UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB


                 [X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934


                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

                    GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
--------------------------------------------------------------------------------
           (Name of small business issuer as specified in its charter)


                           COMMISSION FILE NO. 0-28238

       DELAWARE                                        54-1521616
    (State or other                                 (I.R.S. Employer
    jurisdiction of                               Identification No.)
   incorporation or
     organization)

            21351 RIDGETOP CIRCLE, SUITE 300, DULLES, VIRGINIA 20166
       (Address of Registrant's principal executive offices and zip code)


                                 (703) 654-6091

         SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT:
                                      None

         SECURITIES REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT:
                     Common Stock, $.001 par value per share


      Check  whether  the issuer (1) filed all  reports  required to be filed by
Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days. Yes |X| No |_|


      Check if there is no disclosure  of delinquent  filers in response to Item
405 of Regulation S-K contained herein, 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. |_|

<PAGE>


The issuer's revenue for the year ended December 31, 2003, was $0.

      As of February 13, 2004,  the issuer had  15,371,800  shares of its common
stock, $.001 par value per share, outstanding.


      The   aggregate   market  value  of  the  voting   common  stock  held  by
non-affiliates  of the Registrant as of February 13, 2004, was $32,198,540.  For
the purpose of the  foregoing  calculation  only,  all  directors  and executive
officers of the Registrant are assumed to be "affiliates" of the Registrant.

                                       2
<PAGE>

TABLE OF CONTENTS



PART I                                                                         4

  ITEM 1.   DESCRIPTION OF BUSINESS                                            4

  ITEM 2.   DESCRIPTION OF PROPERTIES                                         27

  ITEM 3.   LEGAL PROCEEDINGS                                                 27

  ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS               27

PART II                                                                       28

  ITEM 5.   MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS
            AND SMALL BUSINESS ISSUER'S PURCHASES OF EQUITY SECURITIES        28

  ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION OR PLAN OF OPERATIONS                                   29

  ITEM 7.   FINANCIAL STATEMENTS                                              33

  ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
            ACCOUNTING AND FINANCIAL DISCLOSURE                               33

PART III                                                                      34

  ITEM 9.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                34

  ITEM 10.  EXECUTIVE COMPENSATION                                            37

  ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
            MANAGEMENT AND RELATED STOCKHOLDER MATTERS                        41

  ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                    43

  ITEM 13.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
            ON FORM 8-K                                                       44

  ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES                            47

SIGNATURES                                                                    48

                                       3
<PAGE>

                           FORWARD-LOOKING STATEMENTS

Our disclosure and analysis in this report contain  forward-looking  statements,
which  provide  our  current   expectations   or  forecasts  of  future  events.
Forward-looking statements in this report include, without limitation:

o     information  concerning  possible or assumed future results of operations,
      trends in financial results and business plans, including those related to
      earnings growth and revenue growth;

o     statements about the level of our costs and operating expenses relative to
      our revenues, and about the expected composition of our revenues;

o     statements about expected future sales trends for our products;

o     statements  about our future capital  requirements  and the sufficiency of
      our cash,  cash  equivalents,  and available bank borrowings to meet these
      requirements;

o     information about the anticipated release dates of new products;

o     other statements about our plans, objectives, expectations and intentions;
      and

o     other statements that are not historical fact.

Words such as "believe,"  "anticipate," "plan," "expect" and similar expressions
may identify forward-looking statements, but the absence of these words does not
necessarily  mean  that  a  statement  is not  forward-looking.  Forward-looking
statements  are subject to known and  unknown  risks and  uncertainties  and are
based on potentially  inaccurate  assumptions that could cause actual results to
differ  materially  from  those  expected  or  implied  by  the  forward-looking
statements. Our actual results could differ materially from those anticipated in
the forward-looking  statements for many reasons, including factors described in
the  section  entitled  Important  Factors  That May  Affect Our  Business,  Our
Operating  Results and Our Stock Price in this  report.  Other  factors  besides
those  described in this report  could also affect  actual  results.  You should
carefully  consider  the factors  described  in the section  entitled  Important
Factors That May Affect Our Business,  Our Operating Results and Our Stock Price
in evaluating our forward-looking statements.

You should not unduly rely on these forward-looking statements, which speak only
as of the date of this report. We undertake no obligation to publicly revise any
forward-looking  statement to reflect  circumstances or events after the date of
this report, or to reflect the occurrence of unanticipated  events.  You should,
however,  review the  factors  and risks we describe in the reports we file from
time to time with the Securities and Exchange Commission ("SEC").


                                     PART I


ITEM 1.     DESCRIPTION OF BUSINESS

We were  incorporated  in the State of Delaware in February  1996.  Prior to our
reverse  acquisition by RJL Marketing Services Inc.,  Guardian,  through certain
subsidiaries,  was in the business of (i)  fabricating  and erecting  structural
steel  for  governmental,   military,  commercial  and  industrial  construction
projects through its 50% owned indirect subsidiary  Structural  Holdings,  Inc.,
(ii)  manufacturing  and distributing  security and safety  products,  primarily
ballistic  protective  equipment  through  ForceOne,   LLC,  of  which  Guardian
indirectly owned a 33% membership interest, and (iii) owning certain real estate
properties through Palo Verde, Inc., a wholly owned subsidiary of Guardian.


REVERSE ACQUISITION

On June 26, 2003, pursuant to the terms of an Amended and Restated Agreement and
Plan of  Reorganization,  dated effective June 12, 2003 (Agreement and Plan), by
and among  Guardian,  RJL  Marketing  Services  Inc., a privately  held Delaware
corporation  (RJL), and all of the shareholders of RJL, Guardian acquired all of
the  outstanding  capital stock of RJL in exchange for the issuance of shares of
common stock and shares of preferred stock of Guardian.

Although  Guardian  is the legal  acquirer in the  acquisition,  and remains the
registrant with the SEC, under generally  accepted  accounting  principles,  the
acquisition  was  accounted  for  as  a  reverse  acquisition,  whereby  RJL  is
considered  the  "acquirer" of Guardian for financial  reporting  purposes since

                                       4
<PAGE>

RJL's  shareholders  controlled more than 50% of the post  acquisition  combined
entity,  the  management  of  Guardian  was that of RJL after  the  acquisition,
Guardian  had no assets  or  liabilities  as of the  transaction  date,  and the
continuing  operations  of the entity  are those of RJL.  Since  Guardian  was a
non-operating entity on the transaction date, Guardian recorded the premium over
net assets purchased as a reduction of additional paid in capital.  In addition,
Guardian is required to present in all  financial  statements  and other  public
information  filings,  from the date of  completion  of the  acquisition,  prior
historical  financial  statements  and  information  of RJL. It also  requires a
retroactive restatement of RJL's historical  stockholders' equity to reflect the
equivalent number of shares of common stock received in the acquisition.

On the effective date,  pursuant to the Agreement and Plan, the two stockholders
of RJL, Mr. Robert A. Dishaw and Mr. Michael W. Trudnak,  exchanged all of their
shares in RJL for an  aggregate  of  5,511,500  shares  of  common  stock and an
aggregate  of 4,097 shares of Series A  Convertible  Preferred  Stock,  $.20 par
value per share ("Series A Preferred Stock"), of Guardian.  The shares of Series
A Preferred Stock have a preferential  liquidation value of $20.00 per share and
each share will be automatically  converted into 1,000 shares of common stock of
Guardian (subject to certain anti-dilution  adjustments) upon Guardian attaining
Earnings Before Income Taxes and Depreciation  (EBITDA)  aggregating  $2,500,000
following  the  Reverse  Acquisition  in the  period  commencing  on the date of
issuance through June 26, 2005, as evidenced by Guardian's  financial  statement
contained  in its  reports  filed  with the SEC under  the  Exchange  Act.  As a
condition to the closing,  Mr. Moorer,  the former  President,  Chief  Financial
Officer and a director of Guardian,  and Messrs  Houtz and  Stevens,  the former
directors  of Guardian  entered  into lock up  agreements  with RJL and Guardian
pursuant to which they agreed not to sell their  shares of Guardian for a period
of six months,  except that they may,  during such period,  sell an aggregate of
50,000 shares a calendar month.

Concurrently with the closing of the Reverse Acquisition,  Guardian closed on an
equity financing pursuant to which it placed an aggregate of 1,000,000 shares of
common  stock at a price of $.50 per share for  aggregate  proceeds of $500,000.
Such   financing  was  required  as  a  condition  to  closing  of  the  Reverse
Acquisition.  Guardian  has granted to  investors  in such  offering a five year
piggy back registration  right (except for underwritten  offerings and offerings
other than for cash registered on a Form S-8 or S-4). Also concurrently with the
closing of the Reverse  Acquisition,  all of the prior officers and directors of
Guardian resigned and were replaced by officers and directors designated by RJL.

At closing of the Reverse Acquisition, RJL had commitments to issue an aggregate
of  5,920,000  shares of common  stock and 2,600  shares of  preferred  stock to
certain consultants all of which have been issued.

Immediately  prior to the closing,  and effective as of June 23, 2003,  Guardian
assigned  all of its  pre-closing  assets  and  liabilities  to a  newly  formed
subsidiary,  Black  Mountain  Holding,  Inc. All of the shares of Black Mountain
Holdings,  Inc., owned by Guardian will be spun off to Guardian's  stockholders,
pro  rata,  in the  nature of a stock  dividend  distribution.  Shareholders  of
Guardian  entitled to participate in the spin-off  distribution will receive one
share of Black  Mountain  for each  share of  Guardian  that they hold as of the
record date.  Guardian  established  June 23,  2003,  as the record date for the
spin-off. Following that date, the shares of Guardian have traded "ex dividend."
Guardian has been advised by prior  management of Guardian  that Black  Mountain
intends to file a  registration  statement  with the SEC to  register  under the
Securities Act the distribution of the spin-off shares to Guardian  shareholders
pro rata and the spin-off  will not occur until such  registration  statement is
declared  effective  by the  SEC.  Pending  effectiveness  of  the  registration
statement, the shares of Black Mountain will be held in a spin-off trust for the
benefit  of  Guardian's  shareholders.  The  trustee  of the trust is J.  Andrew
Moorer, the former President and Chief Financial Officer of Guardian.


EXCLUSIVE DISTRIBUTION AGREEMENT WITH DIAGNOS

Effective as of, and as a condition to, the closing of the Reverse  Acquisition,
we entered  into an  Exclusive  Distribution  Agreement  with  Diagnos,  Inc., a
Canadian  public  company,  pursuant to which we were appointed as the exclusive
distributor of certain knowledge  extraction software that has been developed by
Diagnos.  Under the  agreement,  we were the exclusive  distributor  of Diagnos'
products to the U.S. federal, state and municipal  governments,  U.S. government
contractors,  and the  U.S.  bio-medical  market,  subject  to  certain  limited
carve-outs.  Upon execution of the agreement, we were required to make a royalty
payment to Diagnos in the amount of  $150,000,  which is to be credited  against
the first seven  licenses  that  Guardian  sells.  The agreement was a renewable
ten-year agreement.

The  Exclusive  Distribution  Agreement  with  Diagnos was  mutually  terminated
effective as of January 14, 2004.  The agreement was  terminated for our failure
to deliver the required minimum revenues included in the agreement.  Our failure
to meet those minimum revenue  requirements  resulted from several factors:  (i)
our  inability  to  sell  the  product  to  the  U.S.  government   intelligence
organizations  due to the fact the product was  produced  and owned  outside the
U.S., (ii) the product was a desktop  version,  not an enterprise  version,  and
(iii) the  high-level of technical  sophistication  required to be a user of the
product. The termination of the Exclusive Distribution Agreement required us to:
cease the use of the Diagnos/MCubiX  logo and name on our materials,  return all
intellectual  property owned by Diagnos, and to pay all outstanding invoices (an
aggregate of $25,000) immediately.


                                       5
<PAGE>

In view  of the  development  of our  business  since  the  date of the  Reverse
Acquisition, management of Guardian does not believe that the termination of the
Exclusive  Distribution  Agreement  will have any adverse  impact on our current
plan of  operations  or our  ability  to  develop,  market,  or  distribute  our
healthcare or aviation security  products.  Our healthcare and aviation security
products have been developed independent of MCubiX.


ACQUISITION OF INTELLECTUAL PROPERTY OF DIFFERENCE ENGINES

On October 23,  2003,  we entered  into an  agreement  with  Difference  Engines
Corporation,  a  Maryland  corporation,  pursuant  to which  Guardian  agreed to
purchase  certain  intellectual  property  (IP)  owned  by  Difference  Engines,
including but not limited to certain compression  software technology  described
as Difference  Engine's  Visual Internet  Applications  or DEVision,  as well as
title  and  interest  in the use of the name  and the  copyright  of  Difference
Engines.  Mr. Walter Ludwig,  a director of Guardian,  is also the president,  a
director and a principal stockholder of Difference Engines.

Under the terms of the agreement,  Guardian  issued 587,000 shares of its common
stock as  consideration  for the purchase of the IP and  cancelled a convertible
promissory note that Difference  Engines had issued to Guardian in the amount of
approximately $25,000 representing advances Guardian made to Difference Engines.
The  587,000  shares of  common  stock  are  subject  to a two (2) year lock up.
Guardian has granted  Difference Engines  piggy-back  registration  rights for a
period of three (3) years  commencing on the date of the  expiration of the lock
up period with regard to the shares issued in the  transaction.  Upon expiration
of the two (2)  year  lock up  period,  in the  event  that the  shares  are not
eligible  for  resale  under  Rule 144 and have not been  registered  under  the
Securities  Act, the holder of the shares may demand  redemption  of the shares.
The  redemption  price is to be  calculated  on the basis of the  average of the
closing  bid and asked  prices of  Guardian's  common  stock for the twenty (20)
consecutive business days ending on the day prior to the date of the exercise of
the holder's right of redemption.  The founders of Difference Engines, including
Messrs.  Ludwig and Victor T. Hamilton,  provided  certain  releases to Guardian
related to their  contribution  of the  technology  to Difference  Engines.  The
closing  of  the  acquisition  of  the IP was  subject  to  certain  conditions,
including  a  requirement  that  Difference   Engines  obtain  approval  of  its
stockholders  for the transaction and that Messrs Ludwig and Hamilton enter into
two (2) year and one (1) year employment agreements, respectively, with Guardian
at base salaries of $120,000 and $90,000 per annum, respectively.

The closing of the acquisition of the IP occurred  effective  December 19, 2003,
after  Difference  Engines  obtained  the approval of its  stockholders  for the
transaction.


CONTEMPLATED ACQUISITION OF WISE SYSTEMS, LTD.

On December 3, 2003, we entered into a  non-binding  letter of intent to acquire
Wise Systems Ltd., a developer of radiology  information  systems with principal
offices in the  United  Kingdom.  The  letter of intent is subject to  customary
conditions,  including  performance of due diligence,  negotiation of definitive
agreements,  and receipt by us of audited financial statements for Wise Systems,
obtaining   regulatory  approval  for  the  transaction,   and  other  customary
conditions and may be terminated at any time without  liability to either party.
The  letter  of  intent  provides  for the  payment  of the  purchase  price  of
approximately $2,600,000 in a combination of cash and stock. Also, the letter of
intent  provides for the payment of a two year earn-out to Wise  Systems,  which
may be paid in cash or common stock of Guardian,  at Wise  Systems'  option.  An
earnest  money  deposit of $150,000  was paid by Guardian to Wise  Systems  upon
execution of the letter of intent. It also provided that should the purchase not
close for any reason,  Wise would enter into a non-exclusive  OEM agreement with
Guardian,  on  "most-favored  client"  terms,  allowing  Guardian  to  sell  and
customize its products in the US.


PRIVATE PLACEMENT OF OUR SERIES C CONVERTIBLE PREFERRED STOCK During October and

November,  2003,  we closed  on the sale of an  aggregate  of 545  shares of our
Series C  Convertible  Preferred  Stock.  Berthel  Fisher acted as the placement
agent for the offer and sale of such shares.  We received net proceeds  from the
sale of such shares of $629,895 and paid to Berthel Fisher a commission of 6% of
the  aggregate  proceeds or $37,250,  a due diligence fee of 2% of the aggregate
proceeds  of the  offering or $13,625,  and issued to Berthel  Fisher  placement
agent's  warrants to purchase an aggregate of 21,800 shares of our common stock,
and to reimburse certain extraordinary expenses of Berthel Fisher. The placement
agent's  warrants are  exercisable at a price of $1.95 per share during the five
year period following the issuance  thereof and contain piggy back  registration
rights. On February 13, 2004, pursuant to the authorization of our stockholders,
we increased our authorized shares of common stock to 200,000,000 shares.  Under
the provisions of the Series C Convertible Preferred Stock, the shares of Series
C  Convertible  Preferred  Stock  automatically  converted  into an aggregate of
545,000 shares of our common stock.

                                       6
<PAGE>

BRIDGE NOTES

Beginning December 8, 2003, and concluding  December 19, 2003, we entered into a
series of purchase  agreements  with eight  individuals  under which we sold and
issued to such individuals  convertible promissory notes in the aggregate amount
of $700,000 and warrants to purchase 311,250 shares of our common stock. 200,000
of the warrants are exercisable during the eighteen (18) month period commencing
on the date of issuance at a price of $2.50 per share.  The  remaining  warrants
are  exercisable  as  follows:   (i)  80,000  warrants  exercisable  during  the
twenty-four  (24) month period  commencing on the date of issuance at a price of
$2.50 per share,  and (ii)  31,250  warrants  exercisable  during the sixty (60)
month period  commencing  on the date of issuance at a price of $5.00 per share.
The proceeds of the sale of the notes were used by Guardian for working  capital
purposes.  The notes bear interest at 10% ($70,000) and are repayable sixty days
after the date of issuance of the notes  (maturity  date).  The unpaid notes and
interest,  beyond the maturity date,  bear interest at the rate of 18% per annum
in the event  they are not  repaid  within 60 days of the date of  issuance.  An
event of default  occurs  under the notes if the  principal  or interest are not
paid when due and within 15 days of notice from the note holder of such  failure
to pay; the voluntary or  involuntary  bankruptcy  of Guardian,  the making of a
general assignment for the benefit of creditors,  an application for dissolution
or liquidation, or other relief from bankruptcy, insolvency or similar.

The notes provide that the principal and accrued interest under the notes may be
converted  into units of  securities,  each unit  consisting  of four  shares of
common  stock and one  warrant,  at a price of $6.40 per unit.  A note holder is
also entitled to receive 1,000  warrants to purchase our common stock at a price
of $2.50 per share for each $25,000 in principal  amount of note outstanding for
each 30 day period  during which the notes are  outstanding  beyond the maturity
date. The foregoing warrants contain certain antidilution  provisions,  one time
piggy-back registration rights and other customary provisions.

OUR BUSINESS

Guardian  is  a  technology   company  that   designs,   develops  and  delivers
sophisticated  solutions  to its target  markets.  We  utilize  high-performance
imaging  technologies and advanced  analytics to create  integrated  information
management  technology  products and services that address critical  problems in
healthcare and aviation  security for corporations  and  governmental  agencies.
Each  product  and  service can  radically  improve the quality and  velocity of
decision-making,   organizational   productivity,   and  efficiency  within  the
enterprise.

The core  component  of  Guardian's  overall  business  strategy  is gaining and
securing a competitive advantage through our advanced technologies.  Our product
suite is a platform for innovation that efficiently integrates, streamlines, and
distributes business and clinical information and images across the enterprise.

We  understand  the  challenges  facing our clients such as staffing  shortages,
declining  revenues,   declining   reimbursements,   integration   complexities,
information accuracy across systems, and competitive  pressures.  We develop our
solutions  and  services to help our clients  meet those  challenges  head on by
accelerating  their productivity so they can work more efficiently with the same
staff. We partner with our clients to understand their needs in order to provide
the right  solutions,  and include their feedback in the development  process of
any customized products.

Following the Reverse Acquisition,  Guardian has evolved, in a very short period
of time,  into a focused  product and marketing  structure in the healthcare and
aviation  security  markets.  We  recognize  that  a  company  at our  stage  of
development must continuously focus its efforts.

Each of Guardian's target markets share certain common  characteristics:

      o     Each is large, growing, and underserved.

      o     Each faces  significant  current  and  ongoing  problems  related to
            exponential  data  volume  growth  versus   decreasing   information
            quality.

      o     Each  requires  new  approaches  to  its  challenges,   as  previous
            solutions have become less effective.

      o     Each faces an evolving regulatory environment.

      o     At the same time, our underlying  strengths in technology  expertise
            create bonds between the solutions for both of these markets:

      o     Each  requires  sophisticated  solutions  that  build  on  a  common
            platform that can be easily customized.

      o     Each requires the ability to derive  information  value from images,
            structured data, and text.

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<PAGE>

      o     Most  importantly,  Guardian's core competencies and newly developed
            techniques apply with little  modification  across all of the market
            problems we are addressing.

Currently,  we are focused on providing technology solutions and services in two
primary markets, healthcare and aviation security. However, as we develop new or
enhanced solutions we expect to expand into other markets. We may also engage in
one or more  acquisitions of businesses that are  complementary to our business.
As of December 3, 2003,  we have  entered  into a  non-binding  letter of intent
agreement to acquire Wise Systems,  Ltd., of Corsham, UK, a leading developer of
radiology information systems (RIS). However,  there can be no assurance that we
will be able to close on the Wise Systems Ltd. acquisition or identify any other
such  acquisition  candidates or be able to negotiate  terms for any acquisition
that is acceptable to us.


OUR COMPETITIVE STRENGTHS

We believe  that the  following  competitive  strengths  will  enable us to take
advantage of market opportunities within our targeted industries:

      o     FOCUS.  We believe our focus on products  and  services  with common
            technology cores allows us to adopt  strategies,  pursue  objectives
            and develop  products with features that better address the problems
            of customers.

      o     MULTIPLE EXPERTISE.  We believe our high level of in-house expertise
            in several difficult areas of technology, and our ability to augment
            those capabilities from outside, quickly and appropriately,  creates
            significant competitive advantage.

      o     SOPHISTICATED   INTELLIGENT  INFORMATION  SYSTEMS.  We  believe  our
            sophisticated intelligent information systems give us the ability to
            identify and capitalize on profitable  opportunities  in our markets
            and enhance our  relationships  with our  customers.  We believe our
            systems  are unique for a company  of our size and are  scalable  to
            support our continued growth.

      o     ATTRACTIVE  PRODUCT  STRUCTURES.   Our  systems  and  solutions  are
            designed to ensure that our clients'  budget-making decision process
            is more manageable.

      o     STRONG RELATIONSHIPS WITH DISTRIBUTORS AND OEMS. We are developing a
            network  of  loyal  and  productive  distributors  and  OEMs who are
            attracted  to  Guardian  because  of  our  market-focused  products,
            competitive compensation program, stable presence and user-friendly,
            sophisticated systems.

      o     MANAGEMENT  EXPERIENCE AND INCENTIVE TO MAXIMIZE  STOCKHOLDER VALUE.
            Operational,  organizational and financial standards  implemented by
            our senior  management team have so far driven our rapid development
            of  sophisticated,  targeted  products,  hiring and  retention  of a
            world-class  staff  of  imaging   technology  and  business  process
            professionals,  adherence to a clearly-defined acquisition strategy,
            and expected  profitability in 2004. In addition, our management and
            certain of our  employees  own stock in our company and we expect to
            provide incentive compensation to them in the form of stock options.

      o     PUBLIC FINANCING STRUCTURE. Relative to other companies at our stage
            in  development,  our ability to raise capital in public and private
            markets  significantly  improves our ability to make quick decisions
            regarding  strategic  acquisitions  and commitments  which reassures
            potential allies and partners.


OUR STRATEGIES

We intend to grow the business by focusing on the following strategies:

SALES - Our product distribution strategy is to employ a multi-tiered  marketing
approach that uses a mix of direct sales,  OEMs and distribution  partners.  Our
direct sales force targets each market segment, validates approach, and provides
insight  for  use  with  the OEM  and  partner  channels.  The  partner  channel
distribution  strategy  includes entering into reseller  agreements;  sales lead
exchange   agreements  and  service   bundling   agreements  that  benefit  from
integration of combined product offerings.

PARTNERSHIPS - We also partner with system integration firms to complement their
capabilities and share in custom solution component  development that results in
further market exposure for Guardian.

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<PAGE>

LEVERAGE OF EXPERTISE - We believe business  synergies  between Guardian and our
partners will enable each firm to pursue opportunities made feasible only by the
joint capabilities of both parties.  We will maintain an efficient and effective
operating  structure  where we focus on  systems  consolidation  and  automation
designed to eliminate redundancies and achieve greater operational efficiencies,
which drive down the total cost of service.

CONTINUING  STRENGTH  OF  TECHNOLOGY  - We believe we  currently  have,  and can
maintain,  a  superior  set of  technology  expertise  that  allows us to create
product and service combinations faster, more flexibly, and more completely than
competitors. At a minimum, we presuppose that our partners' core mission will be
to  realize  greater  technology  ROI for their  clients  and  ensure  strategic
alignment between business objectives and technology.

OUR CHALLENGES

We face a number of challenges in capitalizing on our strengths and implementing
our strategies. For example:

      o     Business in general is highly competitive,  and we compete with both
            large multinational  solution providers and smaller companies.  Some
            of our competitors  have more capital,  longer  operating and market
            histories,  and  greater  resources  than we have,  and may  offer a
            broader range of products and lower prices than we offer.

      o     Negative trends caused by irrational price  competition or increased
            costs in the market for our  solutions  could  cause our  results of
            operations to suffer.

      o     Our  success  depends  on  our  ability  to  deliver   sophisticated
            solutions  and  set  prices  competitively.  If we  fail  to  assess
            accurately the risks that we assume, we may fail, which could reduce
            our income or result in an operating loss.

      o     We have little operating  history as a public company and we may not
            be able to develop and  implement  the  infrastructure  necessary to
            operate successfully as an independent public company.

For further  discussion of these and other  challenges we face,  see  "Important
Factors That May Affect Our Business, Our Operating Results and Our Stock
Price."

HEALTHCARE INDUSTRY

MARKET
According to the Centers for Medicare and Medicaid Services (formerly the Health
Care Financing Administration), health care was the largest single sector of the
U.S. economy in 2002. The total healthcare system represents  approximately $1.5
trillion, or 14% of the U.S. gross domestic product.

Increased  consumer,  government,  employer  and  payer  awareness  of the  high
incidence  and  resulting  cost of medical  errors is  resulting in an increased
interest in clinical information  systems.  According to the report published by
the Institute of Medicine  (IOM) of the National  Academies,  between 44,000 and
98,000  unnecessary  deaths result in the United States each year from errors in
medical  treatment,  making  medical  errors the eighth  leading cause of death,
ahead of automobile accidents,  breast cancer, and AIDS. Aside from human costs,
the total  financial  cost of  medical  errors  has been  estimated  at up to $8
billion per year.

In a  follow-up  report  issued by the IOM,  the IOM  reiterated  the urgency of
reducing medical errors, but stated that the United States' healthcare system is
plagued  with even deeper  quality  problems  which  together  detract  from the
"health,   functioning,   dignity,   comfort,   satisfaction  and  resources  of
Americans."  The  use  of  information   technology  to  support   clinical  and
administrative  processes is prominent in the report's recommended strategies to
improve  the  overall  quality  of  healthcare  within  the next ten  years.  We
anticipate  that increased use of information  technology  will be a significant
factor in driving industry practices to higher quality standards.

Healthcare  organizations  face  increasing  regulation and scrutiny by federal,
regional and local authorities. Compliance with regulations governing healthcare
cost reimbursement;  insurance,  and administration  impose financial burdens on
healthcare  organizations.  Recently,  proposed and final regulations  published
under the Health Insurance  Portability and  Accountability  Act of 1996 (HIPAA)
have created  significant  operational  challenges to  healthcare  providers and
payers.

Guardian's Healthcare Solutions division (GHS) provides products and services to
one of the  fastest-growing  sectors in healthcare  and  healthcare  information
management: diagnostic radiology.

                                       9
<PAGE>


DIAGNOSTIC RADIOLOGY INDUSTRY

Radiology  is  inexorably  moving  from film to  digital,  and this is  creating
enormous amounts of data that must be catalogued,  managed, moved, and archived.
Newer  imaging  technologies  such  as  CT  (computerized  tomography)  and  MRI
(magnetic  resonance imaging) are digitally incepted (though in practice,  reads
of these  modalities  are often done by printing  film from the digital  image).
Even  historically  film-based  modalities such as general x-ray and mammography
are moving  toward  digital  inception.  It has not  happened as quickly as some
people had predicted, but the pace is quickening.

As digital  modalities drive radiology toward filmless,  the data volumes become
staggering.  A single mammography study is 300 megabytes, and a large center can
do hundreds in a day. A CT or echocardiography study can be 30-50 gigabytes.  In
many cases records must be kept for 7 years,  10 years,  or even the lifetime of
the patient.

Patient records in radiology are increasingly managed on computers; however, the
vast bulk of the  radiology  archive is still in millions of linear feet of film
racks.  Radiology IT systems fall into two broad classes:  picture archiving and
communication  systems, or PACS, and radiology  information systems, or RIS. The
increasing  trend is for  full  integration  of PACS  and  RIS,  both at a macro
software level, and at the patient record level.

There  were 350  million  imaging  procedures  performed  in the  U.S.  in 1998,
according to Dr. Bob Bell, R. Bell & Associates in February  2000.  The National
Healthcare  Statistics  Group of HHS estimates  total U.S.  patient  spending on
radiology  at  $75  billion  annually,   with  a  9-12%  growth  rate.   Capital
expenditures  on  diagnostic  imaging  equipment  are  $4.52  billion  annually,
according to "Economic Analysis of Filmless Radiology," by Charles Flagle.

The HIPAA (Health Insurance Portability and Accountability Act of 1996) mandates
and the increasingly competitive environment among hospitals and imaging centers
to provide the most efficient  services are creating a wave of continual capital
expenditure.  As  Y2K  spending  inflated  hospital  budgets,  HIPAA  compliance
requirements are creating a new wave of spending.


RADIOLOGY AND HIPAA

HIPAA  regulations  about the patient record have taken a long time to come, and
for  the  most  part  they  are  somewhat  more  admonitory  than  prescriptive.
Regulations  implementing  HIPAA impose national health data standards on health
care  providers  that  conduct  electronic  health  transactions,   health  care
clearinghouses   that   convert   health  data   between   HIPAA-compliant   and
non-compliant formats, and health plans.  Collectively,  these groups, including
most  requirements  of Guardian's  prospective  customers,  are known as covered
entities. These HIPAA standards include:

      o     transaction   and  code  set  standards  that   prescribe   specific
            transaction formats and data code sets for certain electronic health
            care transactions;

      o     privacy  standards that protect  individual  privacy by limiting the
            uses   and   disclosures   of   individually   identifiable   health
            information;

      o     and  data  security  standards  that  require  covered  entities  to
            implement  administrative,  physical and technological safeguards to
            ensure the confidentiality, integrity, availability, and security of
            individually identifiable health information in electronic form.

All covered  entities  were required to comply with the TCS standards by October
16, 2003.  The privacy  standards  imposed by HIPAA have been in effect for most
covered  entities since April 14, 2003,  while the  compliance  deadline for the
security standards is April 21, 2005.

For most healthcare enterprises, compliance with HIPAA is burdensome, but can be
dealt  with  at  a  "best  practices"  level.  For  radiology,  there  are  some
significant  multipliers of concern:  the sheer volume of data and  transactions
that radiology  deals with relative to other  providers,  the issue attendant to
sharing information with referring primary providers,  and, most important,  the
regulatory mandate for disaster recovery.

Disaster  recovery  is not a major  problem  for most  patient  records--offsite
microfiche,  Xeroxing,  mirroring  office hard drives all suffice.  For the film
component of the radiology archive,  it is potentially a very expensive problem,
however. Both on a going-forward basis and to some extent with legacy film, PACS
and HIPAA's disaster-recovery mandate will drive radiology data volumes an order
of magnitude faster than decreases in the costs of storage.

                                       10
<PAGE>

Radiology  providers,  like all others, would prefer to concentrate on providing
their  core  services,  not on  interaction  with  payers  and  compliance  with
regulatory  regimes. In large part, much of the suite of services offered by GHS
is designed to address that desire.

Guardian's   Healthcare   Solutions  division  creates  and  markets  integrated
information  management  technology  products  and  services  for the  radiology
enterprise under the marketing tag "Revisualize Radiology."


OVERVIEW OF GHS

We currently  concentrate  on the  radiology  marketplace,  and more narrowly on
free-standing radiology practices and small hospitals.  While our technology and
services are applicable to other provider specialties,  radiology presents a set
of unique challenges and opportunities.

GHS will initially  target  hospitals  with less than 200 beds and  freestanding
radiology  clinics.  According to the American Hospital  Association,  there are
5,801  hospitals in the U.S.  Approximately  one-third  have less than 200 beds.
According  to the  American  Medical  Information,  Inc.  there are 2,795  major
diagnostic  imaging  centers and more than 5,000 smaller  imaging centers in the
U.S.

According  to market  analysts  Frost and  Sullivan,  the US market  for our GHS
products and services is projected to be $1.7 billion in 2004. While a number of
variously  sized   companies   compete  in  the  radiology  IT  marketplace  the
penetration  rate of these  technologies  and services is still under 20% in the
US.


GHS PRODUCTS

In  November  2003,  Guardian  entered  into a  non-binding  letter of intent to
purchase Wise Healthcare Systems, a developer of healthcare  information systems
based in the UK.  The  letter of  intent  provided  for an  earnest  payment  of
$150,000  against the purchase  price. It also provided that should the purchase
not close for any reason,  Wise would enter into a  non-exclusive  OEM agreement
with  Guardian,  on  "most-favored  client"  terms,  allowing  GHS to  sell  and
customize  its products in the US. With either  outcome  (completed  purchase of
Wise or OEM  agreement),  GHS has market  offerings in three distinct areas that
address the radiology IT marketplace:

      o     Component   software  for  image  compression,   manipulation,   and
            archiving,   all  critical   needs  for   cost-effective   PACS  and
            teleradiology.

      o     Integrated   RIS/PACS  capable  of  managing   any-sized   radiology
            enterprise  that can be sold by  themselves or in concert with GHS's
            services,  but specifically marketed to clinical practices and small
            hospitals.

      o     Integrated  service suites  directed at clinical  practice and small
            hospitals  for managed  mixed  archiving  of data and film,  managed
            HIPAA  compliance,  and management of  interactions  with public and
            private payers.

Though  all of  GHS's  products  and  services  are  currently  exempt  from FDA
premarket authorization requirements,  Guardian intends to register as a medical
device manufacturer and seek "substantial equivalence" certification for them.


COMPONENT SOFTWARE

GHS's DEVision product dramatically  increases lossless,  completely  reversible
compression ratios compared with competitive  products.  Standard techniques can
losslessly  compress  radiology images between 1.5-3 times;  DEVision  currently
averages over 5:1, with a target  average of up to 10:1. For image types such as
x-ray and  mammography,  which can be 300MB each,  such an  improvement  creates
dramatic cost savings in archiving and reduces  network  throughput  both inside
the enterprise and for offsite teleradiology.

For modalities where  "near-lossless"  archiving is acceptable,  DEVision has as
much as 60% better performance than competitive products.  DEVision accomplishes
these increases in medical image compression by:

      o     using proprietary image  pre-processing  techniques to "prep" images
            for compression;

      o     use of a  proprietary  "tuning"  engine that alters the  compression
            approach  based on image  characteristics  by  modality  (e.g.,  CT,
            x-ray,  MR),  series  type (e.g.,  part of the body and angle),  and
            individual image characteristics;

      o     use of single,  multiple, or iterative compression algorithms,  both
            proprietary and standards-facing  whose object is deep reversible or
            "near-lossless"  compression,  rather  than  speed  (which  is  less
            relevant in an archive than in a clinical setting).

                                       11
<PAGE>

DEVision is a software  development  kit designed to be easily  integrated  with
existing  filmless  radiology  systems,  is fully  DICOM  (digital  imaging  and
communication  in medicine)  -compliant . It is sold on a non-exclusive  license
basis with an enterprise  license fee, and varying costs  depending on number of
servers and clients  being used.  We are in  discussions  with  several PACS and
storage vendors, in the US and abroad, and with a large US government healthcare
provider, regarding integration of DEVision into their products.


INTEGRATED RIS/PACS

Whether  Guardian  acquires  Wise  outright or  completes  the  alternative  OEM
arrangement,  following some relatively minor further development, GHS will have
a mature,  fully  integrated  RIS/PACS  available  for sale both as an  end-user
product, and as an OEM product,  either complete or in modules.  Wise's name for
this  product  is  Virtology.Net,  which  name will  likely be  changed  for GHS
markets, but for purposes of this document it will be referred to as such.

The Virtology.Net product line is robust and will require very minor development
enhancements for GHS's purposes.  A complete suite of applications  that address
all of the IT requirements of diagnostic  services within a clinic,  hospital or
group of hospitals has been written:

      o     Virtual-Radiology NET. A fully integrated RIS/PACS,  with full DICOM
            and HL7 (Health Level 7, an emerging set of standards for electronic
            interchange of clinical,  financial, and administrative  information
            among healthcare providers and payers) services

      o     Talk-Tank.NET. Full-featured digital dictation

      o     Virtual-ImageTank.NET. Very robust archiving/database suite

      o     Virtual-Pathology.NET and Virtual-Obstetrics.NET

Virtology.Net  will enter the US market (and elsewhere) with certain  advantages
over competitive products: in price point, flexibility, feature set, and scaling
product path (into ophthalmology and histology, for example). Virtology.Net is a
next-generation  application  development and runtime environment for integrated
RIS/PACS.  Virtology.Net  has an existing UK installed base of over 30 hospitals
and clinics.

Wise decided to develop an application  runtime  environment after reviewing the
competition and finding them wanting, mainly due to limited functionality,  bias
towards user  interface  development  and component  dependence  on  third-party
runtime  environments or operating  systems.  Future product road maps for these
competitive  products  also  concentrated  on  user  interface  development  and
low-level  programming  languages.  While  providing  some  arguable  short-term
advantages,  such an approach creates  long-term  burdens,  among them increased
deployment and maintenance costs, and the need to continually redevelop complete
applications  as the  development,  runtime and  operating  system  environments
change every few years.

The vision  behind  the  development  of  Virtology.Net,  conversely,  was to: o
Develop re-usable application components that are not subject to
      redevelopment due to operating system upgrades

o     Divorce the  application  business logic from the user interface  software
      allowing the user interface to be swapped with ease.

o     Allow application  business logic to be configured without any programming
      effort using configuration files.
o     Application  components  can be called from any third party system using a
      standard messaging protocol.

The resulting product suite is not simply  Web-"enabled," but Web-based from the
ground up. It can be infinitely scaled and integrated with existing  third-party
systems  through SOAP.  Interfaces  are  customized  using standard HTML and XML
editors.   Server-side   functions  can  run  either  under   Microsoft   Server
applications, or Linux/Unix.

With the pending  integration  of one of several  choices of DICOM  viewer,  and
perhaps other visualization  tools, along with GHS's DEVision product,  Guardian
will have a  market-superior  product suite,  particularly  well-suited  for the
clinical  practice market and for integration  with GHS's  contemplated  service
suite.

We  announced  the product  line at the  Radiological  Society of North  America
meeting in December  2003 under the  service  mark PACS for  Practice.  PACS for
Practice  is  designed  with an  understanding  of the  differences  between the
workflow,  clinical,  and archive  requirements of radiology  practices  (versus
hospitals) in mind. Practices see significantly fewer chronic patients, have far
greater  periodicity  in their  workflow,  do the vast  majority of  mammography
examinations,   and  often  have   multiple   locations   with  mixed   modality
environments,  and our offering in this market is oriented toward those specific


                                       12
<PAGE>

needs,  without sacrificing features that all radiologists require in a filmless
system.

Revenues per install will vary  significantly  based on practice size,  modality
mix,  hardware  needs,  and other  factors.  An  average  large  practice  could
anticipate  spending  between  $350,000  and  $1,000,000  on a fully  integrated
RIS/PACS.  PACS for Practice is also specifically  designed to operate in tandem
with  our  managed  mixed   archive   service.   GHS  is   developing   combined
product/service  offerings  that will  "flatten"  the costs to  customers of the
capital portion by blending the costs of equipment and archiving services.


MANAGED MIXED ARCHIVE SERVICE

Managing a  radiology  practice  mixed  archive of paper and film is  expensive,
cumbersome,  and inescapable.  For urban and high-wage suburban practices,  real
estate and  personnel  costs for the  management of tens of thousands of patient
jackets  carrying  millions of paper and film records is a  significant  drag on
practice  profitability  and a distraction  from clinical  responsibilities.  In
addition, new regulatory requirements for disaster recovery and records security
under HIPAA  create more expense and  uncertainty  for  radiology  than for most
other medical specialties.

In response to market  opportunity,  Guardian has created both  technology and a
robust service plan for centralized mixed records  management,  conversion,  and
regulatory  compliance  for the radiology  enterprise  that allows  practices to
concentrate on their core business while saving money,  reducing headcount,  and
upgrading  their clinical  technology.  We will  concentrate on building  market
momentum in the mid-Atlantic  corridor  (Richmond to  Philadelphia)  for a mixed
archive facility to be located in Baltimore.


COMPETITION

We face  intense  competition  from other  providers  of  radiology  information
services  providers.  However,  the current  diagnostic imaging market is highly
fragmented.  Capital  equipment  sales and annual service costs are divided into
four sub-markets: PACS, RIS, dictation/transcription, and charge capture.

There is no direct competitor that offers a working integrated workflow solution
such as that offered by Guardian.  However,  there are seven  companies that are
developing such a product: ADAC/Cerner, Merge, GE, Agfa, Medq, SMS, and IDX.

It is  difficult  to  discern  which  company  is  closest  to  market  with its
developments.  However,  IDX,  Agfa,  Merge,  and  Sunquest/Misys  appear  to be
Guardian's  closest  competitors.  Although some  companies  offer separate RIS,
PACS,  billing,  or  claims  components  such as GE or  McKesson/HBOC,  they are
neither web-based nor integratable.

We believe that the price point,  flexibility,  and integrated service component
of our  offerings  will  afford us a  competitive  advantage.  Current  RIS/PACS
offerings from major competitors such as GE, Siemens,  Cerner, and Phillips have
major  competitive  disadvantages  relative  to GHS when  addressing  the  small
hospital/freestanding clinic market.

Such competitive  offerings are overpriced  relative to the market, as the price
structures  for them  have been  designed  to  address  the  largest  healthcare
enterprises (500+-bed hospitals). Certain of these competitors explicitly ignore
potential  installations  under a fairly high  threshold size ($3 million in one
known case).  Nevertheless,  on a  procedures-per-year  basis,  larger  clinical
practices exceed the size of many hospitals.

Additionally,  many of our  competitors  are  also in the  primary  business  of
selling modalities (MR, CT, or nuclear medicine devices) as well as PACS or RIS.
Their   sales   emphasis   is  on  these   larger-ticket   items,   rather  than
customer-centric RIS/PACS.

The practice  market is generally  quite  underserved in healthcare  information
technology  offerings,  despite a generally much shorter  selling cycle and more
obvious   ROI   calculation.   In   practices,   decisions   are   made  by  the
radiologist/partners,  without the IT gatekeepers typical in larger enterprises.
As well, provable cost savings devolve to the partners  themselves,  rather than
into a general operating budget as in a hospital.

No other  company  that we are aware of  offers  integrated  products  and mixed
archiving  services  designed  to address  not only the  workflow  and  clinical
benefits of RIS/PACS technology, but some of the least tractable economic issues
facing radiology practices today.

GHS will sell these  products and services  both through a direct,  regionalized
sales force and by making  distribution deals with major supplies and technology
providers to the radiology practice market.

                                       13
<PAGE>


AVIATION SECURITY INDUSTRY

MARKET

For more than six weeks  following the September 11, 2001  terrorist  attacks on
the United States,  Congress and the Bush Administration worked on a solution to
protect  the U.S.  transportation  system  from  further  attack  and to restore
confidence on the part of the traveling public.  The result was the Aviation and
Transportation Security Act.

The Act,  which  President  Bush signed into law on November  19, 2001 at Ronald
Reagan  Washington  National  Airport,   created  the  Transportation   Security
Administration  (TSA) within the Department of Transportation and placed strict,
dated  mandates  on the new  agency.  The most  significant  of these  deadlines
include:

o   A requirement  to deploy  Federal  screeners at security  checkpoints at 429
    airports across the Nation within one year of enactment (November 19, 2002);
    and

o   A requirement to have systems in place for screening  every piece of checked
    baggage for explosives not later than December 31, 2002.

After  September 11th, the TSA was charged with the primary  responsibility  for
securing the nation's transportation system, a task fraught with challenges. The
transportation  system crisscrosses the nation and extends beyond our borders to
move  millions of  passengers  and tons of freight  each day.  The extent of the
system,  as well as the sheer volume of passengers and freight  moved,  makes it
both an  attractive  target and  difficult  to secure.  Addressing  the security
concerns is further  complicated  by the number of  transportation  stakeholders
that are involved,  including  government  agencies at the federal,  state,  and
local  levels and  thousands  of private  sector  companies.  Concerns  over air
transportation  safety resulting from the September 11th terrorists  attacks has
resulted  in  decreased  passenger  traffic  levels  and  has  placed  financial
pressures on the airlines.

After considerable intense planning and preparation, the Department has recently
begun to deploy new  passenger  and baggage  screening  systems and, at the same
time,  is building the  infrastructure  necessary  to support a flat,  flexible,
modern organization.

The goals of TSA's Screening  Checkpoint  Design effort are focused on improving
security  (particularly  with  regard  to  preventing  breaches  and  consequent
terminal evacuations or "dumps"),  optimizing efficiency, and improving customer
service.  Simultaneously,  TSA is  continuing  to  research,  develop and test a
second wave (the so-called "White" and "Blue" packages) of Screening  Checkpoint
Design  improvements (with inherently longer lead times) intended for deployment
over the next 18-36 months.

TSA  has  enacted   enhanced   security   measures  at  airports  aimed  at  the
identification  and detection of threat items. These increased security measures
have resulted in increased  frustration by passengers and  significantly  longer
processing  time  per  passenger  to  clear  security.  A  September  2003  U.S.
Government  Accounting  Office report on the  performance of TSA highlighted the
following:  (1) airport security screeners are detecting thousands of designated
threat  items each month  (there are 1,200  designated  threat  items on the TSA
Threat List  including  minor  secondary  threat items such as scissors,  pocket
knives,  and corkscrews),  (2) airport security  screeners are failing to detect
principal threats items (guns, knives,  bombs,  plastique,  and ceramic weapons)
over half the time,  and (3)  passenger  throughput  (the time to clear  through
security) is at unacceptably low levels.

Over a period of 10 years  (2001-2010),  the total U.S. annual people  screening
outlay is  expected to grow to over 15 times its current  size.  Post-9/11,  the
baggage  screening  industry is at the start of a growth spurt.  The industry is
expected to grow from  $200-$250  million per year (sales and service)  over the
last decade,  to $1.5  billion by 2006 and $3.4 billion by 2010.  Prior to 9/11,
the luggage  screening  market (systems and service) hovered around $230 million
per year.  This  market was  projected  to grow to $700  million  in 2003,  $1.2
billion by 2006, and $3.5 billion by 2010.  The container and vehicle  screening
industry is changing its focus from drug  trafficking to  anti-terror  screening
activities.  It will see a rapid growth, from below $60 million per annum in the
1993-2001  period to over $750  million  by 2006 and over $1.4  billion in 2010.
During the period of 2003 - 2006,  about 80% of cargo  screening  activities and
outlay will focus on cargo  carried-on  scheduled  passenger  flights.  Unless a
"cargo  terror"  event  occurs,  cargo  screening  outlay  will grow at a 25-30%
compound annual growth rate.


AVIATION BAGGAGE SCREENING PRODUCTS AND SERVICES

Combining proprietary  technology platforms in imaging and knowledge extraction,
we have developed an intelligent solution that can identify threat items, notify
screeners of the  existence of threat items,  and speed the security  process by
eliminating  unnecessary  baggage  checks,  providing the screener with a second
opinion, and reducing processing time spent on false positives (baggage selected
for security review that contains no threat items). We expect to further enhance
the  development  of our  solution,  called  PinPoint  (a threat  identification
detection  alert  solution),  by the fourth  quarter of 2004. We propose to seek
patent  protection  for the product,  although there can be no assurance that we
will be successful in obtaining any such patent.

                                       14
<PAGE>

PinPoint is an integrated image data analysis  solution and knowledge engine for
image data identification and detection. PinPoint is an alpha stage product that
has been reviewed and  preliminarily  tested by Safe Skies,  the  Transportation
Safety   Administration's   ("TSA")   independent   testing   agency.   PinPoint
successfully  completed and passed the preliminary  test,  which resulted in the
following  developments:   (i)  Safe  Skies  referred  their  scanner  equipment
manufacturers to us to engage in discussions of integrating  PinPoint with their
equipment,  (ii) Safe Skies has provided us with  additional  threat item images
(sophisticated  explosive  materials) to integrate into our solution,  which the
current   scanning   equipment  and  scanner   operators   have  had  difficulty
identifying, and (iii) Safe Skies has established a timeframe for the next level
of testing, a live test on a scanner at Knoxville  Airport.  The largest scanner
manufacturer  has  completed an in-depth  review of PinPoint,  including a field
test of the solution  under a simulated  baggage  scanning  operation.  PinPoint
successfully  completed this simulated test and the manufacturer has scheduled a
live test at their  location  using one of their  scanners and images which they
have collected from the machine.  The test was conducted in early March 2004, at
the manufacturer's U.S. headquarters. We successfully completed this third-party
validation  of our new  threat  identification  and  detection  alert  solution,
PinPoint.  Test results  reveal that  PinPoint is able to detect threat items at
approximately  90% or  greater,  while  limiting  `false  positive'  results  to
approximately 10% or less. False positives  represent detection of a threat item
when no threat item actually exists.  The test  additionally  validated that our
processing  time was around one (1) second  per  image.  All three  results  are
material  improvements on the actual results currently  produced by the scanning
manufacturers and realized by the Transportation Safety Administration.

In the event the solution gains the necessary  level of acceptance  with TSA and
the scanner  manufacturers,  we intend to propose to TSA Phase II and Phase III.
Phase II will  provide  inter-networking  of all scanners  within an  individual
airport.  This project will reduce manpower  requirements and provide a base for
monitoring total airport  security.  Phase III will link the individual  airport
networks together in a wide-area network.  This phase will provide the automated
systems to improve  communications between TSA and the local airport management,
as well as provide the intelligence,  data, and statistics required to develop a
machine learning knowledge system. Deployment of both Phases of the project will
benefit TSA increasing  operational  efficiency,  reducing  operating costs, and
enhancing  intelligence  information.  At this point  there are no firm plans or
commitments by TSA to move forward on these  projects,  however,  these projects
represent the logical next development stage.

Guardian's  objective is to become the leading provider of contraband  detection
systems  worldwide  and to extend its  technology  expertise to address  broader
applications for detection.  Specific elements of Guardian's growth strategy are
to  enhance  our  technological  leadership,  expand  our  sales  and  marketing
organization,  leverage our detection  technology expertise to enter new markets
for detection, and selectively pursue strategic relationships and acquisitions.


COMPETITION

The  competition  between  the  manufacturers  of baggage  (hand-held  and small
parcel)  screening,  luggage and large parcel  screening,  people  screening for
weapon and  explosives  detection,  container and vehicle  screening,  and cargo
screening is intense.  The major  competitors  are AS&E,  Smiths-Detection,  OSI
Rapiscan,  InVision, and L3, each of which is better capitalized and has greater
marketing and other  resources  than Guardian.  The reason is quite simple:  the
U.S.  Government  has  appropriated  hundreds of million  dollars to protect our
borders.  What is not so  obvious is that the  manufacturers  that once held the
largest  share  of  installed  base  are at risk  due to  aging  and  inadequate
technology.  Our  complementary  approach of integrating  our software  solution
within the  manufacturers'  hardware  solution  mitigates  competition  from the
manufacturers.

Also,  several  software  companies and academic  institutions are attempting to
develop  sophisticated  solutions  to aid the  manufacturers  with  detection of
contraband  substances.  To date there has been no known solution developed.  We
believe that Guardian's approach is unique in that it is a non-intrusive adjunct
to the current manufacturers' products. The enhancement identifies contraband at
an accuracy level that is  significantly  higher than the methodology used today
by TSA.

The market for contraband  detection  systems  software is anticipated to become
intensely competitive and is characterized by continuously developing technology
and frequent  introductions of new products and features.  We expect competition
to  increase  as other  companies  introduce  additional  and  more  competitive
products  in  the  aviation  security  market  and  as  we  develop   additional
capabilities  and  enhancements  for  PinPoint  and  new  applications  for  our
technology.  Historically, the principal competitors in the market for explosive
detection   systems  have  been  InVision,   Vivid   Technologies,   Inc.,  EG&G
Astrophysics,   Smiths-Detection,   Thermedics  Detection  Inc.,  and  Barringer
Technologies Inc. Each of these competitors provides aviation security solutions
and products for use in the inspection of checked and carry-on  luggage.  We are
aware of certain  major  corporations  competing in other markets that intend to
enter the aviation security market.

                                       15
<PAGE>

Guardian believes that its ability to compete in the aviation security market is
based upon such  factors as:  product  performance,  functionality,  quality and
features; quality of customer support services,  documentation and training; and
the  capability of the technology to appeal to broader  applications  beyond the
inspection of checked and carry-on baggage. Although we believe that PinPoint is
superior to its competitors'  products in its detection capability and accuracy,
PinPoint  must also compete on the basis of price,  throughput,  and the ease of
integration into existing baggage handling  systems.  Certain of our competitors
may have an  advantage  over  our  existing  technology  with  respect  to these
factors.


PATENTS AND PROPRIETARY RIGHTS

We rely on a combination  of common law trademark,  service mark,  copyright and
trade  secret law and  contractual  restrictions  to  establish  and protect our
proprietary rights and promote our reputation and the growth of our business. We
do not own any patents that would prevent or inhibit our competitors  from using
our technology or entering our market although we intend to seek such protection
as appropriate. It is our practice to require all of our employees,  consultants
and independent contractors to enter into agreements containing  non-disclosure,
non-competition and non-solicitation  restrictions and covenants,  and while our
agreements  with  some  of  our  customers  and  suppliers  include   provisions
prohibiting or restricting the disclosure of proprietary information, we can not
assure you that these contractual arrangements or the other steps taken by us to
protect our proprietary rights will prove sufficient to prevent misappropriation
of our proprietary  rights or to deter independent,  third-party  development of
similar proprietary assets.

Due to the rapid  pace of  technological  change in the  software  industry,  we
believe patent,  trade secret and copyright  protection are less  significant to
our competitive edge than factors such as the knowledge,  ability and experience
of our personnel, new product development,  frequent product enhancements,  name
recognition and the ongoing reliability of our products.


EMPLOYEES

As of December 31, 2003, we employed 17 full-time employees,  of whom two reside
outside the United  States.  None of our  employees  is a party to a  collective
bargaining agreement and we believe our relationship with our employees is good.
We also employ  consultants  and  independent  contractors on a regular basis to
assist in the  completion  of  projects.  It is our  practice to require all our
employees,  consultants  and independent  contractors to enter into  proprietary
information and inventions agreements containing non-disclosure, non-compete and
non-solicitation restrictions or covenants.


IMPORTANT  FACTORS THAT MAY AFFECT OUR BUSINESS,  OUR OPERATING  RESULTS AND OUR
STOCK PRICE

In  addition  to the other  information  in this  report,  you should  carefully
consider the following cautionary factors in evaluating us and our business. Our
financial condition and operating results could be materially adversely affected
by any of the risks set forth  below.  From time to time we may furnish  certain
"forward-looking"  information,  as that  term  is  defined  by (i) the  Private
Securities  Litigation  Reform  Act of 1995,  or the Act,  and (ii) in  releases
issued by the SEC. We are making these cautionary statements pursuant to the Act
and with the intention of obtaining the benefits of the "safe harbor" provisions
of the Act.

We Are A  Development  Stage  Company And Our Business  Plan And  Technology  Is
Unproven.  Since the closing of the reverse acquisition of Guardian Technologies
International,  Inc. by RJL Marketing  Services  Inc. in June 2003,  through the
date of this report, we have generated no revenue.  Also, since the inception of
RJL, we have  experienced  operating losses and negative cash flows. We incurred
an  operating  loss of  $6,463,496  during the  period  from  inception  through
December 31, 2003. We are a  development  stage company and our business plan is
unproven. We cannot assure you that we will ever achieve profitability or, if we
achieve profitability,  that it will be sustainable. The income potential of our
businesses is unproven,  and our limited operating history makes it difficult to
evaluate  our  prospects.  We  anticipate  increased  expenses as we continue to
expand and improve our infrastructure, invest in or develop additional products,
make  acquisitions,  develop  our  technology,  expand  our sales and  marketing
efforts and pursue additional industry  relationships.  Moreover, the acceptance
of the  products  that  we  offer  is  uncertain,  including  acceptance  by the
healthcare and aviation security markets.

We May Face  Competition  From  Other  Developers  Or  Sellers  Of  Imaging  And
Radiology  Technology  And Baggage  Screening  Technology.

While the market for imaging and radiology  technology is highly fragmented,  we
face  competition  from other  companies that are  developing  products that are
expected to be competitive with our products. We also face potential competition
from other  companies  developing  baggage  screening  technology.  Business  in
general  is highly  competitive,  and we compete  with both large  multinational
solution  providers and smaller  companies.  Some of our  competitors  have more
capital,  longer operating and market  histories,  and greater resources than we
have,  and may offer a broader  range of  products  and at lower  prices than we
offer.




                                       16
<PAGE>

We May Undertake  Acquisitions Which Pose Risks To Our Business;  Acquisition Of
Wise Systems,  Ltd. As part of our growth strategy, we may acquire or enter into
joint venture  arrangements with, or form strategic alliances with complimentary
businesses.  Any future acquisition,  investment,  strategic alliance or related
effort  will  be  accompanied   by  the  risks  commonly   encountered  in  such
transactions. These risks may include:

      o     Difficulty of identifying appropriate acquisition candidates;

      o     Paying more than the acquired company is worth;

      o     Difficulty in assimilating the operations of the new business;

      o     Costs  associated  with  the  development  and  integration  of  the
            operations of the new entity;

      o     Existing business may be disrupted;

      o     Entering markets in which we have little or no experience;

      o     Accounting for acquisitions could require us to amortize substantial
            goodwill, adversely affecting our results of operations;

      o     Inability to retain the management and key personnel of the acquired
            business;

      o     Inability  to maintain  uniform  standards,  controls,  policies and
            procedures; or

      o     Customer  attrition with respect to customers  acquired  through the
            acquisition.

We cannot  assure you that we would  successfully  overcome  these  risks or any
other problems associated with any acquisition, investment, strategic alliances,
or related  efforts.  Also,  if we use our common  stock in  connection  with an
acquisition, a stockholder's percentage ownership in us will be reduced and such
stockholder may experience additional dilution.

On December 3, 2003,  we entered into a letter of intent to acquire Wise Systems
Ltd., a developer of radiology information systems with principal offices in the
United  Kingdom.  The  letter of  intent is  subject  to  customary  conditions,
including  performance of due diligence,  negotiation of definitive  agreements,
and receipt by us of audited  financial  statements for Wise Systems,  obtaining
regulatory approval for the transaction,  and other customary conditions and may
be  terminated  at any time  without  liability to either  party.  The letter of
intent  provides  for  the  payment  of  the  purchase  price  of  approximately
$2,600,000 in a combination of cash and stock. It is anticipated  that a part of
the  purchase  price will be paid in common  stock.  Also,  the letter of intent
provides  for the  payment of a two-year  earn out to the  stockholders  of Wise
Systems, which may be paid in cash or common stock of Guardian, at Wise Systems'
option.  An earnest  money  deposit of  $150,000  was paid by  Guardian  to Wise
Systems upon execution of the letter of intent.

However,  there can be no assurance that the  acquisition  will be effected upon
terms  acceptable to us or at all. If we are  unsuccessful  in  completing  this
transaction,  the letter of intent  provides that Wise Systems and Guardian will
enter into an OEM  agreement  whereby we will have the right to  distribute  the
Wise product line in the United States.  The $150,000 earnest money deposit will
convert to prepaid  license fees under the OEM agreement;  however,  we will not
own the technology.

We Are  Depending On The Proceeds Of A Private  Placement  Offering To Implement
Our Business  Strategy.

On  December  22,  2003,  we engaged an  investment  banking  firm to act as our
placement agent and to offer and sell our securities in a private placement. The
securities  will  not be  registered  under  the  Securities  Act and may not be
offered  or sold in the  United  States  absent  registration  or an  applicable
exemption  from  registration.  In the  private  placement  we may  issue  up to
1,250,000  units of  securities,  each unit  consisting of four shares of common
stock and one  warrant  for a purchase  price of $6.40 per unit,  and  aggregate
proceeds of up to  $8,000,000,  although  we reserve  the right to increase  the
maximum  amount of the offering.  We have agreed to pay the  investment  banking
firm a monthly  investment banking fee, issue 25,000 shares of common stock upon
our engagement of the investment banking firm, issue up to 200,000 shares of our
stock as  compensation  for sales of the units,  pay a 9% commission on sales of
the units (to be paid in cash or our stock), issue a warrant equal to 10% of the
common stock sold in the offering  (excluding  the common stock  underlying  the
warrants),  and reimburse  certain  expenses.  There can be no assurance that we
will raise sufficient  financing as a result of this offering.  We are dependent
on the  proceeds of this  offering to  implement  our  business  strategy and to
continue our business operations.  To date our average monthly cash expenditures
have been  approximately  $200,000  and we have relied upon the  proceeds of the
sale of our equity securities and a bridge loan to fund our operations.  We have
raised  approximately  $2,100,000  from the sale of such  securities,  including
$700,000  from the bridge  loans that are  repayable  from the  proceeds  of the
offering.  We  anticipate  that,  based upon our  currently  proposed  plans and
assumptions relating to our operations and proposed expansion,  that the maximum
proceeds of the private offering will satisfy our contemplated cash requirements
the next eighteen months. In the event we raise $3,583,000 in the offering, such
proceeds will satisfy our  contemplated  cash  requirements  for the next twelve
months.  In the event our plans change,  our  assumptions  change or prove to be
inaccurate or if the proceeds of this offering prove to be  insufficient to fund
acquisitions  or expanded  operations,  we would be required to seek  additional
financing or, if such funding is not received,  curtail our operations.  We have
no current  arrangements  with regard to, or sources of,  additional  financing.
There can be no assurance  additional  financing will be available on acceptable
terms, or at all.



                                       17
<PAGE>

Our Stock Price Is Volatile

The stock  market  from time to time  experiences  significant  price and volume
fluctuations  that are  unrelated to the  operating  performance  of  particular
companies.  These broad  market  fluctuations  may cause the market price of our
common  stock to drop.  In  addition,  the market  price of our common  stock is
highly volatile.  Factors that may cause the market price of our common stock to
drop include:

      o     Fluctuations in our results of operations;

      o     Timing and  announcements of new customer orders,  new products,  or
            those of our competitors;

      o     Any acquisitions that we make or joint venture arrangements we enter
            into with third parties;

      o     Changes in stock market analyst recommendations regarding our common
            stock;

      o     Failure of our results of  operations  to meet the  expectations  of
            stock market analysts and investors;

      o     Increases  in the number of  outstanding  shares of our common stock
            resulting  from sales of new shares,  or the  exercise of  warrants,
            stock options or convertible securities;

      o     Reluctance of any market maker to make a market in our common stock;

      o     Changes  in  investors'  perception  of the  aviation  security  and
            healthcare information technology industries generally; and

      o     General stock market conditions.

There Is A Limited  Market  For Our  Common  Stock And No Market For Our Class A
Warrants.

Our common stock is quoted on The Nasdaq Stock Market, Inc.'s OTC Bulletin Board
under the symbol  "GDTI." No  assurance  can be made that an active  market will
develop for our common stock or, if it develops, that it will continue.

Our Common  Stock Is Subject To The SEC's  Penny Stock  Regulations.

Our common stock is subject to the SEC's "penny stock" rules.  These regulations
define a "penny  stock" to be any equity  security  that has a market  price (as
defined) of less than $5.00 per share, subject to certain exceptions,  including
securities listed on Nasdaq. For any transaction involving a penny stock, unless
exempt,  these  rules  require  the  delivery,  prior to the  transaction,  of a
disclosure  schedule prepared by the SEC relating to the penny stock market. The
broker-dealer  also must disclose the commissions  payable to the  broker-dealer
and  the  registered   underwriter,   current  quotations  for  the  securities,
information on the limited market in penny stocks and, if the  broker-dealer  is
the  sole  market-maker,  the  broker-dealer  must  disclose  this  fact and the
broker-dealers' presumed control over the market. In addition, the broker-dealer
must  obtain  a  written  statement  from  the  customer  that  such  disclosure
information was provided and must retain such  acknowledgment for at least three
years.  Further,  monthly  statements  must be  sent  disclosing  current  price
information for the penny stock held in the account.  The penny stock rules also
require that  broker-dealers  engaging in a transaction  in a penny stock make a
special suitability  determination for the purchaser and receive the purchaser's
written  consent to the transaction  prior to the purchase.  The foregoing rules
may materially  and adversely  affect the liquidity for the market of our common
stock.  Such rules may also  affect the  ability of  broker-dealers  to sell our
common stock, the ability of holders of such securities to obtain accurate price
quotations  and may therefore  impede the ability of holders of our common stock
to sell such securities in the secondary market.

Certain  Provisions Of Our Charter And Bylaws May  Discourage  Mergers And Other
Transactions.

Certain  provisions of our certificate of  incorporation  and bylaws may make it
more difficult for someone to acquire  control of us. These  provisions may make
it more difficult for stockholders to take certain  corporate  actions and could
delay or prevent  someone from acquiring our business.  These  provisions  could
limit the price that certain investors might be willing to pay for shares of our
common stock.



                                       18
<PAGE>

Our Board Of Directors May Issue  Additional  Shares Of Preferred  Stock Without
Stockholder Approval.

Our  certificate  of  incorporation  authorizes  the issuance of up to 1,000,000
shares  of  preferred  stock of which  6,000  have been  designated  as Series A
Convertible  Preferred  Stock. In addition,  we have designated  1,170 shares as
Series B  Convertible  Preferred  Stock and 6,000 shares as Series C Convertible
Preferred Stock,  none of which shares are outstanding on the date of the filing
of this report.  Accordingly,  our board of directors may,  without  shareholder
approval,  issue one or more new series of  preferred  stock with  rights  which
could  adversely  affect  the  voting  power or other  rights of the  holders of
outstanding shares of preferred stock or common stock. In addition, the issuance
of additional  shares of preferred  stock may have the effect of rendering  more
difficult  or  discouraging,  an  acquisition  or change of control of Guardian.
Although  we do not have any  current  plans to issue any  additional  shares of
preferred stock, we may do so in the future.

We Depend On Key Personnel.

Our  success  depends  of the  contributions  of our key  management  personnel,
including  Mr.  Robert A. Dishaw,  President and Chief  Operating  Officer,  Mr.
Michael W. Trudnak,  Chairman, Chief Executive Officer, Secretary and Treasurer,
and Mr. William J. Donovan,  Chief Financial Officer. If we lose the services of
any of such  personnel we could be delayed in or precluded  from  achieving  our
business objectives. We do not have key man insurance on any of such officers.

In  addition,  the loss of key members of our sales and  marketing  teams or key
technical  service  personnel could  jeopardize our positive  relations with our
customers. Any loss of key technical personnel would jeopardize the stability of
our  infrastructure  and our ability to provide the service levels our customers
expect.  The loss of any of our key  officers  or  personnel  could  impair  our
ability to successfully execute our business strategy,  because we substantially
rely on their experience and management skills.

Our Directors And Executive Officers Own A Substantial  Percentage Of Our Common
Stock.

Our directors and executive  officers  beneficially own approximately  44.32% of
our outstanding  shares of common stock and 74.13% of our outstanding  shares of
Series A Convertible Preferred Stock, of which 5,527 are issued and outstanding.
Each share of Series A Preferred  Stock  entitles the holder to cast 1,000 votes
with regard to any matter submitted to our stockholders for a vote. Accordingly,
our  directors  and  executive  officers  are  entitled to cast an  aggregate of
10,595,500  votes  on  matters  submitted  to our  stockholders  for a  vote  or
approximately  50.70% of the  total  number  of votes  entitled  to be cast at a
meeting of our stockholders.  These stockholders,  if they acted together, could
exert substantial  control over matters requiring  approval by our stockholders.
These  matters  would  include the  election of  directors  and the  approval of
mergers  or other  business  combination  transactions.  This  concentration  of
ownership may discourage or prevent someone from acquiring our business.

We Have Never Paid A Cash Dividend.

We have never paid a cash  dividend  on our common  stock and do not  anticipate
paying cash dividends in the foreseeable future.

If We Fail To Attract And Retain Additional  Skilled  Personnel,  Our Ability To
Provide  Technology-Based  Application  Development,  Integration,  And  Product
Development  May Be  Limited,  And As A  Result,  We May Be  Unable  To  Attract
Customers And Grow Our Business.

We believe  that our  ability to  attract,  train,  motivate  and retain  highly
skilled technical, managerial and sales personnel,  particularly in the areas of
application   development,   business   intelligence,    knowledge   extraction,
management, healthcare economics, radiology, and technical support, is essential
to our future success. Our business requires individuals with significant levels
of  expertise  in  knowledge  extraction,   business  operations,   mathematics,
quantitative analysis,  and machine learning.  Competition for such personnel is
intense,  and  qualified  technical  personnel  are  likely  to remain a limited
resource for the foreseeable  future.  Locating  candidates with the appropriate
qualifications,  particularly in the desired geographic location,  can be costly
and difficult.  We may not be able to hire the necessary  personnel to implement
our business  strategy,  or we may need to provide higher  compensation  to such
personnel  than  we  currently  anticipate.  If we fail to  attract  and  retain
sufficient  numbers of highly  skilled  employees,  our  ability to provide  the
necessary products,  technologies, and services may be limited, and as a result,
we may be unable to attract customers and grow our business.

Changes May Take Place In Funding For Healthcare.

Initially, Guardian expects to derive a substantial portion of its revenues from
sales of financial,  administrative and clinical healthcare information systems,
and other related  services  within the healthcare  industry.  As a result,  the
success of Guardian is dependent in part on political and economic conditions as
they relate to the healthcare industry.  Virtually all of Guardian's prospective
customers in the  healthcare  industry are subject to  governmental  regulation,
including Medicare and Medicaid regulation.



                                       19
<PAGE>

Accordingly,  Guardian's  prospective  customers  and other  entities with which
Guardian  may develop a business  relationship  are  affected by changes in such
regulations and  limitations in governmental  spending for Medicare and Medicaid
programs.  Recent actions by Congress have limited governmental spending for the
Medicare  and  Medicaid  programs,  limited  payments  to  hospitals  and  other
providers under such programs,  and increased  emphasis on competition and other
programs that potentially  could have an adverse effect on Guardian's  customers
and the other  entities  with which  Guardian  has a business  relationship.  In
addition, federal and state legislatures have considered proposals to reform the
U.S.  healthcare  system at both the federal and state level. If enacted,  these
proposals   could  increase   government   involvement   in  healthcare,   lower
reimbursement rates and otherwise change the business  environment of Guardian's
prospective  customers  and other  entities  with which  Guardian  may develop a
business relationship.  Guardian's prospective customers and other entities with
which  Guardian  may  develop  a  business  relationship  could  react  to these
proposals  and the  uncertainty  surrounding  these  proposals by  curtailing or
deferring investments, including those for Guardian's products and services.

In addition,  many healthcare  providers are  consolidating to create integrated
healthcare  delivery systems with greater market power.  These providers may try
to use their market power to negotiate price reductions for Guardian's  products
and services. If Guardian is forced to reduce its prices, its expected operating
margins  would  likely  decrease.  As  the  healthcare  industry   consolidates,
competition  for  customers  will become  more  intense  and the  importance  of
acquiring each customer will become greater.

Competition For Healthcare Information Systems Is Intense.

The market for healthcare information systems is intensely competitive,  rapidly
evolving and subject to rapid technological  change.  Guardian believes that the
principal  competitive factors in this market include the breadth and quality of
system and product offerings,  the features and capabilities of the systems, the
price of the system and product offerings,  the ongoing support for the systems,
the potential for enhancements and future compatible products.

Some of  Guardian's  competitors  have  greater  financial,  technical,  product
development,  marketing  and  other  resources  than  Guardian,  and some of its
competitors  offer  products  that  we do  not  offer.  Our  principal  existing
competitors include IDX, Eclipsys Corporation, McKesson Corporation, Siemens AG,
Epic  Systems  Corporation,  GE Medical  and Cerner  Corporation.  Each of these
competitors  offers a suite of products  that  compete  with many of  Guardian's
products.  There are  other  competitors  that  offer a more  limited  number of
competing products. Guardian may be unable to compete successfully against these
organizations.  In addition,  Guardian  expects that major software  information
systems companies, large information technology consulting service providers and
system integrators,  and other smaller companies  specializing in the healthcare
industry may offer competitive products or services.

Product Liability Claims May Occur.

Any failure by Guardian's products that provide applications relating to patient
medical  histories,  diagnostic  procedures,  and  treatment  plans could expose
Guardian to product  liability  claims for personal  injury and wrongful  death.
Unsuccessful  claims  could be costly to defend and divert  management  time and
resources. In addition, Guardian cannot make assurances that it will continue to
have  appropriate  insurance  available  to it in  the  future  at  commercially
reasonable rates.

Product Malfunction Liability Claims May Occur.

Any failure by elements of  Guardian's  systems that provide  elements of claims
submitted by its clients could expose Guardian to liability claims for incorrect
billing and electronic claims. Unsuccessful claims could be costly to defend and
divert  management  time  and  resources.  In  addition,  Guardian  cannot  make
assurances that it will continue to have appropriate  insurance  available to it
in the future at commercially reasonable rates.

Specific Government Regulations Relating To Medicare And Medicaid May Impinge On
Guardian.

Many of  Guardian's  prospective  customers  and the other  entities  with which
Guardian may develop a business  relationship operate in the healthcare industry
and, as a result,  are subject to governmental  regulation.  Because  Guardian's
healthcare  products and services are designed to function  within the structure
of the healthcare financing and reimbursement  systems currently in place in the
United  States,  and because  Guardian is pursuing a strategy of developing  and
marketing  products and  services  that support its  customers'  regulatory  and
compliance  efforts,  Guardian may become subject to the reach of, and liability
under, these regulations.

The federal  Anti-Kickback  Law,  among other  things,  prohibits  the direct or
indirect  payment or receipt of any  remuneration  for  Medicare,  Medicaid  and
certain  other  federal  or  state  healthcare  program  patient  referrals,  or
arranging for or  recommending  referrals or other business paid for in whole or
in  part  by the  federal  health  care  programs.  Violations  of  the  federal
Anti-Kickback  Law may  result in civil and  criminal  sanction  and  liability,
including the temporary or permanent  exclusion of the violator from  government
health  programs,  treble damages and imprisonment for up to five years for each
violation.  If the  activities  of a customer of  Guardian or other  entity with
which Guardian has a business  relationship were found to constitute a violation
of the federal  Anti-Kickback Law and Guardian,  as a result of the provision of
products  or services to such  customer or entity,  was found to have  knowingly
participated  in such  activities,  Guardian  could be  subject to  sanction  or
liability  under such laws,  including the exclusion of Guardian from government
health  programs.  As a result of exclusion  from  government  health  programs,
Guardian customers would not be permitted to make any payments to Guardian.



                                       20
<PAGE>

The  federal  Civil  False  Claims  Act and the  Medicare/Medicaid  Civil  Money
Penalties  regulations  prohibit,  among other things,  the filing of claims for
services  that were not provided as claimed,  which were for services  that were
not medically necessary, or which were otherwise false or fraudulent. Violations
of these laws may result in civil damages, including treble and civil penalties.
In  addition  the  Medicare/Medicaid  and other  federal  statutes  provide  for
criminal  penalties for such false  claims.  If, as a result of the provision by
Guardian of products or services to its  customers or other  entities with which
Guardian has a business  relationship,  Guardian  provides  assistance  with the
provision  of  inaccurate  financial  reports  to  the  government  under  these
regulations,  or Guardian is found to have  knowingly  recorded or reported data
relating to inappropriate payments made to a healthcare provider, Guardian could
be subject to liability under these laws.

Medical Device  Regulation  May Require Us To Obtain  Approval For Our Products.

The United States Food and Drug  Administration  has  promulgated a draft policy
for the regulation of computer  software  products as medical  devices under the
1976 Medical  Device  Amendments to the Federal Food,  Drug and Cosmetic Act. To
the  extent  that  computer  software  is a medical  device  under  the  policy,
Guardian,  as a manufacturer of such products,  could be required,  depending on
the product, to:

      o     register and list its products with the FDA;

      o     notify  the FDA and  demonstrate  substantial  equivalence  to other
            products on the market before marketing such products; or

      o     obtain FDA approval by demonstrating safety and effectiveness before
            marketing a product.

Depending  on the intended use of a device,  the FDA could  require  Guardian to
obtain   extensive  data  from  clinical   studies  to  demonstrate   safety  or
effectiveness,  or  substantial  equivalence.  If the FDA  requires  this  data,
Guardian  would be required  to obtain  approval  of an  investigational  device
exemption before undertaking clinical trials.  Clinical trials can take extended
periods of time to complete.  Guardian  cannot provide  assurances  that the FDA
will approve or clear a device after the completion of such trials. In addition,
these  products  would be subject to the Federal Food,  Drug and Cosmetic  Act's
general controls,  including those relating to good manufacturing  practices and
adverse  experience  reporting.  Although it is not possible to  anticipate  the
final  form of the FDA's  policy  with  regard to  computer  software,  Guardian
expects  that the FDA is  likely  to become  increasingly  active in  regulating
computer software intended for use in healthcare  settings regardless of whether
the draft is finalized  or changed.  The FDA can impose  extensive  requirements
governing pre- and post-market conditions like service investigation,  approval,
labeling  and  manufacturing.   In  addition,   the  FDA  can  impose  extensive
requirements governing development controls and quality assurance processes.

System Errors And Warranties May Subject Us To Liability.

Guardian's healthcare  information systems are very complex. As with all complex
information  systems,  Guardian's  healthcare  information  systems  may contain
errors,  especially when first  introduced.  Guardian's  healthcare  information
systems are intended to provide  information to healthcare  providers for use in
the diagnosis and treatment of patients. Therefore, users of Guardian's products
may have a greater  sensitivity  to system  errors than the market for  software
products  generally.  Failure  of a  Guardian  customer's  system to  perform in
accordance  with its  documentation  could  constitute  a breach of warranty and
require Guardian to incur additional expenses in order to make the system comply
with  the  documentation.  If such  failure  is not  timely  remedied,  it could
constitute a material breach under a contract  allowing the client to cancel the
contract and subject Guardian to liability.

A security  breach could damage  Guardian's  reputation  or result in liability.
Guardian  retains and  transmits  confidential  information,  including  patient
health  information.  It is critical that these  facilities  and  infrastructure
remain  secure and be perceived by the  marketplace  as secure.  Guardian may be
required to expend  significant  capital and other  resources to protect against
security  breaches  and hackers or to  alleviate  problems  caused by  breaches.
Despite the  implementation of security measures,  this  infrastructure or other
systems that we interface with,  including the Internet and related systems, may
be vulnerable to physical  break-ins,  hackers,  improper employee or contractor
access,  computer  viruses,  programming  errors,  attacks  by third  parties or
similar disruptive problems. Any compromise of our security, whether as a result
of our own systems or systems that they interface with,  could reduce demand for
Guardian's services and products.



                                       21
<PAGE>

Customer  satisfaction  and  Guardian's  business  could be harmed if Guardian's
business  experiences  delays,  failures  or loss of  data in its  systems.  The
occurrence  of a major  catastrophic  event or other  system  failure  at any of
Guardian's   facilities,   or   at   any   third   party   facility,   including
telecommunications  provider  facilities,  could  interrupt  data  processing or
result in the loss of stored data, which could harm Guardian's business.

We May Infringe The Proprietary Rights Of Others.

If any of Guardian's products violate third party proprietary  rights,  Guardian
may be required to reengineer its products or seek to obtain licenses from third
parties to continue offering its products without substantial reengineering. Any
efforts to reengineer  Guardian's products or obtain licenses from third parties
may not be successful,  in which case Guardian may be forced to stop selling the
infringing product or remove the infringing  functionality or feature.  Guardian
may also  become  subject  to  damage  awards  as a  result  of  infringing  the
proprietary  rights of others,  which could cause  Guardian to incur  additional
losses and have an adverse impact on its financial  position.  Guardian does not
conduct comprehensive patent searches to determine whether the technologies used
in  its  products  infringe  patents  held  by  others.  In  addition,   product
development  is  inherently  uncertain  in  a  rapidly  evolving   technological
environment in which there may be numerous patent applications  pending; many of
which are confidential when filed, with regard to similar technologies.

Unforeseeable  Disruption In The Economy May Take Place  Consequent To Terrorism
Or Other  International  Events.

The terrorist  events of September 11, 2001, as well as new terrorists  threats,
the war in Iraq and the  possibility  of war in other areas of the Middle  East,
have sensitized  Guardian and many other businesses to the potential  disruption
that such activities can have on the economy, the business cycle and, ultimately
on the financial  performance of these  organizations.  It is impossible to know
whether such terrorist or military activities will continue, and whether, and to
what extent, they may cause a disruption that may have a material adverse effect
on the business and financial condition of the Company.

A Number Of Factors That Affect Our Revenues Make Our Future  Results  Difficult
To Predict,  And Therefore We May Not Meet Expectations For A Particular Period.

We believe that our revenues have the potential to vary  significantly from time
to time.  We  believe  that  these  variations  may  result  from many  factors,
including:

      o     the  timing,  size  and mix of  orders  from  our  major  customers,
            including in particular, the TSA and agencies of other governments;

      o     legislative  or other  government  actions  driven,  in part, by the
            public's  perception  of the  threats  facing  commercial  aviation,
            leading to fluctuations in demand for aviation security products and
            services;

      o     delays in product  shipments  caused by the inability of airports to
            install or integrate our products in a timely fashion;

      o     the availability and cost of key components;

      o     the  timing of  completion  of  acceptance  testing  for some of our
            products;

      o     the  introduction  and acceptance of new products or enhancements to
            existing products offered by us or our competitors;

      o     changes in pricing policies by us, our competitors or our suppliers,
            including  possible  decreases  in  average  selling  prices  of our
            products  caused  by  customer  volume  orders  or  in  response  to
            competitive pressures; and

      o     our sales mix to domestic and international customers.

We Expect to Depend On A Small Number Of Customers For A Substantial  Portion Of
Our Future Revenues.

A significant portion of our quarterly and annual operating expenses is expected
to be relatively  fixed in nature.  This means that future revenue  fluctuations
will cause our quarterly and annual operating results to vary substantially.  We
also may choose to increase spending to pursue new market  opportunities,  which
may negatively affect our financial results.

Governmental  Agencies,  The Primary  Customers For Our PinPoint  Products,  Are
Subject To Budget  Processes  Which Could  Limit The Demand For These  Products.

Substantially  all of the potential  customers for our PinPoint  products  under
development to date have been public agencies or quasi-public agencies,  such as
the FAA, the TSA,  airport  authorities  and  manufactures  of threat  detection
devices.  Public  agencies are subject to budgetary  processes  and  expenditure
constraints.

The  funding of  government  programs is subject to  legislative  appropriation.
Budgetary allocations for PinPoint depend, in part, upon governmental  policies,
which  fluctuate  from time to time in response to political and other  factors,
including the public's  perception of the threat of commercial airline bombings.
For example, the terrorist attacks of September 11, 2001 resulted in the passage
of the  Aviation and  Transportation  Security  Act of 2001,  or  Transportation
Security Act,  mandating a small  surcharge on each airline  ticket  purchase to
fund  airline  security.  This  surcharge  was  suspended  from  June 1, 2003 to
September  30,  2003.  We cannot  assure  that the  surcharge  will not again be
suspended  or that  the  funds  generated  by these  surcharges  will be used to
purchase our PinPoint products.  We cannot assure that funds will continue to be
appropriated  by  Congress or  allocated  by the TSA or other  agencies  for the
purchase of PinPoint product or any other such product we develop and market.



                                       22
<PAGE>

Legislative  Actions Could Lead To Fluctuations In Demand For Aviation  Security
Products And Services.

In addition to the Congressional  budgetary process,  other legislation could be
introduced that would impact demand for aviation security products and services.
In  response  to  fluctuation  in concern on the part of voters  about  aviation
security and competing  homeland  security  demands,  or for other reasons,  the
plans for  deployment  of PinPoint  product to screen  baggage could be changed.
Budgetary  debates and delays could result in fewer PinPoint products being sold
to the TSA.

Governmental  Agencies  Have  Special  Contracting  Requirements,  Which  Create
Additional Risks.

In contracting  with public  agencies,  we are subject to public agency contract
requirements that vary from jurisdiction to jurisdiction. Future sales to public
agencies will depend,  in part,  on our ability to meet public  agency  contract
requirements,  certain  of which may be  onerous  or even  impossible  for us to
satisfy.

Government contracts typically contain termination  provisions unfavorable to us
and are  subject  to  audit  and  modification  by the  government  at its  sole
discretion,  which  subject us to  additional  risks.  These  risks  include the
ability of the U.S. government to unilaterally:

      o     suspend or prevent  us for a set period of time from  receiving  new
            contracts or extending  existing  contracts  based on  violations or
            suspected violations of laws or regulations;

      o     terminate our future contracts;

      o     reduce the scope and value of our future contracts;

      o     audit and object to our  contract-related  costs and fees, including
            allocated indirect costs;

      o     control and potentially prohibit the export of our products; and

      o     change certain terms and conditions in our contracts.

The U.S.  government  can terminate any of its contracts  with us either for its
convenience  or if we default by  failing  to  perform  in  accordance  with the
contract schedule and terms.  Termination for convenience  provisions  generally
enable us to  recover  only our costs  incurred  or  committed,  and  settlement
expenses and profit on the work completed prior to termination.  Termination for
default  provisions do not permit these recoveries and make us liable for excess
costs  incurred  by the U.S.  government  in  procuring  undelivered  items from
another  source.  Our contracts  with foreign  governments  may contain  similar
provisions.  In the event we enter  into one or more  government  contracts  for
PinPoint,  the  government's  termination of any such contracts for our PinPoint
product under development would harm our business.

In addition,  U.S.  government  contracts are  conditioned  upon the  continuing
availability of  Congressional  appropriations.  Congress  usually  appropriates
funds annually for a given program on a September 30 fiscal year-end basis, even
though contract performance may take years.  Consequently,  our future contracts
with the TSA may only be partially funded at the outset,  and additional  monies
are normally  committed to the  contract by the TSA only as  appropriations  are
made by Congress for future periods.  The government's failure to fully fund one
or more of the contracts for our PinPoint product under  development  would harm
our business.

Because we expect to contract  with the U.S.  government,  we will be subject to
periodic  audits  and  reviews.  Based on the  results of its  audits,  the U.S.
government may adjust our  contract-related  costs and fees, including allocated
indirect  costs.  In the future,  government  audits and reviews could result in
adjustments to our revenues and cause other adverse effects, particularly to our
relationship  with  the TSA.  In  addition,  under  U.S.  government  purchasing
regulations,  some of our costs, including most financing costs, amortization of
intangible  assets,  portions of our research and  development  costs,  and some
marketing  expenses may not be  reimbursable  or allowed in our  negotiation  of
fixed-price  contracts.  Further,  because we expect to  contract  with the U.S.
government, we will be subject to an increased risk of investigations,  criminal
prosecution,  civil fraud,  whistleblower  lawsuits and other legal  actions and
liabilities to which purely private sector companies are not.



                                       23
<PAGE>

In addition,  public agency  contracts are frequently  awarded only after formal
competitive bidding processes,  which are often protracted and typically contain
provisions  that permit  cancellation in the event that funds are unavailable to
the public  agency.  We may not be  awarded  any of the  contracts  for which we
submit  a  bid.  Even  if  we  are  awarded  contracts,  substantial  delays  or
cancellations  of  purchases  could  result from  protests  initiated  by losing
bidders.

Our Growth Depends On Our  Introduction Of New Products And Services,  Which May
Be Costly To  Develop  And May Not  Achieve  Market  Acceptance.

As part of our  strategy  for growth,  we intend to develop  products to address
additional aviation security opportunities,  such as passenger, carry-on baggage
and  air  cargo  screening.   We  also  intend  to  address  homeland   security
requirements   beyond  aviation,   such  as  screening  at  border  checkpoints,
government offices and  transportation  terminals and ports. We will be required
to spend  funds to  develop  or  acquire  technologies  and  products  for these
initiatives,  and these  initiatives  may divert our  development and management
resources away from our core PinPoint  product.  In addition,  we have acquired,
rather than developed  internally,  some of our  technologies in connection with
our  acquisitions of companies and businesses,  and these  technologies  may not
perform as we expect.  The  development of new products may require greater time
and financial  resources than we currently  anticipate and, despite  significant
investments in research and development,  may not yield commercially  successful
products.

The  development of our products for explosives and weapons  detection is highly
complex.  Successful  product  development  and  market  acceptance  of any  new
products and services that we develop depend on a number of factors,  including:

      o     our timely completion and introduction of new products;

      o     our accurate prediction of the demand for homeland security products
            and the changing  requirements  of the homeland  security  industry,
            including certification or other required performance standards;

      o     the availability of key components of our products;

      o     the quality,  price and  operating  performance  of our products and
            those of our competitors;

      o     our customer service capabilities and responsiveness; and

      o     the success of our relationships with potential customers.

Our Future  PinPoint  Product May Fail To Obtain  Certification  By The TSA.

New products for aviation  security  applications  may require  certification or
approval  by the TSA,  and we  believe  that the TSA  does  not  currently  have
standards for the  certification of aviation  security  products other than bulk
explosives  detection  systems and  explosives  trace  detectors,  or ETD. Other
products, such as metal detectors, are subject to TSA testing prior to approval.
Market  acceptance  of new products may be limited if the TSA has not  developed
standards for  certification  or approval of such products,  and even if it does
develop such  standards,  we may be unable to obtain any such  certification  or
approval, which could materially limit market acceptance of such products. If we
fail to timely  introduce new products or if these  products fail to gain market
acceptance, our results of operations would be harmed.

In addition,  even if  successful  in the United  States,  new products  that we
develop may not achieve market acceptance outside of the United States.  Foreign
governments may be unwilling to commit  financial  resources to purchase our new
products, which would reduce our potential revenues and harm our business.

Our Existing PinPoint Product May Fail To Obtain Re-Certification By The TSA For
Changes In The PinPoint System.

Our existing  PinPoint  product can be required to be  re-certified  by the TSA.
This can happen when a critical  component is changed,  or we wish to make other
changes to the PinPoint systems.  When this happens, the affected PinPoint model
requires   re-certification  by  the  TSA.  The  failure  or  delay  in  gaining
re-certification  for an  existing  PinPoint  product  could harm our ability to
continue to sell the product and recognize associated revenues.

Our Major Potential  Customer,  The TSA, Is A Part Of The Department Of Homeland
Security,  A Newly  Created  Agency That Has  Experienced,  And May  Continue To
Experience,  Delays In Its  Operations,  Which May Cause Delays In Our Receiving
Orders For Our Products  From The TSA.

The TSA is a  relatively  new agency that was  created in  November  2001 by the
Transportation  Security Act. As a result, it has experienced,  and may continue
to  experience,  delays  in  fulfilling  its  mandate  as a result  of delays in
establishing  the necessary  infrastructure  to operate in an efficient  manner.
This may  result in delays in our  receiving  orders for our  PinPoint  product.
Further, the TSA is now a part of the Department of Homeland Security, which was
created  subsequent  to the  creation of the TSA and is  therefore in an earlier
stage of formation,  which may further create delays in our receiving  orders as
this agency is organized.



                                       24
<PAGE>

Future  Sales Of Our  Products  Will Depend On The Ability Of Airports To Secure
Funding To Build Baggage  Handling Systems And To Integrate Our PinPoint Product
Into Such Systems, Which They May Not Be Able To Do.

Future  sales will depend on  integrating  PinPoint  into  existing  baggage and
luggage handling  systems within  airports.  If an airport is not configured for
these systems,  deployment of our PinPoint  products may require  changes in the
airport infrastructure. If our PinPoint product cannot easily be integrated into
existing  baggage  handling  systems,  we may  experience  reduced  sales of our
PinPoint products or these sales may be delayed.  There can be no assurance that
the  government   will  continue  to  fund   installations,   integrations   and
reimbursements  at the  current  level or at all.  If there  is a  reduction  in
funding, we may experience reduced sales of our PinPoint products or these sales
may be delayed.

We believe  that a  substantial  opportunity  exists for  PinPoint  system to be
integrated into baggage handling systems. If airports determine,  in conjunction
with governmental  authorities,  that they will be unable or unwilling to modify
or finance baggage handling systems, this opportunity may be limited.

If Our  PinPoint  Product  Fails To Detect  Explosives,  We Could Be  Exposed To
Product  Liability  And  Related  Claims  For  Which  We May Not  Have  Adequate
Insurance Coverage, And We May Lose Current And Potential Customers.

Our aviation  security business exposes us to potential product liability risks,
which are inherent in the development, sale and maintenance of aviation security
products. Our software is not designed to detect, and FAA/TSA certification does
not  require,  100%  detection  of any and all  explosives  contained in scanned
baggage.  For this reason, or if our products  malfunction,  it is possible that
explosive material could pass undetected utilizing our product, which could lead
to  product  liability  claims.  There are also many  other  factors  beyond our
control  that  could  lead to  liability  claims,  such as the  reliability  and
competence of the customer's  operators and the training of the operators.  Such
liability  claims are likely to exceed any product  liability  insurance that we
may have obtained.

In addition,  the failure of any PinPoint product to detect explosives,  even if
due to operator error and not to the mechanical  failure of an PinPoint product,
could  result in public and  customer  perception  that our products do not work
effectively, which may cause potential customers to not place orders and current
customers to cancel orders already placed or to not place additional orders, any
of which would harm our business and financial results.

We  Expect To  Substantially  Depend On Large  Orders  From A Limited  Number Of
Customers.  As A Result,  Order  Cancellations  From Any Of Our Customers Or The
Failure Of These Customers To Continue To Purchase  PinPoint Products Could Have
A Material Negative Impact On Our Business And Financial  Results.

In any given fiscal quarter or year, our revenues will be derived from orders of
multiple units of our PinPoint  product from a limited number of customers.  The
failure of these customers,  particularly the U.S.  government,  to purchase our
PinPoint products or the cancellation of future orders would harm our business.

The Sales  Cycle For Our  PinPoint  Products  Is  Lengthy,  And We May  Expend A
Significant Amount Of Effort In Obtaining Sales Orders And Not Receive Them.

The sales  cycle of our  PinPoint  product is  expected to be lengthy due to the
protracted   approval   process  that   typically   accompanies   large  capital
expenditures and the time required to install our PinPoint product. In addition,
in the United  States,  the  creation  of the TSA and debate on  formation  of a
Department of Homeland Security,  as well as budgetary debates in Congress,  may
result in additional delays in the purchase of our PinPoint products. During the
sales  cycle we may  expend  substantial  funds  and  management  resources  but
recognize no associated revenue.

Our Future  International  Sales Subject Us To Risks That Could  Materially Harm
Our  Business.

It is part of our growth strategy to establish  international sales. A number of
factors related to our international sales and operations could adversely affect
our business, including:

      o     changes in domestic and foreign regulatory requirements;

      o     political instability in the countries where we sell products;

      o     possible foreign currency controls;

      o     fluctuations in currency exchange rates;



                                       25
<PAGE>

      o     our  ability to protect and  utilize  our  intellectual  property in
            foreign jurisdictions;

      o     tariffs, embargoes or other barriers;

      o     difficulties in staffing and managing foreign operations;

      o     difficulties in obtaining and managing distributors; and

      o     potentially negative tax consequences.

Our failure to obtain the requisite  licenses,  meet  registration  standards or
comply  with other  government  export  regulations,  may affect our  ability to
generate revenues from the sale of our products outside the United States, which
could harm our  business.  In  particular,  our  PinPoint  product  maybe deemed
regulated and subject to export  restrictions under the U.S. Department of State
regulations. Consequently, these regulations may make the product more difficult
to sell to a number of countries.  Compliance  with  government  regulations may
also  subject  us to  additional  fees and  costs.  The  absence  of  comparable
restrictions  on  competitors  in  other  countries  may  adversely  affect  our
competitive position.

Exchange Rate Fluctuations Could Cause A Decline In Our Financial  Condition And
Results Of Operations.

In 2003,  the cost of certain  international  currencies  has  increased  due to
fluctuations  in the exchange rate of the U.S.  dollar against the euro.  Future
fluctuations  in this  exchange rate could  adversely  affect our results in the
event we make foreign sales of our  products.  From time to time, as and when we
determine it is appropriate and advisable to do so, we will seek to mitigate the
effect of exchange rate  fluctuations  through the use of  derivative  financial
instruments.  We cannot assure you, however, that we will continue this practice
or be successful in these efforts.

Our Inability To Adapt To Rapid Technological Change Could Impair Our Ability To
Remain  Competitive.

The aviation security industry may undergo significant technological development
in response to increased demand for aviation  security  products.  A fundamental
shift in  technology  in our product  markets could harm our ability to generate
revenues from sales of PinPoint product and services.

We anticipate that we will incur expenses in the design and initial  development
and marketing of new products and services.  Our  competitors  may implement new
technologies  before we are able to,  allowing  them to provide  more  effective
products at more competitive prices. Future technological  developments could:

      o     adversely impact our competitive  position;

      o     require  write-downs  of  obsolete  technology;

      o     require us to discontinue  production of obsolete products before we
            can  recover  any or all of our related  research,  development  and
            commercialization   expenses;   or

      o     require  significant  capital  expenditures  beyond those  currently
            contemplated.

We cannot  assure  investors  that we will be able to achieve the  technological
advances to remain  competitive and  profitable,  that new products and services
will be developed  and developed on schedule or on a  cost-effective  basis that
anticipated markets will exist or develop for new products or services,  or that
our existing product and services will not become technologically obsolete.

The Aviation  Security  Industry Is Highly  Competitive.  Given The  Anticipated
Continuing Demand For Airport Security Products,  Competition May Increase.

The aviation security  industry is intensely  competitive and we may not compete
successfully.  As a result of increased demand for security systems,  additional
companies  may  enter the  industry.  Some of our  competitors,  and many of the
potential  new entrants into the aviation  security  industry,  have  financial,
technical,  production and other resources  substantially  greater than ours. We
believe that some of our competitors have products undergoing TSA certification.
Our failure to compete  successfully could result in lost sales and could hamper
our financial results.

Litigation May Be Necessary To Enforce Or Defend Against Claims Of  Intellectual
Property  Infringement,  Which Could Be Expensive And, If We Lose, Could Prevent
Us From Selling Our Products.

                                       26
<PAGE>

Litigation may be necessary in the future to enforce our  intellectual  property
rights,  to protect our trade  secrets or to determine the validity and scope of
the proprietary  rights of others.  Any  litigation,  regardless of the outcome,
could be costly and require significant time and attention of key members of our
management and technical personnel.

Our  domestic and  international  competitors,  many of whom have  substantially
greater   resources  and  have  made   substantial   investments   in  competing
technologies,  may have patents that will prevent,  limit or interfere  with our
ability  to  manufacture  and  sell  our  products.  We have  not  conducted  an
independent review of patents issued to third parties.  Because of the perceived
market  opportunity we face,  companies  possessing  technology rights that they
believe  we might  be  infringing  will now be much  more  motivated  to  assert
infringement  of their rights.  These third parties may assert  infringement  or
invalidity  claims  against us and litigation may be necessary to defend against
these claims.  An adverse  outcome in the defense of a patent suit could subject
us to significant  liabilities to third parties,  require  disputed rights to be
licensed from third  parties or require us to cease  selling our products.  Even
successful defenses of patent suits can be costly and time-consuming.

ITEM 2.     DESCRIPTION OF PROPERTIES

We lease  approximately  2,200  square  feet of office  space at 21351  Ridgetop
Circle,  Dulles,  Virginia pursuant to a month-to-month  lease that commenced on
June 5, 2003.  Current  monthly rent is $13,508.  We expect that we will need to
locate  new space  within  the next six months to  accommodate  the  anticipated
growth in staffing.

ITEM 3.     LEGAL PROCEEDINGS

There are no  material  pending  legal,  governmental,  administrative  or other
proceedings to which we are a party.

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

No  matters  were  submitted  for a vote of our  stockholders  during the fourth
quarter of the year ended December 31, 2003.




                                       27
<PAGE>

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
        ISSUER'S PURCHASES OF EQUITY SECURITIES

Our common stock traded on the Nasdaq  SmallCap  Market under the symbol "GRDN".
On April 29, 2002, we were notified by Nasdaq that our securities  were delisted
from  the  Nasdaq  Stock  Market  for  failure  to  meet  Nasdaq's   maintenance
requirement    for   continued    listing   with   respect   to   net   tangible
assets/shareholders equity.

Our common stock,  effective  August 18, 2002, is now traded on The Nasdaq Stock
Market,  Inc.'s OTC Bulletin Board under the symbol "GDTI." The following  table
sets forth the high and low bid prices for each quarter during 2002 and 2003.

                                        HIGH    LOW
                                        ----    ---

FISCAL YEAR ENDED DECEMBER 31, 2002:
      First Quarter ................   $0.10   $0.05
      Second .......................   $0.08   $0.04
      Quarter
      Third Quarter ................   $0.12   $0.12
      Fourth Quarter ...............   $0.36   $0.36

FISCAL YEAR ENDED DECEMBER 31, 2003:
      First Quarter ................   $0.33   $0.33
      Second .......................   $2.55   $2.40
      Quarter
      Third Quarter ................   $2.95   $2.76
      Fourth Quarter ...............   $3.90   $3.85

The  foregoing  quotations  for the periods  since our  delisting  from  Nasdaq,
reflect interdealer prices, without retail mark up, mark down or commission, and
may not represent  actual  trades.  The closing bid price of our common stock on
March 17, 2004, was $4.30 and there were approximately 281 record holders of our
common stock. This amount does not include beneficial owners of our common stock
held in "street name."  Signature Stock Transfer,  Inc.,  Dallas,  Texas, is our
stock transfer and warrant agent.

We have never paid dividends on our common stock.  Currently, we anticipate that
we will retain earnings, if any, to support operations and to finance the growth
and  development of our business and do not anticipate  paying cash dividends in
the foreseeable future.


RECENT SALES OF UNREGISTERED SECURITIES

Sale of Series C Convertible Preferred Stock

During October and November,  2003, we closed on the sale of an aggregate of 545
shares of our Series C Convertible  Preferred Stock. Berthel Fisher acted as the
placement agent for the offer and sale of such shares.  We received net proceeds
from the sale of such shares of $629,895 and paid to Berthel Fisher a commission
of 6% of the  aggregate  proceeds or $37,250,  a due  diligence fee of 2% of the
aggregate  proceeds of the  offering or  $13,625,  and issued to Berthel  Fisher
placement  agent's  warrants to purchase an  aggregate  of 21,800  shares of our
common stock, and to reimburse certain extraordinary expenses of Berthel Fisher.
The placement  agent's  warrants are  exercisable  at a price of $1.95 per share
during the five year period  following  the issuance  thereof and contain  piggy
back registration rights. On February 13, 2004, pursuant to the authorization of
our  stockholders,  we  increased  our  authorized  shares  of  common  stock to
200,000,000 shares.  Under the provisions of the Series C Convertible  Preferred
Stock,  the  shares  of  Series  C  Convertible  Preferred  Stock  automatically
converted into an aggregate of 545,000 shares of our common stock.

The foregoing  shares were issued to the  investors  and the placement  agent in
reliance upon the exemption from the registration requirements of the Securities
Act of 1933, as amended ("the Act") and set forth in Section 4(2) of the Act and
Rule 506 of  Regulation D  promulgated  thereunder  and  constitute  "restricted
securities" within the meaning of Rule 144 (a)(3) under the Act.

Bridge Loans

Beginning December 8, 2003, and concluding  December 19, 2003, we entered into a
series of purchase  agreements  with eight  individuals  under which we sold and
issued to such individuals  convertible promissory notes in the aggregate amount
of $700,000 and warrants to purchase 311,250 shares of our common stock. 200,000
of the warrants are exercisable during the eighteen (18) month period commencing
on the date of issuance at a price of $2.50 per share.  The  remaining  warrants
are  exercisable  as  follows:   (i)  80,000  warrants  exercisable  during  the
twenty-four  (24) month period  commencing on the date of issuance at a price of
$2.50 per share,  and (ii)  31,250  warrants  exercisable  during the sixty (60)
month period  commencing  on the date of issuance at a price of $5.00 per share.
The proceeds of the sale of the notes were used by Guardian for working  capital
purposes.  The notes bear interest at 10% ($70,000) and are repayable sixty days
after the date of issuance of the notes (maturity date).



                                       28
<PAGE>

The notes provide that the principal and accrued interest under the notes may be
converted  into units of  securities  to be issued in this  offering at the same
price as contemplated by our Private Placement Memorandum.  The unpaid notes and
interest,  beyond the maturity date,  bear interest at the rate of 18% per annum
in the event  they are not  repaid  within 60 days of the date of  issuance.  On
March 9, 2004, in accordance  with  provisions  of the purchase  agreements,  we
issued an additional  311,250 warrants to the note holders on the same terms and
conditions as those warrants  previously  issued. The foregoing warrants contain
certain anti-dilution  provisions,  one time piggy-back  registration rights and
other customary  provisions.  In the absence of financing,  the note holders may
convert  their  notes into  shares of our  common  stock at a price of $1.50 per
share.

Cappello Settlement

In October  2003,  we entered into a placement  agent  agreement  with  Cappello
Capital  Corporation  under terms which  obligated  us to issue an  aggregate of
557,757  ten-year  warrants to purchase our common stock at a price of $2.00 per
share.  Management  believed the investment bank failed in its obligations under
the  agreement.  On March 16,  2004,  we  reached  a  negotiated  settlement  to
terminate this placement  agent  agreement and  compensated  the Capello Capital
Corporation  through the issuance of 250,000  two-year  warrants to purchase our
common stock at a price of $2.00 per share. On March 17, 2004,  Cappello Capital
Corporation  exercised  their  cashless  exercise  option  in  exchange  for the
issuance of 197,368 shares of our common stock.

The  foregoing  shares were issued to the  placement  agent in reliance upon the
exemption from the  registration  requirements of the Securities Act of 1933, as
amended  ("the  Act") and set forth in  Section  4(2) of the Act and Rule 506 of
Regulation D  promulgated  thereunder  and  constitute  "restricted  securities"
within the meaning of Rule 144 (a)(3) under the Act.

Private Placement

On December 22, 2003, as amended,  we engaged Berthel Fisher & Company Financial
Services,  Inc.  ("BFC")  to act as our  placement  agent in  connection  with a
contemplated offering to certain "accredited  investors" pursuant to Rule 506 of
Regulation D under the Act. At the execution of the Placement  Agent  Agreement,
we issued to BFC 25,000 shares of our common stock.

On March 25, 2004,  we closed on the sale of an  aggregate of 121,996  shares of
our common stock.  Investors received one common stock purchase warrant for each
four shares of common stock  purchased.  We issued to the investors an aggregate
of 30,499 warrants  exercisable at a price of $2.65 per share during an eighteen
month period  following the issuance  thereof.  BFC acted as the placement agent
for the offer and sale of such shares. We received net proceeds from the sale of
such shares of $177,581  and paid to Berthel  Fisher a  commission  of 9% of the
aggregate  proceeds or $17,567 and issued to BFC placement  agent's  warrants to
purchase an aggregate  of 12,200  shares of our common  stock,  and to reimburse
certain  extraordinary  expenses of BFC.  The  placement  agent's  warrants  are
exercisable at a price of $1.92 per share during the five year period  following
the issuance thereof and contain piggy back  registration  rights and a cashless
exercise provision.

On April 1, 2004,  we closed on the sale of 115,936  shares of our common stock.
Investors  received  one common stock  purchase  warrant for each four shares of
common  stock  purchased.  We issued to the  investors  an  aggregate  of 28,984
warrants  exercisable  at a price of $2.65 per share  during an  eighteen  month
period  following March 25, 2004. BFC acted as the placement agent for the offer
and sale of such shares.  We received net proceeds  from the sale of such shares
of $168,773  and paid to BFC a  commission  of 9% of the  aggregate  proceeds or
$16,695 and issued to BFC placement agent's warrants to purchase an aggregate of
11,594  shares of our  common  stock,  and to  reimburse  certain  extraordinary
expenses of BFC. The placement  agent's  warrants are  exercisable at a price of
$1.92 per share during the five year period  following the issuance  thereof and
contain piggy back registration rights.

The foregoing securities were issued to the investors and the placement agent in
reliance upon the exemption from the  registration  requirements of the Act, and
set forth in Section 4(2) of the Act and Rule 506 of  Regulation  D  promulgated
thereunder and constitute "restricted securities" within the meaning of Rule 144
(a)(3) under the Act.


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
        OPERATIONS

You  should  read  the  following   summary  together  with  the  more  detailed
information and financial  statements and notes thereto  appearing  elsewhere in
this report.  Throughout this report when we refer to "Guardian," "we," "our" or
"us," we mean Guardian  Technologies  International,  Inc. and its  subsidiaries
after giving effect to the reverse  acquisition  of RJL Marketing  Services Inc.
("Reverse Acquisition") completed in June 2003.




                                       29
<PAGE>

DESCRIPTION OF THE COMPANY

Guardian  is  a  technology   company  that   designs,   develops  and  delivers
sophisticated  solutions  to its target  markets.  We  utilize  high-performance
imaging  technologies and advanced  analytics to create  integrated  information
management  technology  products and services that address critical  problems in
healthcare and aviation  security for corporations  and  governmental  agencies.
Each  product  and  service can  radically  improve the quality and  velocity of
decision-making,   organizational   productivity,   and  efficiency  within  the
enterprise.

The core  component  of  Guardian's  overall  business  strategy  is gaining and
securing a competitive advantage through our advanced technologies.  Our product
suite is a platform for innovation that efficiently integrates, streamlines, and
distributes business and clinical information and images across the enterprise.

Currently,  we are focused on providing technology solutions and services in two
primary markets, healthcare and aviation security. However, as we develop new or
enhanced solutions we expect to expand into other markets. We may also engage in
one or more  acquisitions of businesses that are  complementary to our business.
As of December 3, 2003, we have entered into a non-binding  agreement to acquire
Wise Systems, Ltd., of Corsham, UK, a leading developer of radiology information
systems (RIS). However,  there can be no assurance that we will be able to close
on the Wise Systems  Ltd.  acquisition  or identify  any other such  acquisition
candidates or be able to negotiate terms for any acquisition  that is acceptable
to us.

Headquartered in Dulles, Virginia,  Guardian has North American sales offices in
Los Angeles, Minneapolis, and Toronto.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

This  discussion and analysis of our financial  condition and plan of operations
is based upon our consolidated financial statements, which have been prepared in
accordance with accounting  principles  generally accepted in the United States.
The preparation of these financial  statements requires us to make estimates and
judgments that affect the reported amounts of assets,  liabilities,  revenue and
expenses,  and related  disclosure of contingent  assets and liabilities.  On an
on-going  basis,  we evaluate our critical  accounting  policies and  estimates,
including  those  related  to  revenue   recognition,   intangible  assets,  and
contingencies.  We base our estimates on historical experience, where available,
and on various  other  assumptions  that we believe to be  reasonable  under the
circumstances,  the results of which form the basis for making  judgments  about
the carrying values of assets and liabilities that are not readily apparent from
other sources.  Actual results may differ from these  estimates  under different
assumptions  and  conditions.  We  believe  the  following  critical  accounting
policies  affect  the  more  significant  judgments  and  estimates  used in the
preparation of our consolidated financial statements.

Principles of Consolidation

The  consolidated   financial   statements  include  the  accounts  of  Guardian
Technologies International,  Inc. and its wholly-owned subsidiary, RJL Marketing
Services Inc. On June 26, 2003, pursuant to the terms of an Amended and Restated
Agreement and Plan of Reorganization, we acquired all of the outstanding capital
stock of RJL  Marketing  Services Inc. in exchange for the issuance of shares of
common stock and shares of preferred stock.

Method of Accounting

We use the accrual basis of accounting for financial reporting purposes, whereby
revenue is recognized when earned and expenses when incurred.

Cash and Cash Equivalents

For purposes of financial statement presentation,  we consider all highly liquid
debt  instruments  with  initial  maturities  of ninety  days or less to be cash
equivalents.

Fair Value of Financial Instruments

The carrying amount of cash and cash equivalents and accrued expense obligations
approximate  their fair value due to the short term  nature of their  underlying
terms.



                                       30
<PAGE>

Estimates

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

Revenue Recognition

We are a development stage company and, as such, we have not generated  revenues
as of December 31, 2003. We believe revenues will be generated during the fiscal
year ended December 31, 2004. The source of those revenues will be from software
sales and consulting services.  Revenue recognition rules for software sales are
complex.  We will follow specific and detailed  guidelines in measuring revenue;
however, certain judgments will affect the application of our revenue policy.

Valuation of Long-Lived Assets Including Acquired Intangibles We review property
and equipment and certain identifiable intangible assets for impairment whenever
events or changes in circumstances indicate the carrying amount of such an asset
may not be recoverable. Recoverability of these assets is measured by comparison
of their carrying amount to future  undiscounted  cash flows that the assets are
expected  to  generate.  If such  assets  are  considered  to be  impaired,  the
impairment to be recognized in earnings  equals the amount by which the carrying
value of the assets  exceeds  their fair market  value.  We have  recognized  no
material   impairment   adjustments   related  to  property  and   equipment  or
identifiable intangibles during the past year.


PLAN OF OPERATIONS

We develop targeted,  functional, and innovative software solutions and services
to derive  intelligence from images and data. Today,  organizations  collect far
more data,  particularly with the expansive growth in digital imagery, than they
actually  analyze and  meaningfully  apply. The analysis of this data and images
can  lead  to   significant   improvements   in  the  quality  and  efficacy  of
organizational  decision-making.  Business and IT  consultants  predict that the
exponential  growth in data and images over the next  decade will  continue at a
pace equal to or greater than the growth experienced during the past decade. The
need for more  intelligent  and expedient  methods of analyzing data and images,
along with converting the analysis into beneficial decision-making or predictive
analysis bodes well for the business prospects of Guardian.

Our focus for the  immediate  term will be two  markets:  aviation  security and
healthcare  radiology.  While each of these markets represents  enormous revenue
potential,  they are also fraught with many obstacles.  In the aviation security
marketplace  we face the challenge of  validating  the efficacy of our solution.
Many have tried to solve the imaging analysis and detection  problems,  all have
failed to make  substantial  improvements.  We  believe  our  PinPoint  solution
resolves the imaging analysis and detection issues facing governmental  agencies
and hardware  scanner  manufacturers.  Our  challenges  will be  navigating  the
government  procurement  process and  developing  the most  beneficial  business
strategy  for  aligning  with  the  scanner  manufacturers.  In  the  healthcare
radiology  marketplace  we will be marketing  and selling our product to clients
with little  technological  sophistication  who are  accustomed  to  maintaining
images  on  film  and  data  in  handwritten  records.   Properly  developing  a
cost/benefit  analysis will be the key to penetrating the marketplace.  To date,
the only solution  providers  were  extremely  expensive as their primary market
focus was the very largest of hospitals.

During the next twelve months,  we expect to satisfy our cash  requirements from
the proceeds derived from a private placement  offering through Berthel Fisher &
Company Financial Services, Inc. ("BFC"). The offering commenced in Mid-March of
2004 and as of the date of this report has  produced an  aggregate  of $346,354,
net of placement  agent fees and  reimbursable  expenses.  We fully expect to be
able to raise the maximum amount of the offering, $8,000,000.  Proceeds from the
offering  will be used to: (i) acquire Wise  Systems,  Ltd.,  (ii)  complete the
development and productization of PinPoint, (iii) complete the patent process on
several key patentable algorithms and processes,  and (iv) to support the growth
and operating  expenses of the Company.  We believe that we will require between
$1,300,000 and $2,000,000 to support  operations  throughout  2004. This assumes
minimal revenue production during the year.

During this  development  and capital  formation  phase,  and until such time as
adequate  financing  is in  place,  we will  closely  monitor  our costs and our
revenue expectations and will take actions appropriate to the market conditions.

We intend to continue  to invest in both our  existing  technologies  and in the
development or acquisition of additional complimentary technologies,  as well as
in building an efficient marketing and sales  organization.  Looking to 2004, we
believe  we will  transition  during  the  second  quarter  of the  year  from a
`development stage company' to an `operating company.'


                                       31
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

Overview

Our ability to implement our plan of  operations,  including the  acquisition of
Wise  Systems,  Ltd.,  is  predicated  on our ability to generate the  necessary
capital  resources  through one or more equity or debt  financings,  including a
private  placement  through BFC. We intend to use the proceeds of such financing
to complete the acquisition of Wise, to complete the development of the PinPoint
product,  to complete and file patent  applications,  and to support  operations
until  revenue  flow is  sufficient  to meet  the  demands  of  operations.  The
acquisition of Wise and the  subsequent  integration of Wise's product line with
our  DEVision  product  line will  establish  the Company as a viable  solutions
provider in the RIS/PACS  marketplace.  While it is conceivable  that we will be
able to generate  revenues from either product line prior to integration,  it is
not  anticipated  that  the  revenues  generated  would be  sufficient  to cover
operating  expenses.  We will need  approximately  three  months to complete the
development and commercialization of the PinPoint product. We anticipate that we
will  enter  into  some form of  licensing  agreement  with one or more  scanner
manufacturers  during  the three  month  period;  however,  revenues  from those
agreements  will not  materialize  until the product  development  is  complete.
Further, during the remaining three months of development on PinPoint, we intend
to  actively  pursue the  Transportation  Safety  Administration  (TSA)  through
multiple  means.  We believe that  $1,300,000  to  $2,000,000,  in excess of the
$1,800,000 required for the Wise acquisition, is sufficient capital resources to
ensure that we can complete our plan of operations during 2004.

Results of Operations

The  Company had no revenues  for the period  from  Inception  (October 2, 2002)
through  December 31, 2003. Net loss for the period was $6,625,662.  Included in
the net loss were selling, general and administrative expenses of $2,197,041 and
non-cash  expenses in the form of stock-based  compensation  to consultants  and
employees of $4,277,242.

Operating Activities

During  the  year  ended  December  31,  2003,  we used  net  cash in  operating
activities  of  $1,508,585.  During the  period,  we  experienced  a net loss of
$6,524,434 which was offset by non-cash charges of $4,464,393. Predominant among
the non-cash charges were expenses associated with the use of stock compensation
in lieu of cash  compensation  to consultants  and employees.  Additionally,  we
expended $140,000 in royalty payments to Diagnos  Corporation under an exclusive
distribution  agreement,  which we have  subsequently  terminated.  The  royalty
payments  were carried on our  accounting  records as an asset since the royalty
payments  were  intended  to be offset  against  the  resale  of seven  software
licenses of the Diagnos product. As a result of the termination of the agreement
with Diagnos,  we have  recognized and  appropriately  written-off  the software
licenses,  as impaired  assets,  which resulted in a further  non-cash charge to
earnings.  During  the year we made  two  deposits  on  contracts,  $7,900  as a
security  deposit under terms of our office lease  agreement,  and $150,000 as a
good faith deposit at the signing of the letter of intent for the acquisition of
Wise Systems,  Ltd. In addition to cash generated through financing  activities,
we offset  operating  expenses by increasing  vendor payables by $182,480 and by
deferring payroll of $527,176.  The outstanding payroll represents earned salary
due to four executives of the Company.

Investing Activities

During  the  year  ended  December  31,  2003,  we used  net  cash in  investing
activities  of $202,170  for the  purchase of $37,170 of  equipment,  $25,000 of
software,  and $140,000 to acquire seven distributable licenses (royalty payment
discussed above) of the Diagnos software.

Financing Activities

Net cash was  provided  from  investing  activities  through  the sale of common
stock, the sale of preferred stock, and through convertible bridge notes. At the
date of the reverse acquisition,  we issued 1,000,000 shares of its common stock
for net cash  proceeds of $500,000.  During  August and  September  of 2003,  we
issued 133.3 shares of its Series C Convertible  Preferred  Stock to an employee
of the Company for net cash proceeds of $200,000. During October and November of
2003,  we issued  545  shares of its  Series C  Convertible  Preferred  Stock to
investors,  in a private  placement  through Berthel Fisher & Company  Financial
Services,  Inc. (see Item 5 above),  for net cash proceeds after placement agent
and escrow fees of $629,825.  During  December 2003, we entered into a series of
convertible bridge notes (see Item 5 above) for cash proceeds of $700,000.


CRITICAL ACCOUNTING PRONOUNCEMENTS

In December 2002, the FASB issued Statement No. 148, "Accounting for Stock-Based
Compensation  -  Transition  and  Disclosure"  ("SFAS  148").  SFAS 148 provides
alternative  methods of  transition  for a  voluntary  change to the fair market
value method of accounting for stock-based employee  compensation as required by
SFAS 123. In addition,  SFAS 148 amends the disclosure  requirements of SFAS 123
to require more prominent and more frequent  disclosures in financial statements
about the effects of  stock-based  compensation.  The adoption of the disclosure
only requirements of SFAS 148 did not have a significant impact on the Company's
financial statements.



                                       32
<PAGE>

In January  2003,  the FASB  issued  Interpretation  No. 46,  "Consolidation  of
Variable Interest Entities,  an interpretation of ARB No. 51" ("FIN 46"). FIN 46
clarifies   existing   accounting  for  whether  interest   entities  should  be
consolidated  in  financial  statements  based  upon the  investee's  ability to
finance activities  without  additional  financial support and whether investors
possess  characteristics of a controlling financial interest.  FIN 46 applies to
years or interim periods beginning after January 31, 2003. This pronouncement is
not expected to have a material  impact on the Company's  financial  position or
results of operations.

In April 2003, the FASB issued Statement No. 149, "Amendment of Statement 133 on
Derivative  Instruments  and  Hedging  Activities."  This  Statement  amends and
clarifies  financial  accounting  and  reporting  for  derivative   instruments,
including   certain   derivative   instruments   embedded  in  other   contracts
(collectively  referred to as derivatives) and for hedging activities under FASB
Statement  133.  This  Statement  is  effective  for  contracts  entered into or
modified after June 30, 2003,  and for hedging  relationships  designated  after
June 30, 2003. This  pronouncement  is not expected to have a material impact on
the Company's financial position or results of operations.

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with Characteristics of both Liabilities and Equity." This statement
affects the classification,  measurement and disclosure  requirements of certain
freestanding financial instruments,  including mandatory redeemable shares. SFAS
No. 150 is  effective  for all  financial  instruments  entered into or modified
after May 31, 2003,  and  otherwise  is effective  for the Company for the third
quarter of Fiscal 2003.  This  pronouncement  is not expected to have a material
impact on the Company's financial position or results of operations.


ITEM 7.  FINANCIAL STATEMENTS

                    GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.

              FINANCIAL STATEMENTS AS OF DECEMBER 31, 2003 AND 2002
                       TOGETHER WITH THE AUDITORS' REPORT


<TABLE>
<CAPTION>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                                                                                      PAGE
<S>                                                                                                                             <C>
Report of Independent Registered Public Accounting Firm ......................................................................   F-2

Consolidated Balance Sheets as of December 31, 2003 and 2002 .................................................................   F-3

Consolidated Statements of Operations for the year ended December 31, 2003, the period from inception
 (October 2, 2002) to December 31, 2002, and the period from inception (October 2, 2002) to December 31, 2003 ................   F-4

Consolidated Statements of Stockholders' Equity (Deficit) for the year ended December 31, 2003, the period from inception
 (October 2, 2002) to December 31, 2002, and the period from inception (October 2, 2002) to December 31, 2003 ................   F-5

Consolidated Statements of Cash Flows for the year ended December 31, 2003 , the period from inception (October 2, 2002) to
 December 31, 2002, and the period from inception (October 2, 2002) to December 31, 2003 .....................................   F-8

Notes to the Consolidated Financial Statements ...............................................................................  F-10
</TABLE>


<PAGE>


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
Dulles, Virginia

We have  audited  the  accompanying  Balance  Sheets  of  GUARDIAN  TECHNOLOGIES
INTERNATIONAL,  INC. AND  SUBSIDIARIES  and RJL Marketing  Services,  Inc. as of
December  31,  2003  and  2002,  respectively,  and the  related  Statements  of
Operations,  Stockholders'  Equity  (Deficit)  and Cash Flows for the year ended
December 31, 2003, the period from  inception  (October 2, 2002) to December 31,
2002, and for the period from inception  (October 2, 2002) to December 31, 2003.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,   the  financial  position  of  GUARDIAN   TECHNOLOGIES
INTERNATIONAL,  INC.  AND  SUBSIDIARIES  as of  December  31,  2003  and  of RJL
Marketing  Services,  Inc. as of  December  31,  2002,  and the results of their
operations and their cash flows for the year ended December 31, 2003, the period
from  inception  (October 2, 2002) to  December  31,  2002,  and the period from
inception  (October 2, 2002) to December 31, 2003 in conformity  with accounting
principles generally accepted in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial  statements,  the Company has incurred  significant  operating  losses
since inception, has been unable to generate revenues to date, and has a working
capital deficiency. As a result, the Company may not be able to continue to meet
its obligations as they come due. These conditions raise substantial doubt about
the  Company's  ability  to  continue  as a going  concern.  Management's  plans
regarding  these matters also are described in Note 1. The financial  statements
do not  include  any  adjustments  that  might  arise  from the  outcome of this
uncertainty.

ARONSON & COMPANY

Rockville, Maryland
April 11, 2004

                                      F-2
<PAGE>


                          CONSOLIDATED BALANCE SHEETS
           Guardian Technologies International, Inc. and Subsidiaries
                         (A Development Stage Company)
                       With RJL Marketing Services, Inc.



<TABLE>
<CAPTION>
                                                                                             RJL Marketing
                                                                                              Services, Inc.
                                                        December 31, 2003                    December 31, 2002
                                                        -----------------                    -----------------
ASSETS
Current assets:
<S>                                                        <C>                                  <C>
  Cash and cash equivalents                                $    319,229                         $         89
  Other current assets                                              100                                   --
  Prepaid expenses                                                  200                                   --
                                                           ------------                         ------------
    Total current assets                                        319,529                                   89

Equipment, net                                                2,295,386                                   --

Other assets:
  Deposits                                                      157,900                                   --
  Other long-term assets                                        239,434                                   --
                                                           ------------                         ------------
    Total assets                                           $  3,012,249                         $         89
                                                           ------------                         ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
  Accounts payable                                         $    205,953                         $     23,473
  Accrued payroll                                               605,020                               77,844
  Notes payable less discounts                                  569,618                                   --
                                                           ------------                         ------------
    Total current liabilities                                 1,380,591                              101,317
                                                           ------------                         ------------
Stockholders' equity (deficit)
  Preferred stock, $0.20 par value -
    Authorzed - 1,000,000 shares
    Issued and outstanding - 7,375 at December 31, 2003           1,475                                   --
  Common stock, $0.001 par value -
    Authorzed - 15,000,000 shares
    Issued and outstanding - 13,523,500 and 917,950 at
    December 31, 2003 and 2002, respectively                     13,524                                  908
  Stock warrants outstanding                                  1,031,424                                   --
  Deferred stock compensation                               (13,873,418)                                  --
  Additional paid-in capital                                 21,084,315                                 (908)
  Deficit accumulated during the development stage           (6,625,662)                            (101,228)
                                                           ------------                         ------------
    Total shareholders' equity (deficit)                      1,631,658                             (101,228)
                                                           ------------                         ------------
    Total liabilities and stockholders' equity (deficit)      3,012,249                         $         89
                                                           ------------                         ------------
</TABLE>


    The accompanying notes are an integral part of the financial statements.

                                      F-3
<PAGE>

                      CONSOLIDATED STATEMENTS OF OPERATIONS
           Guardian Technologies International, Inc. and Subsidiaries
                          (A Development Stage Company)
                        With RJL Marketing Services, Inc.


<TABLE>
<CAPTION>
                                                                        RJL Marketing
                                                                        Services, Inc.
                                                                 Inception (October 2, 2002)  Inception (October 2, 2002)
                                              Year Ended                   Through                    Through
                                            December 31, 2003          December 31, 2002          December 31, 2003
                                            -----------------    ---------------------------  ---------------------------
<S>                                         <C>                  <C>                          <C>
Net revenues                                  $        --                $        --                $        --

Cost of sales                                          --                         --                         --

Gross profit                                           --                         --                         --

Operating expenses:
   Selling, general and administrative          2,197,041                    101,228                  2,298,269
   Depreciation                                    26,734                         --                     26,734
   Stock-based compensation                     4,277,242                         --                  4,277,242
     Total operating expenses                   6,501,017                    101,228                  6,602,246
                                              -----------                -----------                -----------
Operating loss                                 (6,501,017)                  (101,228)                (6,602,246)
                                              -----------                -----------                -----------
Other income (expense):
   Interest expense                               (23,417)                        --                    (23,417)
                                              -----------                -----------                -----------
     Total other income (expense)                 (23,417)                        --                    (23,417)
                                              -----------                -----------                -----------

Net loss                                      $(6,524,434)               $  (101,228)               $(6,625,662)
                                              -----------                -----------                -----------

Loss per common share:
   Basic                                      $     (0.78)               $     (0.04)               $     (0.90)


Shares used in computing loss per share:
   Basic                                        8,314,785                  2,582,283                  7,392,314
</TABLE>



    The accompanying notes are an integral part of the financial statements.

                                      F-4

<PAGE>
            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
                    Guardian Technologies Inernational, Inc.
                          (A Development Stage Company)
                        With RJL Marketing Services, Inc.

<TABLE>
<CAPTION>


                                                        Shares of       Shares of       Shares of
                                       Shares of       Preferred       Preferred       Preferred      Dollar Amount
                     Date            Common Stock       Class A         Class B         Class C         per Share      Common Stock
-------------------- -------------- ---------------- --------------- --------------- --------------- ---------------- -------------
<S>                     <C>             <C>             <C>             <C>             <C>             <C>
Balance, October
3, 2002 (inception)                        -               -               -               -         $-                $-
Common Stock
Issued to founder       10/23/2002      907,950            -               -               -         -                908
Net loss                                   -               -               -               -         -                -
                     -------------- ---------------- --------------- --------------- --------------- ---------------- -------------
Balance, December
31, 2002                                907,950            -               -               -         -                908
Common Stock
Issued to founders        4/3/2003     4,603,550           -               -               -         -                4,604
Common stock
options issued
pursuant to
employment               5/19/2003         -               -               -               -         0.50             -
Common Stock
Issued to former
shareholders of
pre-acquisition
Guardian
Technologies             6/26/2003     2,150,000           -               -               -         -                2,150
Preferred Class B
issued pursuant to
consulting
agreements for
services                 6/26/2003         -               -              690              -         0.81             -
Preferred Class A
issued to founders
pursuant to the
reverse acquisition      6/27/2003         -             4,097             -               -         0.20             -
Sale of common
stock for cash           6/30/2003     1,000,000           -               -               -         0.50             1,000
Common stock
options issued to
consultant                7/4/2003         -               -               -               -         0.50             -
Common stock
options issued
pursuant to
consulting
agreements for
services                 7/10/2003     2,000,000           -               -               -         0.33             2,000
Common stock
options issued
pursuant to
employment               7/14/2003         -               -               -               -         0.50             -
Compensation
issued pursuant to
consulting
agreements for
services                 7/28/2003     1,820,000         1,430            480              -         0.78             1,820
Common stock
options issued
pursuant to
employment               7/28/2003         -               -               -               -         0.50             -
Common stock
options issued
pursuant to
consulting
agreements for
services                 7/30/2003      150,000            -               -               -         2.35             150
Common stock
options issued
pursuant to
employment                8/4/2003         -               -               -               -         0.50             -
Common stock
options issued
pursuant to
employment               8/18/2003         -               -               -               -         0.50             -
Sale of preferred
stock (Class B)
for cash                 8/26/2003         -               -               33              -         1.50             -
Common stock
options issued
pursuant to
employment                9/1/2003         -               -               -               -         1.25             -

<CAPTION>

                                                                                                                    Deficit
                                                                                                                Accumulated
                                                     Preferred                                                    During the
                        Preferrd      Preferred      Class C        Additional                      Deferred    Development
                     Class A Stock  Class B Stock     Stock      Paid in Capital      Warrants    Compensation     Stage      Total
------------------- --------------- ------------ -------------- ----------------- ------------ ----------------------------- -------
<S>                 <C>
Balance, October
3, 2002 (inception) $-              $-           $-            -                 $-            $-                           $-
Common Stock
Issued to founder   -               -            -              (908)             -            -                    -        -
Net loss            -               -            -              -                 -            -                 101,228)  (101,228)
                    --------------- ------------ -------------- ----------------- ------------ ----------------------------- -------
Balance, December
31, 2002            -               -            -              (908)             -            -                 101,228)  (101,228)
Common Stock
Issued to founders  -               -            -              (4,604)           -            -                    -        -
Common stock
options issued
pursuant to
employment          -               -            -              106,400           -                    (106,400)             -
Common Stock
Issued to former
shareholders of
pre-acquisition
Guardian
Technologies        -               -            -              (2,150)           -            -                    -        -
Preferred Class B
issued pursuant to
consulting
agreements for
services            -               138          -              558,762           -                    (558,900)    -        -
Preferred Class A
issued to founders
pursuant to the
reverse acquisition 819             -                           (819)             -            -                    -        -
Sale of common
stock for cash      -               -                           499,000           -            -                    -        500,000
Common stock
options issued to
consultant          -               -            -              323,000           -                    (323,000)    -
Common stock
options issued
pursuant to
consulting
agreements for
services            -               -            -              658,000           -            -                    -        660,000
Common stock
options issued
pursuant to
employment          -               -            -              332,500           -                    (332,500)    -        -
Compensation
issued pursuant to
consulting
agreements for
services            286             96           -                    2,907,198   -                 (2,909,400)     -        -
Common stock
options issued
pursuant to
employment          -               -            -              589,000           -                    (589,000)    -        -
Common stock
options issued
pursuant to
consulting
agreements for
services            -               -            -              352,350           -                    (352,350)    -        -
Common stock
options issued
pursuant to
employment          -               -            -              798,000           -                    (798,000)    -        -
Common stock
options issued
pursuant to
employment          -               -            -              522,500           -                    (522,500)    -        -
Sale of preferred
stock (Class B)
for cash            -               7            -              49,993            -            -                    -        50,000
Common stock
options issued
pursuant to
employment          -               -            -              39,188            -                     (39,188)    -        -
</TABLE>


                                      F-5
<PAGE>

           CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
                  Guardian Technologies International, Inc.
                        (A Development Stage Company)
                      With RJL Marketing Services, Inc.


<TABLE>
<CAPTION>
                                                                                                   Shares    Shares
                                    Shares    Shares     Shares     Shares     Dollar              of        of
                                    of        of         of         of         Amount              Preferred Preferred
                                    Common    Preferred  Preferred  Preferred  per       Common    Class     Class B
                           Date     Stock     Class A    Class A    Class C    Share     Stock A   Stock     Stock
                           ----     -----     -------    -------    -------    -----     -------   -----     -----
<S>                     <C>     <C>             <C>     <C>          <C>        <C>
Common stock issued
pursuant to consulting
agreements for services  9/11/2003    80,000         -         -         -      2.35        80        -         -

Sale of preferred
stock (Class B) for
cash                     9/12/2003         -         -       100         -      1.50         -        -        20

Warrants for the
purchase of 200,000
shares of common stock   9/18/2003   200,000         -         -         -      2.00         -        -         -

Common stock issued
pursuant to consulting
agreements for services  9/30/2003         -         -         -         -      2.76       200        -         -

Common stock options
issued pursuant to
employment               10/15/2003        -         -         -         -      0.50         -        -         -

Sale of preferred
stock (Class C) for
cash                     10/15/2003        -         -         -       408      1.25         -        -         -

Warrants for the
purchase of 16,320
shares of common stock   10/15/2003        -         -         -         -      1.95         -        -         -

Common stock options
issued pursuant to
employment               11/1/2003         -         -         -         -      1.25         -        -         -

Common stock options
issued pursuant to
employment               11/6/2003         -         -         -         -      1.25         -        -         -

Common stock options
issued pursuant to
employment               11/8/2003         -         -         -         -      0.50         -        -         -

Sale of preferred
stock (Class C) for
cash                     11/21/2003        -         -         -       137      1.25         -        -         -

Warrants for the
purchase of 5,480
shares of common stock
for preferred stock
sale                     11/25/2003        -         -         -         -      1.95         -        -         -

Warrants for the
purchase of 100,000
shares of common stock
for notes payable        12/8/2003         -         -         -         -      2.50         -        -         -

Warrants for the
purchase of 40,000
shares of common stock
for the notes payable    12/8/2003         -         -         -         -      2.50         -        -         -

Warrants for the
purchase of 171,250
shares of common stock
for notes payable        12/19/2003        -         -         -         -      2.50         -        -         -

Common stock issued
pursuant to the
acquisition of software  12/19/2003  587,000         -         -         -      3.85       587        -         -

Common stock issued
pursuant to a
placement agent
agreement                12/23/2003   25,000         -         -         -      3.75        25        -         -


<CAPTION>
                         Shares
                         of                                             Deficit
                         Preferred Additional                         Accumulated
                         Class C   Paid in                Deferred    During the
                         Stock     Capital   Warrants  Compensation  Development    Total
                         -----     -------   --------  ------------  -----------    -----
<S>                     <C>
Common stock issued
pursuant to consulting
agreements for services     -    187,920         -     (188,000)                        -

Sale of preferred
stock (Class B) for
cash                        -    149,980         -             -                  150,000

Warrants for the
purchase of 200,000
shares of common stock      -          -   145,684             -            -     145,684

Common stock issued
pursuant to consulting
agreements for services     -    551,800         -     (552,000)            -           -

Common stock options
issued pursuant to
employment                  -    456,000               (456,000)            -           -

Sale of preferred
stock (Class C) for
cash                       82    469,303         -             -            -     469,385

Warrants for the
purchase of 16,320
shares of common stock      -   (18,532)    18,532             -            -           -

Common stock options
issued pursuant to
employment                  -     41,563         -      (41,563)            -           -

Common stock options
issued pursuant to
employment                  -     45,125         -      (45,125)            -           -

Common stock options
issued pursuant to
employment                  -     15,200         -      (15,200)            -           -

Sale of preferred
stock (Class C) for
cash                       27    160,483         -             -                  160,510

Warrants for the
purchase of 5,480
shares of common stock
for preferred stock
sale                        -    (6,607)     6,607             -            -           -

Warrants for the
purchase of 100,000
shares of common stock
for notes payable           -          -    42,410             -            -      42,410

Warrants for the
purchase of 40,000
shares of common stock
for the notes payable       -          -    34,955             -            -      34,955

Warrants for the
purchase of 171,250
shares of common stock
for notes payable           -          -    74,433             -            -      73,433

Common stock issued
pursuant to the
acquisition of software     -  2,259,363         -             -                2,259,950

Common stock issued
pursuant to a
placement agent
agreement                   -     93,725         -             -                   93,750
</TABLE>

                                      F-6
<PAGE>


           CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
                  Guardian Technologies International, Inc.
                        (A Development Stage Company)
                      With RJL Marketing Services, Inc.


<TABLE>
<CAPTION>
                                                                      Date       Shares of        Shares of        Shares of
                                                                                Common Stock   Preferred Class  Preferred Class
                                                                                                       A               B
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>
Warrants for the purchase of 250,000 shares of common stock        31-Dec-03         -                -                -
Remeasurement of stock issued pursuant to consulting agreements                      -                -                -
Amortization of deferred compensation expense                                        -                -                -
Net Loss                                                                             -                -                -
-----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2003                                                      13,523,500          5,527            1,303
-----------------------------------------------------------------------------------------------------------------------------------



<CAPTION>
                                                                      Shares of          Dollar        Common     Preferred
                                                                   Preferred Class     Amount per      Stock       Class A
                                                                          C              Share                      Stock
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>
Warrants for the purchase of 250,000 shares of common stock               -               1.00           -            -
Remeasurement of stock issued pursuant to consulting agreements           -                -             -            -
Amortization of deferred compensation expense                             -                -             -            -
Net Loss                                                                  -                -             -            -
-------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2003                                               545                          $13,524       $1,105
-------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
                                                                    Preferred    Preferred    Additional Paid in     Warrants
                                                                   P Class B      Class C           Capital
                                                                      Stock         Stock
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                                   <C>
Warrants for the purchase of 250,000 shares of common stock             -            -                -               709,803
Remeasurement of stock issued pursuant to consulting agreements         -            -            8,951,582              -
Amortization of deferred compensation expense                           -            -                -                  -
Net Loss                                                                -            -                -                  -
----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2003                                            $261         $109         $21,084,315         $1,031,424
----------------------------------------------------------------------------------------------------------------------------------


<CAPTION>
                                                                       Deferred       Deficit Accumulated
                                                                     Compensation          During the
                                                                                       Development Stage         Total
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                             <C>
Warrants for the purchase of 250,000 shares of common stock               -                    -                709,803
Remeasurement of stock issued pursuant to consulting agreements      (8,951,582)               -                   -
Amortization of deferred compensation expense                         2,907,440                -               2,907,440
Net Loss                                                                  -               (6,524,434)         (6,524,434)
----------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2003                                           ($13,873,418)       ($6,625,662)         $1,631,658
----------------------------------------------------------------------------------------------------------------------------
</TABLE>

   The accompanying notes are an integral part of the financial statements.


                                      F-7
<PAGE>


                     CONSOLIDATED STATEMENTS OF CASH FLOWS
           Guardian Technologies International, Inc. and Subsidiaries
                         (A Development Stage Company)
                       With RJL Marketing Services, Inc.

<TABLE>
<CAPTION>
                                                                             RJL Marketing
                                                                             Services, Inc.
                                                                               Inception          (October 2, 2002)
                                                           Year Ended            through      Inception (October 2, 2002)
                                                       December 31, 2003    December 31, 2002      December 31, 2003
                                                       -----------------    -----------------      -----------------
Cash flows from operating activities:
<S>                                                        <C>                  <C>                  <C>
Net loss                                                   $(6,524,434)         $  (101,228)         $(6,625,662)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation                                                    26,734                   --               26,734
Stock-based compensation                                     4,277,242                   --            4,277,242
Amortization of bridge note discounts                           20,417                   --               20,417
Impairment of licenses                                         140,000              140,000
Increase in other current assets                                  (100)                (100)                (100)
Increase in prepaids                                              (200)                  --                 (200)
Increase in deposits                                          (157,900)                  --             (157,900)
Increase in accounts payable                                   182,480               23,473              205,953
Increase in accrued payroll                                    527,176               77,844              605,020
                                                           -----------          -----------          -----------
Net cash used in operating activities                       (1,508,585)                 (11)          (1,508,496)
                                                           -----------          -----------          -----------

Cash flows from investing activities:
Purchase of equipment                                          (37,170)                  --              (37,170)
Purchase of licenses                                          (140,000)                  --             (140,000)
Acquisition of software                                        (25,000)                  --              (25,000)
                                                           -----------          -----------          -----------
Net cash used in investing activities                         (202,170)                  --             (202,170)
                                                           -----------          -----------          -----------

Cash flows from financing activities:
Proceeds from issuance of common stock                         500,000                  100              500,000
Proceeds from issuance of preferred stock                      829,895                   --              829,895
Proceeds from convertible bridge notes                         700,000                   --              700,000
                                                           -----------          -----------          -----------
Net cash provided by financing activities                    2,029,895                  100            2,029,895
                                                           -----------          -----------          -----------
Net change in cash                                             319,140                   89              319,229

Cash at the beginning of the period                                 89                   --                   --
                                                           -----------          -----------          -----------
Cash at the end of the period                              $   319,229          $        89          $   319,229
                                                           -----------          -----------          -----------
</TABLE>


                                      F-8
<PAGE>


                     CONSOLIDATED STATEMENTS OF CASH FLOWS
           Guardian Technologies International, Inc. and Subsidiaries
                          (A Development Stage Company)
                       With RJL Marketing Services, Inc.


<TABLE>
<CAPTION>
Supplemental schedule of cash flow information:
<S>                                                                 <C>                <C>                <C>
Cash paid for interest                                              $    3,000         $       --         $    3,000
Common stock issued to founders                                     $    5,512         $       --         $    5,512
Class A preferred issued to founders                                $      819         $       --         $      819
Common stock issued in acquisition of software                      $2,259,950         $       --         $2,259,950
Common stock issued to placement agent for future financing         $   93,750                            $   93,750
Note forgiven in acquisition of software                            $   25,000         $       --         $   25,000
Warrants issued to agents for preferred stock offerings             $   25,139         $       --         $   25,139
Warrants issued to agent for convertible notes                      $  250,789         $       --         $  250,789
Warrants issued as settlement of placement agreement                $  709,803         $       --         $  709,803
Warrant issued for Alliance Partner agreement                       $  145,684         $       --         $  145,684
</TABLE>




                                      F-9
<PAGE>

                    GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

NOTE 1.  DESCRIPTION OF BUSINESS

Guardian designs,  develops and delivers  sophisticated imaging technologies and
advanced intelligent  reasoning solutions that can radically improve the quality
and velocity of decision-making,  organizational  productivity and efficiency of
cognitive  labor  intensive  processes.  The Company has  developed  application
products  and  software  that  can  be  used  to  extract   knowledge  from  all
informational  sources (data + text + images + sounds + symbols) within the same
engine.

The Company  plans to market its products  and services to two primary  markets:
the U.S.  Government and the life sciences  industry.  As opportunities  present
themselves in other  vertical  markets,  the Company will assess the size of the
opportunity,  the resources  required to successfully  complete the opportunity,
and the ongoing market for the developed technology or solution.  Our technology
solutions  provide our clients  with the ability to extract  knowledge  from any
source of information  whether  structured or unstructured - text, data, images,
sounds  and  symbols.  Our  business  model  is  predicated  on  meeting  client
expectations,   managing  client  relationships,   and  providing  comprehensive
solutions to meet client IT needs.

RJL REVERSE ACQUISITION OF GUARDIAN

On June 26, 2003, pursuant to the Plan, Guardian completed a reverse acquisition
of RJL. Although Guardian is the legal acquirer in the acquisition,  and remains
the registrant with the SEC, under generally accepted accounting principles, the
acquisition  was  accounted  for  as  a  reverse  acquisition,  whereby  RJL  is
considered  the  "acquirer" of Guardian for financial  reporting  purposes.  The
following factors contribute to that finding: (i) RJL's shareholders  controlled
more than 50% of the post acquisition  combined  entity,  (ii) the management of
the  Company,  after the  acquisition,  was that of RJL,  (iii)  Guardian had no
assets  or  liabilities  as of the  transaction  date,  and (iv) the  continuing
operations of the business are those of RJL. Since Guardian was a  non-operating
entity on the transaction date, the Company recorded the premium over net assets
purchased as a reduction of Additional Paid in Capital. In addition, the Company
presents in all financial statements and other public information filings,  from
the date of completion of the acquisition, prior historical financial statements
and  information  of RJL. It also  reflects a retroactive  restatement  of RJL's
historical  stockholders'  equity to reflect the equivalent  number of shares of
common stock received in the acquisition.

Immediately prior to the closing of the reverse acquisition, and effective as of
June  23,  2003,  the  Company  assigned  all  of  its  pre-closing  assets  and
liabilities to a newly formed subsidiary, Black Mountain Holdings, Inc. ("BMH").
All of the shares of BMH, owned by the Company will be spun off to the Company's
shareholders,  pro  rata,  in  the  nature  of a  stock  dividend  distribution.
Shareholders of the Company entitled to participate in the spin-off distribution
received one share of BMH for each share of the Company that they held as of the
record date. The Company  established  June 23, 2003, as the record date for the
spin-off.

FINANCIAL CONDITION
Guardian has incurred  operating  losses since  inception  and has a net working
capital  deficiency.  In view of these  matters,  realization  of certain of the
assets in the accompanying  balance sheet is dependent upon continued operations
of the Company,  which in turn is dependent  upon the Company's  ability to meet
its financial  requirements,  raise additional  capital,  and the success of its
future operations.

The Company plans to raise cash to fund its operations  and pay its  outstanding
obligations from credit  facilities or the sale of its securities in the future.
In addition,  the Company  intends to continue its policy of paying  significant
portions of  compensation  with its common stock.  Nonetheless,  there can be no
guarantee  that the Company  will be able to raise cash or maintain  its current
workforce through any of these plans.

The Company's ability to continue as a going concern and meet its obligations as
they  come  due is  dependent  upon its  ability  to  raise  sufficient  cash as
discussed  above.  The existing  cash  balance,  at December  31,  2003,  funded
operations  through  the  first  draw of  financing  proceeds  from the  private
placement agreement.  The Company, in March 2003, entered into a placement agent
agreement with Berthel Fisher & Company to offer a private  placement  financing
with no minimum and a maximum of  $8,000,000.  To date, the Company has received
financing  totaling  $346,354  and  management  is  confident  that  the  entire
$8,000,000  will be raised prior to the ninety day  expiration  of the placement
agent agreement.  The Company anticipates it will require at least $1,300,000 to
$2,000,000 over the next twelve months to complete the research, development and
other steps needed to achieve  commercially  viable product  sales.  The Company
also  anticipates  it will need to  maintain  the current  workforce  to achieve
commercially  viable sales  levels.  There can be no guarantee  that these needs
will be met or that  sufficient  cash will be raised  to  permit  operations  to
continue.  Should the  Company be unable to raise  sufficient  cash to  continue
operations at a level necessary to achieve commercially viable sales levels, the
liquidation value of the Company's  noncurrent assets may be substantially  less
than the balances  reflected in the financial  statements and the Company may be
unable to pay its creditors.

COMMON STOCK

All common stock amounts have been adjusted to reflect the  conversion  ratio of
605.3:1 in the reverse merger transaction.


                                      F-10
<PAGE>

                    GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003


DEVELOPMENT STAGE COMPANY

The Company is a development  stage company as defined in Statement of Financial
Accounting Standards (SFAS) No. 7, Accounting and Reporting by Development Stage
Enterprises.  The Company is considered a development stage entity because it is
devoting  substantially all of its efforts to establishing its planned principal
operations.

OTHER LONG-TERM ASSETS

The Company has paid fees (in cash and common stock - see Note 7) in  connection
with a placement agent agreement to raise equity capital for the Company.  These
costs have been deferred and will be offset  against the proceeds of the capital
raised,  when completed.  Costs incurred in connection with the Alliance Partner
Agreement  with  Telinks  (see  Note 7) have  also  been  deferred  and  will be
amortized on the units-of-revenue  method once revenues are generated under that
agreement.

NOTE 2.  SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The  consolidated   financial   statements  include  the  accounts  of  Guardian
Technologies International,  Inc. ("Guardian" or "Company") and its wholly-owned
subsidiary,  RJL Marketing Services, Inc. ("RJL"). On June 26, 2003, pursuant to
the  terms of an  Amended  and  Restated  Agreement  and Plan of  Reorganization
("Plan"),  Guardian  acquired  all of the  outstanding  capital  stock of RJL in
exchange  for the  issuance  of shares of common  stock and shares of  preferred
stock. All significant  intercompany balances and transactions are eliminated in
consolidation.

We have reclassified certain items in the accompanying 2002 Financial Statements
in   order  to  be   comparable   with  the   current   classifications.   These
classifications had no effect on the previously reported net loss.

Revenue Recognition

As a development  stage  company no revenues have been  generated as of December
31,  2003.  The  source  of  future  revenues  will be from  software  sales and
consulting  services.  Revenue recognition rules for software sales are complex.
The Company will follow specific and detailed  guidelines in measuring  revenue;
however, certain judgments will affect the application of the revenue policy.

Cash Equivalents

Cash and cash equivalents are stated at cost,  which  approximates  market,  and
consists on non-interest  bearing accounts at a bank.  Balances may periodically
exceed  Federal  insurance  limits.  The Company does not consider  this to be a
significant risk.

Property and Equipment

Property and  equipment  are stated at cost less  accumulated  depreciation  and
amortization.  Guardian provides for depreciation and amortization by charges to
operations on a straight-line  basis, in amounts  estimated to allocate the cost
of the assets over their estimated useful lives, as follows:

 --------------------------------------------------- ---------------------
 ASSET CLASSIFICATION                                    USEFUL LIVES
  -------------------------------------------------- ---------------------
 Computer equipment and software....................      3 years
  -------------------------------------------------- ---------------------
 Furniture and fixtures.............................      5 years
 --------------------------------------------------- ---------------------

Research and Development

Guardian accounts for its software and solutions  research and development costs
in accordance with Statement of Financial  Accounting  Standards  (SFAS) No. 86,
"Accounting for the Costs of Computer  Software to Be Sold,  Leased or Otherwise
Marketed."  During the year ended  December  31,  2003,  Guardian  expensed  all
research and development costs.


                                      F-11
<PAGE>

                    GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003


Loss per Common Share

Basic net loss per share is  calculated  using  the  weighted-average  number of
shares of common stock outstanding, including restricted shares of common stock.
The  effect  of  common  stock  equivalents  is not  considered  as it  would be
anti-dilutive.

Use of Estimates
The preparation of these  consolidated  financial  statements in conformity with
accounting   principles   generally  accepted  in  the  United  States  requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements.  Changes in these estimates and assumptions may have a
material  impact on the  consolidated  financial  statements.  Guardian has used
estimates in determining certain provisions  including useful lives for property
and equipment and tax liabilities.

Financial Instruments
The  carrying  value of cash and cash  equivalents,  accounts  payable and notes
payable  approximates  fair  value  based on the  liquidity  of these  financial
instruments and their short-term nature.

Recent Accounting Pronouncements
In December 2002, the FASB issued Statement No. 148, "Accounting for Stock-Based
Compensation  -  Transition  and  Disclosure"  ("SFAS  148").  SFAS 148 provides
alternative  methods of  transition  for a  voluntary  change to the fair market
value method of accounting for stock-based employee  compensation as required by
SFAS 123. In addition,  SFAS 148 amends the disclosure  requirements of SFAS 123
to require more prominent and more frequent  disclosures in financial statements
about the effects of  stock-based  compensation.  The adoption of the disclosure
only requirements of SFAS 148 did not have a significant impact on the Company's
financial statements.

In  December   2003,   the  FASB  issued   Interpretation   No.  46   (revised),
"Consolidation of Variable Interest  Entities,  an interpretation of ARB No. 51"
("FIN 46"). FIN 46 clarifies  existing  accounting for whether variable interest
entities  should  be  consolidated  in  financial   statements  based  upon  the
investee's ability to finance  activities  without additional  financial support
and  whether  investors  possess  characteristics  of  a  controlling  financial
interest. FIN 46 applies to years or interim periods beginning after January 31,
2003.  This  pronouncement  is not  expected  to have a  material  impact on the
Company's financial position or results of operations.

In April 2003, the FASB issued Statement No. 149, "Amendment of Statement 133 on
Derivative  Instruments  and  Hedging  Activities."  This  Statement  amends and
clarifies  financial  accounting  and  reporting  for  derivative   instruments,
including   certain   derivative   instruments   embedded  in  other   contracts
(collectively  referred to as derivatives) and for hedging activities under FASB
Statement  133.  This  Statement  is  effective  for  contracts  entered into or
modified after June 30, 2003,  and for hedging  relationships  designated  after
June 30, 2003. This  pronouncement  is not expected to have a material impact on
the Company's financial position or results of operations.

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with Characteristics of both Liabilities and Equity." This statement
affects the classification,  measurement and disclosure  requirements of certain
freestanding financial instruments,  including mandatory redeemable shares. SFAS
No. 150 is  effective  for all  financial  instruments  entered into or modified
after May 31, 2003,  and  otherwise  is effective  for the Company for the third
quarter of Fiscal 2003.  This  pronouncement  is not expected to have a material
impact on the Company's financial position or results of operations.

Segment Information
SFAS 131, "Disclosures about Segments of an Enterprise and Related Information,"
establishes  standards for reporting  information  about  operating  segments in
annual  financial   statements.   It  also  establishes  standards  for  related
disclosures about products,  services,  geographical  areas and major customers.
Guardian  currently  operates in a single  business  segment related to business
intelligence  modeling  software and services for imaging.  Through December 31,
2003,  the  Company  has  no  customers  and  all of its  activities  have  been
concentrated in the Washington, DC metropolitan area.

Stock-Based Compensation

The  Company  measures   compensation   expense  for  its  employee  stock-based
compensation  plans using the  intrinsic  value method  prescribed by Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees.
The  Company  applies  the  disclosure  provisions  of  Statement  of  Financial
Accounting Standards (SFAS) No. 123, Accounting for Stock-based Compensation, as
amended by SFAS No. 148,  Accounting for  Stock-based  Compensation - Transition
and Disclosure as if the fair  value-based  method had been applied in measuring
compensation expense. Under APB No. 25, when the exercise price of the Company's
employee stock options  equals the market price of the  underlying  stock on the
date of grant, no compensation expense is recognized.

As  required   under  SFAS  No.  123,  the  pro  forma  effects  of  stock-based
compensation  on net income and earnings  per common  share for  employee  stock
options  granted have been  estimated at the date of grant and  beginning of the
period,  respectively,  using a Black-Scholes option pricing model. For purposes
of pro forma  disclosures,  the estimated fair value of the options is amortized
to pro forma net loss over the options'  vesting  period.  The  following  table
illustrates  the effect on net income and  earnings per share if the Company had
applied the fair value  recognition  provisions of SFAS No. 123, to  stock-based
employee compensation.


                                      F-12
<PAGE>

                    GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

<TABLE>
<CAPTION>
                                                                                                From Inception
                                                                             Year Ended       (October 2, 2002) to
                                                                           December 31, 2003    December 31, 2003
                                                                              -----------          -----------
<S>                                                                           <C>                  <C>
Net loss as reported                                                          $(6,524,434)         $(6,625,662)
  Add: Stock-based employee compensation expense included in reported
    net loss                                                                    1,285,944            1,285,944
  Deduct: Stock-based employee compensation expense determined under
    the fair value based method for all awards                                 (3,425,521)          (3,425,521)
                                                                              -----------          -----------
           Pro forma net loss                                                 $(8,664,011)         $(8,765,239)
                                                                              -----------          -----------

Net loss per common share
  As reported:
    Basic                                                                     $     (0.78)         $     (0.90)

  Pro forma:
   Basic                                                                      $     (1.04)         $     (1.19)
</TABLE>


Income Taxes

The Company  accounts for income  taxes under the  liability  method.  Under the
liability  method,  deferred tax assets and liabilities are determined  based on
differences  between financial reporting and tax bases of assets and liabilities
and are  measured  using  enacted tax rates and laws that will be in effect when
the differences are expected to reverse.  Valuation  allowances are established,
when necessary, to reduce tax assets to the amounts expected to be realized.

NOTE 3.  FINANCING ARRANGEMENTS

Beginning December 8, 2003, and concluding  December 19, 2003, we entered into a
series of purchase  agreements with eight  individuals  under which  convertible
promissory  notes in the  aggregate  amount of $700,000 and warrants to purchase
311,250  shares of our common  stock were  issued.  200,000 of the  warrants are
exercisable  during the  eighteen  (18) month period  commencing  on the date of
issuance at a price of $2.50 per share.  The remaining  warrants are exercisable
as follows:  (i) 80,000 warrants  exercisable  during the twenty-four (24) month
period  commencing  on the date of issuance  at a price of $2.50 per share,  and
(ii) 31,250 warrants  exercisable  during the sixty (60) month period commencing
on the date of issuance at a price of $5.00 per share.  The proceeds of the sale
of the notes were used by the Company for working  capital  purposes.  The notes
bore interest at 10% and were repayable sixty days after the date of issuance of
the notes (maturity  date).  The unpaid notes and interest,  which were extended
for 120 days  beyond the  maturity  date,  bear  interest at the rate of 18% per
annum.  An event of default occurs under the notes if: the principal or interest
are not paid when due and within 15 days of notice  from the note holder of such
failure to pay; the voluntary or involuntary  bankruptcy of Guardian; the making
of a general  assignment  for the  benefit  of  creditors;  an  application  for
dissolution or liquidation;  or other relief from insolvency. The face amount of
the notes  was  reduced  by the  value of the  warrants  described  above.  This
discount is amortized to interest expense over the 60 day term of the notes. The
notes are  convertible  into  equity  securities  based on the terms of a future
financing.  The Company  recognizes  the  existence of a  beneficial  conversion
feature  embedded  in the  convertible  instruments  which it is unable to value
until the future  financing is  completed.  The Company  will record  additional
interest expense upon conversion for the beneficial conversion feature.

NOTE 4.  PROPERTY AND EQUIPMENT

As of December 31, 2003, a summary of property and  equipment  and the estimated
useful lives used in the computation of depreciation is as follows:

                                      F-13
<PAGE>

                    GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

                                                     Estimated
                                                    Useful Life
                                          (Years)     Amount
                                          -------     ------

Computer equipment                            3     $    37,170

Software                                      3       2,284,950

Less: accumulated depreciation                           26,734
                                                    -----------
Net property & equipment                            $ 2,295,386
                                                    ===========


The Company also acquired  license rights for $140,000  during 2003,  which were
determined to be impaired at December 31, 2003.

NOTE 5.  ACQUISITIONS

Difference Engines Corporation
On December 19, 2003,  Guardian  purchased  certain  intellectual  property (IP)
owned by Difference  Engines,  including but not limited to certain  compression
software   technology   described  as  Difference   Engine's   Visual   Internet
Applications  or DEVision,  as well as title and interest in the use of the name
and the copyright of Difference Engines. This transaction has been accounted for
as an asset acquisition.  The purchase price for these assets has been allocated
to acquired technology (software) and will be amortized on a straight-line basis
over 3 years.

Under the terms of the agreement,  Guardian  issued 587,000 shares of its common
stock as  consideration  for the purchase of the IP and  cancelled a convertible
promissory note that Difference  Engines had issued to Guardian in the amount of
approximately $25,000 representing advances Guardian made to Difference Engines.
The  587,000  shares of  common  stock  are  subject  to a two (2) year lock up.
Guardian has granted  Difference Engines  piggy-back  registration  rights for a
period of three (3) years  commencing on the date of the  expiration of the lock
up period  with  regard to the  shares  to be  issued in the  transaction.  Upon
expiration of the two (2) year lock up period,  in the event that the shares are
not eligible for resale  under Rule 144 and have not been  registered  under the
Securities  Act, the holder of the shares may demand  redemption  of the shares.
The  redemption  price is to be  calculated  on the basis of the  average of the
closing  bid and asked  prices of  Guardian's  common  stock for the twenty (20)
consecutive business days ending on the day prior to the date of the exercise of
the holder's right of redemption.  The founders of Difference  Engines  provided
certain releases to Guardian related to their  contribution of the technology to
Difference Engines.

Wise Systems, Ltd.

On December 3, 2003, we entered into a  non-binding  letter of intent to acquire
Wise Systems Ltd., a developer of radiology  information  systems with principal
offices in the  United  Kingdom.  The  letter of intent is subject to  customary
conditions,  including  performance of due diligence,  negotiation of definitive
agreements,  and receipt by us of audited financial statements for Wise Systems,
obtaining   regulatory  approval  for  the  transaction,   and  other  customary
conditions and may be terminated at any time without  liability to either party.
The  letter  of  intent  provides  for the  payment  of the  purchase  price  of
approximately $2,600,000 in a combination of cash and stock. Also, the letter of
intent provides for the payment of a two year earn-out to the sellers, which may
be paid in cash or common stock of Guardian, at Wise Systems' option. An earnest
money deposit of $150,000 was paid by Guardian to Wise Systems upon execution of
the letter of intent and is reported on the Consolidated Balance Sheet under the
heading - Deposits.

NOTE 6.  INCOME TAXES

The  benefit  from  income  taxes  reflected  in  the   accompanying   financial
statements,  all of which is deferred,  varies from the amounts which would have
been computed using statutory rates as follows (000's):


                                      F-14
<PAGE>

                    GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

<TABLE>
<CAPTION>
                                             Year Ended       Inception to    Inception to
                                            Dec. 31, 2003    Dec. 31, 2002    Dec. 31, 2003
                                            -------------    -------------    -------------
<S>                                            <C>              <C>              <C>
Federal income taxes at the maximum
statutory rate                                 $ 2,283          $    35          $ 2,318
State income taxes, net of Federal tax
effect                                             196                3              199
Difference in valuation of stock based
compensation                                    (1,625)              --           (1,625)
Increase in valuation allowance                   (854)             (38)            (892)
                                               -------          -------          -------
Benefit from income taxes                      $    --          $    --          $    --
                                               -------          -------          -------
</TABLE>

Deferred income taxes were as follows (000's):

                                            Dec. 31, 2003  Dec. 31, 2002
                                            -------------  -------------
Equipment depreciation slower for tax            $  7         $ --
purposes

Accruals not deductible for tax purposes          228           --
until paid

Net operating loss carryforward                   657           38
                                            -------------  -------------
Deferred tax asset                                892           38

Valuation allowance                               892           38
                                            -------------  -------------
      Total                                      $ --         $ --
                                            -------------  -------------

For income tax purposes,  the Company has a net operating loss  carryforward  of
approximately  $1,700,000  at  December  31,  2003 that,  subject to  applicable
limitations,  may be applied against future taxable income. If not utilized, the
net operating loss carryforward will expire in 2023.

NOTE 7.  STOCKHOLDERS' EQUITY

Each  transaction  effecting  stockholders'  equity is shown in the Statement of
Stockholders'  Equity,  along  with  its  purpose  and  amount.  Fair  value  is
determined  by  reference  to the price the stock  traded at on the  measurement
date, which may not be the date the equity instrument was issued.  Stock options
included in stockholders'  equity reflect only those issued at an exercise price
which was less than fair value (as defined above).  In the case of stock grants,
fair value is set at the measurement  date,  which in the case of employees,  is
the  date of  binding  commitment.  In the  case  of  outside  consultants,  the
measurement date is the date at which their performance is complete.  This total
cost is  first  reflected  as  deferred  compensation  in  stockholders'  equity
(deficit) and then amortized to compensation  expense on a  straight-line  basis
over the period over which the services are performed. When the measurement date
is not the  date of  grant,  the  total  cost is  remeasured  at the end of each
reporting  period  based  on the  fair  market  value  on  that  date,  and  the
amortization is adjusted.

Warrants  were  valued  under  the  Black-Scholes  method  using  the  following
assumptions:

                Volatility                              5%
                Interest Rates                          2%
                Life                    as described in the following section.

The  disclosure  information  presented  in  Note 2 also  used  the  assumptions
described above and an expected life of ten years.

The Series A convertible  preferred  stock issued to the  consultant  was valued
based  on  the  value  of the  underlying  common  stock.  As  described  in the
paragraphs which follow, this conversion requires the Company to achieve certain
operating milestones. The Company believes these milestones will be achieved.

PREFERRED  STOCK - The Company has the  authority to issue  1,000,000  shares of
preferred  stock.  The  Board of  Directors  has the  authority  to  issue  such
preferred  shares in series and  determine  the rights  and  preferences  of the
shares.


                                      F-15
<PAGE>
                    GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003


The  shareholders  of RJL received  4,097 shares of Series "A" Preferred  Stock,
$0.20 par value per share  ("Preferred  A") of the  Company.  In  addition,  the
Company committed 1,430 shares as compensation under a consulting  agreement for
the successful targeting and closing of the reverse  acquisition.  The shares of
Preferred A have a  preferential  liquidation  value of $0.20 per share and each
share will be  automatically  converted into 1,000 shares of common stock of the
Company  (subject  to  certain  anti-dilution   adjustments)  upon  the  Company
attaining  Earnings  Before  Income  Taxes  and  Depreciation  and  Amortization
(EBITDA)  aggregating   $2,500,000   commencing  on  the  date  of  the  reverse
acquisition  and  terminating  on June 26, 2005,  as evidenced by the  Company's
financial  statements  contained  in its  reports  filed  with the SEC under the
Securities  Exchange Act of 1934.  The  foregoing  shares were issued to the RJL
shareholders in reliance upon the exemption from the  registration  requirements
of the  Securities  Act of 1933, as amended ("the Act") and set forth in Section
4(2) of the  Act  and  Rule  506 of  Regulation  D  promulgated  thereunder  and
constitute  "restricted  securities" within the meaning of Rule 144 (a)(3) under
the Act.

We designated  an aggregate of 1,170 shares of our  preferred  stock as Series B
Convertible  Preferred Stock, $0.20 par value per share ("Preferred B"). Holders
of  Preferred  B shares are not  entitled  to receive  dividends,  to vote their
shares  (except as required  by  Delaware  law),  or to any  preemptive  rights.
Holders  are  entitled  to a  liquidation  preference  of $0.20 per share and an
automatic conversion of each Preferred B share into 1,000 shares of common stock
(subject  to  certain  anti-dilution  adjustments)  upon the  Company  obtaining
shareholder  approval for an increase in the number of common shares authorized.
Shares of Preferred B are not otherwise convertible.  At the date of the reverse
acquisition all of the Preferred B shares had been committed to consultants. The
Company  issued the  Preferred B shares as follows:  (i) 690 shares for investor
relations  services,  and (ii) 480 shares for  marketing  and sales  initiatives
within the life sciences market.

On September 3, 2003,  the Company  executed a  Subscription  Agreement  with an
employee  of the  Company  whereby  the  employee  subscribed  for and agreed to
purchase  133.3 shares of Series B Preferred  Stock,  $0.20 par value per share,
for an aggregate  consideration  of $200,000 or $1,500.375 per share.  On August
26th and  September  12th of 2003,  the Company  received  from the employee the
amounts of $50,000 and $150,000, respectively. On October 23, 2003, the Board of
Directors  authorized  and the Series B Preferred  shareholders  consented to an
increase in the Series B Preferred Stock from 1,170 shares to 6,000 shares.  The
employee has been issued 133.3 shares as of this date.

On September 24, 2003, the Company  engaged  Berthel Fisher & Company  Financial
Services,  Inc.  ("BFC")  to act as its  placement  agent in  connection  with a
contemplated offering to certain "accredited  investors" pursuant to Rule 506 of
Regulation D under the Act. The Board of Directors authorized the issuance of up
to 2,400 shares of a Series C Convertible  Preferred Stock,  $0.20 par value per
share  ("Preferred  C).  Shares  of  Preferred  C carry  substantially  the same
designations and rights as the Preferred B shares.

During  October  and  November,  2003,  the  Company  closed  on the  sale of an
aggregate of 545 shares of Series C Convertible  Preferred Stock. Berthel Fisher
acted as the placement agent for the offer and sale of such shares.  We received
net  proceeds  from the sale of such shares of  $629,895,  and issued to Berthel
Fisher  placement  agent's warrants to purchase an aggregate of 21,832 shares of
our common stock,  and to reimburse  certain  extraordinary  expenses of Berthel
Fisher.  The placement  agent's warrants are exercisable at a price of $1.95 per
share during the five year period  following  the  issuance  thereof and contain
piggy back registration rights.

STOCK  WARRANTS  - In  connection  with the offer and sale of shares of Series C
Convertible  Preferred Stock, we issued to Berthel Fisher,  on October 14, 2003,
warrants to  purchase  an  aggregate  of 16,320  shares of common  stock and, on
November 24,  2003,  warrants to purchase an aggregate of 5,480 shares of common
stock.  The warrants are  exercisable  for a period of five years from the issue
date at a price of $1.95 per share. The warrants  contain certain  anti-dilution
provisions in the event of a stock  dividend,  subdivision of our capital stock,
or capital  reorganization,  consolidation  or merger of Guardian.  The warrants
also contain a piggy back registration right.

During December 2003, we issued an aggregate of 331,250 warrants to purchase our
common stock in connection  with the issuance of our bridge notes.  The warrants
are  exercisable  at a prices ranging from $2.50 to $5.00 per share for a period
ranging  from  eighteen  (18) months to five (5) years from the issue date.  The
warrants  contain  certain  anti-dilution  provisions  in the  event  of a stock
dividend,   subdivision   or  our   capital   stock,   capital   reorganization,
consolidation  or merger of  Guardian.  The  warrants  also  contain  piggy back
registration  rights.  The bridge notes  matured  during  February 2004 and were
extended by the note holders for an additional 120 days. In consideration of the
extension of the maturity date of the bridge  notes,  we issued each note holder
an  additional  warrant,  on the  same  terms  and  conditions  as the  original
warrants, for each of the original 331,250 warrants.

In October  2003,  we entered  into a placement  agent  agreement  with  another
investment  bank.   Management  believed  the  investment  bank  failed  in  its
obligations under the agreement.  On March 16, 2004, we negotiated a termination
of this placement  agent  agreement and  compensated the investment bank through
the  issuance of 250,000  two-year  warrants to purchase  our common  stock at a
price of $1.00 per share,  the value of which was charged to  operations  in the
year ended  December  31,  2003.  The  investment  bank  maintains  its cashless
exercise provision and piggyback registration rights as afforded under the terms
of the  placement  agent  agreement.  On March 17,  2004,  the  investment  bank
exercised its cashless  exercise  provision and we issued 197,368 shares of Rule
144 restricted common stock to the investment bank.


                                      F-16
<PAGE>

                    GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003


On  September  18,  2003,  we entered into an Alliance  Partner  Agreement  with
Telinks Canada Ltd.  ("Telinks") to jointly provide a broad range of intelligent
systems  solutions to the  existing  and future  clients of Telinks and Telinks'
affiliated  companies.  The Alliance Partner Agreement  provides Guardian with a
minimum  guarantee  of $2 million  in  revenues.  In  exchange  for the  revenue
guarantee,  Telinks  receives  commissions at a rate of five (5%) percent of the
gross  Guardian  revenue  from  Telinks'  clients  in excess of $2  million.  In
addition,  the sole owner of Telinks  was  granted a warrant to acquire  200,000
shares of common  stock at an exercise  price of $2.00 per share.  The  warrants
expire September 16, 2005.

2003 STOCK  INCENTIVE PLAN - On August 29, 2003, our board of directors  adopted
our 2003 Stock  Incentive  Plan and amended and restated the plan on December 2,
2003 ("Plan").  On February 13, 2004, the stockholders  approved the Plan and an
increase  in the  authorized  number of shares of common  stock to  200,000,000.
Under the Plan,  Guardian may issue options which will result in the issuance of
up to an aggregate of 30,000,000  shares of Guardian common stock.  The board of
directors  recommended  that we submit  the Plan to our  stockholders  for their
approval.  The amended and  restated  Plan was approved by our  stockholders  on
February 13, 2004. As of the date of this report, we have not issued any options
under the Plan.

The  Company  has issued  stock  options  outside  the 2003 Plan.  Stock  option
activity is as follows:

<TABLE>
<CAPTION>
<S>                                                                          <C>
Outstanding, January 1, 2003                                                        --
Issued ($0.50 to $1.25 per share)                                            2,080,000
Exercised                                                                           --
Cancelled                                                                           --
                                                                             ---------
Outstanding December 31, 2003                                                2,080,000
                                                                             ---------

Exercisable at December 31, 2003 (average price of $0.527 per share)
Vesting in 2004                                                              2,077,500
Vesting in 2005                                                                  2,500
Vesting in 2006                                                                     --
Vesting in 2007                                                                     --
                                                                             ---------
                                                                             2,080,000
                                                                             ---------
</TABLE>

COMMON SHARES  RESERVED - At December 31, 2003,  shares of common stock reserved
for future issuance were as follows:

Outstanding stock options                                     2,080,000
Stock options available for grant                            27,920,000
Warrants to purchase common stock                               783,050
Warrants issued February 2004 to bridge note holders            311,250
                                                             ----------
                                                             31,094,300
                                                             ==========

NOTE 8.  RELATED PARTY TRANSACTIONS

Issuances of Stock to Directors, Officers and Others
On October 3, 2002,  Mr.  Dishaw,  Company  President,  acquired 1,500 shares of
common stock of RJL for nominal cash consideration.

On March 21, 2003, RJL entered into a consulting agreement, as amended, with ten
brokers in connection  with services to be provided in connection  with locating
and negotiating the proposed Reverse  Acquisition  between RJL, its stockholders
and Guardian.  RJL agreed to issue, at closing of the acquisition,  an aggregate
of 2,000,000  shares of Guardian for such  services.  Such shares were issued by
the Company during July 2003.

On April 3, 2003, as part of the initial  capitalization of Guardian, Mr. Dishaw
and Mr.  Trudnak,  Company Chief  Executive  Officer,  acquired  3,326 and 4,279
shares of common stock of RJL, respectively, for nominal cash consideration.


                                      F-17
<PAGE>

                    GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003


On May 19, 2003, RJL entered into a consulting agreement with Mr. Tobin pursuant
to which Mr.  Tobin agreed to provide  consulting  services in  connection  with
strategic selling related to our business,  marketing and market  development in
the  bio-medical  industry in North  America and  Europe,  business  continuity,
finance and accounting.  The consulting agreement is for a term that ends on May
1,  2005,   and  may  be   terminated  by  Guardian  in  the  event  a  material
misrepresentation  by Mr.  Tobin or the  commencement  of any  action by the SEC
against Mr. Tobin or any entity owned or controlled  by Mr. Tobin;  or by either
party on not less than 30 days prior written  notice.  As  compensation  for his
services under the  agreement,  Mr. Tobin is entitled to receive an aggregate of
1,820,000 shares of common stock, 1,430 shares of Series A Convertible Preferred
Stock, and 480 shares of Series B Convertible  Preferred Stock of Guardian.  The
shares of Series B Convertible  Preferred  Stock were issued to Mr. Tobin during
August 2003 and the shares of Common  Stock and Series B  Convertible  Preferred
Stock were issued on November 19, 2003.

Effective  October 23, 2003, RJL entered into a three year employment  agreement
with Mr. Dishaw.

Effective  as of January  1,  2003,  RJL  entered  into a three year  employment
agreement with Mr.  Trudnak.  Under the employment  agreement,  as amended,  Mr.
Trudnak is entitled to receive  400,000 shares of our common stock as additional
compensation for his services under the agreement.

Upon the closing of the Reverse  Acquisition  and  effective  June 26, 2003,  we
issued to Mr.  Dishaw  2,945,500  shares of our common stock and 2,212 shares of
our Series A Convertible  Preferred Stock and we issued to Mr. Trudnak 2,566,000
shares  of our  common  stock  and  1,885  shares  of our  Series A  Convertible
Preferred Stock, in exchange for all of their stock in RJL. Also effective as of
June 26, 2003, Mr. Trudnak purchased 400,000 shares of our common stock for cash
consideration of $200,000 in a private placement conducted by us.

On July 30, 2003, Guardian entered into a consulting  agreement with Mr. Moorer,
the  former  President  and Chief  Financial  Officer  of  Guardian  to  provide
consulting services in connection with, among other things, business continuity,
finance and accounting,  strategic  planning,  market  development,  and related
services.  The agreement terminates on July 1, 2004, unless sooner terminated by
the  parties by mutual  agreement,  upon  thirty (30) days notice and in certain
other events. As compensation for such services, Guardian has agreed to issue to
Mr. Moorer 150,000 shares of common stock.

On October 23, 2003,  Guardian entered into an agreement with Difference Engines
Corporation,  a  Maryland  corporation,  pursuant  to which  Guardian  agreed to
purchase certain  intellectual  property owned by Difference Engines,  including
certain compression software technology.  Mr. Walter Ludwig, a Company director,
is the  president,  a  director,  and a principal  of  Difference  Engines.  The
transaction closed on December 19, 2003 (see Note 5).

                                      F-18
<PAGE>

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

Effective   July  9,  2003,   Guardian   dismissed  its  principal   independent
accountants,  Schumacher & Associates,  Inc.  Schumacher & Associates,  Inc. had
been engaged by Guardian as the principal  independent  accountants to audit the
financial  statements  of Guardian for the fiscal year ended  December 31, 2002.
Schumacher & Associates,  Inc.'s reports on the financial statements of Guardian
filed with the Securities and Exchange Commission with regard to the fiscal year
ended December 31, 2002, contained no adverse or disclaimer of opinion; however,
its report did contain a going concern explanatory paragraph.

The action to dismiss  Schumacher & Associates,  Inc.,  as Guardian's  principal
independent  accountants  has been taken  primarily as a result of the change of
control of  Guardian  arising  from the reverse  acquisition  of Guardian by RJL
Marketing  Services  Inc.  (RJL),  on  June  26,  2003.  As a  condition  of the
acquisition,  the  previous  executive  officers  and  members  of the  board of
directors of Guardian  resigned  effective as of the closing of the  acquisition
and were replaced by officers and directors  designated by RJL. The new board of
directors of Guardian has decided to engage the independent  public  accountants
of RJL to audit the  financial  statements of Guardian for the fiscal year ended
December 31, 2003.

The decision to change  accountants was recommended and approved by the board of
directors of Guardian.

In connection with the audit of Guardian's  financial  statements for the fiscal
year ended  December 31, 2002,  and in connection  with the  subsequent  interim
period up to the date of dismissal,  there were no disagreements with Schumacher
&  Associates,  Inc.,  on any  matter of  accounting  principles  or  practices,
financial statement  disclosure,  or auditing scope or procedure,  which, if not
resolved to the satisfaction of Schumacher & Associates, Inc., would have caused
Schumacher & Associates,  Inc., to make  reference to the subject  matter of the
disagreements in its report.

Effective July 10, 2003,  Guardian's Board of Director's approved the engagement
of Aronson & Company to serve as Guardian's  independent  public accountants and
to be the principal  accountants  to conduct the audit of  Guardian's  financial
statements for the fiscal year ending  December 31, 2003,  replacing the firm of
Schumacher & Associates, Inc.



                                       33
<PAGE>

During Guardian's two most recent fiscal years ended December 31, 2001 and 2002,
Guardian did not consult with Aronson & Company  regarding any of the matters or
events  set forth in Item  304(a)(2)(i)  and (ii) of  Regulation  S-B.  However,
Aronson & Company were engaged by RJL to audit RJL's  financial  statements  for
the period ended December 31, 2002.

There were no  disagreements  with our  accountants  on accounting and financial
disclosure in 2003.


ITEM 8A.  CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures.

Guardian,  under the supervision and with the  participation  of our management,
including our Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness  of the  design  and  operation  of our  disclosure  controls  and
procedures (as defined in Rule  13a-15(e)  under the Exchange Act) as of the end
of  period  covered  by this  report.  Based  upon  that  evaluation,  the Chief
Executive  Officer and Chief  Financial  Officer  concluded  that our disclosure
controls  and  procedures  are  effective  in timely  alerting  them to material
information  relating to us (or our  consolidated  subsidiaries)  required to be
disclosed in our periodic SEC filings.

(b) Changes in internal controls.

During the fiscal quarter ended  December 31, 2003,  there has been no change in
our internal  control over financial  reporting that has materially  affected or
reasonably  likely to  materially  affect our internal  control  over  financial
reporting.



                                    PART III

ITEM 9.       DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The directors and executive officers of Guardian are:


          NAME                      AGE                     TITLE
          ----                      ---                     -----

Michael W. Trudnak                   50            Chairman  of the Board,
                                                   Chief Executive
                                                   Officer, Secretary,
                                                   and Treasurer

Robert A. Dishaw                     57            President, Chief
                                                   Operating Officer, and
                                                   Director

Sean W. Kennedy                      53            Director

M. Riley Repko                       46            Director

Walter Ludwig                        47            Director

William J. Donovan                   52            Chief Financial Officer

Guardian's  Certificate  of  Incorporation  provides that the board of directors
shall be divided  into three  classes  and that,  if the board  consists of five
directors,  that the first class shall  consist of two  directors to hold office
for a term of one year from the date of the  ratification  of their  election by
stockholders at the next meeting of  stockholders  held to consider such matter,
the second class shall  consist of one director to hold office for a term of two
years from the date of the  ratification  of his election by stockholders at the
next meeting of stockholders  held to consider such matter,  and the third class
shall consist of two directors to hold office for a term of three years from the
date of the  ratification  of their election by stockholders at the next meeting
of stockholders held to consider such matter. Messrs. Ludwig and Repko have been
designated by the board as Class I directors, Mr. Kennedy has been designated as
a Class II  director,  and Messrs.  Trudnak and Dishaw have been  designated  as
Class III directors.

Biographical  information  with  respect to the present  executive  officers and
directors  of Guardian are set forth  below.  There are no family  relationships
between any present executive officers or directors.



                                       34
<PAGE>

MICHAEL W. TRUDNAK,  CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER,  SECRETARY,
TREASURER AND DIRECTOR.

Mr. Trudnak was appointed Chairman of the Board, Secretary,  and Chief Executive
Officer and designated as a Class III director of Guardian effective June, 2003.
From March 2003 and until the present,  Trudnak has been  Chairman of the Board,
Chief  Executive  Officer,  Secretary,  Treasurer  and a director  of RJL.  From
October  2002  to  March  2003,   Mr.   Trudnak  was  a  consultant  to  certain
telecommunications  services  companies.  From April 2002 to October  2002,  Mr.
Trudnak was Chief Operating Officer and subsequently President,  Chief Executive
Officer  and a director  of  Advanced  Data  Centers,  Inc.,  a  privately  held
telecommunications  services company.  From July 2001 to March 2002, Mr. Trudnak
served as Vice  President  of  Mid-Atlantic  Sales  for  Equant  N.V,  a leading
provider of global IP and data  services to  multinational  companies.  Prior to
Equant's acquisition of Global One, Inc., in July 2001, Mr. Trudnak served as an
Executive  Director for South East Region Sales for Global One from June 1998 to
July 2001,  and from January 1996 to June 1998,  served as Managing  Director of
Global One's sales and  operations  in France and Germany.  From  November  1989
through December 1995, Mr. Trudnak served as director of facilities  engineering
and  then   Senior   Group   Manager   for   Sprint   International,   a  global
telecommunications  services provider. Mr. Trudnak has over twenty-five years of
diversified  executive  management,  sales,  business operations,  technical and
administrative experience in the telecommunications industry. Mr. Trudnak served
in the Marine Corps from April 1972 through January 1976.

ROBERT A. DISHAW, PRESIDENT, CHIEF OPERATING OFFICER AND DIRECTOR.

Mr. Dishaw was appointed President and Chief Operating Officer and designated as
a Class III director of Guardian  effective as of June,  2003. From October 2002
and until the present, Mr. Dishaw has been President and a director of RJL. From
December 2000 to April 2002,  Mr. Dishaw was the  Executive  Vice  President and
General  Manager of Diagnos Inc., a publicly held  Canadian  company,  which has
developed and markets certain knowledge  extraction  software  technology.  From
June 1999 to November  2000,  Mr. Dishaw was a management  consultant to certain
public and private companies in the U.S. and Canada,  providing capital raising,
operational,  sales and marketing services to such companies. From April 1997 to
January 1999,  Mr. Dishaw was President of HDB  Communications,  Inc., a private
corporation that provided  installation  services for Canadian digital satellite
providers. Mr. Dishaw served for more than seven years in the U.S. Air Force and
for ten years in the U.S.  Diplomatic  Service serving as a Second Secretary for
Administration/Political  reporting at U.S. Embassies in Brazil,  Guyana, Zaire,
Burma and Czechoslovakia.

SEAN W. KENNEDY, DIRECTOR.

Mr. Kennedy was designated as a Class II director of Guardian effective in July,
2003 to fill a vacancy on the board of directors created by increasing the board
of directors to five members.  From January 2001 to the present Mr.  Kennedy has
been President and Chief Executive Officer of BND Group,  Inc., a privately held
software  development  company.  From October 1999 to December 2000, Mr. Kennedy
was  divisional  Vice  President  of Votenet  Solutions  a Web  development  and
consultant for trade associations,  political parties and related organizations.
From April 1994 to October 1999,  Mr.  Kennedy was President and CEO of Raintree
Communications Corporation, a privately held telecommunication services company,
focused  on  providing  technology  tools  for  legislative  lobbying  to  Trade
Associations  and  Fortune  500  companies.  From  June,  1989 to April 1994 Mr.
Kennedy was President and CEO of Electronic Funds Transfer Association,  a trade
association  for the  electronic  payments  systems  industry.  Mr. Kennedy is a
graduate of Mount Saint Mary's College in Emmitsburg, Maryland.

M. RILEY REPKO, DIRECTOR.

Mr.  Repko was  designated  as a Class I director  of Guardian  effective  as of
October 1, 2003.  Mr.  Repko was elected  Chairman of the Board of  Directors of
IQBiometrix in June 2003, a public  company.  From June 2001 through April 2003,
Mr.  Repko  served as Vice  President  - Sales &  Business  Development  for TRW
Systems,  Inc.,  Global IT Division.  From December 1998 through June 2001,  Mr.
Repko served as Managing  Director,  Asia-Pacific  Channels for Siebel  Systems,
Inc.  Since June 1994,  Mr.  Repko has been a principal  of The Repko  Group,  a
business consulting firm. Mr. Repko's academic credentials include attending the
Senior Military School at the National Defense  University;  an MS from the U.S.
Air  Force's  Air War  College;  an M.B.A.  (summa  cum laude)  from St.  Mary's
University,  Texas in Operations  Management;  a B.S. in Electrical  Engineering
from the Air Force  Institute of Technology,  Ohio;  and a B.S. in  Physics/Math
(cum laude) from St. Bonaventure University, New York.

WALTER LUDWIG, DIRECTOR, PRESIDENT OF LIFE SCIENCES DIVISION.

Mr. Ludwig was designated as a Class I director of Guardian  effective as of the
closing of the Reverse  Acquisition  in June,  2003.  From  January  2002 to the
present, Mr. Ludwig has been President and Chief Executive Officer of Difference
Engines  Corporation,  a privately held company that provides  performance based
image and video technology for the North American bio-medical market.  Effective
as of the  closing  of the  acquisition  by  Guardian  of  certain  intellectual
property from  Difference  Engines  Corporation on December 19, 2003, Mr. Ludwig
became the President of the Life Science Division of Guardian.  From May 2000 to
January 2002, Mr. Ludwig was an Executive  Vice  President for  Scientific  Data
Systems Inc., a private corporation,  creating  next-generation  video and image
compression firmware tools for cable and satellite television, the Internet, and
wireless platforms. From January 1999 to April 2000, Mr. Ludwig was President of
Channelsee Networks,  Inc., a privately held company that provided  global-scale
visual  content  network  for  internet,  cable  and  wireless  platforms.  From
September 1994 to January 1999, Mr. Ludwig was President of The Prospect Group a
consulting,  literary and foreign rights agency and book packaging company.  Mr.
Ludwig  has more  than  twenty  years  international  experience  in  marketing,
management, and consulting in technology and media (television,  publishing, and
the Internet).  Mr. Ludwig  received a B.A. from the University of California at
Los Angeles.



                                       35
<PAGE>

WILLIAM J. DONOVAN, CHIEF FINANCIAL OFFICER.

Mr. Donovan has been Chief Financial  Officer of Guardian since August 18, 2003.
From January 2003 until August 2003, Mr.  Donovan was an independent  consultant
to an affiliate of American Express Small Business Services. From September 1999
through December 2002, Mr. Donovan was CFO of Streampipe.com,  Inc., a privately
held streaming  communications media company,  which was sold to Tentv, Inc., in
December 2002. From October 1996 to August 1999, Mr. Donovan was Chief Operating
and Financial  Officer for TDI,  Inc., a privately held  international  wireless
telecommunications  services  company.  From October 1986 to October  1996,  Mr.
Donovan  was  the  CFO,   Secretary,   Treasurer  and  a  Director  at  Riparius
Corporation, a privately held holding company with operating subsidiaries in the
areas of real estate  development,  property  management,  general  contracting,
government contracting, and telecommunications engineering. From October 1980 to
October 1986, Mr. Donovan was the Controller for McCormick  Properties,  Inc., a
publicly held  commercial  real estate  subsidiary of McCormick & Company.  From
July 1973 to October 1980,  Mr.  Donovan was the  Controller for AMF Head Sports
Wear,  Inc., a privately held  international  sporting goods  manufacturer and a
subsidiary  of AMF,  Inc.,  a publicly  held  company.  Mr.  Donovan  received a
Bachelor of Arts in History in 1973,  from the  University  of Maryland,  an MBA
from the Sellinger  School of Business,  Loyola College,  Baltimore  Maryland in
1982, and a Certificate  in Accounting  from the University of Maryland in 1978.
Mr.  Donovan has been a Certified  Public  Accountant  since 1982.  He is also a
Certified Business Valuation & Transfer Agent,  Business Brokers Network,  2002.
He has been on the Board as an Advisor for Nogika Corporation,  a privately held
software company since 2001.

Prior  to the  Reverse  Acquisition,  Guardian  had  an  audit  committee  and a
compensation  committee.  We have been advised by prior  management of Guardian,
that the audit committee met twice during fiscal 2003 and that the  compensation
committee met once during fiscal 2003.

The  board  of  directors  does  not  currently   have  an  audit,   nominating,
compensation,  or other  standing  committee.  Accordingly,  the entire board of
directors  performs the functions of an audit committee,  nominating  committee,
and  compensation  committee.  Moreover,  we do not  have  an  "audit  committee
financial expert." We have actively pursued qualified  candidates for this board
position, however, as of this date we have been unable to identify an individual
with the necessary  qualifications to meet the requirements of this position. We
are committed to identifying a qualified individual during 2004.

CODE OF ETHICS

On August 29, 2003, we adopted a Code of Ethics for our chief executive officer,
chief financial officer, principal accounting officer or controller, and persons
performing  similar  functions.  A copy of the  Code of  Ethics  is  filed as an
exhibit to this report and has been posted to our website.  Our website  address
is www.guardiantechintl.com.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section  16(a) of the Exchange Act  requires  our  officers and  directors,  and
persons owning more than 10% of a registered class of our equity securities,  to
file reports of ownership and changes in ownership of our equity securities with
the SEC.  Officers,  directors,  and greater than ten percent  shareholders  are
required  by SEC  regulations  to furnish us with  copies of all  Section  16(a)
reports that they file.

Except as set forth below, based solely upon a review of Forms 3 and 4 submitted
to us  pursuant  to Rule 16a-3 under the  Exchange  Act,  during our most recent
fiscal year and Forms 5 with respect to our most recent fiscal year,  the number
of (1) late reports,  (2) transactions  that were not reported on a timely basis
during the fiscal year ended  December  31, 2003,  and (3) any known  failure to
file a required  report by officers,  directors,  and beneficial  owners of more
than 10% of our common stock is as follows:  based upon information  provided to
Guardian from  Reporting  Persons,  M. Riley Repko failed to timely file Forms 3
and 5 with respect to the year ended December 31, 2003.



                                       36
<PAGE>

ITEM 10.      EXECUTIVE COMPENSATION

COMPENSATION OF EXECUTIVE OFFICERS

The following table sets forth the aggregate cash compensation paid for services
rendered  during  the last  three  years by each  person  serving  as our  Chief
Executive Officer each of our four most highly  compensated  executive  officers
(collectively, the "Named Executive Officers"). The information provided for Mr.
Moorer is  relevant  to his role as the  former  President  and Chief  Executive
Officer of Guardian, prior to the reverse acquisition,  effective June 26, 2003.
On that date Mr. Moorer resigned his positions with the Company.

ITEM 10. EXECUTIVE COMPENSATION COMPENSATION OF EXECUTIVE OFFICERS

The following table sets forth the aggregate cash compensation paid for services
rendered  during  the last  three  years by each  person  serving  as our  Chief
Executive Officer each of our four most highly  compensated  executive  officers
(collectively, the "Named Executive Officers"). The information provided for Mr.
Moorer is  relevant  to his role as the  former  President  and Chief  Executive
Officer of Guardian, prior to the reverse acquisition,  effective June 26, 2003.
On that date Mr. Moorer resigned his positions with the Company.

<TABLE>
<CAPTION>
                                                ANNUAL COMPENSATION
                                                                                               SECURITIES
                                                                           OTHER ANNUAL        UNDERLYING      ALL OTHER
                                                      SALARY   BONUS     COMPENSATION (7)       OPTIONS       COMPENSATION
NAME AND PRINCIPAL POSITION                    YEAR    ($)      ($)            ($)                (#)             ($)
------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>      <C>                                                      <C>
J. Andrew Moorer (1)                           2003     72,600   -              -                         -      33,814
President & CEO                                2002     75,000   -              -                         -      45,000
                                               2001     75,000   -              -                         -      45,000
------------------------------------------------------------------------------------------------------------------------------
Michael W. Trudnak (2)                         2003    275,059   -            6,000                 400,000        -
Chief Executive Officer                                          -
------------------------------------------------------------------------------------------------------------------------------
Robert A. Dishaw (3)                           2003    275,059   -            6,000                       -        -
President and Chief Operating                  2002     70,865   -            1,546                       -        -
Officer
------------------------------------------------------------------------------------------------------------------------------
William J. Donovan (4)                         2003     57,560   -              -                   200,000        -
Chief Financial Officer
------------------------------------------------------------------------------------------------------------------------------
Darrell E. Hill (5)                            2003     76,923   -              -                   200,000        -
Vice President, Client Services
------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)   Mr. Moorer  compensation  reflects cash compensation paid towards his base
      salary, as well as, other compensation which reflects stock grants in lieu
      of salary and bonuses.  Mr. Moorer accepted a reduction in his base salary
      in exchange for stock grants.

(2)   Mr. Trudnak became the Chief Executive  Officer of RJL on January 1, 2003.
      Mr.  Trudnak earned  $226,622 of salary during 2003,  which is accrued and
      unpaid as of December 31, 2003.

(3)   Mr. Dishaw, the founder of RJL Marketing Services,  Inc. earned $77,844 of
      salary during 2002 and $226,622 during 2003,  which are accrued and unpaid
      as of December 31, 2003.

(4)   Mr. Donovan became an executive officer on August 18, 2003.

(5)   Mr.  Hill became an  executive  officer on May 19,  2003.  Mr. Hill earned
      $49,746 of salary during 2003,  which is earned,  accrued and unpaid as of
      December 31, 2003.

(6)   Mr. Lancaster  became an executive  officer on May 19, 2003. Mr. Lancaster
      earned $49,746 of salary during 2003, which is earned,  accrued and unpaid
      as of December 31, 2003.

(7)   Represents automobile allowance payments.


                                       37
<PAGE>

Option Grants in the Last Fiscal Year

<TABLE>
<CAPTION>
                                                Individual Grants                                  Appreciation for Option Term (2)
                         ------------------------------------------------------------------------  --------------------------------
                         Number of Securities
                           Underlying Options    % of Total Options    Exercise or
                               Granted (1)     Granted to Employees    Base Price
     Name                         (#)            in Fiscal Year         ($/Share)    Expiration Date          5%            10%
-----------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>                  <C>                <C>                <C> <C>         <C>           <C>
   Michael W. Trudnak           400,000              19.23%             0.5050        June 25, 2013        $ 23,391      $ 139,544
   Robert A. Dishaw                   -               0.00%              -                                        -              -
   William J. Donovan           200,000               9.62%              0.50        August 17, 2013        908,363      1,432,666
   Darrell E. Hill              200,000               9.62%              0.50         June 25, 2013         142,007        267,840
   Steven V. Lancaster          200,000               9.62%              0.50         June 25, 2013         142,007        267,840
</TABLE>


(1)   Options  granted were  non-qualified  options to acquire  shares of common
      stock. With the exception of Mr. Donovan, these options vested immediately
      upon  employment  and  were  exercisable  for  ten  years.  Mr.  Donovan's
      immediately vested in 50% of his options and the remaining 50% vest at his
      one-year  anniversary.  His options  are  exercisable  for ten years.  The
      foregoing  options  represent  options  that we have  committed  to  issue
      pursuant to certain employment agreements and other arrangements, but were
      outstanding on December 31, 2003.

(2)   Potential  realizable  values are based on the fair market value per share
      on the date of the grant and represent the  hypothetical  gains that could
      be achieved for the respective options if exercised and sold at the end of
      the option term for the appreciated price. The dollar amounts set forth in
      these columns are the result of  calculations  at the five percent and ten
      percent  rates of  appreciation  set by the SEC,  and are not  intended to
      forecast possible future appreciation,  if any, of Guardian's Common Stock
      price.  There can be no assurance  that such potential  realizable  values
      will not be more or less than indicated in the table above.

AGGREGATED  OPTION  EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

No options were exercised by the Named  Executive  Officers  during fiscal 2003.
The number of unexercised  options held by each of the Named Executive  Officers
who  held  options  as of  December  31,  2003  and  the  value  of  unexercised
in-the-money options as of December 31, 2003, are indicated in the table below.

<TABLE>
<CAPTION>
                                                           Number of Securities Underlying    Value of Unexercised In-the-
                                                            Unexercised Options At Fiscal     Money Options At Fiscal Year-
                                                                    Year-end                              End(1)
                             Shares                        -------------------------------    -----------------------------
                           Acquired On
          Name             Exercise        Value Realized     Exercisable   Unexercisable    Exercisable    Unexercisable
     -------------      --------------      -----------      -------------    -----------    -------------  -------------
<S>                                                             <C>                         <C>               <C>
   Michael W. Trudnak          -                  -             400,000                  -  $ 1,340,000       $       -
   Robert A. Dishaw            -                  -                   -                  -            -               -
   William J. Donovan          -                  -             100,000            100,000      335,000         335,000
   Darrell E. Hill             -                  -             200,000                  -      670,000               -
   Steven V. Lancaster         -                  -             200,000                  -      670,000               -
</TABLE>


(1)   Calculated  on the basis of the fair  market  value of $3.85 of the Common
      Stock on  December  31,  2003,  minus the per share  exercise  price.  The
      foregoing  options  represent  options  that we have  committed  to  issue
      pursuant to certain employment agreements and other arrangements, but were
      outstanding on December 31, 2003.

EMPLOYMENT AGREEMENTS

We have entered into employment  agreements with Mr. Dishaw and Mr. Trudnak. Mr.
Dishaw's  employment  agreement commenced on October 23, 2002, and Mr. Trudnak's
employment  agreement  commenced on January 1, 2003.  The  agreements  are for a
three year term and are renewable for one year terms thereafter.  The employment
agreements  provide  for annual  compensation  to Messrs.  Dishaw and Trudnak of
$275,000  provided that such  compensation  will be reduced by commissions  that
they earn on sales of our products.  The  agreements  provide for the payment of
commissions  on sales of our products at a flat rate of 14%, a signing  bonus of
$20,000,  and an  automobile  allowance.  Each of  Messrs.  Dishaw  and  Trudnak
voluntarily deferred his compensation under his employment agreement


                                       38
<PAGE>

until October 2003. The employment  agreements may be terminated  upon the death
or  disability  of the employee or for cause.  In the event the  agreements  are
terminated by us other than by reason of the death or disability of the employee
or for cause,  the  employee  is  entitled to payment of his base salary for one
year following termination. The employee may terminate the agreement on 30 days'
prior  notice  to  Guardian.  Each  employee  has  entered  into a  non-compete,
confidentiality,  proprietary rights and non-solicitation  agreement pursuant to
which the employee  agrees not to disclose  confidential  information  regarding
Guardian and not to compete  with the business of Guardian or solicit  employees
or customers of Guardian for a period of one year  following his  termination of
employment.

We have also entered into  employment  agreements with Mr. Darrell E. Hill, Vice
President, Program Management, and Mr. Steve Lancaster, Vice President, Business
Development.  The agreements  are  essentially  the same as the agreements  with
Messrs. Dishaw and Trudnak, except that the agreements provide for base salaries
of  $125,000  per  annum,  for the  payment of  commissions  on the sales of our
products at the flat rate of 5%, and for performance based bonuses.

We have also  entered  into an  employment  agreement  with Mr.  Donovan,  Chief
Financial Officer of Guardian. Mr. Donovan's employment agreement is essentially
the same as the  agreements  with Messrs.  Dishaw and  Trudnak,  except that Mr.
Donovan's  agreement provides for a base salary of $150,000 per annum.  Further,
if Mr. Donovan terminates his employment agreement by reason of: a change in the
location  of his  workplace  beyond a 50 mile  radius  of  Guardian's  principal
address;  a  material  reduction  in his  responsibilities  or number of persons
reporting to him; a material  demotion;  or an adverse change in his title,  Mr.
Donovan is entitled to be paid his base salary for one year  following  any such
termination.  Also, in the event of a change in control of Guardian and,  within
12 months  of such  change of  control,  his  employment  is  terminated  by the
acquirer or one of the events in the immediately  preceding sentence occurs, Mr.
Donovan is entitled to be paid his base salary for eighteen months from the date
of such termination or event. A "change of control" would include the occurrence
of one of the following events:

     o   the  approval  of the  shareholders  for a complete  liquidation  or
         dissolution of Guardian;

     o   the  acquisition  of 20% or more of the  outstanding  common  stock  of
         Guardian  or of  voting  power  by any  person,  except  for  purchases
         directly from Guardian, any acquisition by Guardian, any acquisition by
         a Guardian employee benefit plan, or a permitted business combination;

     o   if  two-thirds  of the  incumbent  board  members as of the date of the
         agreement cease to be board members,  unless the nomination of any such
         additional board member was approved by three-quarters of the incumbent
         board members;

     o   upon the consummation of a reorganization,  merger,  consolidation,  or
         sale or other  disposition of all or substantially all of the assets of
         Guardian,  except  if  all  of  the  beneficial  owners  of  Guardian's
         outstanding  common  stock or  voting  securities  who were  beneficial
         owners  before such  transaction  own more than 50% of the  outstanding
         common  stock or  voting  power  entitled  to vote in the  election  of
         directors  resulting from such  transaction in  substantially  the same
         proportions,  no person  owns more than 20% of the  outstanding  common
         stock of Guardian or the  combined  voting  power of voting  securities
         except to the extent it existed before such transaction, and at least a
         majority  of the  members of the board  before  such  transaction  were
         members of the board at the time the employment  agreement was executed
         or the action providing for the transaction.

Effective as of December 19, 2003, we entered into  employment  agreements  with
Walter Ludwig, a director of Guardian, and Victor T. Hamilton in connection with
the acquisition of certain assets of Difference Engines Corporation by Guardian.
The employment  agreements are essentially similar to the employment  agreements
with Mr.  Dishaw and Mr.  Trudnak,  except that they  provide for an annual base
salary of $120,000 for Mr. Ludwig and $90,000 for Mr.  Hamilton.  The agreements
also  include a change of control  provision  similar to that  contained  in Mr.
Donovan's  employment  agreement,  except that  Guardian is obligated to pay the
annual  base  salary  for twelve  (12)  months  following  the change of control
termination.

Each of the foregoing agreements provides that the employee shall be entitled to
participate in any stock option plan that we subsequently  adopt,  including the
2003 Stock Incentive Plan.

On June 26, 2003,  the effective  date of the Reverse  Acquisition,  Messrs.  J.
Andrew  Moorer,  President,  Chief  Executive  Officer and a director,  Kevin L.
Houtz, Secretary and a director,  and David W. Stevens, a director,  resigned as
officers and  directors of Guardian and were  replaced by officers and directors
designated  by RJL.  As a  condition  to  closing,  Mr.  Moorer  entered  into a
settlement agreement pursuant to which Mr. Moorer's employment agreement,  dated
February 19, 1999, was terminated and Mr. Moorer agreed to release Guardian from
any and all claims for future compensation  thereunder.  Mr. Moorer and Guardian
entered into mutual  releases for claims arising in connection with Mr. Moorer's
employment  with  Guardian.  In addition,  as a condition  to the  closing,  Mr.
Moorer,  and Messrs Houtz and Stevens,  the former directors of Guardian entered
into lock up agreements with RJL and Guardian  pursuant to which they agreed not
to sell their  shares of Guardian  for a period of six months,  except that they
may, during such period, sell an aggregate of 50,000 shares a calendar month.



                                       39
<PAGE>

2003 AMENDED AND RESTATED STOCK INCENTIVE PLAN

On August 29, 2003, our board of directors adopted our 2003 Stock Incentive Plan
and amended and  restated  the plan on  December  2, 2003  (Plan).  The board of
directors  recommended  that we submit  the Plan to our  stockholders  for their
approval.  The amended and  restated  Plan was approved by our  stockholders  on
February  13,  2004.  As of the  date  of the  filing  of this  report,  we have
committed  to the  issuance  of stock  options,  but have not issued any options
under the Plan.

The Plan is intended to foster the success of Guardian and its  subsidiaries  by
providing incentives to Eligible Employees, directors and consultants to promote
the  long-term  financial  success of Guardian.  The Plan is designed to provide
flexibility  to  Guardian in our ability to  motivate,  attract,  and retain the
services of Eligible  Employees,  directors and consultants upon whose judgment,
interest,  and special effort the successful conduct of our operation is largely
dependent.  The Plan applies to all grants of stock options  granted on or after
the date the Plan is  approved  or adopted  by our  directors  unless  otherwise
indicated.  As of February  13, 2004 the market value of the  30,000,000  shares
underlying the options issuable under the Plan was $108,300,000.

The Plan is  administered  by the board of  directors of Guardian or a committee
designated  by the board  consisting of two or more  directors  appointed by the
board, each of whom is a non-employee  director and an outside director with the
meaning of Section 162(m) of the Code. The Plan is currently administered by the
board and awards are made by the board.  The board has all powers  necessary  or
desirable to administer the Plan. The board has the power to determine the terms
and conditions upon which awards may be made, interpret the Plan, accelerate the
exercisability of any award, establish,  amend or waive rules or regulations for
the Plan's administration,  and make all other determinations and take all other
actions  necessary or advisable for the  administration  of the Plan in its sole
judgment  and  discretion.  The  board  has the  authority  to grant  awards  to
employees,  directors  and  consultants  selected by it,  which awards are to be
evidenced by an agreement.

Under the Plan,  Guardian may issue options which will result in the issuance of
up to an aggregate of 30,000,000  shares of Guardian common stock.  However,  no
options  granted  under  the  Plan  may be  exercised  until  we  have  received
stockholder  approval for an increase in our  authorized  shares of common stock
and filed an  amendment  to our  Certificate  of  Incorporation  to reflect such
increase. The Plan provides for options which qualify as incentive stock options
(Incentive  Options or ISOs) under  Section 422 of the Internal  Revenue Code of
1986, as well as the issuance of non-qualified options  (Non-Qualified  Options)
which do not so qualify.  The shares  issued by  Guardian  under the Plan may be
either treasury shares or authorized but unissued shares as Guardian's  board of
directors or a committee thereof may determine from time to time.

Pursuant to the terms of the Plan, Guardian may grant  Non-Qualified  Options to
directors or consultants of Guardian and its  subsidiaries  at any time and from
time to time as shall be  determined  by the board of  directors  or a committee
appointed  by the  board.  The Plan  also  provides  for the  Incentive  Options
available to any officer or other  employee of Guardian or its  subsidiaries  as
selected by the board of directors or a committee appointed by the board.

Options granted under the Plan must be evidenced by a stock option  agreement in
a form  consistent  with the provisions of the Plan. Each option shall expire on
the  earliest of (a) ten (10) years from the date it is granted,  (b) sixty (60)
days after the  optionee  dies or becomes  disabled,  (c)  immediately  upon the
optionee's  termination  of employment or service or cessation of Board service,
whichever  is  applicable,  or (d)  such  date as the  board of  directors  or a
committee  appointed by the board shall determine,  as set forth in the relevant
option agreement; provided, however, that no ISO which is granted to an optionee
who,  at the time such option is granted,  owns stock  possessing  more than ten
(10)  percent  of the total  combined  voting  power of all  classes of stock of
Guardian or any of its  subsidiaries,  shall be exercisable after the expiration
of five (5) years from the date such option is granted.

The price at which shares of common stock covered by the option can be purchased
is determined by Guardian's  board of directors or a committee  appointed by the
board. In the case of an Incentive Option,  the exercise price shall not be less
than the fair market value of Guardian's common stock on the date the option was
granted or in the case of any  optionee  who, at the time such  incentive  stock
option is granted,  owns stock  possessing  more than ten  percent  (10%) of the
total combined voting power of all classes of stock of his employer  corporation
or of its  parent  or  subsidiary  corporation,  not less than one  hundred  ten
percent  (110%) of the fair market value of such stock on the date the incentive
stock option is granted.

To the extent that an Incentive Option or Non-Qualified  Option is not exercised
within the period in which it may be exercised in accordance  with the terms and
provisions of the Plan described  above,  the Incentive  Option or Non-Qualified
Option will expire as to any then  unexercised  portion.  To exercise an option,
the Plan  participant  must tender an amount equal to the total option  exercise
price of the  underlying  shares and provide  written  notice of the exercise to
Guardian. The right to purchase shares is cumulative so that once the right



                                       40
<PAGE>

to purchase  any shares has vested;  those shares or any portion of those shares
may be purchased at any time  thereafter  until the expiration or termination of
the option.

Awards may be made to  approximately  seventeen (17) employees of Guardian,  our
five directors and to consultants to Guardian. Because awards under the Plan are
determined by the board,  we cannot  determine the benefits or amounts of awards
that will be received or granted in the future  under the Plan.  No options have
been granted under the Plan. The Plan is the only plan pursuant to which options
and shares may be granted or issued.

The  following is a brief summary of the principal  income tax  consequences  of
awards under the Plan.  This summary is based on current federal income tax laws
and  interpretations  thereof,  all of which are  subject to change at any time,
possibly with retroactive effect. This summary is not intended to be exhaustive.

Non-qualified Options. A participant who receives Non-Qualified Options does not
recognize  taxable  income  upon the grant of an  option,  and  Guardian  is not
entitled to a tax deduction. The participant will recognize ordinary income upon
the  exercise of the option in an amount  equal to the excess of the fair market
value of the option  shares on the  exercise  date over the option  price.  Such
income will be treated as compensation to the participant  subject to applicable
withholding tax requirements.  Guardian is generally entitled to a tax deduction
in an amount equal to the amount taxable to the  participant as ordinary  income
in the year the income is taxable to the participant.  Any appreciation in value
after the time of exercise  will be taxable to the  participant  as capital gain
and will not result in a deduction by Guardian.

Incentive  Options.  A  participant  who receives an  Incentive  Option does not
recognize taxable income upon the grant or exercise of the option,  and Guardian
is not entitled to a tax deduction.  The difference between the option price and
the fair market  value of the option  shares on the date of  exercise,  however,
will be  treated  as a tax  preference  item for  purposes  of  determining  the
alternative  minimum tax  liability,  if any, of the  participant in the year of
exercise.  Guardian will not be entitled to a deduction with respect to any item
of tax preference.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

The  following  table  sets  forth  certain  information  with  respect  to  the
beneficial  ownership of our common stock owned as of as of March 19, 2004,  by:
(i)  beneficial  owners of more than 5% of our  common  stock;  (ii) each of our
executive  officers and directors;  and (iii) all of our executive  officers and
directors as a group:

                                                NUMBER OF        % OF COMMON
                                                 SHARES              STOCK
                                              BENEFICIALLY        BENEFICIALLY
   NAME BENEFICIAL OWNER(1)                     OWNED (1)            OWNED
   ------------------------                     ---------            -----
Robert A. Dishaw                               2,945,500(2)          18.92%
Michael W. Trudnak                             2,966,000(3)          19.05%
Sean W. Kennedy                                        0              0.00%
M. Riley Repko                                         0              0.00%
Walter Ludwig                                    587,000(4)           3.77%
William J. Donovan                                     0              0.00%
Max Tobin                                      2,300,000(5)          14.77%
All executive officers and directors as        6,898,500 (7)         44.31%
a group (6 people)(6)

(1)   Beneficial ownership is determined in accordance with Rule 13d-3 under the
      Exchange  Act,  and  is  generally  determined  by  voting  powers  and/or
      investment powers with respect to securities.  Unless otherwise noted, all
      shares of common stock listed above are owned of record by each individual
      named  as  beneficial  owner  and such  individual  has  sole  voting  and
      dispositive power with respect to the shares of common stock owned by each
      of them. Such person or entity's  percentage of ownership is determined by
      assuming that any options or convertible securities held by such person or
      entity which are exercisable within 60 days from the date hereof have been
      exercised or converted as the case may be. All addresses, except as noted,
      are c/o Guardian Technologies International,  Inc., 21351 Ridgetop Circle,
      Suite 300,  Dulles,  Virginia  20166.  Mr. Tobin's address is 7805 Bayview
      Avenue, Suite 614, Ontario, Canada.



                                       41
<PAGE>

(2)   Does not include 2,212,000 shares of common stock issuable upon conversion
      of  2,212  shares  of  Series  A  Convertible  Preferred  Stock  upon  our
      satisfying certain performance  criteria during the two year period ending
      June 26, 2005.  Each such share of Series A  Convertible  Preferred  Stock
      entitles  the holder to 1,000  votes  (subject  to  certain  anti-dilution
      adjustments)  on all matters  presented to  stockholders  for a vote.  Mr.
      Dishaw's 2,212 shares of Series A Convertible Preferred Stock will entitle
      him to cast 2,212,000 votes at a meeting of the shareholders. Accordingly,
      Mr. Dishaw will be entitled to cast an aggregate of 5,157,500 votes on all
      matters submitted to stockholders or 24.45% of the total votes that may be
      cast at a meeting of our stockholders.

(3)   Does not include 1,885,000 shares of common stock issuable upon conversion
      of  1,885  shares  of  Series  A  Convertible  Preferred  Stock  upon  our
      satisfying certain performance  criteria during the two year period ending
      June 26, 2005. Each share of Series A Convertible Preferred Stock entitles
      the holder to 1,000 votes (subject to certain  anti-dilution  adjustments)
      on all matters  presented to the holders of common  stock for a vote.  Mr.
      Trudnak's  1,885  shares  of Series A  Convertible  Preferred  Stock  will
      entitle  him to cast  1,885,000  votes at a meeting  of the  shareholders.
      Accordingly,  Mr.  Trudnak  will  be  entitled  to cast  an  aggregate  of
      4,851,000 votes on all matters  submitted to stockholders or 23.00% of the
      total votes that may be case at a meeting of the shareholders.

(4)   Represents  shares  issued by us in  connection  with the  acquisition  of
      certain  intellectual  property of Difference Engines Corporation of which
      Mr. Ludwig is the President and a principal stockholder.

(5)   Does not include 1,430,000 shares of common stock issuable upon conversion
      of  1,430  shares  of  Series  A  Convertible  Preferred  Stock  upon  our
      satisfying certain performance  criteria during the two year period ending
      June 26, 2005.  Assumes  conversion  of 480 shares of Series B Convertible
      Preferred  Stock into 480,000  shares of common  stock.  Accordingly,  Mr.
      Tobin will be  entitled to cast an  aggregate  of  3,730,000  votes on all
      matters submitted to stockholders or 17.68% of the total votes that may be
      cast at a meeting of the shareholders.

(6)   Includes Messrs. Dishaw, Trudnak, Ludwig, Repko, Kennedy and Donovan.

(7)   Does not include an aggregate of 4,097,000 shares of common stock issuable
      upon  conversion of 2,212 shares of Series A Convertible  Preferred  Stock
      held by Mr.  Dishaw and 1,885  shares of Series A Preferred  Stock held by
      Mr. Trudnak.  Includes  587,000 shares issued by us in connection with the
      acquisition  of  certain  intellectual   property  of  Difference  Engines
      Corporation  of  which  Mr.  Ludwig  is  the  President  and  a  principal
      stockholder.


EQUITY COMPENSATION PLAN INFORMATION

The following table  summarizes our equity  compensation  plan information as of
December  31,  2003.  Information  is  included  for equity  compensation  plans
approved by Guardian's  shareholders and equity  compensation plans not approved
by Guardian's shareholders.

<TABLE>
<CAPTION>
                                                                                                     Shares of Common Stock
                                                                                                          available for
                                              Shares of Common                                           future issuance
                                                 Stock to be                                               under equity
                                            issued upon exercise           Weighted average                compensation
                                                     of                        exercise                  plans (excluding
                                            outstanding options,         price of outstanding               securities
                                                  warrants,                    options,                reflected in column
                                                 and rights              warrants, and rights                  (a))
   Plan Category                                     (a)                          (b)                          (c)
   -------------                        -------------------------       ----------------------      ---------------------------
<S>                                     <C>                             <C>                         <C>
Equity compensation plans approved
by Guardian's stockholders                        2,080,000(1)                  $ 27,920,000                    0.527

Equity compensation plans not
approved by Guardian's stockholders                     -                               -                         -
                                                  ---------                           -----                 -----------
Totals                                            2,080,000                           0.527                 $27,920,000
                                                  ---------                           -----                 -----------
</TABLE>


(1)   Includes  options to purchase shares  outstanding  under the Guardian 2003
      Amended and Restated Incentive Stock Option Plan.

(2)   Includes  shares  available,  as of December 31, 2003, for future issuance
      under the Guardian 2003 Amended and Restated  Incentive Stock Option Plan;
      excludes  securities  reflected  in column  (a).  Subject to the terms and
      provisions of the Plan,  options may be granted to eligible  employees and
      nonqualified  stock options may be granted to directors or  consultants of
      the Company and its Subsidiaries at any time.




                                       42
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The  following  disclosures  are  based  upon  information  furnished  to  us by
management of Guardian prior to the date of the Reverse Acquisition:

During 2002,  Mr. Moorer  exercised  2,700  options to purchase  common stock at
$5.00 per share.

At December 31, 2002,  Mr. Moorer had  outstanding  advances from the Company of
approximately $23,500.

During the fiscal years ended December 31, 2002 and 2001, Mr. Moorer  received a
cash salary of $75,000 per year,  rather than his $120,000 per year  entitlement
under his  employment  agreement.  Mr. Moorer was granted shares of common stock
totaling  270,000 shares for fiscal 2002 and 83,299 shares for fiscal 2001, such
shares  having a fair  market  value on the date of  issuance of $45,000 in each
instance, representing the difference between Mr. Moorer's entitlement under his
employment agreement and the cash salary actually paid.

In May 2003,  we made an exchange  offer to all of the  investors  who purchased
units our the January 2000 private  offering  described  above.  Pursuant to the
exchange  offer,  all investors who purchased units are being given the right to
exchange all of the  warrants  received as part of those units for shares of our
common stock.  The exchange offer consists of one share of common stock for each
unit purchased in the private offering conducted in January 2000. Messrs.  Houtz
and  Stevens,  two of our  directors,  purchased  10,000  units and 2,000 units,
respectively, in the offering and those persons accepted the exchange offer.

The  following  disclosures  relate to  transactions  to which RJL (and Guardian
Technologies  International,  Inc. post Reverse  Acquisition) and its directors,
executive  officers,  nominees for  election as a director,  or any five percent
beneficial owner is or was a party.

On October 3, 2002, Mr. Dishaw  acquired 1,500 shares of common stock of RJL for
nominal cash consideration.

On March 21, 2003, RJL entered into a consulting agreement, as amended, with ten
brokers in connection  with services to be provided in connection  with locating
and negotiating the proposed Reverse  Acquisition  between RJL, its stockholders
and Guardian.  RJL agreed to issue, at closing of the acquisition,  an aggregate
of 2,000,000  shares of Guardian for such  services.  Such shares were issued by
Guardian during July 2003.

On April 3, 2003, as part of the initial  capitalization of Guardian, Mr. Dishaw
and Mr.  Trudnak  acquired  3,326  and  4,279  shares  of  common  stock of RJL,
respectively, for nominal cash consideration.

On May 19, 2003, RJL entered into a consulting agreement with Mr. Tobin pursuant
to which Mr.  Tobin agreed to provide  consulting  services in  connection  with
strategic selling related to our business,  marketing and market  development in
the  bio-medical  industry in North  America and  Europe,  business  continuity,
finance and accounting.  The consulting agreement is for a term that ends on May
1,  2005,   and  may  be   terminated  by  Guardian  in  the  event  a  material
misrepresentation  by Mr.  Tobin or the  commencement  of any  action by the SEC
against Mr. Tobin or any entity owned or controlled  by Mr. Tobin;  or by either
party on not less than 30 days prior written  notice.  As  compensation  for his
services under the  agreement,  Mr. Tobin is entitled to receive an aggregate of
1,820,000 shares of common stock, 1,430 shares of Series A Convertible Preferred
Stock, and 480 shares of Series B Convertible  Preferred Stock of Guardian.  The
shares of Series B Convertible  Preferred  Stock were issued to Mr. Tobin during
August 2003 and the shares of Common  Stock and Series B  Convertible  Preferred
Stock were issued on November 19, 2003.

Upon the closing of the Reverse  Acquisition  and  effective  June 26, 2003,  we
issued to Mr.  Dishaw  2,945,500  shares of our common stock and 2,212 shares of
our Series A Convertible  Preferred Stock and we issued to Mr. Trudnak 2,566,000
shares  of our  common  stock  and  1,885  shares  of our  Series A  Convertible
Preferred Stock, in exchange for all of their stock in RJL. Also effective as of
June 26, 2003, Mr. Trudnak purchased 400,000 shares of our common stock for cash
consideration of $200,000 in a private placement conducted by us.

On July 30, 2003, Guardian entered into a consulting  agreement with Mr. Moorer,
the  former  President  and Chief  Financial  Officer  of  Guardian  to  provide
consulting services in connection with, among other things, business continuity,
finance and accounting,  strategic  planning,  market  development,  and related
services.  The agreement terminates on July 1, 2004, unless sooner terminated by
the  parties by mutual  agreement,  upon  thirty (30) days notice and in certain
other events. As compensation for such services, Guardian has agreed to issue to
Mr. Moorer 150,000 shares of common stock.

On October 23, 2003,  Guardian entered into an agreement with Difference Engines
Corporation,  a  Maryland  corporation,  pursuant  to which  Guardian  agreed to
purchase certain  intellectual  property owned by Difference Engines,  including
certain compression software



                                       43
<PAGE>

technology.  The transaction closed on December 19, 2003. Mr. Ludwig, a director
of Guardian,  is also the president,  a director and a principal  stockholder of
Difference  Engines.  Guardian  issued  587,000  shares of its  common  stock as
consideration  for the purchase of the  intellectual  property  and  cancelled a
convertible note that Difference Engines had issued to Guardian in the amount of
approximately $25,000 representing advances Guardian made to Difference Engines.
The  587,000  shares of common  stock will be subject to a two (2) year lock up.
Guardian has granted  Difference Engines  piggy-back  registration  rights for a
period of three (3) years  commencing on the date of the  expiration of the lock
up period  with  regard to the  shares  to be  issued in the  transaction.  Upon
expiration of the two (2) year lock up period,  in the event that the shares are
not eligible for resale  under Rule 144 and have not been  registered  under the
Securities  Act, the holder of the shares may demand  redemption  of the shares.
The  redemption  price is to be  calculated  on the basis of the  average of the
closing bid and asked prices of Guardian's  common stock for the 20  consecutive
business  days  ending  on the day  prior  to the  date of the  exercise  of the
holder's  right of  redemption.  The founders of Difference  Engines,  including
Messrs. Ludwig and Hamilton, provided certain releases to the Company related to
their contribution of the technology to Difference  Engines.  The closing of the
acquisition  of the  software  was  subject to certain  conditions,  including a
requirement that Difference  Engines obtain approval of its stockholders for the
transaction  and that Messrs Ludwig and Hamilton enter into two (2) year and one
(1) year employment agreements,  respectively, with Guardian at base salaries of
$120,000  and  $90,000  per annum,  respectively.  Other  material  terms of the
employment  agreements are described  under "Item 10.  Executive  Compensation -
Employment Agreements," above.

ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

a) The following documents are filed as part of this report:

1. CONSOLIDATED FINANCIAL STATEMENTS

      Index to Consolidated  Financial  Statements Prior  Independent  Auditor's
      Report
      Consolidated  Balance  Sheet  as  of  December  31,  2003
      Consolidated Statement of Operations for the Year Ended December 31, 2003
      Consolidated  Statement of Changes in  Stockholders'  Deficit for the Year
      Ended December 31, 2003
      Consolidated Statement of Cash Flows for the Year Ended December 31, 2003
      Notes to the Consolidated Financial Statements

2. EXHIBITS

<TABLE>
<CAPTION>
                                                                                                INCORPORATED BY REFERENCE
EXHIBIT NO.        EXHIBIT DESCRIPTION                                                          FORM     FILING DATE      FILED
                                                                                                                        HEREWITH
<S>                                                                                             <C>      <C>   <C>
2.1                Amended and Restated Agreement and Plan of Reorganization dated effective    8-K      06/26/2003
                   June 12, 2003,
                   by and among the Company, RJL Marketing Services, Inc., and the
                   shareholders of RJL
                   Marketing Services, Inc.
3.1                Certificate of Incorporation                                                                               X
3.2                Articles of Amendment to Certificate of Incorporation                                                      X
3.3                Certificate of Designation of Rights and Preferences of Series A           10-QSB     08/15/2003
                   Convertible Preferred Stock.
3.4                Certificate of DesignationS, Preferences and Rights of Series B            10-QSB     08/15/2003
                   Convertible Preferred Stock.
3.5                Certificate of Designations, Preferences and Rights of Series C            10-QSB     11/14/2003
                   Convertible Preferred Stock,
                   dated September 24, 2003.
3.6                Certificate of Amendment to Certificate of Designation of Rights and       10-QSB     11/14/2003
                   Preferences of Series B
                   Convertible Preferred Stock, dated October 27, 2003.
3.7                By-Laws                                                                                                    X
4.1                Form of Common Stock Certificate                                           SB-2       03/22/96
10.1               Employment Agreement, dated October 1, 2002, between RJL Marketing         10-QSB     08/15/2003
                   Services, Inc. and
                   Robert Dishaw.
10.2               Employment Agreement, dated January 1, 2003, between RJL Marketing         10-QSB     08/15/2003
                   Services, Inc. and
                   Michael W. Trudnak.
10.3               Amendment Agreement, dated July 28, 2003, between RJL Marketing Services,  10-QSB     08/15/2003
                   Inc. and Michael W. Trudnak.
</TABLE>


                                       44
<PAGE>

<TABLE>
<S>     <C>                                                                                          <C>          <C>
10.4    Settlement Agreement, dated June 26, 2003, between the Registrant and J. Andrew Moorer.         10-QSB    08/15/2003

10.5    Exclusive Distribution Agreement, dated June 26, 2003, between RJL Marketing Services,          8-K/A     08/26/2003
        Inc. and Diagnos, Inc.

10.6    Employment Agreement, dated May 19, 2003, between RJL Marketing Services, Inc. and              8-K/A     08/26/2003
        Darrell E. Hill.

10.7    Employment Agreement, dated May 19, 2003, between RJL Marketing Services, Inc. and              8-K/A     08/26/2003
        Stephen Lancaster.

10.8    Consulting Agreement, dated May 19, 2003, between RJL Marketing Services, Inc. and Max          8-K/A     08/26/2003
        Tobin.

10.9    Consulting Agreement, dated July 30, 2003, between RJL Marketing Services, Inc. and J.          8-K/A     08/26/2003
        Andrew Moorer.

10.10   Employment Agreement, dated August 4, 2003, between the Registrant and Ruth H. Taylor.           10-QSB   11/14/2003

10.11   Employment Agreement, dated August 18, 2003, between the Registrant and William J.               10-QSB   11/14/2003
        Donovan.

10.12   Consulting Agreement, dated August 20, 2003, between the Registrant and Berthel Fisher &         10-QSB   11/14/2003
        Company Financial Services, Inc.

10.13   Consulting Agreement, dated September 11, 2003, between the Registrant and Clifford             S-8       10/09/2003
        Neuman.

10.14   Consulting Agreement, dated September 25, 2003, between the Registrant and Barry Davis.         S-8       10/09/2003

10.15   Consulting Agreement, dated September 30, 2003, between the Registrant and A.B. Goldberg.       S-8       10/09/2003

10.17   Consulting Agreement, dated July 28, 2003, between the Registrant and Redwood Consultants        10-QSB   11/14/2003
        LLC.

10.18   Consulting Agreement, dated July 4, 2003, between the Registrant and Tosh Consulting.            10-QSB   11/14/2003

10.19   Placement Agents Warrants, dated October 14, 2003, between the Registrant and Berthel            10-QSB   11/14/2003
        Fisher &Company Financial Services, Inc.

10.20   Alliance Partner Agreement, dated September 17, 2003, between the Registrant and Telinks         10-QSB   11/14/2003
        Canada Ltd.

10.21   Compensation Agreement, dated September 18, 2003, between the Registrant and Telinks             10-QSB   11/14/2003
        Canada Ltd.

10.22   Asset Purchase Agreement, dated October 23, 2003, among the Registrant, Difference Engines       10-QSB   11/14/2003
        Corporation.

10.23   Amendment Agreement, dated September 22, 2003, between the Registrant and Berthel Fisher         10-QSB   11/14/2003
        & Company Financial Services, Inc.

10.25   Settlement Agreement dated March 16, 2004 between the Registrant and Cappello Capital                          X
        Corporation.

10.26   Note and Warrant Purchase Agreement, dated as of December 8, 2003 between the Registrant                       X
        and each of the undersigned purchasers: Charles Bell, Daniel Denardis, Scott Porter, Alan
        Stamper, Edward Tschiggfrie, and Bret Williams.

10.27   Convertible Promissory Note, dated December 11, 2003 between the Registrant and Charles T.                     X
        Bell.

10.28   Common Stock Warrant Agreement, dated December 11, 2003, between the Registrant and                            X
        Charles T. Bell.

10.29   Supplemental Common Stock Warrant Agreement, dated December 11, 2003, between the                              X
        Registrant and Charles T. Bell.

10.30   Convertible Promissory Note, dated December 19, 2003 between the Registrant and Daniel                         X
        Denardis.

10.31   Common Stock Warrant Agreement, dated December 19, 2003, between the Registrant and                            X
        Daniel Denardis.

10.32   Supplemental Common Stock Warrant Agreement, dated December 19, 2003, between the                              X
        Registrant and Daniel Denardis.

10.33   Convertible Promissory Note, dated December 19, 2003 between the Registrant and Scott                          X
        Porter.
</TABLE>


                                       45
<PAGE>


<TABLE>
<S>                                                                                                     <C>        <C>
10.34   Common Stock Warrant Agreement, dated December 19, 2003, between the Registrant and                                     X
        Scott Porter.
10.35   Supplemental Common Stock Warrant Agreement, dated December 19, 2003, between the                                       X
        Registrant and Scott Porter.
10.36   Convertible Promissory Note, dated December 8, 2003 between the Registrant and Alan                                     X
        Stamper.
10.37   Common Stock Warrant Agreement, dated December 8, 2003, between the Registrant and                                      X
        Alan Stamper.
10.38   Supplemental Common Stock Warrant Agreement, dated December 8, 2003, between the                                        X
        Registrant and Alan Stamper.
10.39   Convertible Promissory Note, dated December 8, 2003 between the Registrant and Edward D.                                X
        Tschiggfrie.
10.40   Common Stock Warrant Agreement, dated December 8, 2003, between the Registrant and                                      X
        Edward D. Tschiggfrie.
10.41   Supplemental Common Stock Warrant Agreement, dated December 8, 2003, between the                                        X
        Registrant and Edward D. Tschiggfrie.
10.42   Convertible Promissory Note, dated December 19, 2003 between the Registrant and Edward                                  X
        D. Tschiggfrie.
10.43   Common Stock Warrant Agreement, dated December 19, 2003, between the Registrant and                                     X
        Edward D. Tschiggfrie.
10.44   Supplemental Common Stock Warrant Agreement, dated December 19, 2003, between the                                       X
        Registrant and Edward D. Tschiggfrie.
10.45   Convertible Promissory Note, dated December 8, 2003 between the Registrant and Bret                                     X
        Williams.
10.46   Common Stock Warrant Agreement, dated December 8, 2003, between the Registrant and                                      X
        Bret Williams.
10.47   Supplemental Common Stock Warrant Agreement, dated December 8, 2003, between the                                        X
        Registrant and Bret Williams.
10.48   Amended And Restated 2003 Stock Incentive Plan.                                                                         X
10.49   Employment Agreement, dated December 3, 2003, between the Registrant and Walter                      8-K  01/30/2004
        Ludwig.
10.50   Employment Agreement, dated December 3, 2003, between the Registrant and Victor                      8-K  01/30/2004
        Hamilton.
14.1    Code of Ethics of the Company for Chief Executive Officer and Senior Financial Officers                                 X
21      List of Subsidiaries                                                                                                    X
23.1    Independent Auditors' Consent                                                                                           X
31.1    Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer                                                     X
31.2    Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer                                                     X
32.1    Section 1350 Certification of Chief Executive Officer                                                                   X
32.2    Section 1350 Certification of Chief Financial Oficer                                                                    X
</TABLE>

Reports filed on Form 8-K

Current  report  on Form 8-K  dated  October  2,  2003 - Item 9  disclosure,  as
required by Regulation FD, announcing that the Registrant has appointed M. Riley
Repko to its  Board of  Directors.  His  appointment  to  Guardian's  board  was
effective October 1, 2003. Additional  information was included in the Company's
press release dated October 2, 2003, filed as an exhibit thereto.

Current report on Form 8-K dated October 23, 2003 - the Registrant  entered into
an  agreement  with  Difference  Engines  Corporation,  a Maryland  corporation,
pursuant  to which  the  Registrant  agreed  to  purchase  certain  intellectual
property owned by Difference Engines Corporation, a Maryland corporation.



                                       46
<PAGE>

Current report on Form 8-K dated January 30, 2004 - the Registrant completed the
closing of the  acquisition of the IP of Difference  Engines  Corporation  which
occurred  effective  December 19, 2003,  after  Difference  Engines obtained the
approval of its  stockholders for the  transaction.  Additional  information was
included in the Company's  press  release  dated  January 16, 2004,  filed as an
exhibit thereto.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES AUDIT FEES

During the last two fiscal years ended December 31, 2003 and 2002, respectively,
the  aggregate  fees billed by Aronson & Company for the  professional  services
rendered for the audit of the Company's annual financial  statements and for the
reviews of the financial  statements  included in the Company's Form 10-QSB were
approximately $41,516 and $8,500, respectively.

AUDIT-RELATED FEES

"Audit-related"  fees include assurance and related services  reasonably related
to the performance of the audit or review of the Company's financial statements,
such  as  reports  on  internal  control,  review  of SEC  filings,  merger  and
acquisition  due diligence and related  services.  The aggregate  fees billed by
Aronson & Company for  services  related to the  performance  of their audit and
review of financial  statements that are not included in "audit fees" above were
approximately  $14,599 and $0 for the fiscal  years ended  December 31, 2003 and
2002, respectively.

During the fiscal year ended  December 31, 2003,  we paid audit  related fees of
$700 to Schumacher & Associates, the Company's previous auditors.

TAX FEES

Tax fees include tax-related  services,  such as tax return review,  preparation
and compliance,  as well as strategic tax planning services,  and structuring of
acquisitions.  The aggregate fees billed by Aronson & Company for these services
were  approximately  $2,436 and $0 for the fiscal years ended  December 31, 2003
and 2002, respectively.

ALL OTHER FEES

During the last two fiscal years ended December 31, 2003 and 2003, respectively,
there were no fees billed by Aronson & Company for  professional  services other
than those described above.



                                       47
<PAGE>

                                   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 duly
authorized.

                        GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.

                        By: /s/ Michael W. Trudnak
                            ---------------------------------
                            Chief Executive Officer
                            (Principal Executive Officer)

                        By: /s/ William J. Donovan
                            ---------------------------------
                            Chief Financial Officer
                            (Principal Accounting Officer)

                        Dated: April 14, 2004

       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.

<TABLE>
<CAPTION>
     SIGNATURE                                       TITLE
     ---------                                       -----
<S>                             <C>
/s/ Michael W. Trudnak
----------------------------
Michael W. Trudnak               Chairman of the Board, Chief Executive Officer, Treasurer,
Date: April 14, 2004             Secretary and Director (Principal Executive Officer)

/s/ Robert A. Dishaw
-----------------------------
Robert A. Dishaw                 President, Chief Operating Officer and Director
Date: April 14, 2004

/s/ William J. Donovan
-----------------------------
William J. Donovan               Chief Financial Officer (Principal Accounting Officer and
Date: April 14, 2004             Principal Financial Officer)

/s/ Walter Ludwig
-----------------------------
Walter Ludwig                    Director
Date: April 14, 2004

/s/ Sean W. Kennedy
-----------------------------
Sean W. Kennedy                  Director
Date: April 14, 2004

-----------------------------
M. Riley Repko Director
</TABLE>


                                       48