SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                          ----------------------------

                                  FORM 10-KSB

                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1998     Commission file number 0-28238

                   GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
                 (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)


                Delaware                                54-1521616
        (STATE OR OTHER JURISDICTION              (I.R.S. EMPLOYER
      OF INCORPORATION OR ORGANIZATION)           IDENTIFICATION NO.)

      22570 Markey Court, Dulles, Virginia              20166
    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)          (ZIP CODE)

      Issuer's telephone number:                      703-444-7931


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
                                Class A Warrants
                                (Title of Class)

     Check  whether  the Issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
                                                                      ---  ---
     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]

     Issuer's revenues for its most recent fiscal year were $1,656,649.

     The aggregate market value of the voting stock held by non-affiliates as of
April 12, 1999 was  approximately  $1,533,572 based on the average bid and asked
price of such stock.

     The number of shares outstanding of issuer's Common Stock, $.001 par value,
as of April 12, 1998 was 1,243,831.


                      DOCUMENTS INCORPORATED BY REFERENCE:

                                      NONE

Transitional Small Business Disclosure Format (check one)
Yes    No  X
   ---    ---


<PAGE>



                                     PART I

ITEM 1                       DESCRIPTION OF BUSINESS

GENERAL

Guardian Technologies International,  Inc. (referred to hereinafter as the
Company) was originally incorporated in 1989 in the Commonwealth of Virginia,
and commenced  full  production of its products in December,  1990. In 1996, the
Company was  reincorporated in the State of Delaware.  The Company  manufactures
its  products  under its own label at its  facility  in  Dulles,  Virginia.  The
Company currently employs 18 people.


OPERATIONS

The  Company  manufactures  and  distributes   ballistic  protective  equipment,
including equipment commonly referred to as body armor.

The Company's  product  lines  include four basic types of ballistic  protective
vests,  ballistic protective shields,  K-9 ballistic protective vests,  aircraft
ballistic protective equipment, and assorted other ballistic protective devices,
such as ballistic protective blankets and seat cover liners.

The  Company's  four  main  product  lines of  ballistic  protective  vests  are
manufactured  in six styles,  each providing  varying  degrees of protection and
certified under guidelines established by the National Institute of Justice (the
"NIJ").  All of the Company's body armor products are certified  under the NIJ's
Standard 0101.03 for Police Armor.


PRODUCTS

The   Company's   life-saving   products   are   manufactured   primarily   with
AlliedSignal's  High  Performance  Materials  which are  Spectra(R)  1000  woven
fabric, and non-woven composite  ballistic materials Spectra Shield(R),  Spectra
Flex(TM),  Gold  Shield(TM)  and Gold  Flex(TM).  Based on studies  and  testing
performed at H.P. White  Laboratory,  Inc., an independent  testing  laboratory,
tests  prepared by  AlliedSignal  and the  Company's  own test  experience,  the
Company  believes  that  protective  vests  and  equipment   manufactured   with
AlliedSignal  High  Performance  Materials  provide,  pound for  pound,  greater
ballistic  protection  and  reduced  blunt  trauma  to  the  wearer,  at  higher
projectile  velocities and with longer  durability  than similar  equipment made
with other forms of ballistic resistant materials.

The  Company  has been  assigned  rights  to U.S.  patents  numbered  5,327,811;
5,448,938;  and 5,377,577 for, respectively,  a Lightweight Ballistic Protective
Device,  a Removable  Ballistic  Resistant Armor Seat Cover and Floor Mat, and a
Ballistic  Shield.  These patents include  related  production  techniques.  The
Company  also  acquired  the  rights to  manufacture  and  distribute  two other
patented products: a two-panel set of thin,  lightweight rigid  bullet-resistant
armor for police patrol bicycles,  and a prisoner  restraint device for improved
security when  transporting a prisoner.  For the latter device,  the Company was
granted the trademark MAXI-MITT(TM).


MANUFACTURING

The  Company  manufactures  substantially  all  of  its  products.  The  Company
manufactures  its  products  under  its own  label at its  facility  in  Dulles,
Virginia.

<PAGE>


RESEARCH AND DEVELOPMENT

The Company  concluded  research  and  development  during 1996 on a new line of
ballistic  protective vests marketed as the Thin Blue Line (TBL). The TBL vests,
made with  AlliedSignal's  newly  developed  High  Performance  Materials,  Gold
Flex(TM) and Gold Shield(TM),  are light, flexible and cost less to produce. The
TBL products are more competitively  priced than Guardian's other four lines and
should be attractive to the price conscious consumer.

Also  in  1996,  the  Company  introduced  a  two-panel  set of  thin  and  very
lightweight rigid armor which can be easily installed on police patrol bicycles.
The introduction of this product followed the  introductions of a newly designed
ballistic-protective  vest for  police  dogs and a  restraint  device  used when
prisoners are being transported.

The Company did not initiate any new R&D efforts during 1997 or 1998.


RAW MATERIALS, SOURCES AND AVAILABILITY

The Company is  dependent  upon a single  supplier  for the  majority of its raw
materials. These materials are available only from AlliedSignal, which holds the
patent for the unidirectional fiber/resin process incorporating Spectra(R) ultra
high molecular weight  polyethylene  fibers or aramid fibers.  AlliedSignal also
controls the  proprietary  thermoplastic  process used to manufacture its Shield
and Flex materials.


CUSTOMERS

In 1998 and 1997, 2% and 4%,  respectively,  of Guardian's total sales were made
to  foreign  police  and  military   organizations.   The  Company  is  pursuing
opportunities  in  several  nations of the  Pacific  Rim,  in Central  and South
America, in Eastern and Central Europe, and the Middle East.

Government contract work and sales to U.S.  government agencies  represented 19%
of  total  sales in 1998 and 33% in 1997.  Sales to  municipal  law  enforcement
agencies  represented  26% of total  sales in 1998 and 11% in 1997.  The Company
intends to team with manufacturers of compatible armor products and/or materials
to  obtain  contracts  by  bringing  together  technical  expertise,  sales  and
marketing efforts and production capabilities.

The Company  established  a contract  with the General  Services  Administration
(GSA) - the federal government's  principal  procurement channel - which enables
the  Company  to sell all its  products  directly  through  GSA.  The  four-year
contract was signed and became effective on June 1, 1997.

The Company's sales  representatives are making intensive efforts to make direct
contact with key procurement  personnel in small and medium size law enforcement
agencies as well as responding to agency and department  solicitations  for bids
and proposals.

The Company  maintains ties to two large police  fraternal  organizations  which
resulted in sales throughout 1998 and 1997.

<PAGE>


MARKETING AND DISTRIBUTION

The Company's products are marketed directly by the Company and through selected
local dealers of police equipment to local, state, and federal agencies, private
security  companies,  and private  individuals  with legitimate  security needs.
Marketing methods include personal sales presentations, advertising in magazines
and periodicals aimed at the law enforcement profession, direct mail information
dissemination,  participation  by the Company sales  personnel at selected trade
shows and conferences.

The   Company   entered   the   Internet   universe   with  its  own  home  page
(www.guardiantech.com)   and  E-Mail  address   (gti@interramp.com)   which  are
developing  into  resources  for marketing its products in the United States and
around the world.

The Company also subscribes to two other marketing services:  BidNet and FACNet.
BidNet  tracks  bids and  solicitations  for  proposals  from  local  and  state
jurisdictions  throughout  the United  States.  FACNet  provides  information on
federal  procurements  and  is a  required  on-line  service  for  GSA  contract
suppliers  seeking to sell to the U.S.  Department of Defense (DOD). In order to
respond to DOD solicitation  opportunities,  the Company seeks out manufacturers
of compatible  products  and/or  materials  with which the Company can match its
technical expertise, sales and marketing efforts and production capabilities.


BACKLOG

At December 31, 1998, the Company's  estimated  backlog of sales was $75,000.  A
year earlier, at December 31, 1997, the Company's estimated backlog of sales was
$350,000.  The  high  volume  of  backlog  at  December  31,  1997  was due to a
significant  sale  under  the  Company's  contract  with  the  General  Services
Administration  (GSA) of approximately  $466,000 of which $302,000 was completed
during 1997 and $164,000 remained in backlog at year end. The backlog of $75,000
at December 31, 1998 is more in line with the amount in backlog at the end of an
average month.


COMPETITION

The  ballistic  protective  equipment  business  is highly  competitive.  In the
domestic law enforcement,  federal government and military markets,  the Company
has at least five major  competitors.  The Company  believes  that the principal
elements  of  competition  in the  sale of  ballistic  protective  vests  are 1)
materials used in  construction,  2) style and design of the vest, and 3) price.
In the law enforcement  and military  markets,  the Company  frequently bids for
orders  in  response  to  invitations   for  bidding  which  set  forth  product
performance specifications.  Although the Company's products are priced slightly
higher than the competition's  products,  the Company believes its higher prices
are justified by better craftsmanship, higher ballistic capability of materials,
more body area coverage,  and a longer warranty.  In international  markets, the
Company's  competition  consists  of  several  American  competitors  and  a few
international companies.

<PAGE>


ITEM 2                    DESCRIPTION OF PROPERTY

The  Company  vacated  its  previously  leased  premises  to  occupy  its  newly
constructed  facility at 22570  Markey  Court,  Dulles,  Virginia on January 23,
1997.  The total cost for the 33,741  square foot  facility at December 31, 1998
was $2,762,119  comprised of $237,339 for land and $2,524,780 in building costs.
At December 31, 1997 management had leased  approximately 24% of the building to
other tenants.  At February 1, 1998, an additional 32% was leased.

On March 31, 1999,  the Company sold its land and building for  $2,825,000.  The
Company has signed a five year lease for the 15,062  square feet of space it had
been using throughout 1997 and 1998 for approximately  $13,000 per month with an
annual  escalation  of 3%. As a result of the sale,  after March 31,  1999,  the
Company will no longer  recognize  rental income nor will it incur  depreciation
expense or other  operating  expenses  associated  with  owning  and  managing a
commercial building.


ITEM 3                        LEGAL PROCEEDINGS

None.


ITEM 4     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.







<PAGE>



                                    PART II

ITEM 5    MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The common  stock of the Company is traded on the NASDAQ  Stock Market under the
symbol  GRDN.  The  prices  listed  below are the high and low sales for  common
shares during 1997 and 1998.




                                            Price
                                     --------------------
            Quarter Ended               Low        High
            -------------            ---------  ---------

               3/31/97               $ 0.84375  $ 2.53125
               6/30/97               $ 0.875    $ 2.625
               9/30/97               $ 1.375    $ 4.00
              12/31/97               $ 2.50     $ 3.375
               3/31/98               $ 1.75     $ 2.8125
               6/30/98               $ 2.125    $ 3.375
               9/30/98               $ 2.00     $ 3.75
              12/31/98               $ 1.25     $ 3.8125



The common  stock  purchase  warrants of the  Company  were traded on the NASDAQ
Stock Market under the symbol GRDNW. On October 27, 1998 the Company  received a
letter  from NASDAQ  indicating  that the  warrants  were  subject to  delisting
because  the  warrants  had failed to  maintain  a minimum of two active  market
makers.  Based on  limited  interest  in the  warrants  from  outside  investors
management decided not to attempt to rectify the market maker situation.  NASDAQ
subsequently delisted the warrants. The prices listed below are the high and low
sales prices for the common stock warrants during 1997 and 1998.




                                            Price
                                     ---------------------
              Quarter Ended             Low         High
              -------------          ---------   ---------

                 3/31/97             $ 0.09375   $ 0.750
                 6/30/97             $ 0.0625    $ 0.250
                 9/30/97             $ 0.03125   $ 0.46875
                12/31/97             $ 0.250     $ 0.375
                 3/31/98             $ 0.3125    $ 0.3125
                 6/30/98             $ 0.250     $ 0.375
                 9/30/98             $ 0.125     $ 0.4375
                12/31/98             $ 0.050     $ 0.125




There have been no dividends declared since inception.



<PAGE>


ITEM 6   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

GENERAL

The following discussion of the financial condition and results of operations of
the  Company  should  be read in  conjunction  with the  consolidated  financial
statements and related notes thereto.


OVERVIEW

As disclosed  in the  Company's  independent  auditors  report on the  financial
statements as of and for the years ended December 31, 1998 and 1997 (and further
discussed  in Note 2 to the  financial  statements)  the  Company  has  suffered
continued  losses from operations since inception that raise  substantial  doubt
about its ability to continue as a going  concern.  In an effort to reverse this
trend and achieve  profitability  management has taken, or intends on taking the
following actions:

      1.) Seek  acquisition  candidates with profitable  operations to build the
          Company's revenue base.

      2.) Increase  revenue  output of  existing  operations.  During  the first
          quarter of 1999,  Guardian  set in motion the NS  Microwave  Sales and
          Marketing  Agreement that was negotiated as part of the dissolution of
          the previously announced purchase agreement between the two companies.
          The NSM Agreement is anticipated  to produce an additional  element of
          revenue in the form of microwave  products  that can be offered to the
          Company's existing armor products customer base.

      3.) Reduce non-armor manufacturing related costs and activities associated
          with the Company's existing operations. As discussed in Note 11 to the
          financial   statements,   the  Company  sold  its   manufacturing  and
          administrative facility for $2,825,000.  In conjunction with the sale,
          the purchaser  assumed the Company's  note payable,  thereby  reducing
          interest  costs.  Residual  proceeds  from the  sale of  approximately
          $883,000 will be used to facilitate the Company's acquisition plans.


      For  these   reasons,   management   believes  that  no   adjustments   or
      reclassifications  of recorded assets and liabilities is necessary at this
      time.  There  can be no  assurances,  however,  that the  Company  will be
      successful in these plans.






<PAGE>


RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997


Net sales for 1998 were  $1,656,649  compared to $1,154,970 in 1997, an increase
of $501,679 or 43.4%.  The  increase in sales is  attributable  primarily to the
completion  of a new  order to supply  armor  products  to an allied  government
during 1998. The Company anticipates continued sales during 1999 associated with
this order.

The Company's  gross profit in 1998 was $278,672 or 17% compared to a gross loss
of ($82,135) in 1997.  The Company's  improved  margin  resulted from  increased
sales coupled with  reductions in production  costs and increased  manufacturing
efficiency.

Total  operating  expenses were $697,856 for 1998 compared to $799,822 for 1997.
Selling  expenses  were 129,070 in 1998 compared to $258,067 in 1997, a decrease
of $128,997 or 50.0%. The decrease was  attributable  primarily to a decrease in
sales consultant costs of $51,524 and a decrease in advertising and promotion of
$34,730.  General and  administrative  costs were  $568,786 in 1998  compared to
$521,755 in 1997, an increase of $47,301 or 9.0%. The increase was  attributable
primarily to a bad debt cost of $32,224 in 1998.

Other  income  (expense)  was  ($28,071) in 1998  compared to $847 in 1997.  The
decrease was attributable  primarily to two factors.  Rental income increased by
$82,919  from  $101,150  in 1997 to  $184,069 in 1998 as the Company was able to
lease out the  remaining  unoccupied  space in its  Dulles,  Virginia  facility.
Offsetting  the increase in rental income during 1998 was  acquisition  costs of
$111,423 (mostly legal and audit fees) related to a failed acquisition.  Without
these  additional  non-operating  costs,  the Company's net loss would have been
($355,832) or 61% lower than the loss incurred in 1997.

The net loss in 1998 was  ($447,255) or ($.40) per share  compared to ($861,110)
or ($.77) per share in 1997.



<PAGE>

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

Net sales for 1997 were $1,154,970 compared to $1,475,577 in 1996, a decrease of
$320,607 or 21.7%.  The decrease in sales is attributable to a decrease in sales
to foreign  governments  and agencies  (from $314,850 or 21% of sales in 1996 to
$42,059 or 4% of sales in 1996), a decrease of $272,791.

The  Company  sustained  a gross loss in 1997 of  ($82,135)  compared to a gross
profit of $156,834 in 1996.  The  reduction  in gross  margin for the year ended
December  31,  1997 as  compared  to 1996  resulted  from  lower  sales  volume,
production  inefficiencies  attributed to a large number of small orders and the
disposition of approximately $33,000 of obsolete inventory.

Total operating expenses were $779,822 for 1997 compared to $1,202,237 for 1996.
General and  administrative  costs  decreased  $277,322 from $799,077 in 1996 to
$521,755 in 1997.  This  decrease  was  primarily  attributable  to decreases in
professional  fees of $125,000  and salary  decreases  for  officers of $85,000.
Selling expenses  decreased  $145,093 from $403,160 in 1996 to $258,067 in 1997.
This decrease was due to an $85,000 decrease in sales  consultants and a $40,000
decrease in sales commissions  attributable to lower sales volume.  Advertising,
conference and exhibit costs decreased by $11,000.

The 1997 non-operating financing income for the Company decreased from income of
$91,719 in 1996 to expense of $100,303 in 1997. The net financing income in 1996
resulted  because the proceeds from the May, 1996 public  offering were invested
in US Government  agency debt securities.  These securities served as collateral
for a line of  credit  with a  broker.  The  Company  used  the  line of  credit
borrowings  to pay  off  outstanding  loans,  finance  the  construction  of its
production and  headquarters  facility and to provide for working capital needs.
Additionally, on February 7, 1997, the Company executed a note for $900,000 with
a commercial entity.  Interest at 15 percent,  annual rate, is due monthly.  The
note is  secured  by a first  deed of  trust  on the  office  and  manufacturing
facility in Dulles, Virginia. The net financing expense in 1997 resulted from an
excess of the  interest  costs from the line of credit  borrowings  and from the
$900,000 note over the interest  earned in securities.  Interest  capitalized in
connection  with the  construction  of the new facility  amounted to $21,509 for
1996 and $19,000 in 1997.

Rental income  increased from nil in 1996 to $101,150 in 1997 as the Company was
able to  lease  excess  space  in its new  facility.  The net  loss in 1997  was
($861,110) compared to ($953,684) in 1996.


<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 1998 the Company had total assets of  $4,241,669  compared to
total  assets of  $3,729,872  as of December  31,  1997, a decrease in assets of
$511,817. Total liabilities increased from $1,451,004 as of December 31, 1997 to
$2,110,136  as of  December  31,  1998.  Total  shareholders'  equity  decreased
$147,255 to $2,131,533 as of December 31, 1998.

Total current  assets as of December 31, 1998 were  $1,530,634  and consisted of
cash and equivalents of $585,937, net accounts receivable of $193,718, inventory
of $180,786,  notes receivable of $400,000 and prepaid expenses and other assets
of $170,193.  Total current  liabilities  as of December 31, 1998 were $286,880,
comprised of accounts  payable and accrued  expenses of $205,933 and the current
portion of notes payable of $80,947. Working capital as of December 31, 1998 was
$1,243,754 representing an increase in working capital for the year of $877,381.
Working  capital  increased  during  the year  primarily  due to the  receipt of
approximately $1,000,000 in excess funds from a mortgage placed on the Company's
office and manufacturing  facility coupled with the receipt of $300,000 from the
issuance of common stock and the exercise of stock  options  offset by operating
losses sustained during the year of $447,255.

Total  assets as of December  31,  1998 of  $4,241,669  include,  in addition to
current  assets of  $1,530,634  discussed  above,  net property and equipment of
$2,711,035   comprised   primarily  of  costs   associated  with  the  Company's
acquisition of land and the subsequent  construction of the Company's  executive
offices and manufacturing facility thereon.

Total liabilities as of December 31, 1998 of $2,110,136  include, in addition to
current  liabilities of $286,880 discussed above, the long term portion of notes
payable of $1,823,256  comprised of a mortgage received from a commercial entity
bearing  interest at 7.5% per annum.  Long term debt as of December 31, 1997 was
$927,148  comprised  of $900,000 in long term debt  received  from a  commercial
entity  bearing  interest  at 15%  per  annum  and  $27,148  associated  with an
insurance premium finance agreement.

As of December 31, 1998 the Company reported shareholders' equity of $2,131,533.
This  represents a decrease of $147,255  from  December  31, 1997  shareholders'
equity.  The decrease is  attributable to the Company's net loss for the year of
$(447,255)  offset by the  issuance  of common  stock and the  exercise of stock
options in the amount of $300.000.


FORWARD-LOOKING STATEMENTS

The Company believes that this report contains forward-looking statements within
the  meaning of Section  27A of the  Securities  Act of 1933,  as  amended,  and
Section 21E of the Securities Exchange Act of 1934, as amended, that are subject
to certain risks and  uncertainties.  Forward-looking  statements  represent the
Company's  expectations  or beliefs  concerning  future  events,  including  the
following:  any statements  regarding future sales and gross profit percentages,
any statements  regarding the continuation of historical  trends, any statements
regarding the sufficiency of the Company's cash balances and cash generated from
operating  and  financing  activities  for the  Company's  future  liquidity and
capital  resource  needs,  any  statements  regarding  the effect of  regulatory
changes,  the success of development and enhancement of the Company's  products,
the  adequacy  of the  Company's  facilities,  potential  acquisitions,  and any
statements  regarding  the future of the industry  and the various  parts of the
markets in which the Company  conducts its business.  The Company  cautions that
any  forward-looking  statements  made by the Company in this report or in other
announcements  made by the Company are further  qualified by  important  factors
that  could  cause  actual  results  to  differ  materially  from  those  in the
forward-looking statements.


<PAGE>


                              THE YEAR 2000 ISSUE

The Year 2000 Issue (Y2K) is the result of computer programs being written using
two digits rather than four to define the applicable year. Any the the Company's
computer  programs that have date sensitive  software may recognize a date using
"00" as the year 1900 rather than the year 2000.  This could  result in a system
failure or miscalculations causing disruptions of operations,  including,  among
other things, a temporary inability to process  transactions,  send invoices, or
engage in similar normal business  activities.  Based upon a recent  assessment,
the  Company  has made a  preliminary  determination  that it may be required to
upgrade or replace certain portions of its software so that its computer systems
will properly  utilize  dates beyond  December 31, 1999.  The Company  presently
believes  that,  with  upgrades  of existing  software  and  conversions  to new
software at minimal cost, Y2K can be mitigated.  However, the Y2K solutions have
not been  implemented and are not scheduled to be completed until later in 1999.
If such upgrades and conversions are not made, or are not completed or available
timely,  the Year 2000 Issue could have a material  impact on the  operations of
the Company.

Furthermore,  the  Company has yet to initiate  formal  communications  with its
significant  suppliers and large  customers to determine the extent to which the
Company is vulnerable  to those third  parties'  failure to remediate  their own
Year 2000  Issue.  The  Company  has one  supplier  upon which it relies for the
majority of its ballistic  materials.  Should this supplier suffer from problems
related to Y2K,  the  Company  has  alternate  sources to which it could turn to
obtain these materials.  As a secondary alternative,  the Company also has other
sources to which it could turn to obtain  alternative  ballistic  materials made
from other raw materials.  As a result, the Company believes that the effects of
Y2K, as it may effect its  significant  suppliers,  can be  mitigated.  However,
there can be no  guarantee  that the  systems  of other  companies  on which the
Company's business relies will be timely converted, or that a failure to convert
by another  company,  or a conversion  that is  incompatible  with the Company's
systems, would not have a material adverse effect on the Company. In the view of
the foregoing,  there can be no assurance that the Year 2000 Issue will not have
a material adverse effect upon the Company.


                           ACCOUNTING PRONOUNCEMENTS

SFAS No. 133,  "Accounting for Derivative  Instruments and Hedging  Activities",
was issued in June 1998.  This  statement  establishes  accounting and reporting
standards for derivative  instruments  and for hedging  activities.  It requires
that an entity  recognize all derivatives as either assets or liabilities in the
statement of financial  position and measure  those  instruments  at fair value.
This statement is effective for the Company's financial  statements for the year
ended  December  31, 2000 and the  adoption of this  standard is not expected to
have a material effect on the Company's financial statements.

SFAS No. 132,  "Employers'  Disclosures about Pensions and Other  Postretirement
Benefits,  was issued in February 1998.  This  statement  revises the disclosure
requirement for pensions and other  postretirement  benefits.  This statement is
effective for the Company's financial statements for the year ended December 31,
1998 and the adoption of this standard is not expected to have a material effect
on the Company's financial statements.


<PAGE>



ITEM 7                        FINANCIAL STATEMENTS


                         INDEX TO FINANCIAL STATEMENTS



INDEPENDENT AUDITORS' REPORTS                                 

BALANCE SHEET - December 31, 1998                             

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - For the Years Ended
  December 31, 1998 and 1997

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY - For the Years Ended
  December 31, 1998 and 1997

STATEMENTS OF CASH FLOWS - For the Years Ended December 31, 1998 and 1997

NOTES TO FINANCIAL STATEMENTS                                 















<PAGE>






                          INDEPENDENT AUDITOR'S REPORT


Board of Directors and Shareholders
Guardian Technologies International, Inc.
Dulles, Virginia


We  have  audited  the  accompanying  balance  sheet  of  Guardian  Technologies
International,  Inc. as of  December  31,  1998 and the  related  statements  of
operations and comprehensive  loss,  changes in shareholders'  equity,  and cash
flows for the year ended December 31, 1998.  These financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,   the  financial  position  of  Guardian   Technologies
International,  Inc. as of December 31, 1998,  and the results of its operations
and its cash flows for the year ended  December 31,  1998,  in  conformity  with
generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
financial  statements,  the Company has  incurred  losses  from  operations  and
negative  operating cash flows.  These factors raise substantial doubt about the
Company's ability to continue as a going concern.  Management's  plans in regard
to these matters are also  discussed in Note 2. The financial  statements do not
include any adjustments that might result from the outcome of this uncertainty.


HEIN + ASSOCIATES LLP


Denver, Colorado
March 5, 1999, except for Note 11, as to
 which the date is March 31, 1999

<PAGE>






                          INDEPENDENT AUDITOR'S REPORT


To the Board of Directors
Guardian Technologies International, Inc.
Dulles, Virginia


We have audited the balance sheet of Guardian Technologies  International,  Inc.
as of December 31, 1997 and the related  accompanying  statements  of operations
and comprehensive loss, changes in shareholders'  equity, and cash flows for the
year then  ended.  These  financial  statements  are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,   the  financial  position  of  Guardian   Technologies
International,  Inc. as of December 31, 1997,  and the results of its operations
and its cash  flows  for the year  then  ended,  in  conformity  with  generally
accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
financial statements,  the Company has suffered continued losses from operations
that raise  substantial  doubt about its ability to continue as a going concern.
Management's  plans in regard to these matters are also discussed in Note 2. The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.


Thompson, Greenspon & Co., P.C.



Fairfax, Virginia
March 3, 1998


<PAGE>





                   GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.

                                  BALANCE SHEET
                                DECEMBER 31, 1998



                                     ASSETS

       CURRENT ASSETS
         Cash and cash equivalents                              $   585,937
         Accounts receivable                                        193,718
         Inventories                                                180,786 
         Note receivable                                            400,000
         Prepaid expenses and other                                 170,193
                                                                -----------
                Total Current Assets                              1,530,634

       PROPERTY AND EQUIPMENT, net                                2,711,035
                                                                -----------

       TOTAL ASSETS                                             $ 4,241,669
                                                                ===========



                      LIABILITIES AND SHAREHOLDERS' EQUITY

       CURRENT LIABILITIES
         Notes payable and current portion of long-term debt    $    80,947
         Accounts payable                                           193,726
         Accrued payroll and related benefits                        12,207
                                                                -----------
                Total Current Liabilities                           286,880

       LONG TERM DEBT, less current portion                       1,823,256
                                                                -----------
                Total Liabilities                                 2,110,136
                                                                -----------

       COMMITMENTS AND CONTINGENCIES (Notes 2 and 5)

       SHAREHOLDERS' EQUITY
         Preferred stock, $0.20 par value, 1,000,000 shares
           authorized; no shares issued and outstanding                   -
         Common stock, par value $0.001, 15,000,000 shares
           authorized; 1,243,831 shares issued and
           outstanding                                                1,244
         Additional paid-in capital                               4,407,294
         Accumulated  deficit                                    (2,277,005)
                                                                -----------
                Total Shareholders' Equity                        2,131,533
                                                                -----------

       TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY               $ 4,241,669
                                                                ===========



             See accompanying notes to these financial statements.





<PAGE>




                  GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.

                 STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
                     YEARS ENDED DECEMBER 31, 1998 AND 1997




                                                          1998         1997
                                                      -----------  -----------

   Net Sales                                          $ 1,656,649  $ 1,154,970

     Cost of goods sold                                 1,377,977    1,237,105
                                                      -----------  -----------

   Gross Profit (Loss)                                    278,672      (82,135)

   Operating Expenses:
     Selling expenses                                     129,070      258,067
     General and administrative                           568,786      521,755
                                                      -----------  -----------
       Total operating expenses                           697,856      779,822
                                                      -----------  -----------

   Operating Loss                                        (419,184)    (861,957)

   Other Income (Expense):
     Financing expense, net                              (100,717)    (100,303)
     Rental income                                        184,069      101,150
     Costs related to failed acquisition                 (111,423)           -
                                                      -----------  -----------
       Total other income (expense)                       (28,071)         847
                                                      -----------  -----------
   Net Loss and Comprehensive Loss                    $  (447,255) $  (861,110)
                                                      ===========  ===========
   Net Loss per Common Share,
     Basic and Dilutive                               $      (.40) $      (.77)
                                                      ===========  ===========
   Average Common Shares Outstanding,
     Basic and Dilutive                               $ 1,120,310  $ 1,114,201
                                                      ===========  ===========




             See accompanying notes to these financial statements.



<PAGE>





                   GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.

                 STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                     YEARS ENDED DECEMBER 31, 1998 AND 1997




<TABLE>
<CAPTION>
                                                                                                  Net
                                                                                            Unrealized Gain
                                                                      Additional             on Securities
                                                    Common Stock        Paid-in     Notes      Available   Accumulated
                                                  Shares     Amount     Capital   Receivable    for Sale     Deficit      Total
                                                ----------  --------  ----------  ----------  -----------  -----------  ----------

<S>                                            <C>         <C>         <C>       <C>         <C>           <C>         <C>

Balances, January 1, 1997                        1,114,201     1,114   4,140,504     (33,080)      10,736     (968,640)  3,150,634

  Net change in unrealized gain on
    securities available for sale                        -         -           -           -      (10,736)           -     (10,736)
  Cancellation of common stock subscriptions             -         -     (33,080)     33,080            -            -           -
  Net loss                                               -         -           -           -            -     (861,110)   (861,110)
                                                ----------  --------  ----------  ----------  -----------  -----------  ----------
Balances, December 31, 1997                      1,114,201     1,114   4,107,424           -            -   (1,829,750)  2,278,788

  Exercise of options                              100,000       100     249,900           -            -            -     250,000
  Issuance of commom stock                          29,630        30      49,970           -            -            -      50,000
  Net loss                                               -         -           -           -            -     (447,255)   (447,255)
                                                ----------  --------  ----------  ----------  -----------  -----------  ----------
Balances, December 31, 1998                      1,243,831  $  1,244  $4,407,294  $        -  $         -  $(2,277,005) $2,131,533
                                                ==========  ========  ==========  ==========  ===========  ===========  ==========

</TABLE>




             See accompanying notes to these financial statements.





<PAGE>





                   GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.

                            STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 1998 AND 1997



                                                           1998         1997
                                                       -----------  -----------

  CASH FLOWS FROM OPERATING ACTIVITIES
    Net loss                                           $  (447,255) $  (861,110)
    Adjustments to reconcile net loss to cash used
      in operating activities:
        Depreciation and amortization of property
          and equipment                                     92,949       92,812
        Write down of assets to net realizable value        68,224            -
        Interest capitalized in connection with
          construction in progress                               -      (19,000)
        Realized loss on securities available for sale           -        1,464
    Change in operating assets and liabilities:
      (Increase) decrease in:
        Accounts receivable                                 42,382     (208,427)
        Inventories                                        235,550      133,247
        Prepaid expenses and other                         (66,697)      76,725
      Increase (decrease) in:
        Accounts payable                                  (155,725)    (540,389)
        Accrued payroll and related benefits               (19,629)           -
        Customer deposits                                  (80,981)      81,088
                                                       -----------  -----------

        Net cash used in operating activities             (331,182)  (1,243,590)
                                                       -----------  -----------

  CASH FLOWS FROM INVESTING ACTIVITIES
    Payments for construction in progress                        -     (199,253)
    Purchase of property and equipment                      (6,429)     (44,567)
    Proceeds from sale of securities available for sale          -    3,512,311
    Purchase of securities available for sale                    -   (1,022,758)
    Investment in certification costs                       (1,300)      (5,303)
    Decrease in deposits                                         -          487
    Issuance of notes receivable                          (500,000)           -
    Payments on notes receivable                           100,000            -
                                                       -----------  -----------
        Net cash provided by (used in)
          investing activities                            (407,729)   2,240,917
                                                       -----------  -----------

  CASH FLOWS FROM FINANCING ACTIVITIES
    Borrowings on line-of-credit                                 -       40,000
    Payments on line-of-credit                                   -      (40,000)
    Proceeds from issuance of notes payable              1,926,161      900,000
    Payment on notes payable                            (1,010,774)  (1,907,569)
    Exercise of options                                    250,000            -
    Issuance of common stock                                50,000            -
                                                       -----------  -----------
        Net cash provided by (used in)
          financing activities                           1,215,387   (1,007,569)
                                                       -----------  -----------

  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS         476,476      (10,242)

  CASH AND CASH EQUIVALENTS, beginning of period           109,461      119,703
                                                       -----------  -----------

  CASH AND CASH EQUIVALENTS, End of period             $   585,937  $   109,461
                                                       ===========  ===========

  SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
        Cash paid for interest                         $   146,842  $   211,681
                                                       ===========  ===========
        Cancellation of common stock subscriptions     $         -  $    33,080
                                                       ===========  ===========




             See accompanying notes to these financial statements.

<PAGE>



                  GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.

                         NOTES TO FINANCIAL STATEMENTS


1.  NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

      NATURE OF  OPERATIONS - Guardian  Technologies  International,  Inc.  (the
      "Company") was  incorporated in Virginia on October 30, 1989 and commenced
      full production in December 1990. The Company manufactures and distributes
      soft armor  products,  primarily  superior  quality  ballistic  protective
      vests, for law enforcement  officers,  armed forces  personnel,  and other
      legitimate individuals or groups requiring protective equipment.

      In February 1996, the Company was  reincorporated in the State of Delaware
      under  the  name of  Guardian  Technologies  International,  Inc.  and was
      authorized to issue  15,000,000  shares of common stock,  $.001 par value,
      and  1,000,000  shares of  preferred  stock,  $.20 par value.  Thereafter,
      pursuant to approval of the Company stockholders at a special stockholders
      meeting,  a Plan of Agreement  and Merger  between  Guardian  Technologies
      International,  Inc., the Virginia  corporation and Guardian  Technologies
      International,  Inc., the Delaware corporation was executed and filed with
      2,364,983 shares of common stock of the Delaware  corporation  issued in a
      share  for  share  exchange  for  the  2,364,983  shares  of the  Virginia
      corporation then outstanding.

      Effective May 23, 1997, the Board of Directors  authorized a one-for-three
      reverse stock split for the Company's  common shares and Class A warrants,
      thereby  decreasing the number of issued and outstanding  common shares to
      1,114,201  and  reducing  issued  and  outstanding  purchase  warrants  to
      814,417. All references in the accompanying financial statements and notes
      to  financial  statements  to the number of common  shares  and  per-share
      amounts have been restated to reflect the reverse stock split.


      REVENUE RECOGNITION - Manufacturing revenue is recognized upon shipment of
      product.  Rental  income is recorded as earned in  connection  with tenant
      lease agreements at the Company's office and manufacturing facility.


      USE OF ESTIMATES - The preparation of the Company's  financial  statements
      in conformity  with  generally  accepted  accounting  principles  requires
      management  to make  estimates  and  assumptions  that  affect the amounts
      reported in these  financial  statments  and  accompanying  notes.  Actual
      results could differ from those estimates.


      FINANCIAL  INSTRUMENTS  - The  estimated  fair  value  of  cash  and  cash
      equivalents,  accounts receivable,  accounts payable and accrued expenses,
      other  liabilities  approximate  their  carrying  amounts in the financial
      statements.

      Based on the borrowing rates currently  available to the Company for loans
      with  similar  terms and average  maturities,  the fair value of long-term
      debt approximates its carrying value.


      CONCENTRATIONS  OF CREDIT RISK - Financial  instruments  which potentially
      subject the  Company to  concentrations  of credit  risk  consist of trade
      accounts  receivable  and cash.  The Company  grants  credit  terms in the
      normal course of business to its customers,  who are primarily  dealers or
      municipal, state and Federal law enforcement agencies, and who are located
      throughout  the United  States.  As part of its  ongoing  procedures,  the
      Company monitors the credit worthiness of its customers.

      The Company  maintains  cash in  commercial  banks in  accounts  which are
      insured by the Federal Deposit Insurance Corporation (FDIC) up to $100,000
      per customer and in uninsured  accounts.  The cash amount presented on the
      balance  sheet  reflects the actual  amounts on deposit with banks reduced
      for outstanding checks and increased for deposits in transit.  At December
      31, 1998,  the Company had cash in banks in excess of FDIC insured  limits
      of approximately $606,000.



<PAGE>



                   GUARDIAN TECHNOLOGIES INTERNATIONAL, INC

                         NOTES TO FINANCIAL STATEMENTS


1.  NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

      CASH  EQUIVALENTS  - For  purposes of the  statement  of cash  flows,  the
      Company  considers  all  highly  liquid  debt  instruments  with  original
      maturities of three months or less to be cash equivalents.


      ACCOUNTS  RECEIVABLE  - It is the  practice  of  management  to write  off
      receivables  in the year amounts are  determined to be  uncollectible.  No
      allowance for doubtful accounts is reflected in these financial statements
      since  management  believes  all accounts at December 31, 1998 to be fully
      collectible.


      INVENTORIES - Inventories  consist of purchased  materials and components,
      work-in-process,  and finished goods.  Inventories are stated at the lower
      of cost or market,  with cost being  determined  on a first-in,  first-out
      basis. Inventories consisted of the following at December 31, 1998:


         Raw materials and components                     $  148,502
         Work-in-process                                       1,974
         Finished goods                                       30,310
                                                          ----------
                                                          $  180,786
                                                          ==========


      SECURITIES  AVAILABLE  FOR SALE -  Securities  to be held  for  indefinite
      periods  of  time  are  classified  as  securities   available  for  sale.
      Unrealized  gains and losses are  excluded  from  earnings  and shown as a
      separate  component of  shareholders'  equity,  net of  applicable  income
      taxes.


      PROPERTY AND  EQUIPMENT - Property and  equipment are recorded at cost and
      depreciated  over their  estimated  useful  lives.  The  Company  uses the
      straight-line and accelerated methods of depreciation,  respectively,  for
      financial statement and income tax reporting purposes.

      A summary of the estimated useful lives follows:

            Building                                           40 years
            Office furniture and equipment                  5 - 7 years
            Manufacturing equipment                         7 - 8 years


      Expenditures  for maintenance  and repairs which do not materially  extend
      the useful lives of property and equipment  are charged to earnings.  When
      property  or  equipment  is sold or  otherwise  disposed  of, the cost and
      related accumulated  depreciation are removed from the respective accounts
      with the resulting gain or loss reflected in earnings.


      IMPAIRMENT OF LONG-LIVED  ASSETS - The Company  performs an assessment for
      impairment  whenever events or changes in circumstances  indicate that the
      carrying amount of a long-lived  asset may not be recoverable.  If the net
      carrying value exceeds estimated  undiscounted future net cash flows, then
      impairment  is  recognized  to reduce the carrying  value to the estimated
      fair value.



<PAGE>



                   GUARDIAN TECHNOLOGIES INTERNATIONAL, INC

                         NOTES TO FINANCIAL STATEMENTS


1.  NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

      CERTIFICATION COSTS - The Company has capitalized certain costs associated
      with  certification  of its products.  Certification  costs are carried at
      cost  less  accumulated   amortization.   Amortization  is  taken  on  the
      straight-line basis over five years. Certification costs totalling $17,100
      (net) are included in prepaid expenses and other on the balance sheet.


      COMPREHENSIVE  INCOME  (LOSS) - In June  1997,  the  Financial  Accounting
      Standards Board (FASB) issued Statement of Financial  Accounting Standards
      (SFAS) No. 130,  "Reporting  Comprehensive  Income (Loss)".  SFAS No. 130,
      which is effective  for fiscal years  beginning  after  December 15, 1997,
      defines  comprehensive  income  as all  changes  in  shareholders'  equity
      exclusive  of  transactions  with  owners,  such as  capital  investments.
      Comprehensive  income  includes  net  income or loss,  changes  in certain
      assets  and  liabilities  that are  reported  directly  in equity  such as
      translation  adjustments  on  investments  in  foreign  subsidiaries,  and
      certain   changes   in  mimimum   pension   liabilities.   The   Company's
      comprehensive  income  (loss) was equal to its net  income  (loss) for all
      periods presented in these financial statements.


      STOCK-BASED  COMPENSATION - As permitted  under SFAS No. 123,  "Accounting
      for Stock-Based  Compensation",  the Company  accounts for its stock-based
      compensation  in accordance  with the provisions of Accounting  Principles
      Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees". As
      such, compensation expense is recorded on the date of grant if the current
      market price of the underlying  stock exceeds the exercise price.  Certain
      pro forma net income and EPS  disclosures for employee stock option grants
      are also included in the notes to the financial  statements as if the fair
      value method as defined in SFAS No. 123 had been applied.  Transactions in
      equity  instruments with non-employees for goods or services are accounted
      for by the fair value method.


      RENTAL INCOME - The Company  leases out the unused portion of the building
      which it owns.  Rental  income and payments are recorded and received on a
      monthly  basis.  Rental income was $184,069 and $101,150 in 1998 and 1997,
      respectively.


      INCOME TAXES - The Company  utilizes the liability  method for  accounting
      for income taxes.  The liability method accounts for deferred income taxes
      by applying enacted statutory rates in effect at the balance sheet date to
      differences  between  financial  statement amounts and tax bases of assets
      and  liabilities.  The  resulting  deferred  income  tax  liabilities  are
      adjusted to reflect changes in tax laws and rates.  Temporary  differences
      consist of the difference in financial  statement and income tax bases for
      property  and  equipment.  Deferred  income  taxes  related to an asset or
      liability  are   classified   as  current  or  noncurrent   based  on  the
      classification of the related asset or liability.


      NET LOSS PER COMMON  SHARE - The Company  has  adopted  SFAS No. 128 which
      establishes  standards  for computing  and  presenting  earnings per share
      (EPS) for entities with publicly held common stock. The standard  requires
      presentation  of two  categories of EPS - basic EPS and diluted EPS. Basic
      EPS  excludes  dilution  and is computed by dividing  income  available to
      common  stockholders  by the  weighted-average  number  of  common  shares
      outstanding for the year. Diluted EPS reflects the potential dilution that
      could occur if  securities  or other  contracts to issue common stock were
      exercised  or  converted  into common stock or resulted in the issuance of
      common  stock  that  then  shared  in the  earnings  of the  Company.  All
      potential  dilutive  securities  are  antidilutive  as  a  result  of  the
      Company's  net  loss for the  years  ended  December  31,  1998 and  1997.
      Accordingly, basic and diluted EPS are the same for each year.


<PAGE>



                  GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.

                         NOTES TO FINANCIAL STATEMENTS


1.  NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

      RECENTLY ISSUED ACCOUNTING  PRONOUNCEMENTS - SFAS No. 133, "Accounting for
      Derivative  Instruments and Hedging Activities",  was issued in June 1998.
      This  statement   establishes   accounting  and  reporting  standards  for
      derivative  instruments  and for hedging  activities.  It requires that an
      entity  recognize all  derivatives  as either assets or liabilities in the
      statement of  financial  position and measure  those  instruments  at fair
      value. This statement is effective for the Company's financial  statements
      for the year ended  December 31, 2000 and the adoption of this standard is
      not  expected  to  have  a  material  effect  on the  Company's  financial
      statements.

      SFAS  No.  132,   "Employers'   Disclosures   about   Pensions  and  Other
      Postretirement  Benefits,  was issued in  February  1998.  This  statement
      revises the disclosure  requirement for pensions and other  postretirement
      benefits.   This  statement  is  effective  for  the  Company's  financial
      statements  for the year ended  December 31, 1998 and the adoption of this
      standard  is not  expected  to have a  material  effect  on the  Company's
      financial statements.


2.  GOING CONCERN CONSIDERATIONS

      The Company has incurred  losses since  inception,  including  $447,225 in
      1998  and   $861,110  in  1997.   Although   the  current  year  loss  was
      significantly  reduced from that of the previous  year, the Company's loss
      history,   coupled  with  a  relatively  low  gross  margin  business  and
      substantial general and administrative costs raise substantial doubt about
      the  Company's  ability to  continue as a going  concern.  In an effort to
      achieve  profitable  operations,  the Company is  currently  pursuing  the
      following activities:

      - Seeking acquisition  candidates with profitable  operations to build the
        Company's revenue base.

      - Increasing  revenue  output of  existing  operations.  During  the first
        quarter  of  1999,  the  Company  entered  into a  sales  and  marketing
        agreement with NS Microwave  (the NSM Agreement)  that was negotiated as
        part of the dissolution of the previously  announced  purchase agreement
        between the two  companies.  The NSM Agreement is anticipated to produce
        an additional  element of revenue in the form of microwave products that
        can be offered to the Company's existing armor products customer base.

      - Reducing non-armor manufacturing related costs and activities associated
        with the  Company's  existing  operations.  As discussed in Note 11, the
        Company  sold  its   manufacturing  and   administrative   facility  for
        $2,825,000.  In  conjunction  with the sale,  the purchaser  assumed the
        Company's  note  payable,  thereby  reducing  interest  costs.  Residual
        proceeds  of  approximately  $833,000  from  the  sale  will  be used to
        facilitate the Company's acquisition plans.

      For  these   reasons,   management   believes  that  no   adjustments   or
      reclassifications  of recorded assets and liabilities is necessary at this
      time.


3.  NOTE RECEIVABLE

      In  conjunction  with a failed  acquisition  in 1998,  the Company  loaned
      $500,000 to a potentially  acquired  entity.  The interest rate is 8%, and
      payments of $50,000 principal plus interest are due each month. A 637-acre
      parcel of land and a building have been pledged as collateral on the note.
      At December  31,  1998,  the note  balance had been paid down to $400,000.
      Subsequent to December 31, 1998, an additional $150,000 has been repaid on
      this note.


<PAGE>


                  GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.

                         NOTES TO FINANCIAL STATEMENTS




4.  PROPERTY AND EQUIPMENT

      Property and equipment consists of the following at December 31, 1998:


         Land for Builiding                $   237,339
         Building                            2,524,780
         Manufacturing equipment                74,494
         Furniture and fixtures                 76,555
         Computer equipment                     48,637
                                           -----------
                                             2,961,805
         Accumulated depreciation             (250,770)
                                           -----------           
                                           $ 2,711,035
                                           ===========

      Depreciation  expense for the years ended  December  31, 1998 and 1997 was
      $92,949 and $92,812, respectively.

      On March 31, 1999, the Company sold its land and building (see Note 11).


5.  NOTES PAYABLE

      In March 1998, the Company received,  from a commercial  entity, a loan of
      $1,900,000 to refinance an outstanding note payable of $900,000.  The loan
      calls  for a  10-year  term  and  20-year  amortization  schedule  and  is
      collateralized  by a first deed of trust on the  office and  manufacturing
      facility  in  Dulles,  Virginia,  as  well  as  assignment  of all  tenant
      occupancy leases and essentially all assets of the Company. The commitment
      also  provides for monthly  payments of principal and interest of $15,306,
      including interest at 7.5% per annum, with the remaining  principal due at
      maturity.  If the loan is prepaid  in full  before the first five years of
      the loan,  the  Company  will be subject to  certain  prepayment  premiums
      computed as a percent of the unpaid  balance.  This note  payable has been
      assumed by the purchaser of the land and building (see Note 11).

      In February 1997, the Company executed a one year note for $900,000 with a
      commercial entity.  Interest at 15% annual rate was due monthly.  The note
      was  secured  by a first  deed of trust on the  office  and  manufacturing
      facility in Dulles, Virginia. The note was extended to February 1999. This
      note was fully paid off in March 1998 as noted above.

      Also included in notes payable is an insurance  premium finance  agreement
      totaling $35,900.  The agreement matures in May 1999 and calls for monthly
      payments of principal and interest of $5,539 with interest at 8%.

      The  following is a schedule of future  principal  payments as of December
      31, 1998.


              Year ending December 31,
              ------------------------
                      1999                             $    80,946
                      2000                                  48,578
                      2001                                  52,350
                      2002                                  56,414
                      2003                                  60,793
                      Thereafter                         1,605,122
                                                       -----------
                                                         1,904,203
                      Less current portion                 (80,947)
                                                       -----------
                                                       $ 1,823,256
                                                       ===========
<PAGE>



                  GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.

                         NOTES TO FINANCIAL STATEMENTS


6.  LEASE COMMITMENTS

      The Company has executed lease  agreements  with three tenants,  effective
      February  1,  1997  and  one  tenant  effective   February  1,  1998,  for
      approximately 18,800 square feet of office space in the Company's facility
      located in  Dulles,  Virginia.  The  leases are from five to seven  years,
      provide for  monthly  payments of base rent and  operating  expenses,  and
      include a 2% to 3.5% increase in base rent annually.

      At December 31, 1998,  future  minimum lease  payments  receivable  are as
      follows:


            1999                                   $ 184,600
            2000                                     190,900
            2001                                     197,400
            2002                                     131,500
            2003                                      51,500
            Thereafter                                 3,700
                                                   ---------
                                                   $ 759,600
                                                   =========

      During  February  1997,  the Company  purchased  the land and  building it
      currently  uses for its  manufacturing  facility and office space.  Office
      rental  expense of $12,100 for the year ended  December 31, 1997 is net of
      sublease rental income of $36,200.


7.  SHAREHOLDERS' EQUITY

      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 as
      may be  determined by the Board of  Directors.  There were no  ourstanding
      shares of preferred stock in 1998 or 1997.

      Current  year common stock  activity  consisted of the exercise of 100,000
      options by officers  and  directors  of the  Company,  and the issuance of
      29,630 shares,  at market to a company which has a common officer with the
      Company.

      WARRANTS - In conjunction  with the initial  public  offering in 1996, the
      Company issued 814,356 warrants.  These warrants have an exercise price of
      $15.00 per share and expire in the year 2001.  None of these warrants have
      been exercised.

      STOCK  OPTION  PLANS - On December 8, 1997,  the  shareholders  approved a
      stock option plan authorizing  options for 300,000 shares of the Company's
      common  stock.  Under  the  terms  of the  plan,  the  exercise  price  of
      non-qualified  options  will be the  lesser of the book value per share of
      the common stock as of the end of the  Company's  fiscal year  immediately
      preceeding  the date of such  grant or 50% of the fair  market  value  per
      share of the common stock on the date of such grant.  For incentive  stock
      options,  the exercise  price shall not be less than fair market value per
      share  at the  date  of such  grant.  Options  shall  expire  on the  date
      specified  by the Board but not more than 10 years  from the date of grant
      for  non-qualified  and  incentive  stock  options and options  granted to
      employees  expire 90 days  after  termination.  Following  is a summary of
      activity under the stock option plan for the years ended December 31, 1998
      and 1997:


<PAGE>



                   GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.

                         NOTES TO FINANCIAL STATEMENTS


7.  SHAREHOLDERS' EQUITY (continued)

<TABLE>
<CAPTION>
                                               1998                              1997
                                      -----------------------           -----------------------
                                                    Weighted                           Weighted
                                                     Average                            Average
                                        Number      Exercise              Number       Exercise
                                      of Shares       Price             of Shares       Price
                                      ---------     ---------           ---------     --------- 
<S>                                  <C>           <C>                 <C>           <C>

   Outstanding, beginning of year        33,333     $    1.32              33,333     $    1.32

     Granted                            300,000          2.50                   -             -
     Exercised                         (100,000)         2.50                   -             -
                                      ---------     ---------           ---------     ---------
   Outstanding, end of year             233,333     $    2.33              33,333     $    1.32 
                                      =========     =========           =========     =========

</TABLE>

      Of the 300,000 options issued in 1998, 275,000 were issued to officers and
      directors of the  Company.  All of the 100,000  options  exercised in 1998
      were by officers and directors of the Company.

      At December 31,  1998,  all options  were vested and  exercisable.  If not
      previously exercised or forfeited, all options outstanding at December 31,
      1998 will  expire  in the year  ending  December  31,  2000 at a  weighted
      average  exercise  price of $2.33 per share.  At December  31,  1998,  the
      weighted average  remaining  contractual  life of options  outstanding was
      approximately 14 months.

      Presented below is a comparison of the weighted average exercise price and
      fair values of the Company's  common stock on the measurement date for all
      stock options granted to employees during 1998:

                                                 Number of   Exercise     Fair
                                                   Shares       Price     Value
                                                 ---------   --------   --------

      Market price equal to exercise price           5,000   $   2.50   $   2.00
      Exercise price greater than market price     295,000   $   2.50   $   1.52
                                                 ---------   --------   --------
                                                   300,000   $   2.50   $   1.53
                                                 =========   ========   ========


      PRO FORMA STOCK-BASED  COMPENSATION  DISCLOSURES - The Company applies APB
      Opinion 25 and related interpretations in accounting for its stock options
      and warrants which are granted to employees.  Accordingly, no compensation
      cost has been  recognized  for grants of options and warrants to employees
      since  the  exercise  prices  were not less than the  market  value of the
      Company's common stock on the grant dates. Had the compensation  cost been
      determined  based on the fair value at the grant  dates for  awards  under
      those plans consistent with the method of SFAS 123, the Company's net loss
      and EPS would  have been  increased  to the pro  forma  amounts  indicated
      below.

                                   Year Ended
                                  December 31,
                                                        -----------------------
                                                           1998        1997
                                                        ----------   ----------

        Net loss applicable to common shareholders
             As reported                                $ (447,255)  $ (861,110)
             Pro forma                                  $ (579,363)  $ (861,110)

        Net loss per common shareholders
             As reported - basic and diluted            $    (.40)   $     (.77)
             Pro forma - basic and diluted              $    (.52)   $     (.77)

<PAGE>



                    GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.

                         NOTES TO FINANCIAL STATEMENTS


7.  SHAREHOLDERS' EQUITY (continued)

      The fair value of each option granted in 1998 was estimated on the date of
      grant,  using the  Black-Scholes  option-pricing  model with the following
      weighted average assumptions:

           Expected volatility                        165.2%
           Risk-free interest rate                      5.5%
           Expected dividends                              -
           Expected terms (in years)                     2.0

8.  INCOME TAXES

      There was no provision  for income taxes for the years ended  December 31,
      1998 or 1997 due to net  operating  losses,  and deferred tax assets being
      offset by a valuation allowance.

      The deferred tax asset for the years ended  December 31, are  comprised of
      the following items:


                                                     1998       1997
                                                  ---------  ---------

           Deferred tax assets:
             Net operating loss carryforward      $ 843,000  $ 703,000
             Other                                   37,000      3,000
                                                  ---------  ---------
                   Gross deferred tax assets        880,000    706,000 

           Deferred tax liability:
             Property and equipment                 (65,000)   (63,000)
                                                  ---------  ---------
                   Net deferred tax asset           815,000    643,000

           Less: deferred tax asset valuation
             allowance                             (815,000)  (643,000)
                                                  ---------  ---------
                   Net deferred tax asset         $       -  $       -
                                                  =========  =========

      A reconciliation between the amount of reported Federal income tax benefit
      and the amount  computed by multiplying the applicable  statutory  Federal
      income tax rate is as follows:

<TABLE>
<CAPTION>
                                                        1998        %           1997        %
                                                     ---------   ------      ---------   ------
<S>                                                 <C>          <C>        <C>          <C>
Computed expected tax benefit                        $(152,000)   (34)%      $(293,000)   (34)%
(Increase) decrease in tax
  benefit resulting from:
    State tax benefit                                  (18,000)    (4)         (52,000)    (6)
    Other                                               (2,000)     -           80,000      9
    Increase (reduction) in valuation allowance
      related to net operating loss carryforwards
      and change in temporary differences              172,000     38          265,000     31
                                                     ---------   ------      ---------   ------
                                                     $       -      0 %      $       -      0 %
                                                     ---------   ------      ---------   ------

</TABLE>

      At December 31, 1998, the Company has net operating loss  carryforwards of
      approximately  $2,200,000  available  under  provisions  of  the  Internal
      Revenue  Code  to  be  applied  against  future  taxable   income.   These
      carryforwards are subject to annual  limitations on utilization and expire
      from December 31, 2010 through December 31, 2018.




<PAGE>



                  GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.

                         NOTES TO FINANCIAL STATEMENTS


9.  MAJOR CUSTOMERS

      The Company sells its products  primarily to authorized dealers for resale
      to municipal,  county and state law  enforcement  agencies  throughout the
      United States.  Approximately  2% of sales in 1998 and 4% of sales in 1997
      were to foreign governments and agencies.

      Percentage  of sales to major  domestic  customers  at December 31, are as
      follows:

                                                      1998         1997
                                                      ----         ----

          U.S. Government Agency                       19%         33%
          Municipal law enforcement agency             26%         11%


10. MAJOR SUPPLIER CONCENTRATION

      The ballistic resistant products of the Company are primarily manufactured
      with the raw materials Spectra 1000 woven fabric and Spectra Shield. These
      two products are manufactured  and distributed only by one company.  As of
      December 31, 1998 and 1997,  Guardian  Technologies  International,  Inc.,
      owed $80,600 and $129,400, respectively, to this company.


11. SUBSEQUENT EVENTS

      On March 31, 1999, the Company sold its land and building for  $2,825,000,
      which  is  greater  than  its net  cost of  approximately  $2,640,000.  In
      conjunction  with the sale,  the  purchaser  assumed  the  Company's  note
      payable  which  is  collateralized  by the  building,  which  balance  was
      approximately  $1,857,000 on the date of the sale.  The total  proceeds to
      the Company was approximately  $883,000.  The Company also signed a 5-year
      lease  totaling  approximately  $13,000 per month on the building after it
      was  sold.  In  conjunction  with the  sale,  the  Company  will no longer
      recognize rental income nor will it recognize depreciation expense related
      to the building or general operating costs attributable to being the owner
      of a building.

      Subsequent  to  December  31,  1998,   the  Company   disbursed   $861,000
      representing  a  deposit  toward  the  purchase  of a 55.16%  interest  in
      Structural Steel Holdings, Inc., a Delaware Corporation that will purchase
      100% of the stock of an unrelated company. This transaction is expected to
      be consumated in 1999.




<PAGE>



ITEM 8  CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
         DISCLOSURES

None.

                                    PART III

ITEM 9                 DIRECTORS AND EXECUTIVE OFFICERS

     The executive officers and directors of the Company are listed in the table
below and  brief  summaries  of their  business  experience  and  certain  other
information with respect to them are set forth thereafter.


     NAME                   AGE             POSITION

Oliver L. North...........   55   Chairman of the Board,
                                    President and Secretary
J. Andrew Moorer..........   36   Chief Operating Officer
Joseph F. Fernandez.......   61   Director, Treasurer and Vice President
Travis Y. Green...........   44   Director
Herbert M. Jacobi.........   59   Director
Hugh E. Sawyer............   46   Director
John C. Power.............   36   Director

     The  Company's  Articles of  Incorporation  authorize  three (3) classes of
Directors which classes serve for varying terms.  The Articles also grant to the
sitting  Directors  the  authority to fill any  vacancies on the Board and/or to
appoint members to the Board to fill any vacancies resulting from an increase in
the authorized number of Directors.

     Oliver L.  North  has  served  as  Chairman  of the  Board,  President  and
Secretary from  inception.  He graduated from the United States Naval Academy in
June 1968 and served in the United States Marine Corps for twenty-two years. His
service  included  a tour of duty in Vietnam  where he earned a Silver  Star for
heroism, a Bronze Star with a "V" for valor, and two Purple Hearts for wounds in
action.  From 1981  through  1986,  he served  as a member of  President  Ronald
Reagan's   National  Security  Council  staff  and  became  Deputy  Director  of
Political-Military  Affairs. In this capacity,  he helped plan the liberation of
Grenada,  the capture of terrorists  who hijacked the cruise ship Achille Lauro,
and the U.S. raid on Quaddafi's  terrorist  training camps in Libya.  He retired
from the Marine Corps in 1988.

     In March,  1988,  Mr.  North was  indicted  on charges  arising  out of the
so-called Iran-Contra affair. Four of the charges were dismissed prior to trial.
On May 4, 1989 Mr. North was  acquitted on nine counts and convicted on three in
the United  States  District  Court in  Washington,  D.C. The  convictions  were
appealed  to the United  States  Court of Appeals  for the  District of Columbia
Circuit.  On July 20, 1990,  the Court of Appeals  vacated all the  convictions,
reversed one conviction outright,  and sent the case back to the District Court.
The  Independent  Counsel  who had  brought  the case then  declined to continue
further  prosecution  and all  remaining  charges were  dismissed.  There are no
outstanding criminal charges or convictions against Mr. North today.

     J. Andrew Moorer was named Chief  Operating  Officer  during 1998. He began
his career as a Certified Public  Accountant in the Audit and Emerging  Business
Services Group of the international  accounting firm of  PriceWaterhouseCoopers.
Since leaving public  accounting in 1987, Mr. Moorer has held various  positions
in finance with increasing levels of  responxibility,  including the position of
Chief  Financial  Officer for several  firms.  Mr.  Moorer  received  his formal
education at Loyola College of Maryland.


<PAGE>



     Joseph F.  Fernandez has served as Vice  President,  Treasurer and Director
since  inception.  Mr.  Fernandez  began  his  career as a Police  Officer  with
Miami/Dade County Police Department and served in this position for eight years.
In 1967,  he was  employed  by the U.S.  Central  Intelligence  Agency.  In this
capacity,  he served in both  foreign and  domestic  posts  dealing  with highly
sensitive  national  security issues and  intelligence  operations.  As a Senior
Operations Officer in the Clandestine Services, he directly supervised CIA units
of  up  to  35  persons  in  day-to-day  operational  assignments  and  planned,
distributed and accounted for budgets in excess of $8 million.

     On June 22,  1988,  Mr.  Fernandez  was  indicted on five  criminal  counts
arising  out  of  the  so-called  Iran-Contra  Affair.  These  indictments  were
dismissed without prejudice on October 13, 1988. On April 4, 1989, Mr. Fernandez
was  re-indicted in a different venue on four criminal counts arising out of the
Iran-Contra Affair. This indictment was dismissed with prejudice on November 24,
1989. The Independent  Counsel lodged an appeal in the U.S. Court of Appeals. In
September,  1990,  that Court  upheld the  dismissal of the  indictment,  and on
October 5, 1990,  the mandate of the Court of Appeals was issued  thereby making
final  the  dismissal  of  all  charges  against  Mr.  Fernandez.  There  are no
outstanding criminal charges or convictions against Mr. Fernandez today.

     Travis Y Green has been a Director since  inception.  He holds a Masters in
International  Business  Studies from the University of South  Carolina,  and he
graduated  with  a  Bachelors  Degree  in  Business  Administration  from  Emory
University.  Mr. Green was an Account Executive at Dresdner Bank AG, in New York
in 1978,  and continued  his  financial  career at the Wall Street firm of Brown
Brothers  Harriman  & Co.  for 10 years  from 1982  through  1992.  In 1993,  he
established  the  investment  banking  firm of  Green,  Morris &  Associates  in
Atlanta, Georgia where he serves as President.

     Herbert M. Jacobi has been an attorney in private practice in New York, New
York since 1967.

     Hugh Sawyer has served as  President  of  National  Linen  Service,  a $500
million in sales  subsidiary  of National  Service  Industry,  based in Atlanta,
Georgia  since early 1996.  He was  formerly  president  of Wells Fargo  Armored
Services Division of Borg Warner.

     John C.  Power has  served as  President  and Chief  Executive  Officer  of
Redwood  MicroCap Fund,  Inc.  ("MicroCap")  since February,  1992.  MicroCap is
registered as an Investment Company under the Investment Company Act of 1940, as
amended  (the "40  Act"),  but is  attempting  to  de-register  from the 40 Act.
MicroCap has majority and/or  wholly-owned  subsidiaries  engaged in oil and gas
exploration,  production and management and radio  broadcasting.  Since November
1996, Mr. Power has been the Managing  Member of Northern  Lights  Broadcasting,
L.L.C., a limited  liability  company engaged in the acquisition and development
of radio  stations in Montana and North Dakota.  Since  November 1996, Mr. Power
has also been  President  of Power  Surge,  Inc.  Mr.  Power has also  served as
president of Power Curve,  Inc., a private  investment and consulting firm since
1986,  and as an officer and  director of Signature  Wines of Napa Valley,  Inc.
from  September,  1995 to June 1996.  From March,  1994 to September,  1995, Mr.
Power served as a general  partner of  Signature  Wines,  a  California  general
partnership,  a predecessor  entity of Signature Wines of Napa Valley,  Inc. Mr.
Power served as a director of BioSource  International,  Inc. (NASDAQ:BIOI) from
August, 1993 to December,  1994, of Optimax Industries,  Inc. (NASDAQ:OPMX) from
April 1993 to March 1995, and of AirSoft Corporation,  a manufacturer of network
communications  software and systems, from 1993 to June 1996. Mr. Power received
his formal  education at Occidental  College and at the University of California
at Davis.




<PAGE>



COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT

     Section 16 (a) of the Securities Exchange Act of 1934, as amended, requires
the Company's  executive  officers,  directors and persons who own more than ten
percent of the Common Stock (collectively,  "Reporting Persons") to file initial
reports of  ownership  and changes of ownership of the Common Stock with the SEC
and the NASDAQ  Stock  Market.  Reporting  Persons  are  required to furnish the
Company with copies of all forms that they file under Section 16(a). The Company
is not aware of any failure on the part of any Reporting  Persons to timely file
reports required pursuant to Section 16(a).


ITEM 10                      EXECUTIVE COMPENSATION

     The following table sets forth the executive  compensation and distribution
paid to each  executive  officer of the Company  during the years ended December
31.

                          EXECUTIVE COMPENSATION TABLE
<TABLE>
<CAPTION>

                                Annual Compensation                   Long Term Compensation
                            ---------------------------           ----------------------------------

Name                     Year                                        Restricted       Restricted
Principal                Ended                       Other           Stock     Options  LTIF      All other
Other Position           December Salary      Bonus  Compensation    Awards    SARA     Payouts   Compensations
-----------------------  -------- -------     -----  ------------    ------    ----     -------   -------------
<S>                      <C>       <C>         <C>     <C>            <C>       <C>     <C>         <C>
Oliver L. North            1998    $      0     --     --              --        --      --         (1)
President and Secretary    1997    $ 16,014     --     --              --        --      --         (1)

J. Andrew Moorer           1998    $      0     --     --              --        --      --         (1)
Chief Operating Officer    

Joseph F. Fernandez        1998    $ 70,327     --     --              --        --      --         (1)
Vice President             1997    $ 72,849     --     --              --        --      --         (1)

</TABLE>


The above table reflects salary expenses as recorded on the Company's  financial
statements in according with generally accepted accounting principles.  As such,
the amounts may differ from the base salary rates discussed below.


EMPLOYMENT CONTRACTS

Effective  January 1, 1997, the employment  agreements of the President and Vice
President  were amended to reduce the base  salaries  payable to each to $77,900
for 1997 only. Subsequently,  the Compensation Committee reduced the base salary
of the  President  to  $21,150  for 1997 only.  During  1998,  the  Compensation
Committee  further reduced the base salaries of the president and vice president
to $0 and $73,500 respectively.

The Board or Compensation Committee, in their sole discretion, may award bonuses
to the  officers.  The amended  agreements  include  provisions  for  additional
compensation  payable to the officers in the event of  termination of employment
without cause, or upon change of control of the Company.

<PAGE>



ITEM 11    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table sets forth certain  information,  as of April 9, 1999
with respect to the  beneficial  ownership of shares of Common Stock by (i) each
stockholder  known by the Company to be the  beneficial  owner of more than five
percent (5%) of the  outstanding  shares of Common Stock;  (ii) each director of
the Company;  (iii) each  executive  officer  named in the Summary  Compensation
Table appearing  below under  "Executive  Compensation",  and (iv) all executive
officers and  directors as a group.  Except as indicated in the footnotes to the
table,  persons  named in the table have sole voting and  investment  power with
respect to all shares of Common Stock which they respectively own beneficially.




         Name and Address               Number of Shares       Percent
         of Beneficial Owner          Beneficially Owned*     of Class*
         -------------------          -------------------     ---------

         Oliver L. North (1)                  212,990           15.7%
         Rt. 1, Box 560
         Bluemont, VA  20135

         Joseph F. Fernandez (2)              114,355            8.4%
         9542 Whitecedar Court
         Vienna, VA  22180

         Herbert M. Jacobi(3)                  20,000            1.5%
         8 West 38th Street
         New York, NY  10018

         J. Andrew Moorer(3)                   30,000            2.2%
         11 Sundial Circle, Suite 17
         Carefree, AZ  85377

         All Officers and Directors
         as a Group (7 persons)               377,345           27.8%



     *    Under applicable rules of the Securities and Exchange Commission
          (the "SEC"), a person is deemed to be the beneficial owner of a share
          of Common Stock if, among other things, he or she directly or
          indirectly has or shares voting power or investment power with respect
          to such shares.  A person is also considered to beneficially own
          shares of Common Stock which he or she does not actually own but has
          the right to acquire presently or within the next sixty (60) days, by
          exercise of warrants or otherwise.  The percentage of ownership was
          determined by assuming that all Warrants held by this securityholder
          have been exercised and that Warrants held by other securityholders
          have not been exercised.

<PAGE>


(1)  Represents  66,356  shares owned of record by the Oliver North  Irrevocable
     Trust,  72,675 owned by the Oliver North  Guarantor  Annuity  Trust,  1,580
     shares owned by the  Elizabeth  North  General  Partnership,  15,799 shares
     owned by the Elizabeth North Limited  Partnership and 1,580 shares owned by
     the  Oliver  North  General   Partnership   (hereafter   the  "Trusts"  and
     "Partnership",  respectively).  Although Mr. North is not a beneficiary  of
     any of the Trusts,  he continues to maintain voting control over all shares
     owned  beneficially  by the Trusts.  Also includes  incentive stock options
     exercisable to purchase,  in the aggregate,  55,000 shares of the Company's
     common stock at an exercise  price of $2.50 per share  granted to Mr. North
     under the Company's 1997 Incentive Stock Option Plan (the "Plan").

(2)  Represents   94,355  shares  owned  by  Charles  Anthony  Gidden  Fernandez
     (13,334),  Dale  Gidden  Fernandez  (1,017),  John David  Gidden  Fernandez
     (13,334),  Joseph Culver Gidden  Fernandez  (13,334),  Michael Louis Gidden
     Fernandez  (13,334),  Dale  Gidden  Fernandez  C/F  Andrew  Francis  Gidden
     Fernandez  (13,334),  Catherine  Marie Gidden  Fernandez  Gros (13,334) and
     Elizabeth Anne Gidden Fernandez  (13,334).  Notwithstanding  the foregoing,
     Mr.  Fernandez  continues to retain voting control over all shares owned by
     Mr. Fernandez' children.  Also includes incentive stock options exercisable
     to purchase, in the aggregate,  20,000 shares of the Company's common stock
     at an exercise price of $2.50 per share granted under the Plan.

(3)  Includes  stock  options  exercisable  to purchase  shares of the Company's
     common  stock at an  exercise  price of $2.50 per share  granted  under the
     Company's stock option plan in the following amounts:  Jacobi - 20,000; and
     Moorer - 20,000.



<PAGE>



ITEM 12         CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

None.


ITEM 13         EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

    Exhibit
    Number   Description
    -------  ---------------------------------------------

      3.1    Certificate of Incorporation of the Company.*

      3.2    Bylaws of the Company.*

      4.1    Form of Common Stock Certificate.*

      4.2    Form of Warrant.*

     10.1    Employment Agreement between the Company and Oliver L. North.**

     10.2    Employment Agreement between the Company and Joseph F. Fernandez.**

     10.3    Revolving Line of Credit Agreement dated December 7, 1995 among the
             Company, Creditanstalt Corporate Finance, Inc. and Oliver L. North,
             as Guarantor.**

     10.4    Promissory  Note  dated  December  7,  1995  from  the  Company  to
             Creditanstalt Corporate Finance, Inc.**

     10.5    Guaranty dated December 7, 1995 from Oliver L. North to
             Creditanstalt Corporate Finance, Inc.**

     10.6    Amendment dated November 26, 1996 relating to Revolving Loan of
             Credit Agreement among the Company, Creditanstalt Corporate
             Finance, Inc. and Oliver L. North, as Guarantor.**

     10.7    Margin  Agreement  dated June 24,  1996  between  the  Company  and
             Pershing,  Division  of  Donaldson,  Lufkin &  Jenrette  Securities
             Corporation.**

     10.8    Promissory Note dated February 7, 1997 from the Company to Dashco,
             Inc.**

     10.9    Deed of Trust between the Company and Marc A. Busman and Rosalyn R.
             Busman, Trustees.**

     10.10   Deed of Lease  dated  January  23, 1997  between  the  Company,  as
             Landlord, and Freedom Alliance, as Tenant.**

     10.11   Letter re: Line of Credit facility between the Company and Adler
             Financial Group.**

     10.12   Letter re: Loan  commitment  between the Company and The  Baltimore
             Life Insurance Company/Life of Maryland, Inc.***

     11      Statement re: Computation of Per Share Earnings.

     27      Financial Data Schedule

--------------------------------

*    Filed as an Exhibit to the Company's Registration Statement on Form SB-2
     dated March 22, 1996 (Reg. No. 333-2712-NY) and incorporated herein by
     reference.

**   Filed as an Exhibit to the Company's  1996 Form 10-KSB dated April 15, 1997
     and incorporated herein by reference.

***  Filed as an Exhibit to the Company's  1997 Form 10-KSB dated March 31, 1998
     and incorporated herein by reference.

(b)  Reports on Form 8-K

     No reports on Form 8-K were filed by the Company  during the quarter  ended
     December 31, 1998.





<PAGE>




                                   SIGNATURES

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

                    GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
                                  (Registrant)

Date:  April 12, 1999                 By: /s/ Joseph F. Fernandez
                                         ---------------------------
                                             Joseph F. Fernandez
                                             Director, Treasurer and
                                               Vice President

     In  accordance  with the Exchange Act of 1934,  this report has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.

By: /s/ Oliver L. North                         Date:  April 12, 1999
    ---------------------------------------
     Oliver L. North
       Chairman of the Board,
         President and Secretary

By: /s/ J. Andrew Moorer                        Date:  April 12, 1999
    ---------------------------------------
     J. Andrew Moorer
       Chief Operating Officer

By: /s/ Joseph F. Fernandez                     Date:  April 12, 1999
    ---------------------------------------
     Joseph F. Fernandez
       Director, Treasurer and
         Vice President

By: /s/ Travis Y. Green                         Date:  April 12, 1999
    ---------------------------------------
     Travis Y. Green
     Director

By:  /s/ Herbert M. Jacobi                      Date:  April 12, 1999
     --------------------------------------
     Herbert M. Jacobi
     Director

By: /s/ Hugh E. Sawyer                          Date:  April 12, 1999
    ---------------------------------------
     Hugh E. Sawyer
     Director

By: /s/ John C. Power                           Date:  April 12, 1999
    ---------------------------------------
     John C. Power
     Director


<PAGE>


                                 EXHIBIT INDEX



             Exhibit
             Number   Description
             -------  ---------------------------------------------

             3.1      Certificate of Incorporation of the Company.*

             3.2      Bylaws of the Company.*

             4.1      Form of Common Stock Certificate.*

             4.2      Form of Warrant.*

            10.1      Employment Agreement between the Company and
                      Oliver L. North.**

            10.2      Employment Agreement between the Company and of
                      Joseph F. Fernandez.**

            10.3      Revolving Line of Credit Agreement dated December 7, 1995
                      among the Company, Creditanstalt Corporate Finance, Inc.,
                      and Oliver L. North, as Guarantor.**

            10.4      Promissory Note dated December 7, 1995 from the Company to
                      Creditanstalt Corporate Finance, Inc.**

            10.5      Guaranty dated December 7, 1995 from Oliver L. North to
                      Creditanstalt Corporate Finance, Inc.**

            10.6      Amendment dated November 26, 1996 relating to Revolving
                      Loan of Credit Agreement among the Company,
                      Creditanstalt Corporate Finance, Inc. and
                      Oliver L. North, as Guarantor.**

            10.7      Margin  Agreement  dated June 24, 1996 between the Company
                      and  Pershing,  Division of  Donaldson,  Lufkin & Jenrette
                      Securities Corporation.**

            10.8      Promissory Note dated February 7, 1997 from the Company
                      to Dashco, Inc.**

            10.9      Deed of Trust between the Company and Marc A. Busman and
                      Rosalyn R. Busman, Trustees**

            10.10     Deed of Lease dated  January 23, 1997 between the Company,
                      as Landlord, and Freedom Alliance, as Tenant.**

            10.11     Letter re: Line of Credit facility between the Company
                      and Adler Financial Group.**

            10.12     Letter re: Loan Commitment between the Company and
                      The Baltimore Life Insurance Company/Life of Maryland,
                      Inc.***

            11        Statement re: Computation of Per Share Earnings.

            27        Financial Data Schedule



--------------------------------

*    Filed as an Exhibit to the Company's Registration Statement on Form SB-2
     dated March 22, 1996 (Reg. No. 333-2712-NY) and incorporated herein by
     reference.

**   Filed as an Exhibit to the Company's  1996 Form 10-KSB dated April 15, 1997
     and incorporated herein by reference.


***  Filed as an Exhibit to the Company's  1997 Form 10-KSB dated March 31, 1998
     and incorporated herein by reference.

<PAGE>





                                                                      Exhibit 11



                STATEMENT RE:  COMPUTATION OF PER SHARE EARNINGS





                                                             1998        1997
                                                          ---------   ---------

Primary Earnings Per Share

Net Income                                                ($447,255)  ($861,110)

Shares:
Weighted Average Common
Shares Outstanding                                        1,120,310   1,114,201

Effect of Shares Issuable Upon Exercise
of Warrants                                                       0           0

Effect of Shares Issuable Upon Exercise
of Options                                                        0           0

Adjusted Common Shares and Equivalents                    1,120,310   1,114,201

Earnings Per Share - Primary                                 ($0.40)     ($0.77)


Fully Diluted Earnings per Share:

Net Income                                                ($447,255)  ($861,110)

Shares:
Weighted Average Common
Shares Outstanding                                        1,120,310   1,114,201

Effect of Shares Issuable Upon
Exercise of Warrants                                              0           0

Effect of Shares Issuable Upon Exercise
of Options                                                        0           0

Adjusted Common Shares and Equivalents                    1,120,310   1,114,201

Earnings Per Share - Fully Diluted                           ($0.40)     ($0.77)