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, 2003
                        COMMISSION FILE NUMBER 000-21295

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

                              THINKING TOOLS, INC.
                 (Name of Small Business Issuer in Its Charter)


                    DELAWARE                               77-0436410
(State or Other Jurisdiction of Incorporation   (I.R.S. Employer identification
                or Organization)                            number)


                          1621 WEST CROSBY - SUITE 104
                             CARROLLTON, TEXAS 75006
                                 (972) 245-7353
               (Address, including zip code, and telephone number,
        including area code, of registrant's principal executive offices)

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

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                                      NONE

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

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                          COMMON STOCK $0.001 PAR VALUE

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

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

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained herein, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB. |_|

         The issuer had no revenues in its most recent fiscal year.

         The aggregate market value of the voting and non-voting common equity
held by non-affiliates of the registrant as of April 8, 2004 was approximately
$698,965. The number of shares outstanding of the registrant's common stock as
of April 8, 2004 was 10,204,637.

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

Transitional Small Business Disclosure Format:

                                 |_| Yes |X| No

================================================================================


<PAGE>

                              THINKING TOOLS, INC.
                         2003 FORM 10-KSB ANNUAL REPORT

                                TABLE OF CONTENTS

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PART I........................................................................................3

         Item 1. Business.....................................................................3

         Item 2. Properties..................................................................17

         Item 3. Legal Proceedings...........................................................18

         Item 4. Submission of Matters to a Vote of Security Holders.........................18

PART II......................................................................................18

         Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.......18

         Item 6. Management's Discussion and Analysis of Plan of Operation...................19

         Item 7. Financial Statements........................................................23

         Item 8. Changes in and Disagreements With Accountants on Accounting and
                 Financial Disclosure........................................................23

         Item 8A.  Controls and Procedures...................................................23

PART III.....................................................................................24

         Item 9. Directors and Executive Officers of the Registrant..........................24

         Item 10. Executive Compensation.....................................................24

         Item 11. Security Ownership of Certain Beneficial Owners and Management
                  and Related Stockholder Matters............................................24

         Item 12. Certain Relationships and Related Transactions.............................24

         Item 13. Exhibits and Reports on Form 8-K...........................................24

         Item 14. Principal Accountant Fees and Services.....................................27
</TABLE>


<PAGE>

              CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This annual report on Form 10-KSB contains forward-looking statements relating
to future events and our future performance 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, including, without limitation, statements
regarding our expectations, assumptions, estimates, projections, beliefs,
intentions or future strategies that are signified by the words "expects",
"anticipates", "intends", "believes" or similar language. Actual results could
differ materially from those anticipated in such forward-looking statements. All
forward-looking statements included in this document are based on information
available to us on the date hereof.

                                     PART I

ITEM 1.           BUSINESS.

General

         Through our subsidiary, GVI Security, Inc., we provide complete video
surveillance and security solutions to the professional, homeland security,
retail and business to business security markets. We are the exclusive
distributor of video surveillance products for Samsung Electronics in North,
Central and South America. We also distribute other security products such as
digital recording, software systems and networking products. We offer a range of
security products to our professional and retail customers, from simple four
camera observation systems that include monitors and recording devices suitable
for homes and small businesses, also known as closed circuit television systems
(CCTV), to more sophisticated products such as digital video recorders that can
be used on a stand-alone basis or that can be integrated into larger video
surveillance and security systems.

         Our customers include retail outlets such as warehouse clubs,
mass-market retailers and specialty electronics stores, distributors and system
integrators that specialize in video surveillance and security products and
services. Our technology is available to the United States Government through a
General Services Administration GSA contract.

         We operate sales and distribution centers in Dallas, Texas, Mexico
City, Mexico, Sao Paulo, Brazil and Bogota, Colombia.

Corporate History

         We are the successor by merger to Thinking Tools, Inc., a California
corporation, which was incorporated on December 30, 1993 with a business
strategy of developing and marketing business simulation software. In December
1993, Thinking Tools California purchased certain assets of the Business
Simulation Division of Maxis, Inc., a computer game company and creator of the
simulation game SimCity. The assets acquired from Maxis included equipment,
staff, work-in-progress, customers, prospects, software tools, libraries and
processes.

         On August 28, 1996, Thinking Tools California merged with and into the
then newly formed Thinking Tools, Inc., a Delaware corporation. In September
1997, we introduced Think 2000, a Year 2000 business simulation software
product. We invested significant resources and capital in the development and


                                       3
<PAGE>

commercialization of Think 2000, but changes in market conditions and lack of
demand for Year 2000 software products had an adverse effect on the success of
Think 2000 and our business, results of operations and financial condition. On
April 23, 1999, we eliminated substantially all of our operations and terminated
substantially all of our personnel with the exception of certain executive and
administrative personnel.

         On March 7, 2000, through a newly-formed and wholly-owned subsidiary,
StartFree.com, Inc, we acquired the business and substantially all of the assets
and certain of the liabilities of Tritium Network, Inc., a Delaware corporation.
On December 18, 2000, due to the adverse changes in the Internet environment and
especially in the area of Internet service providers, and in light of the fact
that StartFree was not able to generate sufficient revenues to support current
operations, we discontinued the operations of StartFree. On March 1, 2002,
StartFree was dissolved and abandoned.

         From the time we discontinued Startfree's operations until February 20,
2004, we had no active business. On February 20, 2004, pursuant to an Agreement
and Plan of Merger, GVI Security, Inc., a Delaware corporation, merged with our
newly-formed wholly-owned subsidiary, GVI Security Acquisition Corp., becoming
our wholly owned subsidiary.

         Effective April 12, 2004, we changed our name to GVI Security
Solutions, Inc. Commencing on or about April 14, 2004, our common stock will
begin trading under the new symbol of GVIS.

         For more information regarding our acquisitions, see Note 1 to Item 7
"Financial Statements."

Electronic Security Systems Industry

         The electronic security systems industry is comprised of five major
participant groups. These are: product designers/manufacturers, manufacturers'
representatives, distributors, system integrators and dealers. Some
manufacturers are also their own system integrators, while many other
manufacturers sell exclusively through the manufacturers' representatives and
system integrators. We are the exclusive distributor of video surveillance
products for Samsung Electronics in North, Central and South America and a
distributor of other security products manufactured by high technology
manufacturers.

         Today, video surveillance is among the fastest growing segments of the
electronic security systems industry. Video surveillance has undergone
significant changes over the last few years, from the introduction of affordable
digital cameras to the birth of digital recording. Cost effective digital video
recorders (DVR) have enabled a shift from human surveillance to more
sophisticated computer-driven surveillance that utilizes archiving, data mining
and artificial intelligence with predictive behavior algorithms. A DVR is a
computer with special interface cards that accepts camera input and converts
video signals to digital data and stores this data on the hard disc drive of the
computer. The benefits of the DVR are its capacity to store large volumes of
data, the clarity of its pictures, the lack of distortion of images and its
capability to perform rapid searches based upon certain pre-defined parameters.
We believe that over the next few years we will see a full shift in the video
surveillance segment of the electronic security systems industry from analog to
digital equipment.


                                       4
<PAGE>

Strategies

         Our objective is to provide "total solutions" for our customers and
partners by providing a range of products and engineering services designed to
meet the specific needs of the end user. From our simple pre-packaged suites of
easy-to-install security solutions to our range of products that can be fully
integrated into a comprehensive security solution, our goal is to provide our
customers with excellent service and superior technology at competitive prices.

         We believe that by delivering the highest levels of customer service,
we can strengthen our reputation as a reliable and cost-effective provider in
the electronic security systems industry and develop customer loyalty. We are
trying to anticipate and meet our customers' needs by increasing the range of
products and services we offer by entering into new business alliances and by
pursuing acquisitions of complementary businesses enabling us to offer new
products and services. Our goals include further developing our expertise and
products in the digital video recording sector, access control and detection
product areas. Further, we intend to grow our business by expanding and
diversifying our distribution channels and capitalizing on domestic and
international expansion opportunities.

Products and Services

         We are committed to setting new standards in quality, performance and
value by providing "best of breed" integrated security products. We offer a
range of video surveillance and security systems to our retail and professional
customers, from simple four camera observation systems that include monitors and
recording devices suitable for homes and small businesses to more sophisticated
products that can be used on a stand-alone basis or that can be integrated into
a larger more sophisticated security system. We serve the import, support,
marketing, inventory, warranty and distribution needs of our customers.

Professional Products

         Our objective is to provide complete security solutions for our
professional customers, by providing a suite of fully-integrated products that
is complemented by the extensive knowledge and expertise of our dedicated
Enterprise Solutions Group. Our Enterprise Solutions Group will work closely
with our professional customers to assist them in submitting bids for projects,
designing security systems and developing the specifications for a project. Our
Enterprise Solutions Group also provides end-to-end project management,
including installation and implementation of the security systems, and
after-sale service and support.

         We sell the following products separately and as part of our fully
integrated suite of video surveillance and integrated security solutions:

     o    access control

     o    a full line of black and white and color cameras, which include motion
          detection, low light day/night and high resolution, all with systems
          integration capabilities


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     o    a range of waterproof and weather resistant cameras

     o    high speed, remote controlled, dome and pinhole cameras and casings

     o    a complete range of lenses

     o    a range of black and white, color, plasma and flat screen monitors

     o    real time and time lapse videocassette and digital recorders and hard
          disk recorders

     o    digital watchdog ATM/point of service transaction verification
          software

     o    standalone digital recorders

     o    video transmission equipment

     o    digital processors (quads and multiplexers), switchers and video
          management systems

     o    digital video recording software

         We rely on original equipment manufacturer relationships for a number
of our standard products. In some instances, we purchase products that meet our
specifications from a manufacturer and distribute these products under the GVI
label. When assembly of our products is required, it is done in our Dallas,
Texas facility.

Consumer Products

         As the cost of CCTV products decline, small businesses and homeowners
in increasing numbers are installing security surveillance systems to replace or
supplement conventional alarm systems. The consumer products market consists of
end users who purchase systems and install them on their own. Our consumer
products include a broad range of pre-packaged CCTV security solutions. Our CCTV
solutions range from simple four camera observation systems with monitor and
recording devices, to more sophisticated systems that rely on switching with
many cameras and monitoring points. Our CCTV products offered to consumers
through the retail channel include options such as black & white or color
monitors and varying camera counts. Our CCTV products address the typical
acquisition, transmission, viewing, storage and retrieval of video images needs
of the consumer, and encompass the integration of all the standard components
necessary to supply a complete security solution to an end user.

Customer Support

         We believe that our ability to establish and maintain long-term
relationships with our customers and differentiate ourselves from the
competition depends significantly on the strength of our customer support
operations and staff. We offer customer support to both our retail and our
professional customers. We operate customer support centers in Dallas, Texas,
Mexico City, Mexico, Sao Paulo, Brazil, and Bogota, Colombia and also utilize a


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number of independent service providers in the other territories that we
service.

Distribution and Marketing

         We believe that our dual distribution channels enable us to reach a
broad range of potential customers with products and services targeted to meet
their needs and to increase our exposure across the market. We believe that we
provide our customers with functional solutions with superior performance at
competitive prices across both of our distribution channels.

Professional Channel. We offer a wide range of products and services through
local, regional and national system integrators and distributors who resell our
products to professional security providers. System integrators, on their own,
or with the assistance of our Enterprise Solutions Group utilize our products to
develop and install a fully integrated security suite for end users. Our
Enterprise Solutions Group will engineer and deliver integrated security
solutions to end users including airports, sea ports, military installments,
high security federal installations, fortune 500 corporations, casino, gaming
and institutional end users. For the year ended December 31, 2003, 45% of GVI's
revenues were generated through sales in our Professional Channel.

Retail Channel. We also offer our products and services through warehouse clubs,
mass-market retailers and specialty electronics stores including Sam's Club,
Costco, CompUSA, Wal-Mart, Fry's Electronics and J & R Music & Computer World.
Through retailers we offer a pre-packaged suite of easy-to-install CCTV systems
that are suitable for homes and small businesses. We also maintain a technical
support hotline for all of our retail customers. For the year ended December 31,
2003, 55% of GVI's revenues were generated through sales in our Retail Channel.
Sales through our distributor to a major national retailer comprised
approximately 96% of these retail sales.

         We utilize regional sales executives who often support sales across all
of our product and service offerings. We use a combination of our internal sales
force and independent representatives to sell our products to dealers and
systems integrators.

Competition

         We believe that the range of our product and service offerings and our
distribution channels enable us to compete favorably in the market for video
surveillance security products and services. However, some of our competitors
have greater name recognition, longer operational histories and greater
financial, marketing and managerial resources than we do.

         The key factors which drive competition in the video surveillance and
security industry are merchandising, price, quality, product performance, ease
of integration and customer service and support.

Competition in the Professional Sector.

         There are a number of distributors of highly sophisticated,
technologically advanced security components. Very few of these distributors,
however, offer fully integrated security suites that can be customized to meet
the specific needs of the end user. We believe that we have distinguished
ourselves in this market by providing our professional customers with superior
levels of customer service and by giving them the flexibility to choose between
purchasing our products separately or utilizing the expertise and knowledge of
our Enterprise Solutions Group to design and implement a fully integrated
customized security suite for their end users using our products. Our main
competitors in the professional sector are Pelco and Panasonic.

Competition in the Retail Sector.

         The market for video surveillance and security systems' components is
highly competitive and includes of a wide range of electronics companies, each
proficient at supplying a certain component of a CCTV, but only a few of these


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companies have developed a pre-packaged integrated security system. At this
time, our main competitor in this sector is Strategic Vista, which sells
products under the Lorex and Sylvania brands. We believe that we have
distinguished ourselves in the retail market by the quality of our merchandising
and the range of features our products offer relative to their prices.

Strategic Relationships

         We have entered into a Distribution Agreement with Samsung Electronics
pursuant to which Samsung has given us the right to sell, market, lease, license
and distribute Samsung security products, as well as the right to appoint other
distributors to do the same, throughout North, Central and South America. The
Distribution Agreement provides that it may be terminated at any time upon
mutual agreement and that if we fail to meet certain annual volume targets,
Samsung may, after reasonable attempts to renegotiate the financial and
exclusivity terms of the Distribution Agreement, terminate the Distribution
Agreement. Under the Distribution Agreement, we retain the right to develop
and/or independently sell and market security products which are similar to or
competitive with Samsung's products and to enter into similar distribution
agreements with third parties. We have most favored nation status with Samsung
for all products that are covered by the Distribution Agreement. Since the
commencement of the Distribution Agreement, we have met each of the annual
volume targets. Although the Distribution Agreement expires on August 30, 2004,
we are currently working with Samsung to renew the Distribution Agreement on
terms that are acceptable to both parties. We are confident that we will be able
to renew the Distribution Agreement for a term of at least one to five years
depending on the applicable product and distribution channel. In the event the
term of any such renewal is not satisfactory to us, we believe that we could
purchase similar products from alternative sources. For the year ended
December 31, 2003, 74% of GVI's revenues were attributable to sales of products
supplied by Samsung to GVI under the Distribution Agreement.

         We are also a party to distribution arrangements with other high
technology manufacturers who supply us with other products such as digital video
recorders, internet and networking products.


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<PAGE>

Employees

         As of December 31, 2003, we did not have any full time employees, and
GVI had approximately 50 full-time employees. None of its employees are
represented by a labor union or are subject to collective-bargaining agreements.
We believe that we maintain good relationships with our employees.



                                       9
<PAGE>

                                  RISK FACTORS

                 RISKS RELATED TO OUR INDUSTRY AND OUR BUSINESS

Any investment in our common stock involves a high degree of risk. You should
consider carefully the risks described below, together with the other
information contained in this report. If any of the following events actually
occurs, our business, financial condition and results of operations may suffer
materially. As a result, the market price of our common stock could decline, and
you could lose all or part of your investment in our common stock.

IF WE ARE UNABLE TO RENEW OUR EXCLUSIVE DISTRIBUTION AGREEMENT WITH SAMSUNG, OUR
BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATION COULD BE MATERIALLY
ADVERSELY AFFECTED.

         We are the exclusive distributor of Samsung Electronics surveillance
and security products in North, Central and South America under an agreement
that expires on August 30, 2004. We are currently working closely with Samsung
to renew the distribution agreement. Although we are confident that we will be
able to renew the Distribution Agreement for a period of at least one to five
years depending on the applicable product and distribution channel, we cannot
assure you that we will be able to renew it or renew it on the same terms or on
equally favorable terms. Although we have relationships with other manufacturers
and believe we could purchase similar products from alternative sources, we
currently derive a substantial amount of our revenues from the sale of Samsung
products. For the year ended December 31, 2003, 74% of GVI's revenues were
attributable to products manufactured by Samsung. If we are unable to renew our
agreement with Samsung, our business, financial condition and results of
operations will be materially adversely affected.

GVI HAS SUBSTANTIAL INDEBTEDNESS TO ITS LENDER UNDER A CREDIT AGREEMENT THAT
TERMINATES ON NOVEMBER 1, 2005. SUBSTANTIALLY ALL OF OUR ASSETS ARE SUBJECT TO
LIENS IN FAVOR OF OUR LENDER UNDER THE CREDIT AGREEMENT. IN ADDITION, AT
DECEMBER 31, 2003, GVI WAS IN BREACH OF CERTAIN FINANCIAL COVENANTS IN THE
CREDIT AGREEMENT. ALTHOUGH THESE BREACHES WERE WAIVED BY THE LENDER, WE FACE THE
RISK THAT IF WE BREACH THESE OR OTHER COVENANTS IN THE FUTURE, THE LENDER MAY
CHOOSE TO EXERCISE ITS RIGHTS UNDER THE CREDIT AGREEMENT, INCLUDING ITS RIGHT TO
FORECLOSE ON OUR ASSETS.

         As of December 31, 2003, outstanding revolving loans under the Credit
Agreement were approximately $8.7 million. As security for all of its
obligations under the Credit Agreement, GVI granted the lender a first priority
security interest in all of its assets. If an event of default occurs under the
Credit Agreement, at the lender's option, the principal and interest of the
loans and all other obligations under the Credit Agreement will be immediately
due and payable, and the lender may exercise its rights and remedies as a
secured party under the Uniform Commercial Code, and all other rights and
remedies otherwise available to the lender under the loan agreements. At
December 31, 2003, GVI was not in compliance with the minimum tangible net worth
and maximum debt-to-tangible net worth ratio financial covenants contained in
the Credit Agreement. On February 18, 2004, the lender waived GVI's
non-compliance with those financial covenants and amended these covenants for
future periods. While we intend to comply with our obligations under the Credit
Agreement, as amended, in future periods, we cannot assure you that we will be


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successful in doing so. In the event of a future default under the Credit
Agreement, the lender may enforce its rights as a secured party and we may lose
all or a portion of our assets, be forced to materially reduce our business
activities or cease operations.

         In addition, the Credit Agreement contains restrictions that

     o    limit our ability to obtain debt financing, and

     o    place us at a possible competitive disadvantage compared to
          competitors with less leverage or better access to capital resources.

IF WE REQUIRE ADDITIONAL FUNDING TO SUSTAIN AND GROW OUR BUSINESS, WE MAY NOT BE
ABLE TO SECURE THIS FUNDING ON TERMS THAT ARE FAVORABLE TO US. IF WE DO NOT
OBTAIN FUNDING WHEN WE NEED IT, OUR BUSINESS MAY BE ADVERSELY AFFECTED. IN
ADDITION, IF WE HAVE TO SELL SECURITIES IN ORDER TO OBTAINING FINANCING, THE
RIGHTS OF OUR CURRENT HOLDERS MAY BE ADVERSELY AFFECTED.

         We may have to seek additional outside funding sources to satisfy our
future financing demands if our operations do not produce the level of revenue
we require to maintain and grow our business. We will also need funding to
pursue our acquisition strategy. We cannot assure you that outside funding will
be available to us at the time that we need it and in the amount necessary to
satisfy our needs, or, that if such funds are available, they will be available
on terms that are favorable to us. If we are unable to secure financing when we
need it, our business may be adversely affected. If we have to issue additional
shares of common stock or securities convertible into common stock in order to
secure additional funding, our current stockholders may experience dilution of
their ownership of our shares. In the event that we issue securities or
instruments other than common stock, we may be required to issue such
instruments with greater rights than those currently possessed by holders of our
common stock.

IF WE ARE UNABLE TO RESPOND TO THE RAPID TECHNOLOGICAL CHANGES IN OUR INDUSTRY
AND CHANGES IN OUR CUSTOMERS' REQUIREMENTS AND PREFERENCES, OUR BUSINESS,
FINANCIAL CONDITION AND RESULTS OF OPERATION COULD BE MATERIALLY ADVERSELY
AFFECTED.

         If we are unable, for technological, legal, financial or other reasons,
to adapt in a timely manner to changing market conditions or customer
requirements, we could lose customers and market share. The electronic security
systems industry is characterized by rapid technological change. Sudden changes
in customer requirements and preferences, the frequent introduction of new
products and services embodying new technologies and the emergence of new
industry standards and practices could render our existing products, services
and systems obsolete. The emerging nature of products and services in the
electronic security systems industry and their rapid evolution will require that
we continually improve the performance, features and reliability of our products
and services. Our success will depend, in part, on our ability:

     o    to enhance our existing products and services;


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     o    to anticipate changing customer requirements by designing, developing,
          and launching new products and services that address the increasingly
          sophisticated and varied needs of our current and prospective
          customers; and

     o    to respond to technological advances and emerging industry standards
          and practices on a cost-effective and timely basis.

         The development of additional products and services involves
significant technological and business risks and requires substantial
expenditures and lead time. If we fail to introduce products with new
technologies in a timely manner, or adapt our products to these new
technologies, our business, financial condition and results of operations will
be adversely affected. We cannot assure you that even if we are able to
introduce new products or adapt our products to new technologies that our
products will gain acceptance among our customers. In addition, from time to
time, we or our competitors may announce new products, product enhancements or
technological innovations that have the potential to replace or shorten the life
cycles of our products and that may cause customers to defer purchasing our
existing products, resulting in inventory obsolescence.

WE MAY NOT BE ABLE TO MAINTAIN OR IMPROVE OUR COMPETITIVE POSITION BECAUSE OF
STRONG COMPETITION IN THE ELECTRONIC SECURITY SYSTEMS INDUSTRY, AND WE EXPECT
THIS COMPETITION TO CONTINUE TO INTENSIFY.

         The electronic security systems industry is highly competitive and has
become more so over the last several years as security issues and concerns have
become a primary consideration at both government and private facilities
worldwide. Competition is intense among a wide range and fragmented group of
product and service providers, including electronic security equipment
manufacturers, distributors, providers of integrated security systems, systems
integrators, consulting firms and engineering and design firms and others that
provide individual elements of a system. Some of our competitors are larger than
us and possess significantly greater name recognition, assets, personnel, sales
and financial resources. These entities may be able to respond more quickly to
changing market conditions by developing new products and services that meet
customer requirements or are otherwise superior to our products and services and
may be able to more effectively market their products than we can because they
have significantly greater financial, technical and marketing resources than we
do. They may also be able to devote greater resources to the development,
promotion and sale of their products than we can. Increased competition could
require us to reduce our prices, result in our receiving fewer customers orders,
and result in our loss of market share. We cannot assure you that we will be
able to distinguish ourselves in a competitive market. To the extent that we are
unable to successfully compete against existing and future competitors, our
business, operating results and financial condition would be materially
adversely affected.

WE DEPEND ON OUR MANUFACTURERS, SOME OF WHICH ARE OUR SOLE SOURCE FOR SPECIFIC
PRODUCTS. OUR BUSINESS AND REPUTATION WOULD BE SERIOUSLY HARMED IF THESE
MANUFACTURERS FAIL TO PERFORM THEIR CONTRACTUAL OBLIGATIONS TO US AND
ALTERNATIVE SOURCES ARE NOT AVAILABLE.

         In addition to Samsung, we have strategic relationships with a number
of other manufacturers for our products. Our success depends in part on whether
our manufacturers fulfill their contractual obligations satisfactorily and in a


                                       12
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timely manner. If any of our manufacturers fail to satisfactorily perform their
contractual obligations, we may be required to pursue replacement manufacturer
relationships. If we are unable to find replacements on a timely basis, or at
all, we may be forced to either temporarily or permanently discontinue the sale
of certain products and associated services, which could expose us to legal
liability, loss of reputation and risk of loss or reduced profit. Although we
continually evaluate our relationships with our manufacturers and plan for
contingencies if a problem should arise with a manufacturer, finding new
manufacturers that offer a similar type of product would be a complicated and
time consuming process and we cannot assure you that if we ever need to find a
new manufacturer for certain of our products we would be able to do so on a
completely seamless basis, or at all. Our business, results of operation and
reputation would be adversely impacted if we are unable to provide our products
to our customers in a timely manner.

OUR FUTURE SUCCESS DEPENDS IN PART ON ATTRACTING AND RETAINING KEY SENIOR
MANAGEMENT AND QUALIFIED TECHNICAL AND SALES PERSONNEL. WE ALSO FACE CERTAIN
RISKS AS A RESULT OF THE RECENT CHANGES TO OUR MANAGEMENT TEAM.

         Our future success depends in part on the contributions of our
management team and key technical and sales personnel and our ability to attract
and retain qualified new personnel. In particular, our success depends on Thomas
Wade, our President, and Nazzareno Paciotti who joined us as our Chief Executive
Officer and Chief Financial Officer in February 2004. Both Messrs. Wade and
Paciotti have employment agreements with us. There is significant competition in
our industry for qualified managerial, technical and sales personnel and we
cannot assure you that we will be able to retain our key senior managerial,
technical and sales personnel or that we will be able to attract, integrate and
retain other such personnel that we may require in the future. We also cannot
assure you that our employees will not leave and subsequently compete against
us. If we cannot work together effectively to overcome any operational
challenges that arise during the integration process, if our new management team
cannot master the details of our business and our market or if we are unable to
attract and retain key personnel in the future, our business, financial
condition and results of operations could be adversely affected.

WE RELY ON  INDEPENDENT  DEALERS  AND  DISTRIBUTORS  TO SELL OUR  PRODUCTS,  AND
PRIMARILY  ON A SINGLE  RETAILER  TO SELL OUR  PRODUCTS  IN THE RETAIL  CHANNEL;
DISRUPTION TO THESE DISTRIBUTION CHANNELS WOULD HARM OUR BUSINESS.

         Because we sell a significant portion of our products to independent
dealers and distributors, we are subject to many risks, including risks related
to their inventory levels and support for our products. In particular, our
dealers and distributors maintain significant levels of our products in their
inventories. If dealers and distributors attempt to reduce their levels of
inventory or if they do not maintain sufficient levels to meet customer demand,
our sales could be negatively impacted. Sales through our distributors to a
major retailer comprised 96% of our retail sales for the year ended December 31,
2003. Any reduction in sales to such major retailer could also negatively impact
our sales.

         Our dealers and distributors also sell products offered by our
competitors. If our competitors offer our dealers and distributors more
favorable terms, those dealers and distributors may de-emphasize or decline to
carry our products. In the future, we may not be able to retain or attract a


                                       13
<PAGE>

sufficient number of qualified dealers and distributors. If we are unable to
maintain successful relationships with dealers and distributors or to expand our
distribution channels, our business could suffer.

OUR BUSINESS AND REPUTATION AS A DISTRIBUTOR OF HIGH QUALITY VIDEO SURVEILLANCE
AND SECURITY EQUIPMENT MAY BE ADVERSELY AFFECTED BY PRODUCT DEFECTS OR
SUBSTANDARD PERFORMANCE.

         We believe that we offer state-of-the art products that are reliable
and competitively priced. In the event that our products do not perform to
specifications, we might be required to redesign or recall those products or pay
substantial damages or warranty claims. Such an event could result in
significant expenses, disrupt sales and affect our reputation and that of our
products, which would have a material adverse effect on our business, financial
condition and results of operations. Furthermore, product defects could result
in substantial product liability. Although we currently maintain product
liability insurance, we cannot assure you that it is adequate or that it will
remain available on acceptable terms. If we face liability claims that exceed
our insurance or that are not covered by our insurance, our business, financial
condition and results of operation would be adversely affected.

FAILURE TO MANAGE OUR GROWTH AND EXPANSION EFFECTIVELY COULD ADVERSELY AFFECT
OUR BUSINESS.

         Our ability to successfully offer our products and implement our
business plan in a rapidly evolving market requires an effective planning and
management process. We have increased and plan to continue to increase the scope
of our operations domestically and internationally. This growth has placed, and
our anticipated growth in future operations will continue to place, a
significant strain on our management systems and resources. If we are unable to
effectively manage our growth, our business could be adversely affected.

OUR GROWTH STRATEGY INCLUDES MAKING ACQUISITIONS IN THE FUTURE, WHICH COULD
SUBJECT US TO SIGNIFICANT RISKS, ANY OF WHICH COULD HARM OUR BUSINESS.

         Our growth strategy includes identifying and acquiring or investing in
suitable candidates on acceptable terms. In particular, over time, we may
acquire or make investments in providers of product offerings that complement
our business and other companies in the security industry.

         Acquisitions involve a number of risks and present financial,
managerial and operational challenges, including:

     o    diversion of management's attention from running our existing
          business;

     o    increased expenses, including travel, legal, administrative and
          compensation expenses resulting from newly hired employees;

     o    increased costs to integrate personnel, customer base and business
          practices of the acquired company with our own;

     o    adverse effects on our reported operating results due to possible
          write-down of goodwill associated with acquisitions;


                                       14
<PAGE>

     o    potential disputes with sellers of acquired businesses, technologies,
          services or products;

     o    dilution to stockholders if we issue securities in any acquisition;
          and

     o    inability to utilize tax benefits related to operating losses incurred
          by acquired businesses.

         Moreover, performance problems with an acquired business, technology,
product or service could also have a material adverse impact on our reputation
as a whole. In addition, any acquired business, technology, product or service
could significantly under-perform relative to our expectations, and we may not
achieve the benefits we expect from our acquisitions. For all these reasons, our
pursuit of an acquisition and investment strategy or any individual acquisition
or investment, could have a material adverse effect on our business, financial
condition and results of operations.

OUR PRODUCT OFFERINGS INVOLVE A LENGTHY SALES CYCLE AND WE MAY NOT ANTICIPATE
SALES LEVELS APPROPRIATELY, WHICH COULD IMPAIR OUR PROFITABILITY.

         Certain of our products and services are designed for medium to large
commercial, industrial and government facilities desiring to protect valuable
assets and/or prevent intrusion into high security facilities in the United
States and abroad. Given the nature of our products and the customers that
purchase them, sales cycles can be lengthy as customers conduct intensive
investigations of, and deliberate between competing technologies and providers.
For these and other reasons, the sales cycle associated with certain of our
products and services is typically lengthy and subject to a number of
significant risks over which we have little or no control.

         If sales in any period fall significantly below anticipated levels, our
financial condition and results of operations could suffer. In addition, our
operating expenses are based on anticipated sales levels, and a high percentage
of our expenses are generally fixed in the short term. As a result of these
factors, a small fluctuation in timing of sales can cause operating results to
vary from period to period.

WE FACE CERTAIN LABOR, POLITICAL AND CURRENCY RISKS BECAUSE SAMSUNG ELECTRONICS'
FACTORIES ARE LOCATED IN KOREA AND MAY FACE OTHER RISKS IF WE CONTINUE TO EXPAND
OUR BUSINESS INTERNATIONALLY.

         Since our main supplier is located in Korea, we may face a number of
additional risks, including those arising from the current political tension
between North and South Korea. While we have not faced any problems to date, in
the future, as we continue to expand our business internationally, we may face:

     o    regulatory limitations imposed by foreign governments,

     o    fluctuations in currency exchange rates,

     o    political, military and terrorist risks,


                                       15
<PAGE>

     o    disruptions or delays in shipments caused by customs brokers or
          government agencies,

     o    unexpected changes in regulatory requirements, tariffs, customs,
          duties and other trade barriers, and

     o    potentially adverse tax consequences resulting from changes in tax
          laws.

         We cannot assure you that one or more of the factors described above
will not have a material adverse effect on our business, financial condition and
results of operation.

                                INVESTMENT RISKS

OUR COMMON STOCK IS TRADED ON THE "PINK SHEETS" AND AS A RESULT THERE IS A
LIMITED PUBLIC MARKET FOR OUR COMMON STOCK. IN ADDITION, BROKER-DEALERS SELLING
OUR STOCK ARE SUBJECT TO STRINGENT REGULATIONS THAT COULD AFFECT THEIR
WILLINGNESS TO ACTIVELY SELL OUR STOCK, MAKING IT MORE DIFFICULT FOR HOLDERS OF
OUR COMMON STOCK TO SELL SHARES TO THIRD PARTIES OR TO OTHERWISE DISPOSE OF
THEM.

         Our common stock is traded on the "pink sheets" and our securities are
quoted and traded by broker-dealers. Because shares of our common stock are not
currently quoted on a recognized national securities exchange in the United
States or the OTC Bulletin Board, our stock price, as well as the liquidity of
our common stock is adversely impacted. Although we intend to attempt to notify
market makers to request them to apply to the OTC Bulletin Board to initiate
quotations in our common stock, we have no control over the process of quotation
initiation and there can be no assurance such trading will be initiated.

         Shares traded on the "pink sheets" are subject to rules adopted by the
SEC regulating broker-dealer practices in connection with transactions in
"penny-stocks." Such rules require the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and the
risks associated with this market and impose various sales practice requirements
on broker-dealers who sell penny stocks to persons other than established
customers and institutional or wealthy investors. For these types of
transactions, the broker-dealer must make a special suitability determination
for the purchaser and must receive the purchaser's written consent to the
transaction prior to the sale. The broker-dealer also must disclose the
commissions payable to the broker-dealer, current bid and offer quotations for
the penny stock and, if the broker-dealer is the sole market maker, the
broker-dealer must disclose this fact and the broker-dealer's presumed control
over the market. Such information must be provided to the customer orally or in
writing before or with the written confirmation of the trade sent to the
customer. Monthly statements must also be sent to the customer, disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stocks. The additional burdens imposed upon
broker-dealers by such requirements could discourage broker-dealers from
effecting transactions in our common stock and may make it more difficult for
holders of our common stock to sell shares to third parties or to otherwise
dispose of them. Accordingly, we cannot assure you that an active trading market
in our shares will develop or be sustainable.


                                       16
<PAGE>

FUTURE SALES OF COMMON STOCK BY EXISTING STOCKHOLDERS COULD RESULT IN A DECLINE
IN THE MARKET PRICE OF OUR STOCK.

         In connection with the merger pursuant to which GVI became our wholly
owned subsidiary, we entered into a registration rights agreement with the
former stockholders of GVI and our principal stockholder prior to the merger,
pursuant to which we agreed to file a registration statement with the SEC within
120 days following the merger (June 18, 2004) with respect to 1,915,017,183
shares of common stock issuable upon conversion of the Series D and Series E
Preferred Stock, and use our best efforts to cause such registration statement
to become effective as promptly as possible after its filing. Although such
shares are subject to a partial lock-up, which will prohibit each such
stockholder from selling more than 10% of the shares of common stock held by
such stockholder in any 90-day period, sales of substantial amounts of our
common stock in the public market could adversely affect the market price of our
common stock.

OUR DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS OWN A SIGNIFICANT
PERCENTAGE OF OUR SHARES, WHICH WILL LIMIT YOUR ABILITY TO INFLUENCE CORPORATE
MATTERS.

         Our directors, executive officers and other principal stockholders own
approximately 98% of our outstanding common stock as of February 20, 2004.
Accordingly, these stockholders could have a significant influence over the
outcome of any corporate transaction or other matter submitted to our
stockholders for approval, including mergers, consolidations and the sale of all
or substantially all of our assets and also could prevent or cause a change in
control. The interests of these stockholders may differ from the interests of
our other stockholders. In addition, William Teitelbaum, a former officer,
director and significant stockholder, has asserted in a Schedule 13D and a Form
3 filed by him with the SEC on March 1, 2004, that he was issued a warrant by
GVI Security, Inc. which, following the merger, entitles him to receive a
warrant exercisable for 261,991,428 shares of common stock. We are investigating
the bona fides of such warrant. In the event that Mr. Teiltelbaum is entitled to
all or a portion of the warrant, he could own in excess of a majority of the
shares of our outstanding common stock, which will also cause dilution to our
current stockholders. In addition, the limited number of shares held in public
float affects the liquidity of our common stock. Third parties may be
discouraged from making a tender offer or bid to acquire us because of the
concentration of ownership in our stock.

ITEM 2.  PROPERTIES.

      We currently do not own any real property. GVI Security, Inc., which
became our wholly owned subsidiary in February 2004 pursuant to an Agreement and
Plan of Merger, currently leases approximately 37,500 square feet of general
office space on a month to month basis in Carrollton, Texas, which consists of
two properties. The first property is 17,187 square feet and is used for office
and warehouse purposes and the second property, which we use for temporary
warehouse space, is approximately 20,500 square feet. In April 2004, GVI entered
into a lease for approximately 58,850 square feet of warehouse space in
Carrollton, Texas, which expires in October 2009. GVI intends to shift its
offices and warehouse from the other two properties it leases in Carrollton to
this new space. In the opinion of our management, the leased properties are
adequately insured. Our existing properties are in good condition and suitable
for the conduct of our business.


                                       17
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS.

         We are not party to any material pending legal proceedings.

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

         No matter was submitted to a vote of security holders during the fourth
quarter of 2003.



PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         Our common stock trades in the over-the-counter-market under the symbol
"TSIM," and trades of our common stock are currently quoted by Pink Sheets LLC.
Our common stock will trade under the new symbol of "GVIS" effective April 14,
2004. The following table sets forth the quarterly high and low bid prices of a
share of our common stock as reported by (1) the OTC Bulletin Board for the
period commencing January 1, 2002 and ending June 9, 2002, and (2) Pink Sheets
LLC thereafter. The quotations listed below reflect inter-dealer prices, without
retail mark-ups, mark-downs or commissions and may not necessarily represent
actual transactions.

                                             High              Low
                                             ----              ---
             Fiscal 2003
             First Quarter                   $0.02            $0.02
             Second Quarter                  $0.03            $0.01
             Third Quarter                   $0.05            $0.01
             Fourth Quarter                  $0.10            $0.01

             Fiscal 2002
             First Quarter                   $0.24            $0.10
             Second Quarter                  $0.15            $0.01
             Third Quarter                   $0.15            $0.04
             Fourth Quarter                  $0.045           $0.02

         The number of holders of record for our common stock as of December 31,
2003 was approximately 50. This number excludes individual stockholders holding
stock under nominee security position listings.



                                       18
<PAGE>

                                 DIVIDEND POLICY

         We did not pay any dividends on the common stock since our inception
and do not intend to pay any cash dividends to our stockholders in the
foreseeable future.

                      EQUITY COMPENSATION PLAN INFORMATION

         The following table sets forth information with respect to equity
compensation plans (including individual compensation arrangements) of the
Company as of December 31, 2003.

<TABLE>
<CAPTION>
                                   NUMBER OF SECURITIES TO BE        WEIGHTED-AVERAGE        NUMBER OF SECURITIES REMAINING
                                     ISSUED UPON EXERCISE OF        EXERCISE PRICE OF      AVAILABLE FOR FUTURE ISSUANCE UNDER
                                  OUTSTANDING OPTIONS, WARRANTS    OUTSTANDING OPTIONS,   EQUITY COMPENSATION PLANS (EXCLUDING
                                           AND RIGHTS              WARRANTS AND RIGHTS     SECURITIES REFLECTED IN COLUMN(a))
                                               (a)                         (b)                             (c)
                                  -----------------------------    -------------------    ------------------------------------
<S>                                          <C>                          <C>                            <C>
Equity compensation
plans approved by
security holders...............              10,259                       $1.00                          965,741

Equity compensation
plans not approved by security
holders........................             6,217,624                     $0.46                            -0-

         Total.................             6,227,883                     $0.46                          965,741
</TABLE>

ITEM 6.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION.

         This report contains forward-looking statements relating to future
events and our future performance 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, including, without limitation, statements regarding our
expectations, beliefs, intentions or future strategies that are signified by the
words "expects," "anticipates," "intends," "believes" or similar language.
Actual results could differ materially from those anticipated in such
forward-looking statements. All forward-looking statements included in this
document are based on information available to us on the date hereof. We caution
investors that our business and financial performance are subject to substantial
risks and uncertainties. In evaluating our business, prospective investors
should carefully consider the information set forth under the caption "Risk
Factors" in addition to the other information set forth herein and elsewhere in
our other public filings with the Securities and Exchange Commission.



                                       19
<PAGE>

OVERVIEW

         As of December 31, 2003, we had no active business operations and had
not conducted any business operations since December 2000, when we discontinued
the operations of Startfree.com. Subsequent to the period covered by this
Report, on February 20, 2004, pursuant to an Agreement and Plan of Merger, GVI
Security, Inc. merged with our newly-formed wholly-owned subsidiary, GVI
Security Acquisition Corp., becoming our wholly owned subsidiary. As a result of
the Merger, the business of GVI is now our business.

         Through our subsidiary, GVI Security, Inc., we provide complete video
surveillance and security solutions to the professional, homeland security,
retail and business to business security markets. We are the exclusive
distributor of video surveillance products for Samsung Electronics in North,
Central and South America. We also distribute other security products such as
digital recording, software systems and networking products. We offer a range of
security products to our professional and retail customers, from simple four
camera observation systems that include monitors and recording devices suitable
for homes and small businesses, also known as closed circuit television systems
(CCTV), to more sophisticated products such as digital video recorders that can
be used on a stand-alone basis or that can be integrated into larger video
surveillance and security systems.

PLAN OF OPERATIONS

         Over the next 12 months, we intend to continue to operate GVI's
business. We may also seek to acquire one or more additional public or
privately-held companies engaged in the security business and complementary to
our current business. To that end, we are currently engaged in negotiations with
several candidates. A transaction with a target business may be structured as a
merger, consolidation, exchange of our common stock for stock or assets of the
target business or in any other form which will result in the combined
enterprise remaining a publicly-held corporation.

         Our operations are currently funded through borrowings under our
secured revolving credit facility, which is described further below under
"Liquidity and Capital Resources." Management believes that borrowings available
under this credit facility will be sufficient to fund the cash requirements of
our current operations for 2004. However, we may need to obtain additional
financing in connection with our acquisition of other businesses, and there can
be no assurance that we can obtain such financing or obtain such financing
without substantial cost and/or substantial dilution to our stockholders.



                                       20
<PAGE>

Management's Discussion and Analysis of GVI's Operations

         We acquired GVI subsequent to the period covered by this Report.
Accordingly, the financial results of GVI's operations are not reflected in the
Financial Statements included in Item 7 of this Report. As promptly as
practicable following the completion of their audit, GVI's financial statements
for the years ended December 31, 2003 and 2002 will be filed with the Securities
and Exchange Commission in an amendment to the Current Report on Form 8-K we
filed on February 27, 2004 describing the GVI Merger.

YEAR 2003 COMPARED WITH 2002

NET REVENUES

         Total net revenues increased 52% to approximately $56.3 million for the
year 2003 from approximately $37.1 million in 2002. The increase was due to
increases in sales across the range of our products together with the
introduction of several new products manufactured by both Samsung Electronics
and the other manufactures whose products we distribute.

COST OF GOODS SOLD

         Total cost of goods sold increased 53% to approximately $46.7 million
in 2003 from approximately $30.5 million in 2002. The increase was due to the
increased revenue volume in addition to higher inbound freight costs and changes
in our product mix. As a result of the changes in sales and costs of goods sold,
gross profit for 2003 increased to approximately $9.7 million from approximately
$6.6 million for 2002, and gross profit as a percentage of net sales decreased
to 17.2% for 2003, compared with 17.7% for 2002.

OPERATING EXPENSES

         Total operating expenses increased 49% to approximately $7.6 million in
2003 from approximately $5.1 million in 2002.

         Sales and Marketing. Sales and marketing expenses increased 30% to
approximately $3.5 million in 2003 from approximately $2.6 million in 2002. The
increase was primarily due to increased commissions, salaries and travel-related
expenses.

         General and Administrative. General and administrative expenses
increased 69% to approximately $4.1 million in 2003 from approximately $2.5
million in 2002. The increase was primarily due to increased salaries and wages
associated with additional hires and additional provision for doubtful accounts
resulting from our higher revenues.



                                       21
<PAGE>

INTEREST EXPENSE

         Interest expense for 2003 decreased 7% to approximately $228,000 in
2003 from approximately $244,000 in 2002. The decrease was primarily related to
lower interest rates during 2003 compared with 2002.

PROVISION FOR INCOME TAXES

         The provision for federal, state and local income taxes was
approximately $536,000 for 2003 and approximately $56,000 for 2002. Prior to May
23, 2003, the Company elected to be taxed under the provisions of Sub Chapter S
of the Internal Revenue Code. As a Sub Chapter S corporation, GVI did not
provide for or pay any Federal or certain corporate or state income taxes on its
taxable income for the year ended December 31, 2002 and for the period from
January 1, 2003 until May 2003. In May 2003, GVI elected to become a "C"
corporation and accordingly a provision has been made for the payment of income
taxes based on GVI's prorated taxable income for 2003.

NET INCOME

         As a result of the items discussed above, net income for 2003 was
approximately $1.3 million, compared with net income of approximately $1.1
million for 2002, an increase of 11%.

LIQUIDITY AND CAPITAL RESOURCES

         Historically, GVI has funded its operations primarily through cash
generated from operations as well as borrowings under secured revolving credit
facilities.

         On November 1, 2003, GVI entered into a Credit Agreement with Comerica
Bank pursuant to which GVI obtained a $10,000,000 revolving loan credit facility
which terminates on November 1, 2005. Advances under the Credit Agreement are
limited to a borrowing base consisting of 75% of GVI's Eligible AccountS and 50%
of GVI's Eligible Inventory (each as defined in the Credit Agreement).
Contemporaneously with the closing of the Credit Agreement, GVI borrowed
approximately $4.975 million of revolving loans and used all of such proceeds to
repay in full its indebtedness under its prior credit agreement. The Credit
Agreement also provides for the issuance of up to $1,000,000 of letters of
credit. Borrowings under the Credit Agreement are secured by all of GVI's
assets. GVI pays the lender a quarterly fee equal to .25% per annum on the
unused portion of the credit facility.

         Interest on the revolving loans is due on a monthly basis. At GVI's
option, revolving loans currently bear interest at a rate either tied to the
lender's prime rate or the rate of interest offered in the interbank Eurodollar
market selected by lender. Depending on GVI's debt-to-tangible net worth ratio,
prime rate borrowings bear interest at a rate equal to the lender's prime rate
minus .50%, the lender's prime rate, or the lender's prime rate plus .50%, and
Eurodollar borrowings bear interest at a rate equal to the applicable Eurodollar
rate plus between 2.25% and 3.25%.

         The Credit Agreement provides for a number of affirmative and negative
covenants, restrictions, limitations and other conditions including among
others, maintenance of minimum tangible net worth, maintenance of minimum
quarterly earnings, and compliance with debt to tangible net worth ratio
covenants.


                                       22
<PAGE>

         At December 31, 2003, GVI was not in compliance with the minimum
tangible net worth and maximum debt-to-tangible net worth ratio financial
covenants contained in the Credit Agreement. On February 18, 2004, the lender
waived GVI's non-compliance with those financial covenants and amended those
covenants for future periods. In connection with this waiver and amendment, the
lender increased the interest rate applicable to borrowings under the Credit
Agreement to those described above, and required GVI to pay the lender a fee of
$25,000. Management believes that GVI will be able comply with its obligations
under the Credit Agreement, as amended, in future periods, although there can be
no assurance in this regard.

         At December 31, 2003, GVI had cash and cash equivalents of $69,114,
working capital of approximately $2.0 million and outstanding revolving loans of
approximately $8.7 million, with approximately $1.3 million of additional
availability under the Credit Agreement, compared to cash and cash equivalents
of $166,064, working capital of approximately $1.2 million and outstanding
revolving loans of approximately $3.3 million, with approximately $1.7 million
of additional availability under its Credit Agreement with Comerica Bank at
December 31, 2002. Management believes that GVI's existing cash position and
credit facility combined with internally generated cash flow will satisfy its
cash requirements for 2004.

ITEM 7.   FINANCIAL STATEMENTS.

         The Financial Statements and Notes thereto can be found beginning on
page F-1, "Index to Financial Statements," at the end of this Form 10-KSB.

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

         Not Applicable.

ITEM 8A.  CONTROLS AND PROCEDURES

         Nazzareno Paciotti, our Chief Executive and Chief Financial Officer has
concluded, based on his evaluation as of December 31, 2003, that our disclosure
controls and procedures are effective to ensure that information required to be
disclosed by us in the reports we file or submit under the Securities Exchange
Act of 1934, as amended, is recorded, processed, summarized and reported within
the time periods specified in the SEC's rules and forms.

         Our management, including our Chief Executive and Chief Financial
Officer, does not expect that our disclosure controls and procedures or internal
control over financial reporting will prevent all error and all fraud. A control
system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the system are met and cannot
detect all deviations. Because of the inherent limitations in all control


                                       23
<PAGE>

systems, no evaluation of control can provide absolute assurance that all
control issues and instances of fraud or deviations, if any, within the Company
have been detected. While we believe that our disclosure controls and procedures
and our internal control over financial reporting have been effective, in light
of the foregoing, we intend to continue to examine and refine our disclosure
controls and procedures and our internal control over financial reporting to
monitor ongoing developments in this area.

         There were no significant changes in our internal control over
financial reporting subsequent to our evaluation of our internal control over
financial reporting that could materially affect or are reasonably likely to
materially affect our internal control over financial reporting.

PART III

ITEM 9.           DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         The information required to be disclosed hereunder will be disclosed by
amendment to this Form 10-KSB prior to April 29, 2004.

ITEM 10.          EXECUTIVE COMPENSATION.

         The information required to be disclosed hereunder will be disclosed by
amendment to this Form 10-KSB prior to April 29, 2004.

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

         The information required to be disclosed hereunder will be disclosed by
amendment to this Form 10-KSB prior to April 29, 2004.

ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The information required to be disclosed hereunder will be disclosed by
amendment to this Form 10-KSB prior to April 29, 2004.

ITEM 13.          EXHIBITS AND REPORTS ON FORM 8-K.

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


EXHIBIT
NO.               DESCRIPTION
-------           -----------

3.1               Certificate of Incorporation of Thinking Tools, Inc.
                  (incorporated herein by reference to our Registration
                  Statement on Form SB-2 (Registration No. 33-11321), as filed
                  with the SEC on September 3, 1996).

3.2               By-Laws of Thinking Tools, Inc. (incorporated herein by
                  reference to our Registration Statement on Form SB-2
                  (Registration No. 33-11321), as filed with the SEC on
                  September 3, 1996).


                                       24
<PAGE>

4.1*              1996 Stock Option Plan (incorporated herein by reference to
                  our Registration Statement on Form SB-2 (Registration No.
                  33-11321), as filed with the SEC on September 3, 1996).

4.2               Form of Stock Certificate (incorporated herein by reference to
                  Amendment No. 1 to the Registration Statement, as filed with
                  the SEC on October 15, 1996).

4.3               Technologies Warrant (incorporated herein by reference to
                  Amendment No. 1 to the Registration Statement, as filed with
                  the SEC on October 15, 1996).

4.4*              1997 Stock Option Plan (incorporated herein by reference to
                  Annex A of our Proxy Statement, dated November 13, 1997).

4.5               Certificate of the Designations, Powers, Preferences and
                  Rights of the Series A Convertible Preferred Stock of Thinking
                  Tools, Inc. (incorporated herein by reference to our Current
                  Report on Form 8-K, as filed with the SEC on March 22, 2000)

4.6               Certificate of the Designations, Powers, Preferences and
                  Rights of the Series B Convertible Preferred Stock of Thinking
                  Tools, Inc. (incorporated herein by reference to our Current
                  Report on Form 8-K, as filed with the SEC on March 22, 2000).

4.7               Certificate of the Designations, Powers, Preferences and
                  Rights of the Series C Convertible Preferred Stock of Thinking
                  Tools, Inc. (incorporated herein by reference to our Current
                  Report on Form10-QSB, as filed with the SEC on November 27,
                  2000).

4.8               Agreement and Plan of Merger, dated as of February 19, 2004,
                  by and among Thinking Tools, Inc., GVI Security, Inc., and GVI
                  Security Acquisition Corp. (incorporated herein by reference
                  to Exhibit 2.1 of our Current Report on Form 8-K, as filed
                  with the SEC on February 27, 2004).

4.9               Registration Rights Agreement, dated as of February 19, 2004,
                  by and among the Registrant and the stockholders of the
                  Registrant party thereto (incorporated herein by reference to
                  Exhibit 2.2 of our Current Report on Form 8-K, as filed with
                  the SEC on February 27, 2004).

4.10              Voting Agreement, dated as of February 19, 2004, by certain
                  stockholder of GVI Security, Inc. in favor of GVI Acquisition
                  LLC (incorporated herein by reference to Exhibit 2.3 of our
                  Current Report on Form 8-K, as filed with the SEC on February
                  27, 2004).

4.11              Certificate of the Designations, Powers, Preferences and
                  Rights of the Series D Convertible Preferred Stock of Thinking
                  Tools, Inc. (incorporated herein by reference to Exhibit 4.2
                  of our Current Report on Form 8-K, as filed with the SEC on
                  February 27, 2004).


                                       25
<PAGE>

4.12              Certificate of the Designations, Powers, Preferences and
                  Rights of the Series E Convertible Preferred Stock of Thinking
                  Tools, Inc. (incorporated herein by reference to Exhibit 4.1
                  of our Current Report on Form 8-K, as filed with the SEC on
                  February 27, 2004).

4.13*             Thinking Tools, Inc. 2004 Long-Term Stock Incentive Plan

10.1              Demand Convertible Grid Note (as amended) (incorporated herein
                  by reference to our Annual Report on Form 10-KSB for our
                  fiscal year ended December 31, 2000, as filed with the SEC on
                  May 2, 2001).

10.2*             Executive Employment Agreement, dated as of February 17, 2004,
                  by and between the Registrant and Nazzareno E. Paciotti.

10.3*             Consulting Agreement, dated as of February 17, 2004, by and
                  between the Registrant and November Group, Ltd.

10.4*             Executive Employment Agreement, dated as of July 22, 2003, by
                  and between the Registrant and Thomas Wade.

10.5              Credit Agreement by and between the Registrant and Comerica
                  Bank, dated as of November 1, 2003.

21.1              Subsidiaries of the Registrant.

24.1              Power of Attorney (included with signature pages hereto).

31.1              Certification of Nazzareno Paciotti, Chief Executive Officer
                  and Chief Financial Officer of the Registrant, pursuant to
                  Rules 13a-14(a) and 15(d)-14(a) of the Securities Exchange Act
                  of 1934, as amended, dated April 14, 2004.

32.1              Certification by Nazzareno Paciotti, Chief Executive Officer
                  and Chief Financial Officer of the Registrant, pursuant to 18
                  U.S.C.ss.1350, dated April 14, 2004.

------------------
*Indicates management contract or compensatory plan or arrangement.

(b) Reports on Form 8-K

         On October 1, 2003, we filed a Current Report on Form 8-K, Item 4,
regarding the resignation of our independent auditors, Mercadien P.C.(formerly
Druker, Rahl & Fein). On October 7, 2003, we filed an amendment to that Current
Report on Form 8-K.


                                       26
<PAGE>


ITEM 14.          PRINCIPAL ACCOUNTANT FEES AND SERVICES.

         The information required to be disclosed hereunder will be disclosed by
amendment to this Form 10-KSB prior to April 29, 2004.



                                       27
<PAGE>


                                   SIGNATURES


In accordance with Section 13 or 15(d) of the Exchange Act, Thinking Tools, Inc.
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized, on this 14th day of April, 2004.

                                                  THINKING TOOLS, INC.



                                                  By: /s/ Nazzareno E. Paciotti
                                                      --------------------------
                                                      Nazzareno E. Paciotti
                                                      Chief Executive Officer


Pursuant to the requirements of the Securities 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.

<TABLE>
<CAPTION>
          SIGNATURE                              TITLE                                  DATE
          ---------                              -----                                  ----

<S>                             <C>                                                 <C>
/s/  Nazzareno E. Paciotti      Chief Executive Officer (Principal Executive        April 14, 2004
--------------------------      Officer), Chief Financial Officer (Principal
Nazzareno E. Paciotti           Accounting and Financial Officer) and Director



--------------------------      Chairman of the Board of Directors                  April __, 2004
Howard Safir

/s/ Dan Altobello
--------------------------      Director                                            April 14, 2004
Dan Altobello

/s/ Richard Berman
--------------------------      Director                                            April 14, 2004
Richard Berman

/s/ Bruce Galloway
--------------------------      Director                                            April 14, 2004
Bruce Galloway

/s/ Frederick W. Gluck
--------------------------      Director                                            April 14, 2004
Frederick W. Gluck
</TABLE>



                                       28
<PAGE>

<TABLE>
<CAPTION>
<S>                             <C>                                                 <C>
/s/ Fred Knoll
--------------------------      Director                                            April 14, 2004
Fred Knoll


/s/ Joseph R. Rosetti
--------------------------      Director                                            April 14, 2004
Joseph R. Rosetti

/s/ Thomas Wade
--------------------------      Director                                            April 14, 2004
Thomas Wade

/s/ David Weiner
--------------------------      Director                                            April 14, 2004
David Weiner

/s/ Moshe Zarmi
--------------------------      Director                                            April 14, 2004
Moshe Zarmi
</TABLE>



                                       29
<PAGE>

                                  EXHIBIT INDEX

EXHIBIT
NO.               DESCRIPTION
-------           ------------

3.1               Certificate of Incorporation of Thinking Tools, Inc.
                  (incorporated herein by reference to our Registration
                  Statement on Form SB-2 (Registration No. 33-11321), as filed
                  with the SEC on September 3, 1996).

3.2               By-Laws of Thinking Tools, Inc. (incorporated herein by
                  reference to our Registration Statement on Form SB-2
                  (Registration No. 33-11321), as filed with the SEC on
                  September 3, 1996).

4.1*              1996 Stock Option Plan (incorporated herein by reference to
                  our Registration Statement on Form SB-2 (Registration No.
                  33-11321), as filed with the SEC on September 3, 1996).

4.2               Form of Stock Certificate (incorporated herein by reference to
                  Amendment No. 1 to the Registration Statement, as filed with
                  the SEC on October 15, 1996).

4.3               Technologies Warrant (incorporated herein by reference to
                  Amendment No. 1 to the Registration Statement, as filed with
                  the SEC on October 15, 1996).

4.4*              1997 Stock Option Plan (incorporated herein by reference to
                  Annex A of our Proxy Statement, dated November 13, 1997).

4.5               Certificate of the Designations, Powers, Preferences and
                  Rights of the Series A Convertible Preferred Stock of Thinking
                  Tools, Inc. (incorporated herein by reference to our Current
                  Report on Form 8-K, as filed with the SEC on March 22, 2000)

4.6               Certificate of the Designations, Powers, Preferences and
                  Rights of the Series B Convertible Preferred Stock of Thinking
                  Tools, Inc. (incorporated herein by reference to our Current
                  Report on Form 8-K, as filed with the SEC on March 22, 2000).

4.7               Certificate of the Designations, Powers, Preferences and
                  Rights of the Series C Convertible Preferred Stock of Thinking
                  Tools, Inc. (incorporated herein by reference to our Current
                  Report on Form10-QSB, as filed with the SEC on November 27,
                  2000).

4.8               Agreement and Plan of Merger, dated as of February 19, 2004,
                  by and among Thinking Tools, Inc., GVI Security, Inc., and GVI
                  Security Acquisition Corp. (incorporated herein by reference
                  to Exhibit 2.1 of our Current Report on Form 8-K, as filed
                  with the SEC on February 27, 2004).


<PAGE>

4.9               Registration Rights Agreement, dated as of February 19, 2004,
                  by and among the Registrant and the stockholders of the
                  Registrant party thereto (incorporated herein by reference to
                  Exhibit 2.2 of our Current Report on Form 8-K, as filed with
                  the SEC on February 27, 2004).

4.10              Voting Agreement, dated as of February 19, 2004, by certain
                  stockholder of GVI Security, Inc. in favor of GVI Acquisition
                  LLC (incorporated herein by reference to Exhibit 2.3 of our
                  Current Report on Form 8-K, as filed with the SEC on February
                  27, 2004).

4.11              Certificate of the Designations, Powers, Preferences and
                  Rights of the Series D Convertible Preferred Stock of Thinking
                  Tools, Inc. (incorporated herein by reference to Exhibit 4.2
                  of our Current Report on Form 8-K, as filed with the SEC on
                  February 27, 2004).

4.12              Certificate of the Designations, Powers, Preferences and
                  Rights of the Series E Convertible Preferred Stock of Thinking
                  Tools, Inc. (incorporated herein by reference to Exhibit 4.1
                  of our Current Report on Form 8-K, as filed with the SEC on
                  February 27, 2004).

4.13*             Thinking Tools, Inc. 2004 Long-Term Stock Incentive Plan

10.1              Demand Convertible Grid Note (as amended) (incorporated herein
                  by reference to our Annual Report on Form 10-KSB for our
                  fiscal year ended December 31, 2000, as filed with the SEC on
                  May 2, 2001).

10.2*             Executive Employment Agreement, dated as of February 17, 2004,
                  by and between the Registrant and Nazzareno E. Paciotti.

10.3*             Consulting Agreement, dated as of February 17, 2004, by and
                  between the Registrant and November Group, Ltd.

10.4*             Executive Employment Agreement, dated as of July 22, 2003, by
                  and between the Registrant and Thomas Wade.

10.5              Credit Agreement by and between the Registrant and Comerica
                  Bank, dated as of November 1, 2003.

21.1              Subsidiaries of the Registrant.

24.1              Power of Attorney (included with signature pages hereto).

31.1              Certification of Nazzareno Paciotti, Chief Executive Officer
                  and Chief Financial Officer of the Registrant, pursuant to
                  Rules 13a-14(a) and 15(d)-14(a) of the Securities Exchange Act
                  of 1934, as amended, dated April 14, 2004.

32.1              Certification by Nazzareno Paciotti, Chief Executive Officer
                  and Chief Financial Officer of the Registrant, pursuant to 18
                  U.S.C.ss.1350, dated April 14, 2004.

-------------
*Indicates management contract or compensatory plan or arrangement.

<PAGE>



                              THINKING TOOLS, INC.

                          INDEX TO FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2003 and 2002





<TABLE>
<CAPTION>
                                                                         Page
                                                                        Number
                                                                        ------
<S>                                                                     <C>
INDEPENDENT AUDITORS' REPORT...........................................    F-1

FINANCIAL STATEMENTS

         Balance Sheets................................................    F-2

         Statements of Operations......................................    F-3

         Statements of Shareholders' Equity (Deficiency)...............  F-4-5

         Statements of Cash Flows......................................    F-6

         Notes to Financial Statements................................. F-7-19

</TABLE>

<PAGE>

INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Shareholders of
      Thinking Tools, Inc.:

We have audited the  accompanying  balance sheets of Thinking Tools,  Inc. as of
December  31,  2003  and  2002,  and  the  related   statements  of  operations,
shareholders' equity (deficiency) and cash flows for the years 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 audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of Thinking  Tools,  Inc. as of
December 31, 2003 and 2002, and the results of its operations and its cash flows
for the years then ended in  conformity  with  accounting  principles  generally
accepted in the United States of America.



MERCADIEN, P.C., CPAs

Hamilton, New Jersey

March 23, 2004

                                                                             F-1


<PAGE>


                              THINKING TOOLS, INC.

                                 BALANCE SHEETS

                           DECEMBER 31, 2003 and 2002

<TABLE>
<CAPTION>
(In thousands, except share amounts)
                                                      2003        2002
                                                    --------    --------
<S>                                                 <C>         <C>

ASSETS

CURRENT ASSET:
  Cash                                              $     --    $      1

                                                    --------    --------
TOTAL ASSETS                                        $     --    $      1
                                                    ========    ========


LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)

CURRENT LIABILITIES:
  Note payable - related party                      $  1,000    $  1,000
  Loan payable - related party                           150          75
  Accounts payable                                       209         244
  Accrued expenses                                       460         360
                                                    --------    --------
       Total current liabilities                       1,819       1,679
                                                    --------    --------

SHAREHOLDERS' EQUITY (DEFICIENCY)
  Preferred stock, Series A $.001 par value;
   3,000,000 shares authorized; 1,148,799
   shares issued and outstanding at 2003
   and 2002                                                1           1
  Preferred stock, Series B $.001 par value;
   200 shares authorized; 200 shares issued
   and outstanding at 2003 and 2002                       --          --
  Preferred stock, Series C $.001 par value;
   400,000 shares authorized; none issued or
   outstanding                                            --          --
  Common stock, $.001 par value: 20,000,000
   shares authorized; shares issued and
   outstanding: 10,204,637 at 2003 and 2002               10          10
  Additional paid-in capital                          20,778      20,778
  Accumulated deficit                                (22,608)    (22,467)
                                                    --------    --------
       Total shareholders' equity (deficiency)        (1,819)     (1,678)
                                                    --------    --------
TOTAL LIABILITIES AND SHAREHOLDERS'
    EQUITY (DEFICIENCY)                             $     --    $      1
                                                    ========    ========
</TABLE>






See notes to financial statements.

                                                                             F-2

<PAGE>


                              THINKING TOOLS, INC.

                            STATEMENTS OF OPERATIONS

                     Years Ended December 31, 2003 and 2002


<TABLE>
<CAPTION>
(In thousands, except per share amounts)

                                                                 2003            2002
                                                             ------------    ------------
<S>                                                          <C>             <C>
REVENUES                                                     $         --    $         --
                                                             ------------    ------------
OPERATING EXPENSES
 Selling, general and administrative                                   31              41
                                                             ------------    ------------
  Total operating expenses                                             31              41
                                                             ------------    ------------
LOSS FROM OPERATIONS                                                  (31)            (41)

OTHER EXPENSE
 Interest                                                            (110)           (106)
                                                             ------------    ------------
LOSS FROM CONTINUING OPERATIONS                                      (141)           (147)
                                                             ------------    ------------
DISCONTINUED OPERATIONS
 Gain from abandonment of liabilities of
     subsidiary (net of income tax effect of $0)                       --             916
                                                             ------------    ------------
NET (LOSS) INCOME                                            $       (141)   $        769
                                                             ============    ============
(LOSS) INCOME PER SHARE: Basic and diluted
   Loss from continuing operations                           $      (0.01)   $      (0.01)
   Gain from abandonment of liabilities of
     subsidiary                                                        --            0.09
                                                             ------------    ------------
Net (loss) income per share                                  $      (0.01)   $       0.08
                                                             ============    ============


SHARES USED IN CALCULATION OF NET (LOSS) INCOME PER SHARE:

   Basic and diluted                                           10,204,637      10,204,637
                                                             ============    ============
</TABLE>


See notes to financial statements.                                          F-3

<PAGE>


                              THINKING TOOLS, INC.
                 STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
                     Years Ended December 31, 2003 and 2002

<TABLE>
<CAPTION>
(In thousands, except share amounts)
                                                         Preferred Stock
                                          -----------------------------------------------------------------
                     Common Stock                Series A                Series B            Series C
                ------------------------- ------------------------- ------------------- -------------------
                   Shares       Amount       Shares       Amount     Shares    Amount    Shares    Amount
               -------------- ---------- -------------  ---------- --------- --------- --------- ----------
<S>      <C>     <C>              <C>      <C>               <C>       <C>       <C>                 <C>
BALANCES,
 January 1, 2002 10,204,637       $ 10     1,148,799         $ 1       200       $ -         -       $ -
Net Loss                  -          -             -           -         -         -         -         -
               -------------- ---------- -------------  ---------- --------- --------- --------- ---------
BALANCES,
December 31,2002 10,204,637         10     1,148,799           1       200         -         -         -

Net Loss                  -          -             -           -         -         -         -         -
               -------------- ---------- -------------  ---------- --------- --------- --------- ---------
BALANCES,
December 31,2003 10,204,637       $ 10     1,148,799         $ 1       200       $ -         -       $ -
               ============== ========== =============  ========== ========= ========= ========= =========
</TABLE>



See notes to financial statements.                                          F-4


<PAGE>


                              THINKING TOOLS, INC.
                 STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
                     Years Ended December 31, 2003 and 2002





                                                                  Total
                                 Additional                   Shareholders'
                                   Paid-in      Accumulated      Equity
                                   Capital        Deficit     (Deficiency)
                                -------------  -------------- --------------
BALANCES,
 January 1, 2002                 $    20,778    $ (23,236)    $    (2,447)
Net Income                                 -          769             769
                                -------------  -------------- --------------
BALANCES,
 December 31, 2002                    20,778      (22,467)         (1,678)
Net Loss                                   -         (141)           (141)
                                -------------  -------------- --------------
BALANCES,
 December 31, 2003               $    20,778    $ (22,608)    $    (1,819)
                                =============  =============  ==============





See notes to financial statements.                                          F-5

<PAGE>


                              THINKING TOOLS, INC.

                            STATEMENTS OF CASH FLOWS

                     Years Ended December 31, 2003 and 2002


<TABLE>
<CAPTION>
(In thousands)
                                                                   2003     2002
                                                                  -----    -----
CASH FLOWS FROM OPERATING ACTIVITIES

<S>                                                               <C>      <C>
 Net (Loss) Income                                                $(141)   $ 769
 Adjustments to reconcile net (loss) income to net cash used in
  operating activities
  Gain from abandonment of liabilities of subsidiary                 --     (916)
  Interest expense for related party loan                           110      106
 Changes in current assets and liabilities:
  Accounts payable                                                  (35)       2
  Accrued expenses                                                  (10)     (69)
                                                                  -----    -----
 Net cash used by operating activities                              (76)    (108)
                                                                  -----    -----
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from note payable                                         --       33
  Proceeds from related party loan                                   75       75
                                                                  -----    -----
  Net cash provided by financing activities                          75      108
                                                                  -----    -----
  Net decrease in cash                                               (1)      --

CASH, beginning of year                                               1        1
                                                                  -----    -----
CASH, end of year                                                 $  --    $   1
                                                                  =====    =====
</TABLE>


See notes to financial statements.                                          F-6

<PAGE>


                              THINKING TOOLS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     Years Ended December 31, 2003 and 2002

1.    NATURE OF BUSINESS

      Thinking  Tools,  Inc. (the  "Company")  was  incorporated  in Delaware on
      August 8, 1996, as a wholly-owned  subsidiary of Thinking  Tools,  Inc., a
      California  corporation  (the  "Predecessor  Corporation").  On August 28,
      1996, the  Predecessor  Corporation  was merged with and into the Company.
      References herein to the "Company" include the Predecessor Corporation and
      its former subsidiary, StartFree.com, Inc. ("StartFree") (see Note 9).

      The Company was formed on December 30, 1993, to purchase certain assets of
      the  Business  Simulation  Division  (the  "Division")  of Maxis,  Inc., a
      leading   computer  game  company  and  creator  of  the  simulation  game
      SimCityTM.  Through the purchase  agreement with Maxis,  Inc., the Company
      acquired the Division's  equipment,  staff,  work-in-progress,  customers,
      prospective  customers,  software  tools,  libraries  and  processes.  The
      Company's products included  SimRefinery,  a refinery  simulation product,
      SimHealth,  a health care reform  simulation  product and TelSim,  a local
      telephone exchange simulation product.

      The Company  commenced  operations  in December 1993 to develop and market
      business  simulation  software.  From its inception  until March 1999, the
      Company  was  engaged  in  research   and   development   activities   and
      organizational efforts, including the development of its initial products,
      recruiting  personnel,   and  establishing   marketing  and  manufacturing
      capabilities  and  raising  capital.   The  Company  commenced  commercial
      activities in January 1994, but has never generated  substantial  revenues
      from the sale of these products.

      The Company through its subsidiary,  StartFree, acquired substantially all
      of the assets and assumed certain liabilities of Tritium Networks, Inc. on
      March 7, 2000,  through the  issuance of  preferred  stock.  Concurrently,
      financing was provided from proceeds of the sales of the Company's  common
      stock to  investors.  In  December  2000,  the  Company  discontinued  the
      operations  of  StartFree,  and,  in March  2002,  the  Company  abandoned
      StartFree (see Note 9).

      On February 20, 2004,  pursuant to an  Agreement  and Plan of Merger,  the
      Company,   through  GVI  Security   Acquisition   Corp.,  a  newly  formed
      wholly-owned  subsidiary  of the  Company,  effected  a  merger  with  GVI
      Security,  Inc., and as a result, GVI Security, Inc. became a wholly-owned
      subsidiary of the Company (see Note 11).

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

      Cash - The Company considers all highly liquid debt instruments  purchased
      with  an  original  maturity  date  of  three  months  or  less to be cash
      equivalents.

      Concentration  of Credit Risk -  Financial  instruments  that  potentially
      subject  the  Company  to  concentration  of  credit  risk  are  cash  and
      equivalents.  Risks  associated with cash and equivalents are mitigated by
      banking with credit-worthy institutions.



                                                                            F-7

<PAGE>


                              THINKING TOOLS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     Years Ended December 31, 2002 and 2001


2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

      Beneficial  Conversion  Features - Where the  Company  issues  convertible
      debt,  and the terms of conversion of the stock are such that the value of
      the stock at the date of  issuance  of the debt  exceeds the amount of the
      debt,  such excess is  considered a  beneficial  conversion  feature.  The
      Company accounts for the beneficial  conversion feature as a debt discount
      and a  corresponding  credit to equity.  The debt discount is amortized as
      additional interest expense over the term of the debt.

      Stock  Compensation - The Company accounts for stock-based  awards granted
      to  directors  and  employees  based  on the  intrinsic  value  method  in
      accordance  with  Accounting   Principles  Board  (APB)  Opinion  No.  25,
      "Accounting for Stock Issued to Employees."

      Net Loss Per Share - The Company follows Statement of Financial Accounting
      Standards  (SFAS) No. 128 "Earnings Per Share." Due to the Company's  loss
      from continuing  operations in 2003 and 2002, all convertible  securities,
      options and warrants at December 31, 2003 and 2002 are antidilutive; hence
      both basic and diluted loss per share for that year are computed  based on
      the weighted average number of shares of common stock  outstanding  during
      the period.

3.    ACCRUED EXPENSES

Accrued expenses at December 31, 2003 and 2002 are as follows (in thousands):

                              2003   2002
                              ----   ----

Legal and professional fees   $129   $139
Interest                       331    221
                              ----   ----
                              $460   $360
                              ====   ====

4.    INCOME TAXES

      The Company  records income taxes using the asset and liability  approach,
      whereby deferred tax assets, net of valuation allowances,  and liabilities
      are recorded  for the future tax  consequences  of  temporary  differences
      between  financial  statement and tax bases of assets and  liabilities and
      for the benefit of net operating loss carry forwards.

      Due to the  Company's  history of net losses and its  inability to use its
      net  operating  loss  carryforwards  as explained  below,  the Company has
      provided a valuation  allowance  for the full amount of the  deferred  tax
      assets.  Calculations  for deferred tax assets and liabilities at December
      31, 2003 and 2002, are as follows (in thousands):








                                                                            F-8

<PAGE>


                              THINKING TOOLS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     Years Ended December 31, 2002 and 2001

4.    INCOME TAXES (CONTINUED)

                                                    2003       2002
                                                 -------    -------
 Deferred tax assets

Net operating loss carryforwards                 $ 5,651    $ 5,635
Tax credits                                          261        261
Accruals and reserves not currently deductible        72         32
Stock compensation                                 1,926      1,926
                                                 -------    -------
Total deferred tax assets                          7,910      7,854
Less valuation allowance                          (7,910)    (7,854)
                                                 -------    -------
Net deferred tax assets                          $    --    $    --
                                                 =======    =======

      As of December 31, 2003, the Company has net operating loss  carryforwards
      of  approximately  $14,128,000  for  federal  and  state  purposes.  As of
      December  31,  2003,  the  Company  also has tax credit  carryforwards  of
      $261,000 and $133,000 for federal and state  purposes,  respectively.  The
      carryforwards expire beginning in 2009 and 2004, respectively. Federal and
      State of California  tax laws limit the  utilization of net operating loss
      carryforwards  in the event of a change in ownership or change in business
      (see Note 11) as defined by Internal Revenue Service Code Section 382. Due
      to these changes, these carryforwards will no longer be available.

5.    NOTES PAYABLE

      In  July  2000  the  Company   approved  bridge  financing  from  Thinking
      Technologies,  L.P. ("Technologies"),  a related party (See Note 8), under
      which the  Company  would  receive an  aggregate  sum of up to $500,000 in
      exchange for (i) a demand note convertible  commencing  February 2001 into
      shares of the  Company's  common stock at $0.375 per share and (ii) a five
      year warrant to purchase 200,000 shares of the Company's common stock at a
      price of $0.50 per share  commencing  February  2001. In November 2000 the
      Board approved an increase in the bridge  financing from  Technologies  to
      $1,000,000,  and the warrant was revised to the right to purchase  425,066
      shares  of  common  stock  for up to five  years at $.375  per  share.  In
      February 2001, the conversion price was modified for both the note and the
      warrant to $.12 per share.

      On  January  4,  2002,   Technologies   transferred  the  Note  to  Europa
      International  Inc.  ("Europa"),  also a related party (See Note 8). As of
      the date of transfer,  Technologies had advanced approximately $967,000 in
      principal   under  the  terms  of  the  note.   On  January  4,  2002,  in
      consideration of Europa's  agreement not to demand payment on the note for
      a period of six months,  the Board of Directors of the Company  approved a
      resolution further reducing the conversion price of the note, so that upon
      conversion,  the note would  convert  into 80% of the  outstanding  Common
      Stock  of the  Company  on a  fully-diluted  basis.  Both  the  note  upon
      conversion   and  the  warrants  are  subject  to  certain   anti-dilution
      adjustments.  The note is collateralized by all of the Company's property.
      Interest  accumulated  at 10% per annum.  Through  December 31, 2003,  the
      Company had  received  $1,000,000  in principal  (including  approximately
      $33,000  from  Europa).   Through   December  31,  2003,  a  liability  of
      approximately  $317,000  for  interest  has  accrued  on the  note  and is
      included in accrued expenses. (See Note 11 for subsequent events.)


                                                                            F-9

<PAGE>


                              THINKING TOOLS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     Years Ended December 31, 2003 and 2002

5. NOTES PAYABLE (CONTINUED)

      During the years ended  December 31, 2003 and 2002,  the Company  received
      advances  approximating  $75,000 each year from  Europa.  These loans bear
      interest at 10% per annum and are due upon  demand.  Through  December 31,
      2003, a liability of approximately $14,000 for interest has accrued on the
      loan and is  included  in accrued  expenses.  (See Note 11 for  subsequent
      events.)

      For the years  ended  December  31, 2003 and 2002,  the  Company  recorded
      non-cash   interest   expense   approximating   $110,000   and   $100,000,
      respectively, for accrued interest on the note and related party loans.

6.    SHAREHOLDERS' EQUITY (DEFICIENCY)

      Preferred Stock

      On March 7,  2000,  1,148,799  shares  of Series A  Convertible  Preferred
      Stock,  $.001 par value, were issued in connection with the acquisition of
      all of the assets and certain  liabilities of Tritium  Network,  Inc. (the
      "Tritium  Acquisition").  The  Series  A  Convertible  preferred  stock is
      convertible  into a maximum of 11,487,985  shares of Thinking Tools common
      stock when the Company  files with the  Secretary of State of the State of
      Delaware  to  increase  the  authorized  number  of  shares  to  at  least
      35,000,000 shares. (See Note 11.)

      The Series A Convertible Preferred Stock contain a provision for dividends
      that entitle the holder to receive cumulative dividends at the rate of 8%,
      per annum,  in the event that the  shares  are not  converted  by March 7,
      2001.  The  dividends  accumulate  after that date and are  payable at the
      Company's  option in cash or in  additional  shares of Series A  Preferred
      Stock.  No dividends  have ever been paid on the Series A Preferred  stock
      and at  December  31,  2003  and  2002,  accrued  dividends  thereon  were
      approximately $1,294,252 and $834,717, respectively. (See Note 11.)

      In  January  2002,  Technologies  entered  into an  amendment  to a voting
      agreement  with a  shareholder  controlling  a majority  of the  Company's
      Series A  Convertible  Preferred  Stock,  whereby  Technologies  agreed to
      convert its note (see Note 5), and, upon  conversion  of the note,  cancel
      any and all pledges by the shareholder to secure the note. The shareholder
      agreed to vote for the following  amendments to the Company's  Certificate
      of  Incorporation:  (i) to eliminate the right of the holders of Preferred
      stock to receive  dividend  payments  and/or  (ii) to reduce the number of
      shares of  common  stock  into  which  each  share of  Preferred  Stock is
      convertible  from 10 (ten) to 2.5  (two-and-one-half)  or a number greater
      than 2.5.  Pursuant to the agreement,  Technologies also agreed to vote in
      favor of increasing the  authorized  shares of common stock of the Company
      to a level that would be  sufficient  to permit  exercise  of  outstanding
      stock options, conversion of debt into common shares and the conversion of
      outstanding shares of Preferred Stock.

      On March 7, 2000, in connection with the Tritium  Acquisition,  200 shares
      of Series B Convertible  Preferred Stock,  $.001 par value per share, were
      issued to the Company's  Chairman.  Subsequent to December 31, 2003, these
      shares were  transferred to GVI  Acquisition,  LLC. The Series B Preferred
      Stock has certain voting control rights until March 7, 2005.

      In August  2000,  the Company  authorized  400,000  shares of new Series C
      preferred  stock.  At December 31, 2003,  no Series C preferred  stock has
      ever been issued.

                                                                            F-10

<PAGE>


                              THINKING TOOLS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     Years Ended December 31, 2003 and 2002

6.    SHAREHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)

      Warrants

      In 1996,  warrants were issued to Technologies to purchase  468,242 shares
      of common  stock at an  exercise  price of $1.07 per  share,  expiring  in
      December 2006.

      On December 10, 1999,  in  connection  with the Tritium  Acquisition,  the
      Company issued  2,450,000  warrants to purchase the Company's common stock
      at an exercise  price of $.50 per share.  The  warrants  were issued to an
      acquisition  consultant  as  compensation  for  services  provided.  These
      warrants  vested on March 7,  2000,  and  expire  in  December  2004.  The
      warrants are subject to certain anti-dilution adjustments.

      On December  10, 1999,  the  Company's  Chairman  and its Chief  Executive
      Officer were granted  warrants to purchase  549,800 and 550,000  shares of
      common stock,  respectively,  at an exercise price of $.50 per share.  The
      warrants were issued as compensation for services rendered in facilitating
      the Tritium  acquisition.  The warrants  were vested on December 10, 1999,
      and are  exercisable  until  December  2004.  The  warrants are subject to
      certain anti-dilution adjustments.

      In  connection  with the Tritium  acquisition,  the Company  contributed a
      warrant to purchase 1,262,275 shares of its common stock to the capital of
      StartFree.  The warrants  are  exercisable  at $.01 per share.  In October
      2000,  these warrants were exercised in part to purchase 500,400 shares of
      the Company's common stock, which left a warrant for the remaining 761,875
      shares. The warrants are subject to certain anti-dilution adjustments.

      As  discussed  in Note 5,  pursuant  to the  2000  bridge  financing  from
      Technologies,  the Company  granted a warrant to  Technologies to purchase
      425,066 shares of common stock at $.375 per share, expiring February 2006.
      In February 2001, the conversion price was modified to $.12 per share. The
      warrant is subject to certain anti-dilution adjustments.

      The  compensation  and similar  expenses  resulting  from  issuance of the
      warrants were recognized in periods prior to 2001.

      Stock Options

      Under the  Company's  1996 and 1997  Stock  Option  Plans  (the  "Plans"),
      options to purchase up to an aggregate  of 976,000  shares of common stock
      may be granted to officers, directors, employees or consultants. The Plans
      provide for issuing both incentive  stock options and  nonqualified  stock
      options,  which must be granted at fair market value at the date of grant,
      as determined by the Plan  administrator.  Options granted under the Plans
      become  exercisable  as determined by the Board of Directors and expire at
      the end of ten  years.  Options  granted  are  forfeited  90 days after an
      employee's separation from the Company.

      Outstanding  stock options issued under the Plans at December 31, 2003 and
      2002 were 10,259 and 20,518,  respectively.  These options were  initially
      granted  under the Plans to four  Board  members at an  exercise  price of
      $1.00 per share.  During 2003 and 2002, 10,259 options were forfeited each
      year due to the resignation of Board members.




                                                                            F-11

<PAGE>


                              THINKING TOOLS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     Years Ended December 31, 2003 and 2002

6.    SHAREHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)

      Stock Options (Continued)

      In 1995,  options  were issued  outside of the Plans to  directors  and an
      unaffiliated  person to  purchase  58,964  shares and 15,000  shares at an
      exercise price of $.79 and $1.00 per share, respectively.  During 2003 and
      2002,  directors who resigned  forfeited their options.  Remaining options
      outstanding  were  29,741  and  44,482  at  December  31,  2003 and  2002,
      respectively.

      On December 10, 1999, the Board of Directors  granted  options  outside of
      the Plans to Board members and employees for purchase of 1,690,000  shares
      of common stock at an exercise price of $.50 per share.  In 1999,  990,000
      options vested, and in December 2000 the remaining 700,000 options vested.
      The Board of Directors  also granted  options  outside of the Plans to the
      Company's  Chairman  to  purchase  352,900  shares of  common  stock at an
      exercise  price of $.50 per  share  in lieu of cash  compensation  owed at
      December 31, 1998 for services of  approximately  $176,000.  These options
      were  issued  and  vested  as of  December  10,  1999.  Remaining  options
      outstanding  were  982,900 and  1,502,900  at December  31, 2003 and 2002,
      respectively.

      The  compensation  and similar  expenses  resulting  from  issuance of the
      options were recognized in periods prior to 2001.

      A summary of the status of the Company's  stock options as of December 31,
      2003 and 2002,  and the changes  during the years ended  December 31, 2003
      and 2002, is presented below:

<TABLE>
<CAPTION>
                                                                    Number of             Range of
                                                                      Shares           Exercise Prices
                                                                  ---------------     -----------------

<S>                                                                  <C>              <C>
Outstanding at January 1, 2002                                       1,862,900        $   .50 - 1.000
Granted                                                                     --        $            --
Exercised                                                                   --        $            --
Forfeited                                                             (295,000)       $   .50 - 1.000
                                                                  ---------------
Outstanding at December 31, 2002                                     1,567,900        $   .50 - 1.000
Granted                                                                     --        $            --
Exercised                                                                   --        $            --
Forfeited                                                             (545,000)       $   .50 - 1.000
                                                                  ---------------
Outstanding at December 31, 2003                                     1,022,900        $   .50 - 1.000
                                                                  ===============

     Weighted-average fair value of options remaining exercisable
     At December 31, 2003                                                         $            1.48
                                                                                  =================
</TABLE>


                                                                            F-12


<PAGE>


                              THINKING TOOLS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     Years Ended December 31, 2003 and 2002

6.    SHAREHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)

      Stock Options (Continued)

The following table summarizes information about stock options outstanding as of
December 31, 2003:

<TABLE>
<CAPTION>
                          Outstanding Options                                   Exercisable Options
                    --------------------------------------------------    --------------------------------
                       Number           Weighted-
                     Outstanding         average          Weighted-          Number           Weighted-
                         at             Remaining          average        Outstanding at       average
   Exercise         December 31,       Contractual        Exercise        December 31,        Exercise
    Prices              2003              Life              Price             2003              Price
----------------    --------------    --------------    --------------    --------------    --------------
<S>      <C>               <C>          <C>                    <C>               <C>               <C>
         $ 1.00            25,259       2.6 years              $ 1.00            25,259            $ 1.00
           0.79            14,741       1.6 years                0.79            14,741              0.79
           0.50           982,900       5.9 years                0.50           982,900              0.50
                    --------------                                        --------------
                        1,022,900                                             1,022,900
                    ==============                                        ==============
</TABLE>


At December 31, 2003, the Company has stock-based employee compensation plans,
which are described more fully above. The Company accounts for those plans under
the recognition and measurement principles of APB Opinion No. 25, Accounting for
Stock Issued to Employees, and related Interpretations. No stock-based employee
compensation cost is reflected in net income, as all options granted under those
plans had an exercise price equal to the market value of the underlying common
stock on the date of grant.

Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), requires the disclosure of pro forma net income and
earnings per share as if the Company adopted the fair value method for stock
based awards to directors and employees as of the beginning of fiscal 1995.
Under SFAS 123, the fair value of the stock-based awards is calculated through
the use of the minimum value method for all periods prior to the initial public
offering, and subsequently through the use of option pricing models, even though
such models were developed to estimate the fair value of freely tradable, fully
transferable options without vesting restrictions, which significantly differ
from the Company's stock option awards. These models also require subjective
assumptions, including future stock option price volatility and expected time to
exercise, which greatly affect the calculated values. The Company's calculations
were made using the minimum and Black-Scholes option pricing models with the
following weighted average assumptions: expected life of 30 to 40 months; 61%,
stock volatility subsequent to the initial public offering in 1996; risk-free
interest rates, approximately 6%; and no dividends during the expected term. The
Company's calculations are based on a multiple option valuation approach, and
forfeitures are recognized as they occur.


                                                                            F-13

<PAGE>


                              THINKING TOOLS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     Years Ended December 31, 2003 and 2002

6.    SHAREHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)

      Stock Options (Continued)

      The following table  illustrates the effect on net income and earnings per
      share if the company had applied the fair value recognition  provisions of
      FASB  Statement  No. 123,  Accounting  for  Stock-Based  Compensation,  to
      stock-based employee compensation (In Thousands):


<TABLE>
<CAPTION>
                                              2003            2002
                                           ----------       --------

<S>                                        <C>             <C>
Net (Loss) Income, as reported             $     (141)     $     769
Deduct:  Total stock-based employee
    compensation expense determined
    under fair value based method for
    all awards, net of related
    tax effect                                     --             --
                                           ----------       --------
Pro forma net (loss) income                $     (141)      $    769
                                           ==========       ========
Earnings per share:
    Basic and diluted - as reported        $     (.01)      $   (.01)
                                           ==========       ========
    Basic and diluted - pro forma          $     (.01)      $   (.01)
                                           ==========       ========
</TABLE>


7.    FAIR VALUE OF FINANCIAL INSTRUMENTS

      The carrying amounts reflected in the financial statements at December 31,
      2003 and 2002 for cash  approximates  its respective fair value due to the
      short  maturity of the  instrument.  The fair value of the note payable at
      December  31,  2003 is based on the  current  rates and terms at which the
      Company could borrow funds.

8.    RELATED PARTY TRANSACTIONS

      The Company's Chairman is the principal of Knoll Capital Management, L.P.,
      which is the general partner of  Technologies  and manages the investments
      of  Europa  (See  Note 5).  Technologies  owned  approximately  38% of the
      Company's  outstanding  common stock as of December 31, 2003 and 2002, and
      owns warrants to purchase 893,308 additional shares of common stock. As of
      December  31,  2003,  Europa had the right to convert the note payable and
      accrued interest thereon to 111,682,820  shares of the common stock. As of
      December 31, 2003, Mr. Knoll,  as an individual,  owns options for 552,900
      shares and  warrants  for 549,800  shares of common stock (see Note 6) and
      200 shares of Series B Convertible  Preferred  Stock,  $.001 par value per
      share.  The Series B Preferred Stock has voting control rights until March
      7, 2005, and is convertible into 200 shares of the Company's common stock.
      During 2003 and 2002, Europa advanced  approximately  $75,000 each year in
      demand loans to the Company, bearing interest at 10% per year.

9.    DISCONTINUED OPERATIONS

      In December 2000, the Company discontinued the operations of StartFree.com
      ("StartFree"). Creditors were notified in February 2001 that StartFree had
      no available assets with which to settle its obligations.  Effective March
      1, 2002,  StartFree was dissolved due to the  revocation of its charter by
      the State of Delaware,  at which time it was abandoned by the Company. The
      Company  is  not  liable  for  StartFree's   obligations.   The  financial
      statements  since December 2000 include no activity of StartFree until the
      abandonment  on March 1, 2002.  On this  date,  a gain on  abandonment  of
      StartFree of $916,000  was  recognized  upon the removal of the  remaining
      liabilities of StartFree,  consisting of accounts  payable of $853,000 and
      accrued expenses of $63,000.


                                                                            F-14

<PAGE>


                              THINKING TOOLS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     Years Ended December 31, 2003 and 2002

10.   NEW ACCOUNTING PRONOUNCEMENTS

      Standards Implemented

      In  December  2002,  the  FASB  issued  SFAS  No.  148,   "Accounting  for
      Stock-Based  Compensation  - Transition  and  Disclosure."  The  Statement
      amends FASB Statement No. 123, "Accounting for Stock-Based  Compensation",
      to provide alternative methods of transition for a voluntary change to the
      fair  value  based  method  of   accounting   for   stock-based   employee
      compensation.   In  addition,   this   Statement   amends  the  disclosure
      requirements  of Statement 123 to require  prominent  disclosures  in both
      annual and interim financial statements about the method of accounting for
      stock-based  employee  compensation  and the effect of the method  used on
      reported results. The Company has implemented the disclosure provision for
      the year ended December 31, 2003.

      In May  2003,  the FASB  issued  SFAS No.  150,  "Accounting  for  Certain
      Financial   Instruments  with  Characteristics  of  both  Liabilities  and
      Equity." This Statement establishes standards for how an issuer classifies
      and measures certain financial  instruments with  characteristics  of both
      liabilities  and equity.  It requires that an issuer  classify a financial
      instrument  that is within its scope as a  liability  (or an asset in some
      circumstances).  The Statement  was  effective  for financial  instruments
      entered into or modified  after May 31, 2003.  Its adoption did not have a
      material effect on the Company's Financial Statements.

      New Standards to be Implemented

      None.

11.   SUBSEQUENT EVENTS

      On February  16,  2004,  the Board of Directors  and  Stockholders  of the
      Company  authorized new Series D and E Convertible  Preferred Stock,  each
      for par value of $.001 per share,  and  approved  the adoption of the 2004
      Long-Term  Incentive  Plan and reserved  386,094,320  shares of the common
      stock (prior to giving  effect to the reverse stock split) for issuance of
      awards thereunder.

      On February 17, 2004,  the Board of Directors  granted  options  under the
      2004 Long-Term  Incentive  Plan to purchase an aggregate of  approximately
      173,875,000  shares of  common  stock of the  Company.  The  options  were
      granted to certain  officers,  consultants and directors of the Company at
      an exercise  price of $.04 per share,  the fair market value of the common
      stock on that date.  These options vest 25%  immediately,  25% on February
      17, 2005, 25% on February 17, 2006, and 25% on February 17, 2007.

      On February  20, 2004,  pursuant to an  Agreement  and Plan of Merger (the
      "Merger  Agreement")  dated as of  February  19,  2004,  by and  among the
      Company, GVI Security, Inc. ("GVI"), and GVI Security Acquisition Corp., a
      newly  formed  wholly-owned  subsidiary  of the  Company.  Pursuant to the
      Merger Agreement,  GVI merged (the "Merger") with GVI Security Acquisition
      Corp.,   becoming  the   Company's   wholly-owned   subsidiary,   and  the
      stockholders of GVI became stockholders of the Company as described below.
      As a result of the Merger,  the business of GVI is now the Company's  only
      business.  GVI is the exclusive  distributor of Samsung  Electronics video
      security  products in North,  Central and South America,  and  distributes
      video  surveillance and other security products to wholesale  distributors
      and  consumers.  GVI's  security  products  include both  proprietary  GVI
      solutions and Samsung Electronics components.



                                                                            F-15

<PAGE>


                              THINKING TOOLS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     Years Ended December 31, 2003 and 2002


11.   SUBSEQUENT EVENTS (CONTINUED)

      For accounting  purposes,  because Thinking Tools, Inc. had become a shell
      company, the Merger will be treated as a recapitalization of GVI Security,
      Inc.

      In the Merger,  the Company  issued to the former  stockholders  of GVI an
      aggregate of 1,000,000 shares of the Series E Convertible  Preferred Stock
      ("Series  E  Stock").  Each  share of Series E Stock is  convertible  into
      1,833.948  shares of the  Company's  common  stock,  so that the shares of
      Series E Stock issued in the Merger are  convertible  into an aggregate of
      approximately   1,833,948,000   shares  of  the  Company's  common  stock,
      constituting   approximately  95.3%  of  the  outstanding  shares  of  the
      Company's  common  stock  outstanding  following  the Merger  assuming the
      conversion  of all other  outstanding  shares of the  Company's  preferred
      stock. The shares of Series E Stock will be  automatically  converted into
      shares of the  Company's  common stock when the Company  files the Charter
      Amendment (defined below).

      The two  largest  stockholders  of GVI prior to the  Merger  were  William
      Teitelbaum,  who owned  approximately 47.8% of GVI's common stock, and GVI
      Acquisition LLC ("Acquisition  LLC"), which owned  approximately  38.3% of
      GVI's common stock. As a result of the Merger,  Teitelbaum and Acquisition
      LLC were respectively  issued 478,260.86 and 382,608.68 shares of Series E
      Stock, so that (i) Teitelbaum  beneficially owns 877,105,548 shares of the
      Company's   common  stock,   constituting   approximately   47.2%  of  the
      outstanding shares of the Company's common stock outstanding following the
      Merger  assuming the  conversion  of all other  outstanding  shares of the
      Company's  preferred stock,  and (ii)  Acquisition LLC  beneficially  owns
      701,684,423   shares  of  the   Company's   common   stock,   constituting
      approximately  37.8% of the  outstanding  shares of the  Company's  common
      stock  outstanding  following  the Merger  assuming the  conversion of all
      other  outstanding  shares of the Company's  preferred stock. In addition,
      Teitelbaum  claims ownership of a warrant allegedly issued by GVI prior to
      the Merger, which would, he claims, under the terms of the Merger, entitle
      him to  purchase  261,991,428  shares  of  common  stock  at an  aggregate
      exercise price of $3,285.70 (the "Warrant").  The Company is investigating
      the bona fides of the Warrant.

      Acquisition  LLC is a California  limited  liability  company,  whose sole
      managers,  Fred Knoll and David Weiner, are directors of the Company.  The
      sole  members  of  Acquisition  LLC  are  Woodman  Management  Corporation
      ("WMC"),  which has a 47.5%  membership  interest in Acquisition  LLC, and
      Europa,  which has a 52.5%  membership  interest in Acquisition LLC. David
      Weiner  controls  WMC  and is its  sole  stockholder.  Fred  Knoll  is the
      principal  of Knoll  Capital  Management,  L.P.,  which is the  investment
      manager for Europa.

      In  addition,  pursuant to the Merger  Agreement,  certain  employees  and
      directors  of  GVI  were  issued  options  to  purchase  an  aggregate  of
      approximately  183,394,797  shares of the Company's common stock under the
      2004 Long-Term  Incentive Plan in exchange for the cancellation of options
      to purchase shares of GVI's common stock held by such persons prior to the
      Merger. These options have an exercise price of $.0049 and vest 77,942,789
      immediately,  45,848,699  on May 22, 2004,  45,848,699 on May 22, 2005 and
      13,754,610 on May 22, 2006.


                                                                            F-16

<PAGE>


                              THINKING TOOLS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     Years Ended December 31, 2003 and 2002

11.   SUBSEQUENT EVENTS (CONTINUED)

      Immediately  prior  to the  Merger,  and as a  condition  thereto,  Europa
      exchanged  the  Convertible  Demand Grid Note issued by the Company in the
      principal amount of $1,000,000,  and all other indebtedness of the Company
      to  Europa,  (see Note 5) for 10,000  shares of the  Series D  Convertible
      Preferred  Stock  ("Series  D Stock")  of the  Company,  which  shares are
      convertible  into an aggregate of 77,218,860  shares of common stock.  The
      shares of Series D Stock will be  automatically  converted  into shares of
      the Company's  common stock when the Company  files the Charter  Amendment
      defined below.

      Pursuant to its obligations under the Merger Agreement, on March 23, 2004,
      the  Company  filed  with  the  Securities  and  Exchange  Commission,   a
      Definitive  Information  Statement  with  respect to the  approval  by the
      Company's  stockholders of (i) amendments to the Company's  certificate of
      incorporation  increasing  the authorized  shares of the Company's  common
      stock to 75,000,000 and effecting a one-for-65  reverse stock split of the
      common stock so that the Company will have  sufficient  shares of unissued
      common stock so as to permit the  conversion of all of the Series D Stock,
      Series E Stock and all other  convertible  securities  of the Company (the
      "Charter Amendment"),  (ii) the Stock Option Plan, and (iii) to change its
      name to GVI Security Solutions, Inc. These actions were approved of by the
      Board of Directors on February  26,  2004.  The Company  intends to file a
      Certificate  of Amendment to its  Certificate  of  Incorporation  with the
      Secretary  of  State  of the  State  of  Delaware  giving  effect  to such
      amendments  in April 2004.  Upon such filing,  all  outstanding  shares of
      Series A Preferred Stock,  Series D Preferred Stock and Series E Preferred
      Stock would  automatically  convert  into shares of the  Company's  common
      stock.

      In  addition,  an  amendment  to the right of the  holders of the Series A
      Preferred Stock was approved in January 2004. Series A preferred dividends
      will be  retroactively  eliminated in accordance with the Delaware General
      Corporation  Law,  and the  number of shares of common  stock the Series A
      Preferred  Stock is  convertible  into will be reduced  from 10 to 2.5, so
      that the outstanding shares of Series A Convertible  Preferred Stock would
      convert into a maximum of 2,871,997.5  shares (before giving effect to the
      reverse stock split).

      Unaudited Pro Forma Condensed Financial Statements

      The following  unaudited pro forma condensed  financial  statements of the
      Company have been prepared to indicate how the financial statements of the
      Company might have looked if the Merger with GVI and transactions  related
      to that Merger had occurred as of the beginning of the period presented.

      The pro forma condensed financial  statements have been prepared using the
      audited historical  financial  statements of the Company and GVI as of and
      for the year ended  December 31, 2003. The per share  information  has not
      been  affected for the 65:1 reverse  stock split,  as it has yet to become
      effective. For accounting purposes, because the Company had become a shell
      company, the Merger will be treated as a recapitalization of GVI.

      The pro forma condensed financial statements should be read in conjunction
      with a reading of the historical  financial  statements of the Company and
      GVI.  The pro forma  condensed  financial  statements  are  presented  for
      illustrative purposes only and are not intended to be indicative of actual
      financial condition or results of operations had the Merger been in effect
      during the periods  presented,  or of  financial  condition  or results of
      operations that may be reported in the future.


                                                                            F-17

<PAGE>



                              THINKING TOOLS, INC.
                         NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002


11.   SUBSEQUENT EVENTS (CONTINUED)

Unaudited Pro Forma Condensed Financial Statements (Continued)

                              THINKING TOOLS, INC.
                  UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
                                DECEMBER 31, 2003


<TABLE>
<CAPTION>
(In thousands)                                         Historical
                                                ----------------------------              Pro Forma
                                                 Thinking         GVI          -------------------------------------
                                                Tools, Inc.    Security, Inc.   Adjustments     Notes       Combined
                                                -----------   ---------------  -------------------------------------
<S>                                             <C>            <C>            <C>                          <C>
ASSETS

CURRENT ASSETS:
Cash                                            $     --       $     69       $     --                     $     69
Accounts receivable, net                              --         12,402             --                       12,402
Inventory                                             --          8,368             --                        8,368
Other receivables                                     --          1,429             --                        1,429
Prepaid expenses and other current assets             --            456             --                          456
Deferred income taxes                                 --            302             --                          302
                                                --------       --------       --------                     --------

Total Current Assets                                  --         23,026             --                       23,026


Property and equipment, net                           --            565             --                          565


Other Assets
Deferred loan origination fee, net                    --              5             --                            5
                                                --------       --------       --------                     --------

TOTAL ASSETS                                    $     --       $ 23,596       $     --                     $ 23,596



LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable                                $    209       $ 11,173       $     --                     $ 11,382
Accrued expenses                                     460            738           (331)           (a)           867
Note payable - related party                       1,000             --         (1,000)           (a)            --
Loan payable - related party                         150             --             --                          150
Federal income taxes payable                          --            456             --                          456
                                                --------       --------       --------                     --------

Total Current Liabilities                          1,819         12,367         (1,331)                      12,855


LINE OF CREDIT                                        --          8,650             --                        8,650


DEFERRED INCOME TAXES                                 --             89             --                           89
                                                --------       --------       --------                     --------

Total Liabilities                                  1,819         21,106         (1,331)                      21,594
                                                --------       --------       --------                     --------

SHAREHOLDERS' EQUITY


Preferred Stock, Series A                              1             --             --                            1
Preferred Stock, Series B                             --             --             --                           --
Preferred Stock, Series C                             --             --             --                           --
Preferred Stock, Series D                             --             --             --            (a)            --
Preferred Stock, Series E                             --             --              1            (b)             1
Common Stock                                          10             --             --                           10
Additional paid in capital                        20,778            575        (21,137)           (a) (b)       216
Retained Earnings (Deficit)                      (22,608)         1,915         22,467            (b)         1,774
                                                --------       --------       --------                     --------

Total Shareholders' Equity                        (1,819)         2,490          1,331                        2,002
                                                --------       --------       --------                     --------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY      $     --       $ 23,596       $     --                     $ 23,596
                                                ========       ========       ========                     ========

</TABLE>




                                                                            F-18

<PAGE>


                              THINKING TOOLS, INC.
                         NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002


11.   SUBSEQUENT EVENTS (CONTINUED)

Unaudited Pro Forma Condensed Financial Statements (Continued)

                              THINKING TOOLS, INC.
             UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
                          YEAR ENDED DECEMBER 31, 2003

<TABLE>
<CAPTION>
(In thousands, except per share amounts)
                                                  Historical
                                         ------------------------------              Pro forma
                                           Thinking             GVI          ----------------------------
                                          Tools, Inc       Security, Inc.    Adjustments       Combined
                                         -----------      --------------     -----------      -----------
<S>                                      <C>               <C>               <C>             <C>
REVENUES                                 $        --       $    56,336       $       --      $    56,336

COST OF GOODS SOLD                                --            46,667               --           46,667
                                         -----------       -----------       ----------      -----------
GROSS PROFIT                                      --             9,669               --            9,669

SELLING, GENERAL AND ADMINISTRATIVE               31             7,649               --            7,680
                                         -----------       -----------       ----------      -----------
OPERATING INCOME/(LOSS)                          (31)            2,020               --            1,989

INTEREST EXPENSE                                (110)             (227)              --             (337)
                                         -----------       -----------       ----------      -----------
INCOME (LOSS) BEFORE INCOME TAXES               (141)            1,793               --            1,652

INCOME TAXES                                      --               536               --              536
                                         -----------       -----------       ----------      -----------
NET INCOME/(LOSS)                        $      (141)      $     1,257       $       --      $     1,116
                                         ===========       ===========       ==========      ===========
INCOME/(LOSS) PER SHARE:
Basic                                    $        (0)      $         5                       $         0
                                         ===========       ===========                       ===========
Diluted                                  $        (0)      $         5                       $         0
                                         ===========       ===========                       ===========
SHARES USED IN CALCULATION OF NET
INCOME/(LOSS) PER SHARE:
Basic                                         10,205               230                            10,205
                                         ===========       ===========                       ===========
Diluted                                       10,205               230                         1,458,910
                                         ===========       ===========                       ===========
</TABLE>

           Notes to Unaudited Pro Forma Condensed Financial Statements

(A)   These adjustments reflect the exchange of the Convertible Demand Grid Note
      issued by the Company in the principal amount of $1,000,000, and all other
      indebtedness  of the  Company  to Europa,  for  10,000  shares of Series D
      Preferred Stock, immediately prior to the Merger.

(B)   These  adjustments  reflect the issuance of  1,000,000  shares of Series E
      Convertible  Preferred  Stock  to the  former  stockholders  of GVI and to
      effect the recapitalization of GVI.

(C)   Income/(loss)  per share  information  does not reflect  the 65:1  reverse
      stock split, as it has yet to become effective.

(D)   Diluted  earnings  per  share  assumes  conversion  of  Series A, D, and E
      Preferred   Stock   converting  on  April  30,  2003,  and  conversion  of
      exercisable  options  and  warrants  based  on the  terms  of  the  Merger
      Agreement and the Company's traded market price subsequent to the Merger.





                                                                            F-19