell our safety products to manufacturers, distributors, dealers
        and, in some instances, to selected end-users.
  2
  We
        currently market safety devices used with powered parking gates. In the future,
        we anticipate that we may market safety devices for industrial doors, commercial
        overhead doors, and powered slide gates. A longer term goal is to license
        our
        InvisaShield technology to manufacturers of powered closure
        products.
 
 **Sales**
 
 During
        2005 and 2006, Magnetic Automation Corp. was our largest customer, comprising
        approximately 16% of our product revenues in both years. During 2005, we
        recognized $300,000 from Rytec Corporation as other operating revenue. The
        payment to us by Rytec was originally an advance against future product
        delivery, but in March 2005, we amended our agreement and recognized the
        amount
        as compensation for development efforts in 2005. We recognized no revenue
        from
        Rytec Corporation in 2006.
 
 **Financing**
 
 In
        August
        2005, the Company issued 10,000 shares of Series B Convertible Preferred
        Stock
        in the face amount of $1,000,000 for $878,000 (net of $122,000 transaction
        expenses) which was paid in the respective amounts of $378,000 and $500,000
        at
        closing. Additionally, the transaction included:
 
 ·
              Detachable
                  warrants to acquire up to 2,500,000 shares of the Company’s Common Stock
                  at $0.30 per share. The warrants expire on August 31, 2010 and
                  are subject
                  to call by the Company upon the Common Stock trading at a price
                  of $0.60,
                  a minimum trading volume of 60,000 shares for 20 consecutive days
                  and the
                  registration statement being
                  effective.
 
 ·
              In
                  addition to the transaction costs referred to above, the Company
                  granted
                  warrants to acquire up to 666,667 shares of the Company’s Common Stock at
                  $0.16 per share to a broker. The term of the warrants is three
                  years.
 
 ·
              The
                  Preferred Stock is non-voting and is entitled to receive dividends
                  at an
                  annual rate equal to the lower of the Prime Rate plus 3.5% or 9%.
                  The
                  dividend may either be paid in cash or registered shares of the
                  Company’s
                  Common Stock, subject to certain limitations. The Preferred Stock
                  is
                  convertible into Common Stock at the option of the holder. The
                  conversion
                  price is equal to 80% of the market price at the time of conversion,
                  subject to a floor of $0.12 per share and a ceiling of $0.275 per
                  share.
 In
        2006,
        we issued 400,000 shares of Common Stock to Robert McLain at $0.11cash per
        share
        and issued 316,670 shares of Common Stock pursuant to exercise stock options
        at
        0.075 and 0.085 cash per share.
  In
        2006
        the Company entered into a short term borrowing agreement of $128,337 from
        three
        stockholders (MAG Capital, LLC; Mercator Momentum Fund, LLC; Monarch Pointe
        Fund, LLC) under a short-term secured 10%
        note.
  In
        2006,
        we also borrowed $30,500 from Friday Harbour, LLC (an affiliate of Samuel
        Duffey) under the Company’s convertible facility loan agreement. Additional
        borrowing in 2006 brings the outstanding balance as of December 31, 2006
        to
        $97,500 plus accrued interest. Subsequent borrowing in 2007 increased this
        total
        to $110,900, plus accrued interest.
 
 
 **Technology**
 
 The
        InvisaShield technology uses electronic circuitry that emits, controls, and
        monitors 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 that is monitored can be varied in sensitivity from a distance of
        approximately one meter to a centimeter or less, depending upon the selected
        application. 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
        metallic items. The technology allows flexibility in designing and locating
        the
        antenna. This may offer unique opportunities to place presence-sensing fields
        where they can be used more efficiently or effectively. This adaptability
        may
        mean that the InvisaShield technology can perform non-contact presence-sensing
        tasks not currently possible with competing technologies and/or it may perform
        presence-sensing tasks similar to those performed by competing technologies,
        but
        in a more efficient, effective, and reliable manner.
 
  3
  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. 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 the InvisaShield technology may have greater capability, flexibility
        and
        benefits than other non-contact sensing technologies.
 
 *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 many companies, including
        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 capabilities 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
        five Patents issued by the U.S. Patent Office, three of which were issued
        in the
        fiscal year 2006 or the first quarter of 2007: Patent No. 5,337,039 issued
        on
        August 9, 1994, Patent No. 6,819,242 issued on November 16, 2004, Patent
        No.
        7,023,222,B2 issued on April 4, 2006; Patent No. 7,167,093 B2 issued on January
        23, 2007 and Patent No. 7,187,282 issued on March 6, 2007. In addition, we
        have
        filed for two patents (as PCT, or Patent Cooperation Treaty filings), one
        provisional patent application and have one application pending, all of which
        cover improvements to the InvisaShield technology.
 
 We
        have a
        trademark on the 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 useful in our efforts to protect our
        perceived competitive advantages.
 
 We
        are
        unaware of any agreements in effect that would require us to pay
        royalties.
 
 **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 can generally be 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 used by our safety products, is
        regulated by the Federal Communications Commission. RMI submitted its patented
        technology for required FCC testing and, in August of 1993, it 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 rule, UL-325, while
        not a
        governmental regulation, is considered an indication of reasonable safety
        for
        powered gates, doors and windows, and is a requirement for UL certification
        for
        certain powered gate, door and window operators. Gate and operator manufacturers
        that rely upon UL certification or consider UL certification important for
        components most likely will 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.
  4
  We
        have
        applied 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. We also have applied for CE certification,
        which
        is important in Europe, the U.K. and elsewhere (the equivalent to UL
        certification). Other markets may have additional governmental or certification
        requirements. All UL and CE applications are being held in advance due to
        funding constraints.
 **Warranty**
 
 Our
        safety products are sold with a 90-day (upgradeable to one year) limited
        warranty. We anticipate that our security products will carry a warranty
        that is
        generally in line with industry suppliers’ practice. We have had no claims
        expensed under the warranty in 2005 or 2006.
 
 **Employees**
 
 We
        have
        three employees which consist of two full time employees (one of which is
        a
        leased employee) and our CFO which is a Part time employee. We have no unions
        and we have not entered into any collective bargaining agreement with any
        group
        of employees. We believe that we have a good relationship with our
        employees.
 
 **Research
        and Development**
 
 During
        the years ended December 31, 2005 and 2006, research and development expenses
        totaled $174,292 and $119,937, respectively.
 **Item
        2 - Description of Property**
 
 As
        of
        December 31, 2006 we lease 5,500 square feet of office and research lab space
        in
        the Airport Business Center in Sarasota, Florida. The lease expires December
        2009. Annual payment is approximately $50,000 plus taxes, typical of the
        local
        market rate for such facilities. We lease the facilities from a non-affiliated
        party. No zoning or other governmental requirements are needed for the continued
        use of our facilities. In April 2007, we replaced the lease space which we
        occupied during 2006 with space which is located in the same business center.
        We
        expect to occupy the new space in the second quarter of 2007. The new space
        has
        2,500  square
        feet which we rent for $2,069  per
        month. The new space is on a monthly basis with a thirty day notice feature,
        to
        provide maximum flexibility. The current lease has been assigned to a new
        tenant.
  We
        have
        adopted a policy, pursuant to which, we do not invest in real estate or maintain
        an interest in real estate, real estate mortgages or securities issued that
        are
        based upon real estate activities. We maintain lease insurance that we believe
        is adequate.
 
 **Item
        3 - Legal Proceedings**
 
 None.
 **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.
 
  5
  **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 during the last two
        fiscal years. Such prices represent quotations between dealers, without dealer
        markup, markdown, or commissions, and may not represent actual
        transactions.
 
 As
        of
        December 31, 2006 there were 375 stockholders of record of Invisa Common
        Stock.
 **Quarter**
              **High
                  Bid**
              **Low
                  Bid**First
                  Quarter 2005
              0.57
              0.21Second
                  Quarter 2005
              0.24
              0.03Third
                  Quarter 2005
              .035
              0.12Fourth
                  Quarter 2005
              0.26
              0.09First
                  Quarter 2006
              0.23
              0.10Second
                  Quarter 2006
              0.30
              0.13Third
                  Quarter 2006
              0.23
              0.05Fourth
                  Quarter 2006
              0.10
              0.03
 
 On
        December 31, 2006, 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 was
        $0.05 per share.
 
 We
        believe that there are presently approximately 13 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.
 
 **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, our capital requirements and our 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.
 
 **Transfer
        Agent**
 
 The
        Transfer Agent for the Common Stock of the Company is Continental Stock Transfer
        and Trust Company 17 Battery Place, New York, NY 10004.
 
 **Recent
        Sales of Unregistered Securities**
 
 In
        2006,
        we issued 400,000 shares of Common Stock to Robert McLain at $0.11cash per
        share
        and issued 316,670 shares of Common Stock pursuant to exercise of stock options
        at 0.075 and 0.085 cash per share.
  6
  **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 in this filing. 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. The cautionary statements made herein should
        be read
        as being applicable to all related forward-looking statements in this Annual
        Report on Form 10-KSB
 
 **Background
        of our Company**
 
 We
        are a
        development-stage company, and we expect to continue the commercialization
        of
        our InvisaShield technology. For the year ended December 31, 2006, we had
        revenue from product sales of $136,980, principally representing sales of
        our
        product for powered parking gates. In addition to limited revenue, these
        sales
        have been a vehicle for receiving customer feedback on the reliability, ease
        of
        installation, and determining the market’s acceptance of our safety
        product.
 
 Financing
        for our development activities in 2006 was derived from limited sales, the
        sale
        of common and short-term debt financing. We are working to increase our sales
        of
        product, further reduce operating costs and obtain financing including through
        business combinations and licensing relationships and transactions. In the
        future, we may develop additional safety and security products and bring
        them to
        market.
 
 In
        February 2002 Invisa acquired Radio Metrix, Inc. (“RMI”) thereby obtaining
        ownership of the patent held by RMI. Prior to acquiring ownership of the
        patent,
        Invisa was selling safety sensors for gates (principally, automobile parking
        facility gates) under a sub-licensing arrangement with RMI for safety products
        only. Acquiring RMI, and thus the patent, was a business decision as it enabled
        Invisa to gain access to universal use of the patent technology, including
        not
        only safety but security and other products.
 
 Through
        October 2003, we planned to develop, manufacture and sell sensor devices
        for use
        not only in parking facility gates, where we already had developed commercial
        products but in other safety and security devices. In October 2003, we
        hired a new CEO who, shortly after his employment, revised our strategy to
        focus
        more on selling licenses rather than manufacturing and selling devices. Because
        of the constraints on our finances, we did not believe that we had the available
        resources to market, manufacture and sell closure, security and other devices.
        The licensing of our technology, although reducing our ability to enjoy the
        full
        value of the patent, was to provide us with an inflow of funds without our
        having to expend significant resources. In April 2005 the CEO’s employment was
        terminated and we have reinstated our original sales strategy. In addition
        to
        continuing to sell our precuts to manufacturers, dealers, distributors and
        customers, we plan to continue to seek to have manufacturers (OEM’s) in embedded
        our patented sensors in their closure devices and to develop cooperative
        marketing and sales programs with the OEM’s.
 
 We
        have
        continued to (i) enhance our patent and (ii) work on developing new patents
        compatible with the patent we purchased. For example, in 2003 we sold 30
        security devices to a museum. These devices used the technology represented
        by
        our original patent but also contained technology developed specifically
        for
        security purposes. In the future, as additional uses evolve for our technology,
        we will continue to enhance our technology and adapt it to new uses. In 2006
        and
        early 2007 we received notification of the issuance of three new patents,
        all of
        which were issued in 2007.
 
 Invisa
        generated sales of parking automated sensors in 2005 and 2006 of $239,285
        and
        $136,980, respectively. In 2003, we also sold 30 security devices to a major
        museum which are currently in use. All of these sales relate to our
        patents.
 
 **Limited
        Operating History**
 
 We
        have
        had a limited history of operations and 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. The information in this Form 10-KSB
        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.
 
  7
  **Year
        Ended December 31, 2005 Compared to the Year Ended December 31,
        2006**
 
 *Net
        Sales* -
        During
        the years ended December 31, 2005 and 2006, product sales totaled
        $239,285  and
        $136,980, respectively. The Company's sales to date have been limited and
        constrained by lack of capital. We had a gross profit of $116,524 for the
        year
        ended December 31, 2005 and gross profit of $42,782 for the year ended December
        31, 2006. Gross margin was 49%
        and  31% during
        2005 and 2006, respectively. Other operating revenue in 2005 of $300,000
        relates
        to the recognition of development fees from Rytec Corporation. The payment
        was
        originally received during 2002 and was classified as deferred revenue for
        future product shipments. During 2005 the agreement was modified and the
        fee was
        recognized ratably during the year as compensation for development work
        performed by the Company pursuant to the modification.
 
 *Research
        and Development Expenses* - During
        the years ended December 31, 2005 and 2006, research and development expenses
        totaled $174,292 and $119,937, respectively. The decrease of $54,355 in 2006
        was
        due principally to a reduction in facility expense, insurance expense and
        work
        force, resulting in decreases in salaries and wages and payroll taxes. In
        the
        fourth Quarter of 2006, employment of our in-house engineer and his assistant
        was terminated. These former employees are currently considered outside
        consulting resources on an as requested/as available basis. To date, we have
        not
        requested significant access to this consulting resource and accordingly
        have
        experienced a reduction in research and development expenses.
  *Selling,
        General and Administrative Expenses* - During
        the years 2005 and 2006, selling, general and administrative expenses totaled
        $1,227,592 and $1,420,743, respectively. The increase  of
        $193,156 in 2006 principally resulted from increased compensation and related
        payroll expenses, outside consulting fees and marketing activities.
 
 *Amortization
        and Impairment of Patent -* During
        the year 2003, the Company decreased the carrying amount of its patent costs
        of
        $12,217,808 by $5,517,808 to $6,700,000 to reflect the fair value as determined
        by the Company’s management. In 2003 the Company revised its strategy to focus
        more on selling licenses rather than manufacturing and selling devices. The
        patent impairment results principally from the Company’s forecast of reduced
        expected discounted future cash flows associated with the licensing business
        model. Realization of the patent’s carrying value will require a
        substantial  minimum
        revenue growth through 2011, which is consistent with the Company’s internal
        budgets and projections over the same period. This assumed level of revenue
        growth is based upon a relatively low level of actual revenues during 2006
        on
        which percentage growth is predicated, management’s assessment of the available
        market for its product and its assumed availability of financing which will
        be
        necessary to fund the Company’s business plan. Amortization after the impairment
        charge is $788,235 per year. While we believe that the carrying value of
        our
        patent is not currently impaired, future impairment charges could occur if
        we
        are not successful in raising the capital necessary to fund the Company’s
        business plan and generate profitable operations sufficient to recover the
        cost
        of the patent.
 
 *Interest
        Income (expense), Net* - During
        2005 interest income totaled $2,677 and during 2006 interest income totaled
        $2,585 which was offset by $27,703 interest expense. The Company maintained
        excess cash, if available, in an interest bearing money market
        account.
 
 *Net
        Loss applicable to Common Stockholders and Net Loss Per Share applicable
        to
        Common Stockholders* - The
        Company’s net loss applicable to Common Stockholders and net loss per share
        applicable to Common Stockholders for these periods decreased from  $2,889,668
        and $0.12 in 2005 to $2,401,251 and $0.12 in 2006
        respectively, as a result of the matters described above.
 
 **Plan
        of Development and Operations**
 
 We
        raised
        $227,087 in debt and equity funding during
        2006. This financing has been used to support our business plan, but on a
        limited basis due to financial constraints. As a result we are seeking other
        sources of financing, including possible corporate consolidation. For the
        near-term future the Company will focus its marketing energy and sales efforts
        in the parking gate area which has been our primary customer base for many
        years. We will also explore strategic relationships with potential expansion
        into other areas such as commercial garage doors, swimming pool fencing and
        security as funding permits.
 
 We
        limited our energies to the parking facility gate market in 2006 and we expect
        to continue to limit our efforts to this market for the foreseeable
        future.  In the fourth quarter of 2006, as part of our continuing efforts
        to cut costs and to manage to available financial resources, our staff was
        further reduced. Our in-house engineer and his assistant were terminated
        and are
        currently considered outside consulting resources on an as requested/as
        available basis. To date, we have not requested significant access this
        consulting resource. As a result, at December 31, 2006 we had two full time
        employees, one of which was leased on a full time basis from an employment
        leasing company. Additionally, a third employee, our CFO, was employed on
        a
        part-time basis. We believe that a significant financing or business
        development, such as a business combination, will be necessary to sustain
        and
        grow our business.
  8
  Implementing
        the Company’s plan of development and operations will require additional
        funding. Accordingly, the Company is pursuing additional funding which may
        include debt or equity financing, Additionally , the Company is considering
        the
        potential for establishing business relationships or transactions which may
        enhance the Company’s access to additional funding and also potentially
        facilitate its operations. In the event the Company is not able to access
        sufficient funding to support its operations its business operations will
        be
        threatened.
 
 **Liquidity
        and Capital Resources**
 
 From
        inception through December 31, 2006 we raised cash of approximately $16.1 million
        net of issuance costs, principally through private placements of common and
        preferred stock financings. At December 31, 2006, we had cash and cash
        equivalents totaling $2,900.
        This amount of cash on hand at December 31, 2006 reflects the residual after
        a
        short term borrowing of $128,337 from stockholders under a secured 10% note
        due
        on March 1, 2007. This loan was accompanied by the issuance of 150,000 warrants
        at $0.04 per share to an affiliate of the lenders. On February 28, 2007,
        this
        note was modified to extend the maturity date by six months, and to subordinate
        the security interest to a new borrowing closed on the same date. Also on
        February 28, 2007, the Company entered into a loan agreement to borrow up
        to
        $150,000 under a secured 10% note due in six months. In addition to having
        a
        first security interest in all of the Company’s assets the note was secured by a
        security interest in twenty million shares of common stock pledged by the
        Company. Through April 1, 2007, $83,824 has been borrowed under this loan
        agreement.
 
 In
        the
        fourth quarter ending on December 31, 2006 our sales were $33,285 compared
        with
        sales of $138,566 for the fourth quarter of 2005. Our loss for the fourth
        quarter of 2006 was $380,304, compared
        with $1,406,042 for the same quarter in 2005. During the fourth quarter of
        2006,
        we further reduced our staff to cut costs and better manage to our limited
        available funding. While the reduction in staff has placed greater burdens
        on
        our remaining employees, we do not believe that it has materially impacted
        sales. However, the staff reduction has negatively impacted, and we anticipate,
        will continue to negatively impact, new technology and product development
        activities.
 
 From
        inception (February 12, 1997) through December 31, 2006, we were largely
        focused
        on technology and product development. The estimated dollar amount spent
        during
        this period on company-sponsored research and development was $3,471,292. Because
        of the Company’s net losses (which aggregate $27,850,789 from
        inception through December 31, 2006), limited capital, and ongoing product
        development expenses, the Company’s consolidated financial statements report
        that substantial doubt exists regarding the Company’s ability to continue as a
        going concern.
 
 The
        $3,471,292 of direct research and development expenses that we incurred from
        inception through December 31, 2006 has been 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.
 
 In
        August
        2005, we entered into a Preferred Stock placement whereby we received $878,000,
        net of transaction expenses. In 2006 we raised additional capital through
        the
        sale of 716,670 shares
        of
        Common Stock for cash totaling $68,250, net of transaction expenses. Further
        in
        2006, we raised $30,500 through the issuance of unsecured short term debt
        and in
        the fourth quarter of 2006, we entered into three credit facility agreements
        to
        borrow up to $135,446 under secured notes to use for corporate expenses of
        which
        $128,337 was borrowed through December 31, 2006. In connection with the issuance
        of these secured notes, the Company issued to an advisor warrants to purchase
        150,000 shares of the Company’s common stock at an exercise price of $0.04 per
        share. The warrants have a 10-year term and are immediately exercisable and
        through December 31, 2006 remained unexercised.
  The
        Company had negative working capital at December 31, 2006, totaling $968,602.
        At
        December 31, 2006 the Company had $2,900 in cash and cash equivalents to
        fund
        its operations. To finance planned operations through at least the next 12
        months, we will continue to depend upon our ability to access additional
        financing. To support operations, in February 2007, we entered into an
        additional credit facility agreement pursuant to which we may borrow up to
        $150,000, subject to agreement of the lender, under secured promissory notes.
        Our plan is to seek to obtain the funding required to meet ongoing operating
        expenses through additional private equity and debt financing, license fees,
        grants, and through potential strategic or business relationships, transactions
        or business combinations.
  Additional
        funding may not be available when required or it may not be available on
        favorable terms. Without adequate funds, we may need to significantly reduce
        or
        refocus our operations or 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 funding 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.
  9
   **Risk
        Factors**
 
 You
        should carefully consider the risks and uncertainties described below and
        the
        other information in this filing before deciding to purchase our common stock.
        If any of these risks or uncertainties occurs, our business, financial condition
        or operating results could be materially harmed. In that case the trading
        price
        of our common stock could decline and you could lose all or part of your
        investment. The risks and uncertainties described below are not the only
        ones we
        may face. Risks related to our business we have historically incurred losses
        and
        losses are expected to continue in the future, which means that we may not
        be
        able to continue operations unless we obtain additional funding. Our auditors
        have qualified their audit opinion with regard to our ability to continue
        as a
        going concern.
 
 We
        have
        historically incurred losses.
 
 In
        the
        twelve months ended December 31, 2006, we sustained a net loss of $2.3 million.
        From inception through December 31, 2006, we have sustained aggregate net
        losses
        of $27.9 million. Future losses are expected to continue. Accordingly, we
        may
        experience significant liquidity and cash flow problems if we are not able
        to
        raise additional capital as needed and on acceptable terms. No assurances
        can be
        given that we will be successful in reaching or maintaining profitable
        operations. Our ability to generate revenue and achieve profitability depends
        upon our ability, alone or with others, to complete the development of our
        proposed products and manufacture, market and sell our products. Because
        of our
        ongoing losses and our very limited financial resources, our auditors have
        included an explanatory paragraph in their audit opinion with regard to our
        ability to continue as a going concern.
 
 **We
        will need to raise additional capital to continue our operations or we may
        be
        unable to fund our operations, promote our products or develop our
        technology.**
 
 Our
        operations have relied almost entirely on external financing to fund our
        operations. Such financing has historically primarily come from the sale
        of
        stock to third parties and to a lesser degree from borrowings and revenue
        from
        product sales and license fees. We anticipate, based on our current proposed
        plans and assumptions relating to our operations (including the timetable
        of,
        and costs associated with, new product development), that we will need
        additional debt or equity funding to continue to operate our business. We
        may
        seek to access required capital through potential strategic or business
        relationships or business combinations which may be dilutive to our current
        stockholders. We will need to raise additional capital to fund our anticipated
        operating expenses and future expansion. Among other things, external financing
        will be required to cover our operating costs. We cannot assure you that
        financing whether from external sources or related parties will be available
        if
        needed or on favorable terms. If additional financing is not available when
        required or is not available on acceptable terms, we may be unable to fund
        our
        operations and planned growth, develop or enhance our technology, take advantage
        of business opportunities or respond to competitive market pressures, any
        of
        which could raise doubt as to the Company’s ability to continue as a going
        concern. Any reduction in our operations may result in a lower stock
        price.
 
 **Our
        additional financing requirements could result in dilution to existing
        stockholders.**
 
 The
        additional financings we will require may be obtained through one or more
        transactions which effectively dilute the ownership interests of our
        stockholders. Further, we may not be able to secure such additional financing
        on
        terms acceptable to us, if at all. We have the authority to issue additional
        shares of common stock, as well as additional classes or series of ownership
        interests or debt obligations which may be convertible into any one or more
        classes or series of ownership interests. We are authorized to issue 95,000,000
        shares of common stock and 5,000,000 shares of preferred stock. Such securities
        may be issued without the approval or other consent of our
        stockholders.
 
 **We
        are a development stage company and have a limited operating history upon
        which
        you can base your investment decision.**
 
 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.
 
 **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, Tyco, General Electric, Bosch, Siemens 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. Additionally, 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.
 
  10
  **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 is dependent, 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. Accordingly, our prospects must be considered
        in light of the risks, expenses and difficulties frequently encountered in
        connection with the establishment of a new business in a highly competitive
        industry, characterized by frequent new product introductions. We anticipate
        that we will incur substantial operating expenses in connection with the
        development and testing of our proposed products and expect these expenses
        to
        result in continuing and significant operating losses until such time, if
        ever,
        that we are able to achieve adequate levels of sales or license revenues.
        We may
        not be able to raise additional financing, increase revenues significantly,
        or
        achieve profitable operations.
  **Management
        and founders of the Company control a significant amount of our common stock
        and
        such concentration of ownership may have the effect of delaying or preventing
        a
        change of control of our Company.**
 
 As
        a
        result, these management stockholders will have significant influence in
        matters
        requiring stockholder approval, including the election and removal of directors,
        the approval of significant corporate transactions, such as any merger,
        consolidation or sale of all or substantially all of the our assets, and
        the
        control of our management and affairs. Accordingly, such concentration of
        ownership may have the effect of delaying, deferring or preventing a change
        in
        our control, impeding a merger, consolidation, takeover or other business
        combination involving us or discouraging a potential acquirer from attempting
        to
        obtain control of our Company.
 
 **The
        limits of our of product liability insurance coverage may affect our
        Business.**
 
 We
        may be
        exposed to potential product liability claims by consumers. Although we maintain
        product liability insurance, there can be no assurance that such insurance
        will
        be sufficient to cover all possible liabilities to which we may be exposed.
        Any
        product liability claim, even one that was not in excess of our insurance
        coverage or one that is meritless and/or unsuccessful, could adversely affect
        our cash available for other purposes, such as research and development.
        In
        addition, the existence of a product liability claim could affect the market
        price of our common stock. In addition, certain vendors may require minimum
        product liability insurance coverage as a condition precedent to purchasing
        or
        accepting products for retail distribution. Product liability insurance coverage
        includes various deductibles, limitations and exclusions from coverage, and
        in
        any event might not fully cover any potential claims. Failure to satisfy
        such
        insurance requirements could impede the ability of us or our distributors
        or
        licensees to achieve broad retail distribution of our proposed products,
        which
        could have a material adverse effect on us.
 
 **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
        five issued patents and have filed 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.**
 
 Technology-based
        companies, such as ours, have the potential to be involved in litigation
        related
        to allegations of patent infringement. Although we have no knowledge of any
        such
        claims, 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.
 
  11
  **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 our marketplace
        will
        require extensive technological upgrades and enhancements to accommodate
        many of
        the new products and services that we anticipate will be added to our
        marketplace. 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.
 
 **We
        are thinly staffed.**
 
 We
        have
        three employees which consist of two full time employees (one of which is
        a
        leased employee) and our CFO which is a Part time employee. Unless additional
        employees are hired, the limited size of our staff may restrict the level
        or
        nature of our business operations.
  **Item
        7 - Financial Statements**
 
 The
        Financial Statements of the Company and the accompanying notes thereto, and
        the
        Report of Independent Registered Public Accounting Firm is included as part
        of
        this Form 10-KSB beginning on Page F-1.
 **Item
        8 - Changes in and Disagreements with Accountants on Accounting and Financial
        Disclosure**
 
 None.
 **Item
        8a - Controls and Procedures**
 
 An
        evaluation was performed under the supervision and with the participation
        of the
        Company’s management, including its Chief Operating Officer (“COO”) and Chief
        Financial Officer (“CFO”) of the effectiveness of the design and operation of
        the Company’s disclosure controls and procedures. Based on that evaluation, the
        Company’s management, including the COO and CFO, concluded that the Company’s
        disclosure controls and procedures were effective as of December 31, 2006.
        There
        have been no significant changes in the Company’s internal controls over
        financial reporting or in other factors that could significantly affect internal
        controls that have materially affected, or are reasonably likely to have
        materially affected, our internal control over financial
        reporting.
 
 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.
 
 **Item
        8b - Other Information**
  None.
  12
  **PART
        III**
 **Item
        9 - Directors and Executive Officers of the Registrant**
 
 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 at
        December 31, 2006 are as follows:
 
 Positions
                  and Offices PresentlyName
              
              Age
              
              Held
                  with the CompanyEdmund
                  C. King
              
              72
              
              Director,
                  Chief Financial Officer, TreasurerStephen
                  A. Michael
              
              59
              
              Director
                  and ChairmanGregory
                  J. Newell
              
              57
              
              DirectorJohn
                  E. Scates
              
              49
              
              DirectorCarl
                  A. Parks
              
              47
              
              President
                  and Chief Operating Officer
  There
        are
        no family relationships among any directors, executive officers or significant
        employees.
 
 EDMUND
        C.
        KING has served as our Chief Financial Officer and Director since February
        9,
        2000. 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; 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 certificate in the state of California
        .
 
 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, and currently,
        Mr.
        Michael had served as Chairman. In April 2005 he became and remained in that
        position until June of 2006. 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 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.
 
  13
  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.
 
 CARL
        A.
        PARKS, prior to being elected our President and Chief Operating Officer in
        June
        2006, served as the Company’s Vice President of Operations since 2001. Mr. Parks
        has had over 20 years experience in many phases of electronic manufacturing
        including assembly methods, techniques, hiring personnel, defining processes
        and
        selecting equipment. Prior to joining the Company, in 2000 and 2001 Mr. Parks
        served as a Customer Development Manager at ProTek Electronics in Sarasota,
        Florida where Mr. Parks had direct responsibility for the location,
        qualification and booking of new business and where he developed and managed
        the
        Quotation procedure and Costing model. In 1999 and part of 2000, Mr. Parks
        served as a Customer Development Manager at MSI of Central Florida in Melbourne,
        Florida. At MSI, Mr. Parks directed all manufacturing operations including
        hiring a core management team and had direct responsibility for new business
        development. From 1994 to part of 1999, Mr. Parks served as a customer service
        engineer at Genesis Manufacturing in Oldsmar, Florida. At Genesis, Mr. Parks
        had
        direct responsibility for the location and qualification of new customers.
        In
        addition, Mr. Parks provided front-end engineering support for all new program
        start-ups and provided component level sourcing support to all new programs.
        Mr.
        Parks received an A.S. Business degree in 1983 from Manatee Junior College.
        He
        has also received 1,600 hours of special instructions in many phases of
        manufacturing technology.
 
 **Significant
        Employees**
  In
        the
        fourth quarter of 2006, as part of continuing efforts to manage available
        financial resources, our in-house engineer, which was a significant employee,
        and his assistant were terminated. The terminated engineer is considered
        an
        outside consulting resource potentially available on an as requested/as
        available basis. To date, we have not requested significant access this to
        this
        consulting resource. While we do not believe that the reduction in staff
        has
        materially impacted our sales efforts, we anticipate that our ability to
        engage
        in significant new technology or product development activities will be
        materially adversely effected.
 
 **Compensation
        Committee and Compensation of Directors**
 
 Messrs.,
        Newell and Scates serve on the Compensation Committee, which determines the
        compensation amounts to be paid to our directors, officers and employees.
        We are
        currently in the process of establishing a formal plan for compensating our
        directors. To date, directors have been reimbursed for actual expenses incurred
        in connection with performing duties as directors and have not received
        compensation for attendance at meetings, except that Messrs. Newell and Scates
        were each entitled to be paid an annual director's fee of $10,000 which has
        not
        yet been paid and accrues. Amounts accrued through July 31, 2004 were
        satisfied through a deferred stock grant arrangement. Currently, directors
        will
        be compensated by the grant of options from time to time, under the Company’s
        various compensation plans.
 
 **The
        Audit Committee**
 
 The
        audit
        committee of the Board of Directors currently consists of two directors,
        Messrs.
        Newell and Scates, each of whom is a non-employee director, and each of whom
        meets the independence and other requirements to serve on our audit committee
        under applicable securities laws and the rules of the SEC and the American
        Stock
        Exchange ("AMEX"). Although we are not listed on the AMEX, we have voluntarily
        chosen to comply with the AMEX audit committee qualification requirements.
        The
        Board of Directors has determined that Mr. Newell qualifies as an audit
        committee financial expert as defined in item 401 of Regulation SB promulgated
        under the Securities Act of 1933, as amended. Mr. Newell is independent as
        such
        term is used in Item 7(d) (3) (IV) of Schedule 14A under the Exchange
        Act.
 
 **Code
        of Ethics**
 
 Our
        board
        of directors has adopted a Code of Business Conduct and Ethics and Compliance
        Program which is applicable to Invisa, Inc. and to all our directors, officers
        and employees, including Invisa, Inc.’s principal executive officer and
        principal financial officer, principal accounting officer or comptroller,
        or
        other persons performing similar functions.
  A
        copy of
        the Company’s Code of Ethics may be obtained free of charge by making the
        request to the Company in writing.
 
 **Advisors**
 
 Set
        forth
        below are Advisors who have been engaged by the Company and a description
        of the
        compensation arrangements with said Advisors.
  14
  **Industry
        Advisory Board**
 
 The
        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.
 
 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 vested over
        a
        two-year period and is now fully vested. 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.
 
 **Compliance
        with Section 16(a) of the Exchange Act**
 
 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.
 **Item
        10 - Executive Compensation**
 **Summary
        Compensation Table**
 
 Annual Compensation
              
              Long
                  Term Compensation Awards**Restricted**
              
              **Securities****Other
                  Annual**
              
              **Stock**
              
              **Underlying**
              
              **LTIP**
              
              **All
                  Other****Name
                  and**
              
              
              
              **Salary**
              
              **Bonus**
              
              **Compensation**
              
              **Award(s)**
              
              **Options**
              
              **Payouts**
              
              **Compensation****Principal
                  Position**
              
              **Year**
              
              **($)**
              
              **($)**
              
              **($)**
              
              **($)**
              
              **(#)**
              
              **($)**
              
              **($)**Carl
                  A. Parks
              
              
              2006
              
              
              87,192
              
              
              -------
              
              
              -------
              
              
              -------
              
              
              -------
              
              
              ------
              
              
              -------President
              
              
              2005
              
              
              104,694
              
              
              5000
              
              
              -------
              
              
              -------
              
              
              -------
              
              
              -------
              
              
              ------2004
              
              
              101,846
              
              
              -------
              
              
              -------
              
              
              -------
              
              
              -------
              
              
              -------
              
              
              -------Herbert
                  M. Lustig(1)
              
              
              2006
              
              
              --------
              
              
              -------
              
              
              -------
              
              
              -------
              
              
              -------
              
              
              -------
              
              
              -------2005
              
              
              67,961
              
              
              -------
              
              
              -------
              
              
              -------
              
              
              -------
              
              
              -------
              
              
              169,3642004
              
              
              195,000
              
              
              -------
              
              
              -------
              
              
              **------**
              
              
              -------
              
              
              -------
              
              
              -------Stephen
                  A. Michael,(2)
                Director
              
              
              2006
              
              
              ------
              
              
              -------
              
              
              -------
              
              
              -------
              
              
              100,000
              
              
              -------
              
              
              -------2005
              
              
              ------
              
              
              -------
              
              
              -------
              
              
              -------
              
              
              1,130,000
              
              
              -------
              
              
              -------2004
              
              
              12,500
              
              
              -------
              
              
              -------
              
              
              -------
              
              
              -------
              
              
              -------
              
              
              -------Edmund
                  C. King, Director,(3)
              
              
              2006
              
              
              ------
              
              
              -------
              
              
              -------
              
              
              -------
              
              
              100,000
              
              
              -------
              
              
              -------CFO/Treasurer
              
              
              2005
              
              
              ------
              
              
              -------
              
              
              -------
              
              
              -------
              
              
              1,350,000
              
              
              -------
              
              
              7,5002004
              
              
              120,000
              
              
              -------
              
              
              -------
              
              
              -------
              
              
              -------
              
              
              -------
              
              
              -------
 (1) Mr.
        Lustig commenced employment in November 2003. Salary paid to him totaled
        $32,500
        in 2003 and $195,000 in 2004. His employment was terminated in April 2005
        and he
        received $237,325 (other compensation is severance) cash compensation in
        2005.
        An additional $30,636 has been accrued by the Company as an additional severance
        amount. The severance amount properly owed to Mr. Lustig is currently being
        reviewed by the Company.
  15
  (2) Mr.
        Michael earned a base salary of $12,500 for the month of January 2004 and
        earned
        a base salary of $120,000 during the year 2003, none of which was paid in
        cash;
        other annual compensation comprised of a car allowance was paid in cash.
        During
        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
        accrued; (ii) $16,000 of the bonus was paid in cash and $27,050 was not paid
        and
        accrued; (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. In late 2004, it
        was
        agreed that $243,608 of accrued compensation will be paid with 94,162 shares
        of
        unregistered Common Stock to be issued and delivered in 2005 or 2006 at the
        election of the Company. In 2005 Mr. Michael has not received a salary; he
        received options to acquire 1,130,000 share of the Company’s common stock at
        market on date of grant.
 
 
  (3) Mr. King
        earned a base salary of $120,000 during 2003 and 2004, of which $30,000 was
        paid
        each year, respectively, in cash in the form of a consulting fee through
        Teasdale Corporation, which is controlled by Mr. King; and the remainder
        accrues. During 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 December 2004, 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 December 2004.
        An
        additional $30,000 was paid to Mr. King in 2004. This compensation was paid
        to
        Mr. King through Teasdale Corporation, which is controlled by Mr. King and
        which
        provided consulting services to the Company. In late 2004, it was agreed
        that
        $182,500 of accrued compensation will be paid with 70,542 shares of unregistered
        Common Stock to be issued and delivered in 2005 or 2006 at the election of
        the
        Company. In 2005 Mr. King has not received a salary; however, he received
        options to acquire 1,350,000 shares of the Company’s Common Stock at market on
        date of grant. In 2005 Mr. King was paid in cash in the form of a monthly
        consulting fee at $2,500 per month for the months of January 2005 through
        March
        2005, for a total of $7,500.
 
 **Dividend
        Policy**
 
 The
        payment by us of dividends, if any, in the future, rests within the sole
        discretion of our board of directors. The payment of dividends will depend
        upon
        our earnings, our capital requirements and our financial condition, as well
        as
        other relevant factors. We have not declared any cash dividends since our
        inception, and have no present intention of paying any cash dividends on
        our
        common stock in the foreseeable future.
 
 **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. From time to time, directors are granted options
        under the Company’s various stock option plans, as reflected above in Item
        10.
 
 **Employment
        Contracts and Termination of Employment and Change in Control
        Arrangements**
 
 In
        June
        2006, the Company entered into a three year employment contract with William
        R.
        Hildebrand, with terms that required the salary of $120,000 per annum plus
        the
        issuance of 900,000 stock options vesting monthly for a period of three years.
        After an initial three month period, the contract also requires three months
        salary as severance. Mr. Hildebrand’s employment was terminated in October 2006.
        The Company has recorded the three months severance pay.
 
 In
        June
        2006, the Company entered into a three year employment contract with Carl
        A.
        Parks, with terms that required the salary of $125,000 per annum. The contract
        also requires six months severance compensation.
 
 The
        employment contracts listed above constitute the Company’s only written
        employment contracts.
 
 **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, 2006 of (i) each person known by us to beneficially
        own five percent (5%) or more of such shares; (ii) each of our directors
        and
        executive officers; and (iii) all of our current executive officers, directors,
        and five percent (5%) or more beneficial owners as a group. Except as otherwise
        indicated, all shares are beneficially owned, and the persons named as owners
        hold investment and voting power.
  16
  
 
 
 **Name
                  and Address of**
                **Beneficial
                  Owner****(1)**
              
              **Title
                  of Class**
              
              **Positions
                  Held (Officers & Directors)**
              
              **Amount
                  and Nature of Shares Beneficially Owned****(2)**
              
              **Percentage**
                **Owned****(2)**Michael
                  R. Ries, CPA (Trustee)(3)
              
              
              Common
                  Stock
              
              
              
              
              
              1,864,584
              
              
              7.31
              %Kenneth
                  D. Doerr (Trustee)(3)
              
              
              Common
                  Stock
              
              
              
              
              
              1,864,584
              
              
              7.31
              %M.A.G.
                  Capital, LLC and affiliates(4)
              
              
              Common
                  Stock
              
              
              
              
              
              2,741,710
              
              
              9.99
              %Asset
                  Managers International, Ltd.(5)
              
              
              Common
                  Stock
              
              
              
              
              
              2,829,935
              
              
              9.99
              %Stephen
                  A. Michael(6)
              
              
              Common
                  Stock
              
              
              Chairman
                  & Director
              
              
              5,050,438
              
              
              18.63
              %Edmund
                  C. King(7)
              
              
              Common
                  Stock
              
              
              CFO,Treasurer
                  & Director
              
              
              1.467,582
              
              
              5.50
              %Gregory
                  J. Newell(8)
              
              
              Common
                  Stock
              
              
              Director
              
              
              192,732
              
              
              0.75
              %John
                  E. Scates(9)
              
              
              Common
                  Stock
              
              
              Director
              
              
              192,732
              
              
              0.75
              %Carl
                  A. Parks
              
              
              Common
                  Stock
              
              
              President
              
              
              450,000
              
              
              1.73
              %Christopher
                  Maggiore
              
              
              Common
                  Stock
              
              
              
              
              
              1,750,001
              
              
              6.42
              %
 All
        directors, executive officers, and 5% beneficial owners as a group (5 persons;
        6,906,484 shares, 23.73 % (approx.))
 
 (1)
              Unless
                  otherwise provided herein all addresses are c/o Invisa, Inc., 6935
                  15thStreet East, Suite 120, Sarasota, Florida 34243. The address for
                  Mr. Ries
                  is 4837 Swift Road, Suite 210, Sarasota, Florida 34231; for Mr.
                  Doerr is
                  240 South Pineapple Avenue, Sarasota, Florida 34230; for Asset
                  Managers
                  International, Ltd. and for M.A.G. Capital and affiliates is 555
                  South
                  Flower Street, Suite 4500, Los Angeles, California
                  90071.
 
 (2)
                
                
                
                
                
                (4)
              The
                  percentage calculations are based on 25,497,738 shares that were
                  outstanding as of December 31, 2006 plus the respective beneficial
                  shares
                  owned by each selling stockholder. 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, 2006
                  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.
                
                Includes
                    M.A.G. Capital, LLC; Mercator Momentum Fund, L.P.; Monarch Pointe
                    Fund,
                    Ltd and Mercator Momentum Fund III, L.P. David F. Firestone is
                    the
                    managing member of M.A.G. Capital LLC and as such he has beneficial
                    ownership of shares owned by M.A.G. Capital LLC and its affiliated
                    funds.
                    The following table presents the total number of shares held
                    by the
                    respective Funds:
 PreferredCommon
                A
                B
                WarrantsMonarch
                    Point Fund, Ltd.
                535,475
                9,715
                2,000
                402,000Mercator
                    Momentum Fund III, LP
                ----
                ----
                1,000
                198,000Mercator
                    Momentum Fund, LP
                263,953
                4,785
                ----
                150,000799,420
                14,500
                3,000
                750,000
  (*)Each
          share of Series A Preferred Stock and Series B Preferred Stock may be converted
          by the holder into that number of shares of common stock as is determined
          by
          dividing 100 by .12. The documentation governing the terms of the Series
          A
          Preferred Stock, the Series B Preferred Stock and the warrants contains
          provisions prohibiting any conversion of the Series A Preferred Stock or
          the
          Series B Preferred Stock or exercise of the warrants that would result
          in M.A.G.
          Capital, LLC, Mercator Momentum Fund, LP, Monarch Pointe Fund, Ltd., Mercator
          Momentum Fund III, LP and their affiliates, collectively beneficially owning
          more than 9.99% of the outstanding shares of our common stock as determined
          under Rule 13d-3 of the Securities Exchange Act of 1934. As a result of
          these
          provisions, none of such entities hold beneficial ownership of more than
          9.99%
          of the outstanding shares of our common stock..
  17
  
 (5)
              Asset
                  Managers International, Ltd. has 5,833,333 shares of common stock
                  that may
                  be acquired upon the conversion of outstanding Series B Preferred
                  Stock
                  (at an assumed conversion price of $0.12 per share) and 1,750,000
                  shares
                  of common stock that may be acquired upon the exercise of the immediately
                  exercisable warrants at $0.30 per share. The documentation governing
                  the
                  terms of the Series B Preferred Stock and warrants contains provisions
                  prohibiting any conversion of the Series B Preferred Stock or exercise
                  of
                  the warrants that would result in Asset Managers International,
                  Ltd. and
                  its affiliates collectively beneficially owning more than 9.99%
                  of the
                  outstanding shares of our common stock as determined under Rule
                  13d-3 of
                  the Securities Exchange Act of 1934. As a result of these provisions,
                  none
                  of such entities hold beneficial ownership of more than 9.99% of
                  the
                  outstanding shares of our common stock. The natural persons who
                  beneficially own the securities held by Asset Managers International
                  Ltd.
                  are the directors of Asset Managers International Ltd, which are
                  Oskar
                  Lewnowski and William Maycock.
 
 
 (6)
              Includes
                  3,448,438 shares owned by Mr. Michael and options to purchase 1,605,000
                  shares. Of the 1,605,000 currently vested options: 300,000 were
                  granted to
                  Mr. Michael in 2000 with an exercise price of $3.00 per share and
                  an
                  expiration date of July 26, 2007; 300,000 were granted in 2002
                  with an
                  exercise price of $3.85 per share and an expiration date of January
                  21,
                  2007; 400,000 were granted to Mr. Michael in 2005 with an exercise
                  price
                  of $0.09 per share and an expiration date of June 15, 2015; and
                  480,000
                  were granted to Mr. Michael in 2005 with an exercise price of $0.10
                  per
                  share and an expiration date of August 25, 2015. Mr. Michael also
                  has
                  options to purchase additional 250,000 and 100,000 shares, respectively.
                  However, such options have only 125,000 shares vested nor will
                  he have any
                  additional vested within 60 days of the date hereof. The 1,605,000
                  vested
                  options were granted pursuant to the Company’s option
                  plans.
 
 (7)
              Includes
                  262,582 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 1,200,000
                  shares.
 
 (8)
              Includes
                  options to purchase 185,000 shares.
 
 (9)
              Includes
                  options to purchase 185,000 shares.
 
 **Item
        12 - Certain Relationships and Related Transactions**
 
 To
        the
        best of our knowledge, other than as set forth below, there were no material
        transactions, or series of similar transactions, or any currently proposed
        transactions, or series of similar transactions, to which we were or are
        to be a
        party, in which the amount involved exceeds $60,000, and in which any director
        or executive officer, or any security holder who is known by us to own of
        record
        or beneficially more than 5% of any class of our Common Stock, or any member
        of
        the immediate family of any of the foregoing persons, has an interest except
        as
        described below:
 
 During
        2006, the following options to acquire common stock were issued under the
        Company’s various plans to the following directors:
 Number
                  ofoptions
                  issuedStephen
                  Michael
              
              
              100,000Edmund
                  King
              
              
              100,000Gregory
                  Newell
              
              
              100,000John
                  Scates
              
              
              100,000400,000
  
  Also,
        in
        2006 the Company entered into a short term borrowing agreement of $128,337
        from
        three stockholders (MAG Capital, LLC; Mercator Momentum Fund, LLC; Monarch
        Pointe Fund, LLC) under a short-term secured 10%
        note. We also issued 266,670 shares of common stock in connection with the
        exercise of stock options by a stockholder (Christopher Maggiore).
  In
        2006,
        we also borrowed $30,500 from Friday Harbour, LLC (an affiliate of Samuel
        Duffey) under a convertible facility loan agreement.
  
  18
   **Item
        13 - Exhibits List**
 **INDEX
        TO EXHIBITS**
 
 ITEM
                  NO.
              DESCRIPTION2.11
              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,
                  200310.11
              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, 200310.21
              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, 200310.31
              Form
                  of Plan 2003 Option Agreement with Joseph F. Movizzo - May 13,
                  2003
                  (including form of Letter of Investment Intent)10.41
              Consulting
                  Agreement - March 2003 between Crescent Fund, Inc. and the
                  Company10.51
              Agreement
                  dated as of April 24, 2003 between Alan A. Feldman and the
                  Company10.61
              Financing
                  Agreement dated as of May 9, 2003 between BarBell Group, Inc. and
                  the
                  Company10.71
              Series
                  2003A 7% Convertible Note Due June 9, 2004, dated May 9, 2003 from
                  the
                  Company to BarBell Group, Inc.10.81
              Investment
                  Agreement dated as of May 9, 2003 between BarBell Group, Inc. and
                  the
                  Company10.91
              Warrant
                  to Purchase Shares of Common Stock dated as of May 9, 2003, issued
                  by the
                  Company to BarBell Group, Inc.10.101
              Registration
                  Rights Agreement dated as of May 9, 2003 between the Company and
                  BarBell
                  Group, Inc.10.111
              Broker-Dealer
                  Placement Agent Selling Agreement - May 2003 between Capstone Partners
                  LC
                  and the Company10.122
              Amended
                  and Restated Regulation S Subscription Agreement - July 22, 2003
                  between
                  Capstone Partners LC and the Company10.132
              Amended
                  and Restated Regulation S Subscription Agreement - July 22, 2003
                  executed
                  by Nautilus Technologies, Ltd. - subscribing for 125,000
                  Units10.142
              Amended
                  and Restated Regulation S Subscription Agreement - July 22, 2003
                  executed
                  by GM Capital Partners, Ltd. - subscribing for 50,500
                  Units10.152
              Amended
                  and Restated Regulation S Subscription Agreement - July 22, 2003
                  executed
                  by Kallur Enterprises, Ltd. - subscribing for 50,000
                  Units10.162
              Publicity
                  Agreement - July 2003 between Capital Financial Media, Inc. and
                  the
                  Company
  10.172
              Consulting
                  Agreement - July 2003 between National Financial Communications
                  Corp. and
                  the Company10.182
              Agreement
                  - July 2003 between Brooks Houghton & Company, Inc. and the
                  Company10.192
              Non-Exclusive
                  Financial Advisor Agreement - July 2003 between Source Capital
                  Group, Inc.
                  and the Company10.202
              Consulting
                  Agreement - July 2003 between Patrick W.H. Garrard d/b/a The Garrard
                  Group
                  of West Redding, CT and the
                  Company
  19
  
 10.212
              Investment
                  Agreement Modification I dated as of July 21, 2003 by and among
                  Invisa,
                  Inc. and BarBell Group, Inc.10.222
              Joint
                  Development Agreement - July 2003 between Dominator International
                  Ltd. And
                  SmartGate, L.C.10.233
              Engagement
                  Agreement dated September 9, 2003 between G.M. Capital Partners,
                  Ltd and
                  Invisa, Inc.10.244
              Employment
                  Agreement dated November 6, 2003 between Herb Lustig and Invisa,
                  Inc.10.254
              Severance
                  Agreement dated November 13, 2003 between Samuel S. Duffey and
                  Invisa,
                  Inc.10.264
              Agreement
                  dated November 13, 2003 between Invisa, Inc. and the Duffey related
                  shareholders10.275
              SDR
                  Metro Inc. letter extension agreement10.285
              SDR
                  Metro Inc. confirmation letter agreement10.295
              Severance
                  Agreement dated January 26, 2004 between Stephen A. Michael and
                  Invisa,
                  Inc.10.305
              Consulting
                  Agreement dated January 26, 2004 between Stephen A. Michael and
                  Invisa,
                  Inc.10.315
              Severance
                  Agreement dated December 31, 2003 between William W. Dolan and
                  Invisa,
                  Inc.10.325
              Agreement
                  dated February 11, 2004 between The Video Agency, Inc. and Invisa,
                  Inc.10.335
              Employment
                  Agreement dated March 2004 between Charles Yanak and Invisa,
                  Inc.10.345
              2003-A
                  Employee, Director, Consultant and Advisor Stock Compensation
                  Plan.10.355
              First
                  Amendment to Invisa, Inc., 2003 Incentive Plan Date As of November
                  6,
                  200310.365
              Stock
                  Option Agreement for Herb M. Lustig dated November 6,
                  200310.376
              Subscription
                  Agreement for issuance of 22,000 shares of Series A Convertible
                  Preferred
                  Stock and Common Stock Warrants10.386
              Registration
                  Rights Agreement10.396
              Warrants
                  to Purchase Common Stock (Mercator Momentum Fund, LP, Mercator
                  Advisory
                  Group, LLC, and Monarch Pointe Fund,
                  Ltd.)
  10.406
              Certificate
                  of Designations of Preferences and Rights of Series A Convertible
                  Preferred Stock.10.417
              Marketing
                  Agreement between Aurelius Consulting Group and Invisa,
                  Inc.10.427
              Lease
                  Agreement among HAR-WAL ASSOCIATES, INC. and WR-I ASSOCIATES, LTD.
                  and
                  Invisa, Inc. dated September dated September 23, 200410.4311
              Business
                  consulting agreement10.4411
              Opinion
                  of counsel regarding legality of Common Stock10.45
              Consent
                  of Aidman, Piser and Company, PA10.4611
              Consent
                  of Legal Counsel10.4711
              Power
                  of Attorney relating to subsequent
                  amendments
 
  20
  
 10.489
              Promissory
                  note agreements dated October 10, 2006 by and between Invisa, Inc.
                  and
                  M.A.G. Capital, LLC; Mercator Momentum Fund III, LP and Monarch
                  Pointe
                  Fund, Ltd. Borrowing Certificates and Forms of
                  Assignments10.499
              Warrant
                  Agreement dated October 10, 2006 by and between Invisa, Inc. and
                  Ocean
                  Park Advisors, LLP10.509
              UCC
                  Financing Statements10.519
              Schedule
                  of Advances: Permitted Payments10.5210
              Business
                  Consulting Agreement dated August 14, 2006 between Invisa, Inc.
                  and John
                  Anderson10.538
              Carl
                  A. Parks Employment agreement141
              Code
                  of Business Conduct and Ethics and Compliance
                  Program
 
 31.18
              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 2002.31.28
              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 2002.32.18
              Certification
                  Pursuant to 18 U.S.C. Section 1350.32.28
              Certification
                  Pursuant to 18 U.S.C. Section 1350.1
              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
              Previously
                  filed on April 14, 2004 with Invisa Form 10-KSB for the fiscal
                  year ended
                  December 31, 2003 and incorporated herein by
                  reference.
 
 6
              Previously
                  filed on August 18, 2004 with Invisa Form 10-QSB and incorporated
                  herein
                  by reference.
 
 7
              Previously
                  filed on February 7, 2005 with Invisa Form 10-KSB for the fiscal
                  year
                  ended December 31, 2004 and incorporated herein by
                  reference.
 
 8
              Filed
                  herewith.9
              Previously
                  filed on October 10, 2006 with Invisa Form 8-K/A dated October
                  10, 2006
                  and are incorporated by reference.10
              Previously
                  filed on August 17, 2006 with Invisa Form 8-K dated August 14,
                  2006 and
                  are incorporated by reference.11
              Previously
                  filed on August 14, 2006 with Invisa Form S-8 dated August 14,
                  2006 and
                  are incorporated by reference
 
  21
  **Item
        14 - Principal Accountant Fees and Services**
 Fees
        for
        the Year ended December 31, 2006 were:
 
 
 Audit
                  fees
              
              $
              69,400Audit
                  related fees
              
              $
              40,000Tax
                  fees
              
              $
              9,000
 Fees
        for
        the Year ended December 31, 2005 were:
 
 Audit
                  fees
              
              $
              80,800Audit
                  related fees
              
              $
              25,028Tax
                  fees
              
              $
              6,500
 
 The
        audit
        committee has approved 100% of the above services.
   22
   
 **SIGNATURES**
 
 In
        accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
        this report to be signed on its behalf by the undersigned, thereonto duly
        authorized.
  **INVISA,
                  INC.**Dated:
                  April17,
                  2007
              By:
              /s/ Carl
                  A. ParksCarl
                  A. ParksPresident
                  and Chief Operating OfficerDated:
                  April 17, 2007
              By:
              /s/ Edmund
                  C KingEdmund
                  C KingChief
                  Financial Officer
 
  
  **NOW
        ALL PERSONS BY THESE PRESENTS** , that
        each of the undersigned hereby constitutes and appoints Stephen A. Michael
        as
        his true and lawful attorney-in-fact and agent, with full power of substitution
        and resubstitution, for him and on his behalf to sign, execute and file this
        annual report on Form 10-KSB and any or all amendments without limitation
        to
        this annual report, and to file the same, with all exhibits thereto and any
        and
        all documents required to be filed with respect therewith, with the Securities
        and Exchange Commission or any regulatory authority, granting unto such
        attorney-in-fact and agent full power and authority to do and perform each
        and
        every act and thing requisite and necessary to be done in connection therewith
        and about the premises in order to effectuate the same as fully to all intents
        and purposes as he might or could do if personally present, hereby ratifying
        and
        confirming all that such attorney-in-fact and agent, or his substitute or
        substitutes, may lawfully do or cause to be done.
 
 In
        accordance with the Exchange Act, this report has been signed below by the
        following persons on behalf of the registrant and in the capacities and on
        the
        dates indicated.
 
 
 Date:
                  April 17, 2007
              /s/
                  Carl A. ParksCarl
                  A. Parks, President and Chief Financial OfficerDate:
                  April 17, 2007
              /s/
                  Stephen A. MichaelStephen
                  A. Michael, Chairman, DirectorDate:
                  April 17, 2007
              /s/
                  Edmund C. KingEdmund
                  C. King, Chief Financial Officer, DirectorDate:
                  April 17, 2007
              /s/
                  Gregory J. NewellGregory
                  J. Newell, DirectorDate:
                  April 17, 2007
              /s/
                  John E. ScatesJohn
                  E. Scates, Director
  
  
  
  **Report
        of Independent Registered Certified Public Accounting
        Firm**
 
 
 Board
        of
        Directors and Stockholders
 Invisa,
        Inc.
 
 We
        have
        audited the accompanying consolidated balance sheet of Invisa, Inc. and
        Subsidiaries (the “Company”) as of December 31, 2006 and the related
        consolidated statements of operations, stockholders’ equity, and cash flows for
        each of the years in the two-year period then ended, and for the period from
        February 12, 1997 (inception) through December 31, 2006. 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 standards of the Public Company
        Accounting Oversight Board (United States of America). Those standards require
        that we plan and perform the audit to obtain reasonable assurance about whether
        the financial statements are free of material misstatement. The Company is
        not
        required to have, nor were we engaged to perform, an audit of its internal
        control over financial reporting. Our audit included consideration of internal
        control over financial reporting as a basis for designing audit procedures
        that
        are appropriate in the circumstances, but not for the purpose of expressing
        an
        opinion on the effectiveness of the Company’s internal control over financial
        reporting. Accordingly, we express no such opinion. An audit includes examining,
        on a test basis, evidence supporting the amounts and disclosures in the
        financial statements, 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 consolidated financial statements referred to above present
        fairly,
        in all material respects, the consolidated financial position of Invisa,
        Inc. as
        of December 31, 2006 and the consolidated results of its operations and its
        cash
        flows for each of the years in the two-year period then ended, and for the
        period from February 12, 1997 (inception) through December 31, 2006, in
        conformity with accounting principles generally accepted in the United States
        of
        America.
 
 The
        accompanying consolidated financial statements have been prepared assuming
        that
        the Company will continue as a going concern. As discussed in Note B to the
        financial statements, the Company has incurred significant losses and used
        cash
        in operating activities during the years ended December 31, 2006 and 2005
        and
        expects that additional capital will be required in order to continue operations
        in 2007. These factors, among others, as discussed in Note B, 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 B. The financial
        statements do not include any adjustments that might result from the outcome
        of
        this uncertainty.
 
 */s/
        Aidman, Piser & Company, P.A.*
 Tampa,
        Florida
  April
        17,
        2007
  
  F-1
   Invisa,
        Inc. and Subsidiaries
 (A
        Development Stage Enterprise)
 CONSOLIDATED
        BALANCE SHEET
 
 
 **December
                  31,****2006**ASSETSCurrent
                  assets:Cash
                  and cash equivalents
              
              $
              2,900Accounts
                  receivable
              
              
              11,650Inventories
              
              
              71,839Prepaids
                  and other assets
              
              
              20,233Total
                  current assets
              
              
              106,622Furniture,
                  fixtures and equipment, net of $105,594 accumulated
                  depreciation
              
              
              29,962Patent,
                  net of $2,364,706 accumulated amortization
              
              
              4,335,294Total
                  assets
              
              $
              4,471,878LIABILITIES
                  AND STOCKHOLDERS’ EQUITYCurrent
                  liabilities:Accounts
                  payable, trade
              
              $
              268,123Accrued
                  expenses
              
              
              145,512Due
                  to stockholders and officers
              
              
              552,837Preferred
                  dividends payable
              
              
              108,750Total
                  current liabilities
              
              
              1,075,222Commitment
                  (Note J)
              
              
              -----Stockholders’
                  equityConvertible
                  Preferred Stock, 5 million shares authorized ($0.001 par
                  value):Series
                  A, 14,500 shares issued and outstanding
              
              
              1,277,000Series
                  B, 10,000 shares issued and outstanding
              
              
              1,000,000Common
                  Stock; 95,000,000 shares authorized ($.001 par value), 25,497,738
                  shares
                issued
                  and outstanding
              
              
              25,498Additional
                  paid-in capital
              
              
              31,634,059Stock
                  subscriptions receivable
              
              
              (283,904
              )Deficit
                  accumulated during the development stage
              
              
              (30,255,997
              )Total
                  stockholders’ equity
              
              
              3,396,656Total
                  liabilities and stockholders’ equity
              
              $
              4,471,878
 
  See
        notes
        to consolidated financial statements.
   F-2
   
 Invisa,
        Inc. and Subsidiaries
 (A
        Development Stage Enterprise)
 CONSOLIDATED
        STATEMENTS OF OPERATIONS
 
 
 **February
                  12,****1997
                  (Date of****inception)****Through****Years
                  Ended December 31,**
              
              **December
                  31,****2005**
              
              **2006**
              
              **2006**Net
                  sales
              
              $
              239,285
              
              $
              136,980
              
              $
              1,334,331Other
                  operating revenues
              
              
              300,000
              
              
              ---
              
              
              300,000Costs
                  and expenses:Cost
                  of goods sold (exclusive of patent amortization shown separately
                  below)
              
              
              122,761
              
              
              94,197
              
              
              948,324Research
                  and development costs
              
              
              174,292
              
              
              119,937
              
              
              3,471,292Selling,
                  general and administrative expenses
              
              
              1,227,592
              
              
              1,420,442
              
              
              15,203,358Patent
                  amortization
              
              
              788,235
              
              
              788,235
              
              
              3,858,364Impairment
                  of patent
              
              
              -----
              
              
              -----
              
              
              5,517,808Loss
                  from operations
              
              
              (1,773,595
              )
              
              (2,285,831
              )
              
              (27,364,815
              )Other
                  income (expense):Interest
                  (expense) income, net
              
              
              2,677
              
              
              (25,118
              )
              
              (845,672
              )Debt
                  extinguishment gain
              
              -----
              
              
              -----
              
              
              360,0002,677
              (25,118
              )
              
              (485,672
              )Loss
                  before income tax
              
              
              (1,770,918)
              
              
              
              )
              
              (27,850,487
              )Income
                  tax
              
              
              -----
              
              
              -----
              
              
              -----Net
                  loss
              
              
              (1,770,918
              )
              
              (2,310,949
              )
              
              (27,850,487
              )Non-cash
                  constructive dividend related to Convertible Preferred
                Stock
                  accretions
              
              
              (1,000,000
              )
              
              -----
              
              
              (2,296,640
              )Preferred
                  Stock dividends
              
              
              (18,750
              )
              
              (90,000
              )
              
              (108,750
              )Net
                  loss applicable to Common Stockholders
              
              $
              (2,789,668
              )
              $
              (2,400,949
              )
              $
              (30,255,877
              )Net
                  loss per share applicable to Common Stockholders:Basic
                  and diluted
              
              $
              (0.12
              )
              $
              (0.10
              )Weighted
                  average Common Stock shares outstanding:
                Basic
                  and diluted
              
              
              22,742,956
              
              
              24,529,553
 
 
 See
        notes
        to consolidated financial statements.
  F-3
  CONSOLIDATED
        STATEMENTS OF STOCKHOLDERS’ EQUITY
 **Deficit****Accumulated****Convertible**
              
              
              
              **Additional**
              
              **Stock**
              
              **During
                  the****Preferred
                  Stock**
              
              **Common
                  Stock**
              
              **Paid-In**
              
              **Subscriptions**
              
              **Development****Shares**
              
              **Amount**
              
              **Shares**
              
              **Amount**
              
              **Capital**
              
              **Receivable**
              
              **Stage**
              
              **Total**FEBRUARY
                  12, 1997 (INCEPTION)
              
              
              -----
              
              $
              -----
              
              
              -----
              
              $
              -----
              
              $
              -----
              
              $
              -----
              
              $
              -----
              
              $
              -----Summary
                  of transactions from February 12, 1997through
                  December 31, 2004:Issuance
                  of Common Stock to founders
              
              
              -----
              
              
              -----
              
              
              6,105,128
              
              
              5,980
              
              
              (5,980
              )
              
              -----
              
              
              -----
              
              
              -----Issuance
                  of Common Stock for cash
              
              
              -----
              
              
              -----
              
              
              4,257,350
              
              
              4,257
              
              
              9,031,704
              
              
              -----
              
              
              -----
              
              
              9,035,961Exercise
                  of stock options
              
              
              -----
              
              
              -----
              
              
              1,027,964
              
              
              1,027
              
              
              1,316,160
              
              
              (985,000
              )
              
              -----
              
              
              332,187Offering
                  costs
              
              
              -----
              
              
              -----
              
              
              500,000
              
              
              500
              
              
              637,436
              
              
              -----
              
              
              -----
              
              
              637,936Conversion
                  of notes payable
              
              
              -----
              
              
              -----
              
              
              635,022
              
              
              635
              
              
              449,365
              
              
              -----
              
              
              -----
              
              
              450,000Original
                  issue discount on notes payable
              
              
              -----
              
              
              -----
              
              
              -----
              
              
              -----
              
              
              201,519
              
              
              -----
              
              
              -----
              
              
              201,519Common
                  Stock issuable for rent
              
              
              -----
              
              
              -----
              
              
              164,799
              
              
              290
              
              
              88,084
              
              
              -----
              
              
              -----
              
              
              88,374Issuance
                  of Common Stock for services
              
              
              -----
              
              
              -----
              
              
              606,144
              
              
              607
              
              
              1,254,355
              
              
              -----
              
              
              -----
              
              
              1,254,962Issuance
                  of Common Stock options for services
              
              
              -----
              
              
              -----
              
              
              -----
              
              
              -----
              
              
              550,987
              
              
              -----
              
              
              -----
              
              
              550,987Original
                  issue discount
              
              
              -----
              
              
              -----
              
              
              -----
              
              
              -----
              
              
              144,000
              
              
              -----
              
              
              -----
              
              
              144,000Issuance
                  of Common Stock related to reorganization
              
              
              -----
              
              
              -----
              
              
              2,009,000
              
              
              2,009
              
              
              227,991
              
              
              -----
              
              
              -----
              
              
              230,000Issuance
                  of Common Stock related to Radio Metrix merger
              
              
              -----
              
              
              -----
              
              
              3,685,000
              
              
              3,685
              
              
              11,268,815
              
              
              -----
              
              
              -----
              
              
              11,272,500Interest
                  accrued on notes related to stock subscriptions receivable
              
              
              -----
              
              
              -----
              
              
              -----
              
              
              -----
              
              
              248,836
              
              
              (248,836
              )
              
              -----
              
              
              -----Settlement
                  of accounts in connection with severance agreements
              
              
              -----
              
              
              -----
              
              
              -----
              
              
              -----
              
              
              544,090
              
              
              923,432
              
              
              -----
              
              
              1,467,522
  F-4
  
 Exercise
                  of Stock Warrants
              
              
              -----
              
              
              -----
              
              
              602,000
              
              
              602
              
              
              1,138,143
              
              
              -----
              
              
              -----
              
              
              1,138,745Issuance
                  of Convertible Preferred Stock and
                detachable
                  Warrants for cash, net of costs paid in the form of common
                  stock
              
              
              22,000
              
              
              640,360
              
              
              162,500
              
              
              163
              
              
              1,296,477
              
              
              -----
              
              
              ----
              
              
              1,937,000Non-cash
                  constructive dividend related to
                beneficial
                  conversion features of Convertible Preferred Stock
              
              
              ----
              
              
              1,296,640
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              (1,296,640
              )
              
              ----Conversion
                  of Convertible Preferred Stock
                into
                  Common Stock
              
              
              (7,500
              )
              
              (660,000
              )
              
              1,500,000
              
              
              1,500
              
              
              658,500
              
              
              ----
              
              
              ----
              
              
              ----Issuance
                  of Common Stock for
                settlement
                  of cash advances
              
              
              ----
              
              
              ----
              
              
              80,925
              
              
              81
              
              
              80,844
              
              
              ----
              
              
              ----
              
              
              80,925Issuable
                  Common Stock for settlement of
                related
                  party accrued compensation
              
              
              ----
              
              
              ----
              
              
              300,000
              
              
              300
              
              
              194,700
              
              
              ----
              
              
              ----
              
              
              195,000Gain
                  on related party accrued compensation
                extinguishment
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              581,132
              
              
              ----
              
              
              ----
              
              
              581,132Issuance
                  of Common Stock Warrants for
                settlement
                  of royalty contract
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              91,400
              
              
              ----
              
              
              ----
              
              
              91,400Collections
                  of stock subscriptions receivable
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              36,500
              
              
              ----
              
              
              36,500Adjustment
                  of stock subscriptions receivable
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              (20,000
              )
              
              20,000
              
              
              ----
              
              
              ----Net
                  loss
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              (23,768,740
              )
              
              (23,768,740
              )BALANCE
                  AT DECEMBER 31, 2004
              
              
              14,500
              
              
              1,277,000
              
              
              21,635,832
              
              
              21,636
              
              
              29,978,558
              
              
              (253,904
              )
              
              (
                  25,065,380
              )
              
              5,957,910
  F-5
  
 Issuance
                  of Convertible Preferred Stock and
                detachable
                  Warrants for cash, net of costs paid
              
              
              10,000
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              878,000
              
              
              -----
              
              
              ----
              
              
              878,000Non-cash
                  constructive dividend related to
                Convertible
                  Preferred Stock accretions
              
              
              ----
              
              
              1,000,000
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              (1,000,000
              )
              
              ----Issuance
                  of Common Stock for cash
              
              
              ----
              
              
              ----
              
              
              1,066,662
              
              
              1,066
              
              
              78,934
              
              
              ----
              
              
              ----
              
              
              80,000Issuance
                  of Common Stock for services
              
              
              ----
              
              
              ----
              
              
              1,096,774
              
              
              1,097
              
              
              103,903
              
              
              ----
              
              
              ----
              
              
              105,000Issuance
                  of Common Stock options for services
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              33,000
              
              
              ----
              
              
              ----
              
              
              33,000Interest
                  accrued on notes related to stock
                subscriptions
                  receivable
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              15,000
              
              
              (15,000
              )
              
              ----
              
              
              ----Preferred
                  Stock Series B dividend
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              (
                  18,750
              )
              
              (
                  18,750
              )Net
                  loss
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              (1,770,918
              )
              
              (1,770,918
              )BALANCE
                  AT DECEMBER 31, 2005
              
              
              24,500
              
              $
              2,277,000
              
              
              23,799,268
              
              $
              23,799
              
              $
              31,087,395
              
              $
              (268,904
              )
              $
              (27,855,048
              )
              $
              5,264,242Issuance
                  of Common Stock for cash
              
              
              ----
              
              
              ----
              
              
              400,000
              
              
              400
              
              
              43,600
              
              
              ----
              
              
              ----
              
              
              44,000Stock
                  options exercised
              
              
              
              
              
              
              
              
              316,670
              
              
              317
              
              
              23,933
              
              
              ----
              
              
              ----
              
              
              24,250Issuance
                  of Common Stock for services
              
              
              ----
              
              
              ----
              
              
              981,800
              
              
              982
              
              
              132,652
              
              
              ----
              
              
              ----
              
              
              133,634Employee
                  share-based compensation
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              198,089
              
              
              ----
              
              
              ----
              
              
              198,089Issuance
                  of Common Stock options for services
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              133,390
              
              
              ----
              
              
              ----
              
              
              133,390Interest
                  accrued on notes related to stock
                subscriptions
                  receivable
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              15,000
              
              
              (15,000
              )
              
              ----
              
              
              ----Preferred
                  Stock Series B dividend
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              (
                  90,000
              )
              
              (90,000
              )Net
                  loss
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              ----
              
              
              (2,310,949
              )
              
              (2,310,949
              )BALANCE
                  AT DECEMBER 31, 2006
              
              
              24,500
              
              $
              2,277,000
              
              
              25,497,738
              
              $
              25,498
              
              $
              31,634,059
              
              $
              (283,904
              )
              $
              (30,255,997
              )
              $
              3,396,656
 
 See
        notes
        to consolidated financial statements.
 
  F-6
  
 Invisa,
        Inc. and Subsidiaries
 (A
        Development Stage Enterprise)
 CONSOLIDATED
        STATEMENTS OF CASH FLOWS
 
 
 **February
                  12,****1997
                  (Date of****inception)****Through****Years
                  Ended December 31,**
              
              **December
                  31,****2005**
              
              **2006**
              
              **2006**Cash
                  flows from operating activities:Net
                  loss
              
              $
              (1,770,918
              )
              $
              (2,310,949
              )
              $
              (27,850,487
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Patent
                  impairment
              
              
              -----
              
              
              -----
              
              
              5,517,808Depreciation
                  and amortization
              
              
              809,515
              
              
              804,670
              
              
              4,412,274Common
                  Stock and options exchanged for services/settlements
              
              
              138,000
              
              
              465,113
              
              
              3,226,253Debt
                  extinguishment gain
              
              
              ----
              
              
              ----
              
              
              (360,000
              )Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              30,238
              
              
              15,618
              
              
              (158,364
              )Inventories
              
              
              692
              
              
              (24,364
              )
              
              (71,839
              )Prepaids
                  and other assets
              
              
              70,371
              
              
              (6,874
              
              
              (20,234
              )Accounts
                  payable, trade
              
              
              (46,665
              )
              
              224,573
              
              
              268,123Accrued
                  expenses
              
              
              43,989
              
              
              22,563
              
              
              95,504Deferred revenue
              
              
              (300,000
              )
              
              ----
              
              
              ----Net
                  cash used in operating activities
              
              
              (1,024,778
              )
              
              (809,650
              )
              
              (14,940,962
              )Cash
                  flows from investing activities:Patent
                  acquisition
              
              
              ----
              
              
              ----
              
              
              (550,000
              )Transaction
                  costs in connection with RMI business combination
              
              
              ----
              
              
              ----
              
              
              (121,475
              )Purchases
                  of furniture, fixtures and equipment
              
              
              (5,347
              )
              
              ----
              
              
              (238,846
              )Net
                  cash used in investing activities
              
              
              (5,347
              )
              
              ----
              
              
              (910,321
              )Cash
                  flows from financing activities:Net
                  change in line of credit
              
              
              ----
              
              
              ----
              
              
              ----Proceeds
                  from notes payable
              
              
              50,000
              
              
              128,337
              
              
              178,337Proceeds
                  from notes payable and redeemable Common Stock
              
              
              ----
              
              
              ----
              
              
              908,000Payment
                  of notes payable
              
              
              (50,000
              )
              
              ----
              
              
              (520,800
              )Collection
                  of stock subscriptions
              
              
              ----
              
              
              ----
              
              
              36,500Due
                  to shareholders and officers
              
              
              67,000
              
              
              30,500
              
              
              1,551,483Proceeds
                  from sale of convertible Preferred Stock
              
              
              878,000
              
              
              ----
              
              
              2,815,000Proceeds
                  from sale of Common Stock
              
              
              80,000
              
              
              68,250
              
              
              10,655,663Cash
                  received with combination transaction
              
              
              ----
              
              
              ----
              
              
              230,000Net
                  cash provided by financing activities
              
              
              1,025,000
              
              
              227,087
              
              
              15,854,183Net
                  (decrease) increase in cash
              
              
              (5,125
              )
              
              (582,563)
              
              
              2,900Cash
                  at beginning of period
              
              
              590,588
              
              
              585,463
              
              
              ----Cash
                  at end of period
              
              
              585,463
              
              
              2,900
              
              $
              2,900
  
 See
        notes
        to consolidated financial statements.
 (Continues)
 
  F-7
  Invisa,
        Inc. and Subsidiaries
 (A
        Development Stage Enterprise)
 CONSOLIDATED
        STATEMENTS OF CASH FLOWS - CONTINUED
 
 
 **February
                  12,****1997
                  (Date of****inception)****through****Year
                  Ended December 31,**
              
              **December
                  31,****2005**
              
              **2006**
              
              **2006**SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOW INFORMATIONCash
                  paid during the period for interest
              
              $
              -----
              
              $
              -----
              
              $
              229,162Non-cash
                  financing and investing activities:Notes
                  payable incurred in connection with merger
                  transactions
              
              $
              -----
              
              $
              -----
              
              $
              1,300,000Notes
                  payable canceled in connection with merger transaction
              
              $
              -----
              
              $
              -----
              
              $
              337,489Common
                  Stock issued in connection with merger transaction(3,685,000shares)
              
              $
              -----
              
              $
              -----
              
              $
              11,272,500Due
                  to employees in connection with merger transaction
              
              $
              ----
              
              $
              ----
              
              $
              175,000Accrued
                  expenses assumed in connection with merger transaction
              
              $
              ----
              
              $
              ----
              
              $
              50,000Exchange
                  of liabilities for Common Stock
              
              $
              ----
              
              $
              ----
              
              $
              857,057Common
                  Stock issued representing stock offering commitment (200,000
                  shares)
              
              $
              -----
              
              $
              -----
              
              $
              554,000Preferred
                  dividends accrued as liabilities
              
              $
              18,750
              
              $
              90,000
              
              $
              108,750Non-cash
                  preferred stock accretions
              
              $
              1,000,000
              
              $
              ----
              
              $
              2,296,640
  
 
 See
        notes
        to consolidated financial statements.
 
  F-8
  NOTE
        A -
        DESCRIPTION OF ORGANIZATION AND BUSINESS
 
 Invisa,
        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. The Company, however, is currently
        manufacturing and selling powered closure safety devices for certain gates.
        The
        Company acquired a license to use the core technology used in the powered
        closure safety devices in 1992.
 
 NOTE
        B -
        LIQUIDITY AND MANAGEMENT’S PLANS
 
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. For the year ended December 31, 2006 and
        since
        the date of inception, the Company has had net losses applicable to Common
        Shareholders of $2.4 million and $30.2 million, respectively. As of December
        31,
        2006, the Company has not emerged from the development stage and has negative
        working capital of $0.09 million. 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. Continuation
        of the Company as a going concern is dependent upon additional external funding
        and, ultimately, a substantial increase in sales volume and achievement of
        profitable operations. The Company intends to finance 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 term notes and proceeds from licensing agreements until
        such
        time that funds provided by operations are sufficient to fund working capital
        requirements. While management believes that such financing and licensing
        sources will be available to the Company, there can be no assurance in that
        regard. The financial statements do not include any adjustments that might
        result from the outcome of this uncertainty. The
        Company’s auditors issued a “going-concern” uncertainty opinion on the financial
        statements for the year ended December 31, 2006, citing significant losses
        at
        that date, which raised substantial doubt about the Company’s ability to
        continue as a going-concern. Continuation of the company as a going concern
        is
        dependent upon additional external funding and, ultimately, a substantial
        increase in sales volume and achievement of profitable operations.
  To
        finance planned operations through at least the next 12 months the
        Company will continue to depend upon its existing cash and cash
        equivalents, together with anticipated net proceeds from private placements
        of
        equity or debt, potential license fees and product sales. Management
        believes that the cash required for product development and operations,
        especially for the marketing, production and sale of its products, will
        increase in the future. Management's plan is to access this additional cash
        required from a variety of potential sources, including: public equity
        financing, private equity financing, license fees, grants, and public or
        private
        debt or a corporate merger or sale transaction. In the event the Company is
        not able to access sufficient capital to carryout the aforementioned plan
        or
        adopt an alternative plan. Accordingly, the Company is currently considering
        changes which may involve reducing or disposing of its current business
        (including reevaluation of the carrying value of its deferred patent costs)
        as
        necessary to access additional capital or manage operations to a level permitted
        by available capital.  There can be no assurances that these plans will be
        successful.  Failure to secure additional financing in a timely manner and
        on favorable terms when needed will have a  material adverse effect on the
        Company's ability to continue as a going concern, which contemplates the
        realization of assets and satisfaction of liabilities in the normal course
        of
        business.
 
 NOTE
        C -
        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Principles
        of Consolidation
 
 The
        consolidated financial statements include the accounts of Invisa and its
        wholly
        owned subsidiaries, SmartGate, L.C. and RMI. All intercompany balances and
        transactions have been eliminated. Both of the subsidiaries were merged into
        Invisa in December 2004.
 
 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.
  F-9
   Invisa,
        Inc. and Subsidiaries
 (A
        Development Stage Enterprise)
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
 
 NOTE
        C -
        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 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. The Company maintains its
        cash
        and cash equivalents at a major commercial bank. Such amounts are occasionally
        in excess of the maximum federally insured amounts.
 
 Accounts
        Receivable, Major Customer Information and Export Sales
 
 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 . During
        2005, Magnetic Automation Corp. was our largest customer, comprising
        approximately 20% of our product revenues. During 2006, Magnetic Automation
        Corp. was again our largest customer, comprising approximately 16% of our
        product revenues.
 
 Inventories
 
 Inventories
        are stated at the lower of cost or market. Cost is determined using a method
        with 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. Depreciation expense was $21,280 and $21,280 for 2005
        and 2006, respectively.
 
 Patent
 
 The
        patent for the Company’s underlying technology is amortized on a straight-line
        method over 10 years, which represents the remaining useful life of the patent.
        At December 31, 2003, the Company recorded an impairment charge of $5,517,808
        that was included in the consolidated statement of operations to reflect
        the
        fair value as determined by the Company’s management. The patent impairment
        results principally from perceived shifts in markets and our approach to
        such
        markets requiring more reliance on our patents applied for and less on the
        original patent. Realization of the patents’ carrying value will require 60%
        minimum revenue growth through 2012, which management believes is achievable.
        Amortization is $788,235 per year.
  F-10
  Invisa,
        Inc. and Subsidiaries
 (A
        Development Stage Enterprise)
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
   NOTE
        C -
        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 Revenue
 
 Product
        sales under fixed price arrangements are recognized as revenue upon shipment
        of
        product (when title transfers to the purchaser) and collectability is assured.
        Other operating revenues relate to services and are recorded as
        earned.
 
 Licensing
        agreement
 
 In
        July
        2002 Invisa entered into an Original and Independent Distribution License
        Agreement with Rytec Corporation (the Agreement) and received $300,000 cash
        representing an advance on the first 3000 units purchased by Rytec. In February
        2005, because of extended development efforts by Invisa, the Agreement was
        revised to recharacterize the $300,000 deposit as compensation to the Company
        for engineering expenditures and efforts expended by Invisa during 2005.
        Price
        reductions reflected in the original Agreement were also
        discontinued.
 
 Shipping
        costs
 
 Shipping
        and handling costs are included in cost of sales in the accompanying statements
        of operations.
 
 Research
        and Development Costs
 
 Research
        and development costs consist of direct costs that are associated with the
        development of the Company’s technology. These costs are expensed as
        incurred.
 
 Advertising
        Costs
 
 The
        Company’s policy is to expense advertising costs as incurred.
 
 Warranty
        Costs
 
 The
        Company warrants its products for ninety days. Estimated warranty costs are
        recognized in the period product is shipped. However, there have been no
        significant warranty costs incurred through December 31, 2006, nor are any
        significant amounts expected to occur subsequently. Accordingly, no warranty
        liability has been recognized for any period presented.
  F-11
   Invisa,
        Inc. and Subsidiaries
 (A
        Development Stage Enterprise)
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 
 
 NOTE
        C -
        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 Income
        Taxes
 
 Deferred
        income tax assets and liabilities are computed annually for differences between
        the financial statements and income tax bases of assets and liabilities that
        will result in taxable or deductible amounts in the future, based on enacted
        tax
        laws and rates applicable to the periods in which the differences are expected
        to affect taxable income. Valuation allowances are established when necessary
        to
        reduce deferred tax assets to the amount expected to be realized.
 
 Financial
        Instruments
 
 The
        Company’s financial instruments include cash and cash equivalents, accounts
        receivable, accounts payable and due to stockholders. The carrying amounts
        of
        these financial instruments approximate their fair value, due to the short-term
        nature of these items and the use of market rates of interest.
 
 Derivative
        Financial Instruments
 
 The
        Company generally does not use derivative financial instruments to hedge
        exposures to cash-flow risks or market-risk that may affect the fair values
        of
        its financial instruments. However, certain other financial instruments,
        such as
        warrants and embedded conversion features that are indexed to the Company’s
        common stock , are classified as liabilities when either (a) the holder
        possesses rights to net cash settlement or (b) physical or net-share settlement
        is not within the control of the Company. In such instances, net-cash settlement
        is assumed for financial accounting and reporting, even when the terms of
        the
        underlying contracts do not provide for net-cash settlement. Such financial
        instruments are initially recorded at fair value and subsequently adjusted
        to
        fair value at the close of each reporting period.
 
 Impairment
        of Long-Lived Assets
 
 The
        Company evaluates the recoverability of its long-lived assets or asset groups,
        including patents, annually; or whenever adverse events or changes in business
        climate indicate that the expected undiscounted future cash flows from the
        related asset may be less than previously anticipated. If the net book value
        of
        the related asset exceeds the undiscounted future cash flows of the asset,
        the
        carrying amount would be reduced to the present value of its expected future
        cash flows and an impairment loss would be recognized.
 
 The
        Company’s management performed a valuation of the patent in connection with its
        acquisition in February 2002. In doing this valuation we considered several
        factors, including the size of the total applicable safely marrket, our
        estimates of penetration into these markets and a valuation. These markets
        are
        large and growing, principally as a result of increased emphasis on safely
        by
        governmental agencies and others and increased concerns for security,
        principally as a result of the September 11, 2001 terrorist event and all
        that
        has followed relative to terrorism.
 
 During
        the fourth quarter of 2003 the Company expensed $5,517,808 to reflect an
        impairment of its patent. Our original cost of the patent totaled $13,711,000
        which we paid in February 2002 and April 2003. The patent impairment resulted
        principally from the Company’s forecast of reduced expected discounted future
        cash flows associated with the licensing business model.
 
 The
        Company evaluated the recoverability of its deferred patent costs of $4,335,294
        as of December 31, 2006. In doing this evaluation we considered several factors
        including the size of the total applicable safely and security markets, our
        estimates of penetration into this market and a valuation. The Valuation
        was
        based on a discounted cash flow model (income approach) which considered
        our
        projected sales of individual safely products and applicable costs principally
        in the United States. As a result of the evaluation no impairment of the
        carrying value of deferred patent costs was recorded.
 
 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.
 
 Employee
        Stock-Based Compensation
 
 In
        January 2006, the Company adopted provision of Statement of Financial Accounting
        Standards No. 123R - Share-based Payments (FAS 123R) replacing Accounting
        for
        Stock Based Compensation (“FAS 123”), which are similar and require the use of
        the fair-value based method to determine compensation for all arrangements
        under
        which employees and others receive shares of stock or equity instruments
        (warrants and options) The adoption of this standard had no significant impact
        on the Company’s 2006 results of operations. Share-based options expense in 2006
        was $198,089.
 
 Had
        compensation cost for the Company’s stock options been determined on the fair
        value at the grant dates for stock-based employee compensation arrangements
        consistent with the method required by SFAS 123R, the Company’s net loss and net
        loss per common share would have been the pro forma amounts indicated below
        for
        the year ended December 31, 2005:
 Net
                  loss applicable to Common Stockholders, as reported
              
              
              (2,789,788
              )Add:
                  stock-based employee compensation cost under the fair value based
                  method,
                  net of related tax effects
              
              
              (353,110
              )Pro
                  forma net loss applicable to Common Stockholders
              
              
              (3,142,898
              )Net
                  loss per share-applicable to Common Stockholders basic and
                  diluted:as
                  reported
              
              
              (.12
              )Pro
                  forma
              
              
              (.14
              )
 
  F-12
  Invisa,
        Inc. and Subsidiaries
 (A
        Development Stage Enterprise)
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
   New
        Accounting Pronouncements
  In
        February 2006, the FASB issued Statement of Financial Accounting Standard
        (SFAS)
        No. 155 (SFAS No. 155), *Accounting
        for Certain Hybrid Financial Instruments - an amendment of FASB Statements
        No. 133 and 140,* to
        simplify and make more consistent the accounting for certain financial
        instruments. Specifically, SFAS No. 155 amends SFAS 133, *Accounting
        for Derivative Instruments and Hedging Activities,* to
        permit fair value remeasurement for any hybrid financial instrument with
        an
        imbedded derivative that otherwise would require bifurcation, provided that
        the
        whole instrument is accounted for on a fair value basis. Prior to fair value
        measurement, however, interest in securitized financial assets must be evaluated
        to identify interest containing embedded derivatives requiring bifurcation.
        The
        amendments to SFAS 133 also clarify that interest-only and principal-only
        strips
        are not subject to the requirements of the SFAS, and that concentrations
        of
        credit risk in the form of subordination are not embedded derivatives. Finally,
        SFAS No. 155 amends SFAS 144, *Accounting
        for the Impairment or Disposal of Long-Lived Assets,* to allow
        a qualifying special-purpose entity (SPE) to hold a derivative financial
        instrument that pertains to a beneficial interest other than another derivative
        financial instrument. SFAS No. 155 applies to all financial instruments
        acquired or issued after the beginning of an entity’s first fiscal year that
        begins after September 15, 2006, with earlier application allowed. The
        Company does not anticipate that the adoption of this statement to have a
        material impact on its consolidated financial statements.
 
 In
        September 2006, the FASB issued Statements of Financial Accounting Standards
        No.
        157, *Fair
        Value Measurements* (“FAS
        157”). This Standard defines fair value, establishes a framework for measuring
        fair value in generally accepted accounting principles and expand disclosures
        about fair value measurements. FAS 157 is effective for financial statements
        issued for fiscal years beginning after November 15, 2007 and interim periods
        within those fiscal years. The adoption of FAS 157 is not expected to have
        a
        material impact on the Company’s financial position, results or operations or
        cash flows.
 
 The
        Financial Accounting Standards Board (“FASB”) has recently announced a new
        interpretation, FASB Interpretation No. 48, “Accounting for Uncertainty in
        Income Taxes” (FIN 48), which will be effective for fiscal years beginning after
        December 15, 2006. FIN 48 clarifies the accounting for uncertainty in income
        taxes recognized in a enterprise’s financial statements in accordance with FASB
        Statement No. 109, “Accounting for Income Taxes”. FIN 48 prescribes a
        recognition threshold and measurement attribute for the financial statement
        and
        measurement of a tax position taken or expected to be taken in a tax return.
        FIN
        48 also provides guidance on derecognition , classification, interest and
        penalties, accounting in interim periods, disclosure and transition. The
        adoption of FIN 48 is not expected to have a material impact on the Company’s
        financial position, results of operations or cash flows and had no impact
        on
        stockholders equity at December 31, 2006.
 
 In
        February 2007, the Financial Accounting Standards Board issued FASB Statement
        No. 159, *The
        Fair Value Option for Financial Assets and Financial Liabilities* (FAS
        159), which includes an amendment to FASB Statement No. 115. The Statement
        permits entities to choose, at specific election dates, to measure eligible
        financial assets and financial liabilities at fair value (referred to as
        the
“fair value option”) and report associated unrealized gains and losses in
        earnings. Statement 159 is effective for fiscal years beginning after November
        15, 2007. As of December 31, 2006 the Company has not determined the effect
        that
        the fair value option, if elected, will have on the consolidated financial
        position or results of operations.
 
 NOTE
        D -
        INVENTORIES
 
 Inventories
        consist of the following at December 31, 2006:
 
 Finished
                  goods
              
              $
              10,705Raw
                  materials
              
              
              61,134$
              71,839
   F-13
  
  Invisa,
        Inc. and Subsidiaries
 (A
        Development Stage Enterprise)
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
 NOTE
        E -
        ACCRUED EXPENSES
 
 Accrued
        expenses consist of the following at December 31, 2006:
 
 Interest
                  Expense
              
              $
              11,641Vacation
                  Pay
              
              
              24,075Consulting
                  Fees
              
              
              12,000Accrued
                  compensation and related taxes
              
              
              80,437$
              145,514
 NOTE
        F -
        DUE TO STOCKHOLDERS AND OFFICERS
 
 Due
        to
        stockholders and officers consists principally of amounts accrued in connection
        with severance agreements with two principal stockholders. The amounts payable
        are non-interest bearing (see Note K).
 NOTE
        G -
        LOSS PER SHARE
 
 The
        following table sets forth the computation of basic and diluted net loss
        per
        share:
 
 **December
                  31,****2005**
              
              **2006**Numerator:Net
                  loss applicable to Common Stockholders
              
              $
              (2,789,668
              )
              
              (2,400,949
              )Denominator:For
                  basic loss per share - weighted average shares
              
              
              22,742,956
              
              
              24,529,553Effect
                  of dilutive securities - stock options
              
              
              -----
              
              
              -----For
                  diluted loss per share
              
              
              22,742,956
              
              
              24,529,553NNet
                  loss per share - applicable to Common Stockholders basic and
                  diluted
              
              $
              (0.12
              )
              $
              (0.10
              )
 
 Options
        and warrants to purchase 13,074,546 and 14,536,042 shares of Common Stock
        as of
        December 31, 2005 and 2006, respectively, are not considered in the calculation
        of diluted loss per share because the effect would be
        anti-dilutive.
 
 NOTE
        H -
        COMMON AND PREFERRED STOCK
 
 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 Stock and 5,000,000 Preferred Stock; rights and preferences of the
        Preferred Stock are to be set by the Board of Directors. This authorization
        was
        reflected in the Company’s financial statements at December 31,
        2003.
 
  F-14
  Invisa,
        Inc. and Subsidiaries
 (A
        Development Stage Enterprise)
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
 
 NOTE
        H -
        COMMON AND PREFERRED STOCK - Continued
 
 In
        September 2004, the Company issued 22,000 shares of Series A Convertible
        Preferred Stock in the face amount of $2,200,000 for $1,937,000 (net of $263,000
        transaction expenses) which was paid in the respective amounts of $1,158,200
        and
        $778,800 at closing. Additionally, the transaction included:
 
 ·
              Issuance
                  of Detachable Warrants to acquire up to 1,500,000 shares of the
                  Company’s
                  Common Stock at $1.00 per share. The Warrants expire on August
                  16,
                  2007.
 
 ·
              In
                  addition to the transaction costs referred to above, the Company
                  granted
                  162,500 shares of Common Stock and Detachable Warrants to acquire
                  up to
                  162,500 shares of the Company’s Common Stock at $1.00 per share to a
                  broker. The term of the Warrants is three
                  years.
 
 ·
              The
                  Preferred Stock is non-voting, entitled to dividends only when,
                  or if,
                  declared by the Board of Directors and has preference over the
                  Common
                  Stock in the event of the Company’s liquidation. The Preferred Stock is
                  convertible into Common Stock at the option of the holder. The
                  conversion
                  price is equal to 80% of the market price at the time of conversion,
                  subject to a floor of $0.50 per share and a ceiling of $1.17 per
                  share.
                  During 2005, the floor was modified to $0.12 per share as an inducement
                  to
                  execute the Series B Convertible Preferred Stock transaction discussed
                  below.
 
 The
        Company accounted for the host instrument as equity under the guidance of
        SFAS
        No. 150, *Accounting
        for Certain Financial Instruments with Characteristics of both Liabilities
        and
        Equity,* and
        under provisions of EITF 00-19, *Accounting
        for Derivative Financial Instruments Indexed to, and Potentially Settled
        in, a
        Company’s Own Stock,* and
        accounted for both the beneficial conversion feature and the warrants as
        equity
        as well.
 
  F-15
   Invisa,
        Inc. and Subsidiaries
 (A
        Development Stage Enterprise)
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
   NOTE
        H -
        COMMON AND PREFERRED STOCK - Continued
 
 In
        August
        2005, the Company issued 10,000 shares of Series B Convertible Preferred
        Stock
        in the face amount of $1,000,000 for $878,000 (net of $122,000 transaction
        expenses) which was paid in the respective amounts of $378,000 and $500,000
        at
        closing. Additionally, the transaction included:
 
 ·
              Detachable
                  warrants to acquire up to 2,500,000 shares of the Company’s Common Stock
                  at $0.30 per share. The warrants expire on August 31, 2010 and
                  are subject
                  to call by the Company upon the Common Stock trading at a price
                  of $0.60,
                  a minimum trading volume of 60,000 shares for 20 consecutive days
                  and the
                  registration statement being
                  effective.
 
 ·
              In
                  addition to the transaction costs referred to above, the Company
                  granted
                  warrants to acquire up to 666,667 shares of the Company’s Common Stock at
                  $0.16 per share to a broker. The term of the warrants is three
                  years.
 
 ·
              The
                  Preferred Stock is non-voting and is entitled to receive dividends
                  at an
                  annual rate equal to the lower of the Prime Rate plus 3.5% or 9%.
                  The
                  dividend may either be paid in cash or registered shares of the
                  Company’s
                  Common Stock, subject to certain limitations. The Preferred Stock
                  is
                  convertible into Common Stock at the option of the holder. The
                  conversion
                  price is equal to 80% of the market price at the time of conversion,
                  subject to a floor of $0.12 per share and a ceiling of $0.275 per
                  share.
  The
        Series B Preferred Stock and Series A Preferred Stock as amended permit the
        Company, in its discretion, to redeem part or all of the outstanding Preferred
        A
        and B Stock at 125 percent of par value per share until August 2007 and
        thereafter at 150 percent of par value, plus any accrued dividends.
 
 The
        Company accounted for the host instrument as equity under the guidance of
        SFAS No. 150, *Accounting
        for Certain Financial Instruments with Characteristics of both Liabilities
        and
        Equity,* and
        under provisions of EITF 00-19, *Accounting
        for Derivative Financial Instruments Indexed to, and Potentially Settled
        in, a
        Company’s Own Stock,* and
        accounted for both the beneficial conversion feature and the warrants as
        equity
        as well.
 
 In
        2006
        the Company issued 400,000 shares of common stock for cash of $44,000 and
        issued
        316,670 shares of common stock in connection with the exercise of options
        for
        cash of $24,250. The Company also issued 981,800 shares of common stock for
        services totaling $133,634.
 
 Warrants
        were issued to financial advisors that included registration right obligations
        that the Company has determined are not within its control. The warrants
        were
        fair valued on the date of grant and secured as a liability. The change in
        fair
        value at each reporting date is recorded as an expense in the accompanying
        consolidated statement of operations. The derivative liability at December
        31,
        2006 is included in accrued  expenses
        in the accompanying consolidated balance sheet.
 
  F-16
  Invisa,
        Inc. and Subsidiaries
 (A
        Development Stage Enterprise)
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
 NOTE
        I-
        STOCK OPTION AND WARRANT ACTIVITY
 
 The
        Company has five stock-based compensation plans which provides for the granting
        of options to purchase the Company’s Common Stock to employees, directors,
        consultants and advisors. The options granted are subject to a vesting schedule
        as set forth in each individual option agreement.
  
 **Maximum
                  Shares****of
                  Common Stock****Plan**
              
              **which
                  can be issued**2000
                  Plan
              
              
              1,200,0002002
                  Plan
              
              
              1,500,0002003
                  Plan
              
              
              1,500,0002003A
                  Plan
              
              
              3,500,0002006
                  Plan
              
              
              2,500,00010,200,000
 
 Activity
        with respect to the stock-based compensation plans is summarized as
        follows:
 **Shares**
              
              **Range
                  of Exercise**
                **Prices**
              
              **Weighted-average
                  Option price per share**Outstanding
                  at December 31, 2004
              
              
              1,624,334
              
              
              
              
              $
              3.35Options
                  granted
              
              
              5,377,500
              
              $
              0.08-0.16
              
              $
              0.11Options
                  canceled
              
              
              (30,000
              )
              $
              2.00-3.50
              
              $
              2.93Outstanding
                  at December 31, 2005
              
              
              6,971,834
              
              
              
              
              $
              0.85Options
                  granted
              
              
              1,300,000
              
              $
              0.15-0.26
              
              $
              0.23Options
                  exercised
              
              
              (50,000)
              
              $
              0.09
              
              $
              0.09Options
                  canceled/expired
              
              
              (1,221,834
              )
              $
              0.00
              
              $
              1.39Outstanding
                  at December 31, 2006
              
              
              7,000,000
              
              
              
              
              $
              0.65Options
                  exercisable at December 31, 2006
              
              
              31,296
              
              
              5,233,332
              
              $
              0.81
 
  Aggregate
        intrinsic value of options outstanding at December 31, 2006 is
        $0.00.
 
 The
        total
        intrinsic value of options exercised during 2006 was $765.
 
 
 
 
 
 
 
 
  F-17
  Activity
        with respect to warrants for common stock is as follows:
 **Shares**
              
              **Range
                  of Exercise**
                **Prices**
              
              **Weighted-average
                  Option price per share**Balance
                  at January 1, 2005
              
              
              3,886,679Warrants
                  granted
              
              
              3,833,333
              
              $
              0.08-0.30
              
              $
              0.24Warrants
                  exercised
              
              
              (399,996
              )
              $
              0.08
              
              $
              0.08Warrants
                  canceled
              
              
              (1,217,304
              
              $
              1.00-$1.07
              
              $
              1.03Outstanding
                  at December 31, 2005
              
              
              6,102,712
              
              
              
              
              $
              0.74Warrants
                  granted
              
              
              2,150,000
              
              $
              0.010-0.70
              
              $
              0.42Warrants
                  exercised
              
              
              (266,670
              )
              $
              0.08
              
              $
              0.08Warrants
                  canceled/expired
              
              
              (
                  450,000
              )
              $
              1.00-$4.50
              
              $
              1.61Outstanding
                  at December 31, 2006
              
              
              7,536,042
              
              
              
              
              $
              0.62Warrants
                  exercisable
              
              
              6,756,042
              
              
              
              
              $
              0.64
 
 Aggregate
        intrinsic value of warrants outstanding at December 31, 2006 is
        $1,500.
 
 The
        total
        intrinsic value of warrants exercised during 2005 and 2006 was $2,000 and
        $2,600, respectively.
  F-18
  
 
 Invisa,
        Inc. and Subsidiaries
 (A
        Development Stage Enterprise)
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
 NOTE
        I -
        STOCK OPTION AND WARRANT ACTIVITY (continued)
 
 The
        range
        of exercise prices, shares, weighted-average remaining contractual life and
        weighted-average exercise price for the options and warrants outstanding
        at
        December 31, 2006 is presented below:
 
 **Range
                  of**
                **Exercise
                  prices**
              **Shares**
              **Weighted-average**
                **Remaining**
                **Contractual
                  life**
              **Weighted-average
                  Exercise price**$0.01-$1.00
              12,945,167
              5.5
                  years
              $0.33$1.01-$2.00
              400,000
              2.6
                  years
              $1.75$2.01-$7.25
              1,190,875
              6.9
                  years
              $3.58
 
 The
        range
        of exercise prices, shares and weighted-average exercise price for the options
        and warrants exercisable at December 31, 2006 are presented below:
 **Range
                  of Exercise prices**
              **Shares**
              **Weighted
                  average Exercise price**$0.01-$1.00
              10,398,499
              $0.35$1.01-$2.00
              400,000
              $1.75$2.01-$7.25
              1,190,875
              $3.58
 
 
 The
        fair
        value of the options granted in 2006 and 2005 (included pro forma disclosure
        in
        Note D) was estimated on the date of grant using the Black-Scholes
        option-pricing model with the following weighted average assumptions for
        the
        above years:
 **2005**
              **2006**Dividend
                  yield
              0.00%
              0.00%Expected
                  volatility
              209%-228%
              209%-228%Risk
                  free interest rates
              2.00%
              4.3%-4.9%Expected
                  lives
              3
                  years
              2-10
                  years
 
 The
        weighted-average grant date fair value for options granted during 2005 and
        2006
        was approximately $0.08 and $0.12, respectively.
 
 As
        of
        December 31, 2006, there was $296,670 of total unrecognized compensation
        cost
        related to nonvested share-based compensation arrangements granted under
        the
        Plans. That cost is expected to be recognized through 2009.
 
 
 NOTE
        J -
        COMMITMENT
 
 Operating
        Leases
 
 For
        the
        previous two years, the Company has occupied space in a building in Sarasota,
        Florida under a lease with a five year term expiring December, 2009 and annual
        lease payments of approximately $50,000. In the second quarter of 2007, the
        Company has assigned this lease to a new tenant and moved to space with less
        square footage and occupancy costs in the same business center which is occupied
        on a month to month basis.  Rent expense for the years ended December 31,
        2006 and 2005 was $52,625 and $50,077, respectively.
 
 
  F-19
  Invisa,
        Inc. and Subsidiaries
 (A
        Development Stage Enterprise)
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 
  NOTE
        K -
        DUE TO STOCKHOLDERS AND OFFICERS
 
 In
        2004,
        the Company cancelled $776,132 of accrued compensation owed certain directors,
        officers and former employees in exchange for 300,000 shares of common stock.
        The remaining $307,000 balance of their accrued compensation will be paid
        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 in connection with these
        transactions.
 
 During
        2005 and 2006, a stockholder advanced $67,000 and $30,500 (10% interest)
        respectively to the Company (balance due of $97,500 at December 31, 2006).
        The
        advance can increase to $150,000 and may be converted into shares of common
        stock at a conversion price of $0.075.
 
 Due
        to
        stockholders and officers also includes $20,000 of accrued director
        fees.
 
 During
        2006 three stockholders advanced $128,337 to the Company. It is due in August,
        2007 and bears 10% interest. The amounts are collateralized by all assets
        of the
        Company.
 
 NOTE
        L -
        INCOME TAXES
 
 Deferred
        taxes are recorded for all the tax effects of 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, 2005 or 2006.
 
 Reconciliation
        of the federal statutory income tax rate of 34.0% to the effective income
        tax
        rate is as follows at December 31:
 **2005**
              
              **2006**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
              %-0-
              %
              
              -0-
              %
 
 Deferred
        tax asset and liability components were as follows:
 **2005**
              
              **2006**Deferred
                  tax assets:Compensation
                  payable
              
              $
              21,861
              
              $
              16,527Net
                  operating loss
              
              
              5,742,649
              
              
              6,186,778Other
              
              
              129,743
              
              
              253,7495,894,253
              
              
              6,457,054Patent
              
              
              1,351,626
              
              
              1,056,054Basis
                  difference in assets
              
              
              4,183
              
              
              2,287Net
                  deferred tax assets
              
              
              4,538,444
              
              
              5,398,713Less
                  valuation allowance
              
              
              (4,538,444
              )
              
              (5,398,713
              )Net
                  deferred tax asset
              
              $
              -----
              
              $
              -----
   F-20
  Invisa,
        Inc. and Subsidiaries
 (A
        Development Stage Enterprise)
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
 
 NOTE
        L -
        INCOME TAXES (continued):
 
 SFAS
        No.
        109 *Accounting
        for Income Taxes* requires
        that a deferred tax asset be reduced by a valuation allowance if, based on
        the
        weight of available evidence it is more likely than not (a likelihood of
        more
        than 50 percent) that some portion or all of the deferred tax assets will
        not be
        realized. The valuation allowance should be sufficient to reduce the deferred
        tax asset to the amount that is more likely than not to be realized. As a
        result
        the Company recorded a valuation allowance with respect to all the Company’s
        deferred tax assets.
 
 The
        Company has a federal net operating loss carryforward of approximately $16.5
        million as of December 31, 2006. Under Section 382 and 383 of the Internal
        Revenue Code, if an ownership change occurs with respect to a “loss
        corporation”, as defined, there are annual limitations on the amount of the net
        operating loss and other deductions which are available to the Company. The
        Company has not determined the impact of these limitations at this
        time.
 NOTE
        M -
        SUBSEQUENT EVENTS
  On
        February 28, 2007, the Company entered into a loan agreement to borrow up
        to
        $150,000 under a secured 10% note due in 6 months. In addition to having
        a first
        security interest in all of the Company’s assets the note was secured by a
        security interest in 20,000,000 shares of common stock pledged by the Company.
        Through April 1, 2007 $83,824 has been borrowed under this loan
        agreement.
   F-21
  **EXHIBIT
        10.45**
  **CONSENT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 We
        consent to the incorporation by reference in the Registration Statement (Form
        S-8) pertaining to the common stock issuable under stock options granted
        by the
        Invisa, Inc. Business Consulting Agreement by the Registrant on August 14,
        2006
        of our report dated April 17, 2007 with respect to the consolidated financial
        statements of Invisa, Inc., included in its Annual Report (Form 10-KSB) for
        the
        year ended December 31, 2006, filed with the Securities and Exchange
        Commission.
 
 /s/
        Aidman, Piser & Company, P.A.
 Tampa,
        Florida
 April
        17,
        2007
 
 
 
  F-22
  **EXHIBIT
        31.1**
 **CERTIFICATIONS**
 
 I,
        Carl
        A. Parks, certify that:
 
 1.
            I have reviewed this Annual Report on Form 10-KSB of Invisa,
        Inc.;
 
 2.
             Based on my knowledge, this report does not contain any
        untrue statement of a material fact or omit to state a material fact necessary
        to make the statements made, in light of the circumstances under which such
        statements were made, not misleading with respect to the period covered by
        this
        annual report;
 
 3.
             Based on my knowledge, the financial statements, and other
        financial information included in this report, fairly present in all material
        respects the financial condition, results of operations and cash flows of
        the
        small business issuer as of and for the periods presented in this
        report;
 
 4.
             The small business issuer’s other certifying officer(s)
        and I are responsible for establishing and maintaining disclosure controls
        and
        procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
        internal control over financial reporting (as defined in Exchange Act Rules
        13a-15(f) and 15d-15(f)) for the small business issuer and have:
 
 (a)   Designed
        such disclosure controls and procedures, or caused such disclosure controls
        and
        procedures to be designed under our supervision, to ensure that material
        information relating to the small business issuer, including its consolidated
        subsidiaries, is made known to us by others within those entities, particularly
        during the period in which this report is being prepared;
 
 (b)  Designed
        such internal control over financial reporting, or caused such internal control
        over financial reporting to be designed under our supervision, to provide
        reasonable assurance regarding the reliability of financial reporting and
        the
        preparation of financial statements for external purposes in accordance with
        generally accepted accounting principles;
 
 (c)  Evaluated
        the effectiveness of the small business issuer’s disclosure controls and
        procedures and presented in this report our conclusions about the effectiveness
        of the disclosure controls and procedures as of the end of the period covered
        by
        this report based on such evaluation; and
 
 (d)  Disclosed
        in this report any change in the small business issuer’s internal control over
        financial reporting that occurred during the small business issuer’s most recent
        fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of
        an annual report) that has materially affected, or is reasonably likely to
        materially affect, the small business issuer’s internal control over financial
        reporting.
 
 5.
           The small business issuer’s other certifying officer(s) and I have
        disclosed, based on our most recent evaluation of internal control over
        financial reporting, to the small business issuer’s auditors and the audit
        committee of the small business issuer’s board of directors (or persons
        performing the equivalent functions):
 
 (a)
          All significant deficiencies and material weaknesses in the design or
        operation of internal control over financial reporting which are reasonably
        likely to adversely affect the small business issuer’s ability to record,
        process, summarize and report financial information; and
 
 (b)
           Any fraud, whether or not material, that involves management or
        other employees who have a significant role in the small business issuer’s
        internal control over financial reporting; and
 
 
 Date: April
                  17, 2007
              
              /s/*lCarl
                  A. Parks*President
                  and Chief Operating Officer
  F-23
  **EXHIBIT
        31.2**
 **CERTIFICATIONS**
 
 I,
        Edmund
        C. King, Chief Financial Officer, certify that:
 
 1.
            I have reviewed this Annual Report on Form 10-KSB of Invisa,
        Inc.;
 
 2.
             Based on my knowledge, this report does not contain any
        untrue statement of a material fact or omit to state a material fact necessary
        to make the statements made, in light of the circumstances under which such
        statements were made, not misleading with respect to the period covered by
        this
        annual report;
 
 3. Based on
        my knowledge, the financial statements, and other financial information included
        in this report, fairly present in all material respects the financial condition,
        results of operations and cash flows of the small business issuer as of and
        for
        the periods presented in this report;
 
 4.
             The small business issuer’s other certifying officer(s)
        and I are responsible for establishing and maintaining disclosure controls
        and
        procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
        internal control over financial reporting (as defined in Exchange Act Rules
        13a-15(f) and 15d-15(f)) for the small business issuer and have:
 
 (a)   Designed
        such disclosure controls and procedures, or caused such disclosure controls
        and
        procedures to be designed under our supervision, to ensure that material
        information relating to the small business issuer, including its consolidated
        subsidiaries, is made known to us by others within those entities, particularly
        during the period in which this report is being prepared;
 
 (b)  Designed
        such internal control over financial reporting, or caused such internal control
        over financial reporting to be designed under our supervision, to provide
        reasonable assurance regarding the reliability of financial reporting and
        the
        preparation of financial statements for external purposes in accordance with
        generally accepted accounting principles;
 
 (c)  Evaluated
        the effectiveness of the small business issuer’s disclosure controls and
        procedures and presented in this report our conclusions about the effectiveness
        of the disclosure controls and procedures as of the end of the period covered
        by
        this report based on such evaluation; and
 
 (d)  Disclosed
        in this report any change in the small business issuer’s internal control over
        financial reporting that occurred during the small business issuer’s most recent
        fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of
        an annual report) that has materially affected, or is reasonably likely to
        materially affect, the small business issuer’s internal control over financial
        reporting.
 
 5.
           The small business issuer’s other certifying officer(s) and I have
        disclosed, based on our most recent evaluation of internal control over
        financial reporting, to the small business issuer’s auditors and the audit
        committee of the small business issuer’s board of directors (or persons
        performing the equivalent functions):
 
 (a)
          All significant deficiencies and material weaknesses in the design or
        operation of internal control over financial reporting which are reasonably
        likely to adversely affect the small business issuer’s ability to record,
        process, summarize and report financial information; and
 
 (b)
           Any fraud, whether or not material, that involves management or
        other employees who have a significant role in the small business issuer’s
        internal control over financial reporting; and
 Date: April
                  17, 2007
              
              /s/*Edmund
                  C. King*
 **Edmund
        C. King, Chief Financial Officer**
  F-24
  **EXHIBIT
        32.1**
 
 **INVISA,
        INC.**
 **CERTIFICATION
        PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF
        THE
        SARBANES-OXLEY ACT OF 2002**
 
 
 In
        connection with the Annual Report of Invisa, Inc. (the “Company”) on Form 10-KSB
        for the period ending December 31, 2006 as filed with the Securities and
        Exchange Commission on the date hereof (the “Report”), I, Carl A. Parks,
        Persident and Chief Operating Officer of the Company, certify, pursuant to
        18
        U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
        Act of
        2002, that to my knowledge:
 
 1.    The
        Report fully complies with the requirements of section 13(a) or 15(d) of
        the
        Securities Exchange Act of 1934; and
 
 2.    The
        information contained in the Report fairly presents, in all material respects,
        the financial condition and results of operations of the Company.
 
 
 */s/* Carl
        A.
        Parks
 ________________________________
 Carl
        A.
        Parks
 President
        and Chief Operating Officer
 April
        17,
        2007
  F-25
  **EXHIBIT
        32.2**
 
 **INVISA,
        INC.**
 **CERTIFICATION
        PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF
        THE
        SARBANES-OXLEY ACT OF 2002**
 
 
 In
        connection with the Annual Report of Invisa, Inc. (the “Company”) on Form 10-KSB
        for the period ending December 31, 2006 as filed with the Securities and
        Exchange Commission on the date hereof (the “Report”), I, Edmund C. King, Chief
        Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350,
        as
        adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to
        my
        knowledge:
 
 1.    The
        Report fully complies with the requirements of section 13(a) or 15(d) of
        the
        Securities Exchange Act of 1934; and
 
 2.    The
        information contained in the Report fairly presents, in all material respects,
        the financial condition and result of operations of the Company.
 
 
 
 
 */s/
        Edmund C. King*
 __________________________________
 Edmund
        C.
        King
 Chief
        Financial Officer
 April
        17,
        2007