UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                ______________

                                  FORM 10-KSB

(Mark One)
|X|  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 31, 2002
                                      OR

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
1934

For the transition period from _______ to _______

                       Commission file number 000-21295

                             THINKING TOOLS, INC.
                             --------------------
                (Name of small business issuer in its charter)

<TABLE>
<CAPTION>
<S>                                                                      <C>
           Delaware                                                                  77-0436410
           --------                                                       ---------------------------------
(State or other jurisdiction of                                          (I.R.S. Employer Identification No.)
incorporation or organization)

200 Park Avenue, Suite 3900, New York, New York                                         10166
-----------------------------------------------                           ---------------------------------
 (Address of principal executive offices)                                             (Zip Code)

Issuer's telephone number, including area code : (212) 808-7474
                                                 ---------------

Securities registered under Section 12(b) of the Exchange Act: None
                                                               ----

Securities registered under Section 12(g) of the Exchange Act: Common Stock, $.001 par value
</TABLE>

Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities  Exchange Act of 1934 during the past 12
months (or for such shorter  period that the  Registrant  was required to file
such reports),  and (2) has been subject to such filing  requirements  for the
past 90 days.

Yes  [ ]   No  [X]

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 or any amendment to
this Form 10-KSB. [ ]


<PAGE>


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

As of January 31, 2004, the aggregate market value of the voting stock held by
non-affiliates of the Registrant was approximately $158,856.

As of January 31, 2004,  10,204,637  shares of Common Stock,  $.001 par value,
were outstanding.

Transitional Small Business Disclosure Format (Check one):   Yes ___  No  X


                      DOCUMENTS INCORPORATED BY REFERENCE

None.


<PAGE>



             CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

         This 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. DESCRIPTION OF BUSINESS

General
-------

         Thinking Tools, Inc., a Delaware corporation (the "Company" or "we")
has not had active business operations since December 2000. Since that time,
our activities have been limited to evaluating from time to time candidates
with which to enter into business combinations or strategic transactions.

History
-------

         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
merged into the Company.

         The Predecessor Corporation was incorporated in California on
December 30, 1993 with a business strategy of developing and marketing
business simulation software. In December 1993, the Predecessor Corporation
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.

         In September 1997, we introduced Think 2000, a Year 2000 business
simulation software product. We invested significant resources and capital in
the development and 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.


<PAGE>


         On March 7, 2000, through a newly-formed and wholly-owned subsidiary,
StartFree.com, Inc. ("StartFree"), we acquired (the "Tritium Acquisition") the
business and substantially all of the assets and certain of the liabilities of
Tritium Network, Inc., a Delaware corporation ("Tritium") in exchange for
1,148,798.5 shares of our Series A Preferred Stock, par value $.001 per share
(the "Series A Preferred Stock").

         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.

Plan of Business
----------------

         The Company intends to locate and enter into a transaction with an
existing, public or privately-held company that, in management's view, has
growth potential (a "Target Business"). To that end, the Company is currently
engaged in negotiations with several candidates. A transaction with a Target
Business may be structured as a merger, consolidation, exchange of the
Company's common stock for stock or assets of the Target Business or any other
form which will result in the combined enterprise remaining a publicly-held
corporation.

         Acquisitions  or business  combinations  may not be  available at the
times or on terms  acceptable  to us, or at all. In  addition,  acquiring,  or
combining with, a business involves many risks, including:

         -  unforeseen obligations or liabilities;

         -  difficulty assimilating the acquired operations and personnel;

         -  risks of entering markets in which we have little or no direct
            prior experience;

         -  potential impairment of relationships with employees or customers
            as a result of changes in management; and

         -  potential substantial dilutive issuances of equity, large and
            immediate write-offs, and the incurrence of debt.

         We cannot assure you that we will consummate any acquisitions or
business combinations or that we will be able to obtain additional financing
for such acquisitions or combinations, if necessary. If any acquisitions or
combinations are made, we cannot assure you that the acquired or combined
business will perform as expected.

         Furthermore, Federal and state tax laws and regulations may have a
significant impact upon the structuring of transactions. We will endeavor to
structure a transaction so as to achieve


<PAGE>


the most favorable tax treatment. There can be no assurance that the Internal
Revenue Service or relevant state tax authorities will ultimately assent to
our tax treatment of a particular consummated transaction. To the extent the
Internal Revenue Service or any relevant state tax authorities ultimately
prevail in recharacterizing the tax treatment of a transaction, there may be
adverse tax consequences to the Company, a target business and their
respective stockholders.

         Pending negotiation and consummation of a transaction, the Company
anticipates that it will have, aside from carrying on its search for a
transaction partner, no business activities, and, thus, no source of revenue.
Should the Company incur any significant liabilities prior to a combination
with a Target Business, it may not be able to satisfy without additional
financing such liabilities as are incurred.

Employees
---------

         The Company currently does not have any paid employees. Moshe Zarmi,
our President, Chief Executive Officer and Secretary, and Fred Knoll, our
Chairman, are our only officers.

Subsequent Event
----------------

         Pursuant to a letter of intent dated November 12, 2003, we have
agreed with GVI Security, Inc. to enter into definitive agreements providing
for the merger of GVI with and into a newly formed wholly-owned subsidiary of
ours. Approximately 38% of the outstanding common stock of GVI is held by a
limited liability company of which Europa International, Inc., our principal
stockholder, is a 50% member. Fred Knoll, our Chairman, is the principal of
Knoll Capital Management, L.P., which is the investment manager for Europa.
GVI is the exclusive distributor of Samsung Electronics security products in
North America, and distributes video surveillance and other security products
to wholesale distributors and consumers. The letter of intent provides that in
such merger, the stockholders of GVI would be issued shares of a new class of
our preferred stock that upon conversion would constitute 95% of our
outstanding shares of Common Stock on a fully-diluted basis, resulting in
substantial dilution to our current stockholders. The definitive agreements
would contain customary representations, warranties and closing conditions.
There can be no assurance that the merger with GVI will be consummated.

Item 2. DESCRIPTION OF PROPERTY

        The Company does not own or lease any real property.

Item 3. LEGAL PROCEEDINGS.

        We are not involved in any pending material legal proceedings.

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


<PAGE>


         No matters were submitted to our security holders for a vote during
the year ended December 31, 2002.

                                    PART II
                                    -------

Item 5. MARKET FOR 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. The following table sets forth the quarterly high and low bid
prices of a share of Common Stock as reported by (i) the OTC Bulletin Board
for the period commencing January 1, 2001, and ending on June 9, 2002, and
(ii) 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.


<TABLE>
<CAPTION>
             Period                                        High                Low
             ------                                        ----                ---
             Fiscal 2002
             -----------
<S>                                                         <C>                <C>
             First Quarter                                  .24                .10
             Second Quarter                                 .15                .01
             Third Quarter                                  .15                .04
             Fourth Quarter                                .045                .02

             Fiscal 2001

             First Quarter                                  .31                .09
             Second Quarter                                 .25                .06
             Third Quarter                                  .20                .10
             Fourth Quarter                                 .23                .07
</TABLE>

         The number of holders of record for our Common Stock as of December
31, 2002 was approximately 45. This number excludes individual stockholders
holding stock under nominee security position listings.

         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.


<PAGE>


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 OR PLAN OF OPERATION

Plan of Operation
-----------------

         We have not had active business operations since December 2000, when
we discontinued the operations of Startfree.com. Since that time, our
activities have been limited to evaluating from time to time candidates with
which to enter into business combinations or strategic transactions.

         We intend to locate and enter into a transaction with a Target
Business. To that end, the Company is currently engaged in negotiations with
several candidates. A transaction with a Target Business may be structured as
a merger, consolidation, exchange of the Company's common stock for stock or
assets of the Target Business or any other form which will result in the
combined enterprise remaining a publicly-held corporation.

         Pending negotiation and consummation of a transaction with a Target
Business, the Company anticipates that it will have, aside from carrying on
its search for a transaction partner, no business activities, and, thus, no
source of revenue. Should the Company incur any significant liabilities prior
to a combination with a Target Business, it may not be able to satisfy without


<PAGE>


additional financing such liabilities as are incurred.

         We anticipate that our expenses will increase as we continue to
locate and enter into transactions with Target Businesses, and we expect to
continue to incur losses for the foreseeable future.

         The Company currently does not have sufficient cash to meet its cash
requirements. The Company expects that it will be required to continue to
borrow from stockholders and affiliates of its stockholders to meet such
requirements.

         Our continued existence is dependent on our ability to negotiate
additional acquisitions, to raise additional financing and to develop
successful operations.

Abandoned Operations
--------------------

         In December 2000, the Company discontinued the operations of
StartFree.com, Inc., its wholly-owned subsidiary ("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 abandonment of StartFree has resulted in a gain from
abandonment of the liabilities of StartFree of $916,000.

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.

                                   PART III
                                   --------

Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
        COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

         The executive officers and directors of the Company as of January 30,
2004 are as follows:


<TABLE>
<CAPTION>
<S>                                               <C>         <C>
NAME                                              AGE         POSITION
----                                              ---         --------
Mr. Fred Knoll                                    48          Chairman of the Board, Director
</TABLE>


<PAGE>


<TABLE>
<CAPTION>
<S>                                               <C>         <C>
NAME                                              AGE         POSITION
----                                              ---         --------
Mr. Moshe Zarmi                                   65          President, Chief Executive Officer, Director
Mr. Frederick Gluck                               68          Director
</TABLE>


         Fred Knoll has been Chairman of the Board and a member of the board
of directors since September 1994. Mr. Knoll has also been the principal, from
1987 to the present, of Knoll Capital Management, a private investment
management company. Mr. Knoll is the portfolio manager of two hedge funds;
Knoll Capital Fund I and Knoll Capital Fund II, and manages a private account
for ABN Amro Inc. Mr. Knoll holds a B.S. in Electrical Engineering and
Computer Science from M.I.T., a B.S. in Management from the Sloan School at
M.I.T., and a M.B.A. from Columbia University in Finance and International
Business.

         Moshe Zarmi has been President, Chief Executive Officer, and a
director of Thinking Tools, Inc. since February 12, 1998. From July 1997 to
December 1997, Mr. Zarmi was a consultant to us. Mr. Zarmi has 30 years
experience, primarily in high technology industries. From February 1993 to
January 1997, Mr. Zarmi was CEO of Geotest, a leading Automated Test Equipment
company based in Southern California. His extensive business experience
includes a tenure at Israel Aircraft Industries ("IAI"), where he held various
positions in finance and administration, as well as head of US marketing and
sales. Mr. Zarmi also served as President of ATG, the Canadian subsidiary of
IAI. Additionally, Mr. Zarmi headed his own company which specialized in
technology transfer and worked mainly with Israeli high technology companies
doing business in the United States. Mr. Zarmi attended Tel Aviv University
and holds an M.B.A. from Columbia University.

         Frederick W. Gluck has been a member of the board of directors since
October 1994. He is currently serving as a consultant to McKinsey & Company,
Inc. Mr. Gluck served as vice-chairman and a director of Bechtel Group, Inc.
and as a member of the Board of Directors of Bechtel Enterprises, Inc. from
1995 to 1998. He also served as a member of both companies' executive
committees. Prior to joining Bechtel, Mr. Gluck spent more than 25 years with
McKinsey & Company, and was ultimately its managing director. Mr. Gluck serves
on the Harvard Business School Board of Directors of the Associates, the
Management Education Council of the Wharton School, the U.S./ Hong Kong
Economic Cooperation Committee, the Council on Foreign Relations and the Board
of the International Executive Service Corps.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section  16(a) of the  Securities  Exchange Act of 1934,  as amended,
requires our Directors,  executive officers, and persons who own more than 10%
of a registered  class of our equity  securities,  to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of our shares and other equity securities.  Directors,  officers and
greater  than 10%  shareholders  are required to furnish us with copies of all
Section 16(a) forms that they file. To the Company's  knowledge,  based solely
on a review of the Forms 3, 4, and 5 submitted to the Company  during and with
respect to the year ended  December


<PAGE>


31, 2002 ("Fiscal 2002"), there were no known failures to file a required Form
3, 4 or 5 and no known late filings of a required Form 3, 4 or 5 during Fiscal
2001 by any person required to file such forms with respect to the Company
pursuant to Section 16 of the Exchange Act, other than the failure to file a
Form 4 by Thinking Technologies, L.P. and a Form 3 by Europa International,
Inc. in connection with the transfer by Thinking Technologies to Europa of a
Demand Convertible Grid Note (described below) originally issued to Thinking
Technologies. Such Forms 3 and 4 were subsequently filed by Europa and
Thinking Technologies respectively.

Item 10. EXECUTIVE COMPENSATION

         We have not paid compensation in the three fiscal years ended
December 31, 2002 to any of our officers, and we currently do not have any
employees

STOCK OPTION GRANTS

         The Company did not award any stock options during Fiscal 2002.

AGGREGATED OPTION EXERCISES IN FISCAL 2002 AND FY-END OPTION VALUES

<TABLE>
<CAPTION>
        NAME          SHARES ACQUIRED      VALUE          NUMBER OF UNEXERCISED           VALUE OF UNEXERCISED
        ----            ON EXERCISE       REALIZED     OPTIONS AT FISCAL YEAR END       IN-THE-MONEY OPTIONS AT
                            (#)             ($)             (#) EXERCISABLE/              FISCAL YEAR END ($)
                            ---             ---               UNEXERCISABLE            EXERCISABLE/ UNEXERCISABLE
                                                        --------------------------     ---------------------------
<S>                   <C>                 <C>           <C>                            <C>
Moshe Zarmi                  --              --              750,000/750,000                  $0.00/$0.00
</TABLE>


Arrangements with Directors and Executive Officers
--------------------------------------------------

         Our Directors do not receive any cash compensation for their
participation on the board.

Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth as of January 30, 2004, certain
information known to us with respect to the beneficial ownership of our voting
securities by (i) each person who is known by us to own of record or
beneficially more than 5% of the outstanding Common Stock, (ii) each of our
directors and Named Executive Officer, and (iii) all our directors and
executive officers as a group. Except as otherwise indicated, the stockholders
listed in the table have sole voting and investment powers with respect to the
shares indicated.


<PAGE>


<TABLE>
<CAPTION>
                                                          AMOUNT AND NATURE OF          PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER                      BENEFICIAL OWNERSHIP            CLASS (1)
------------------------------------                      --------------------            ---------
<S>                                                       <C>                            <C>
(i) Beneficial Owners of more than 5% of Common Stock
    (other than directors and executive officers)
Bruce Galloway (2)                                          603,708(3)                      5.9%
Digital Creative Development Corp. (4)                      569,500                         5.6%
Engage, Inc.(5)                                             984,799(6)                      9.1%
Europa International, Inc. (7)                              111,682,820(8)                 91.6%
Gem Management Limited (9)                                  777,518                         7.6%
Global e-Markets, Inc. (10)                               2,450,000 (11)                   19.3%
Thinking Technologies, L.P. (12)                          4,743,722 (13)                   42.7%
Michael Lee (14)                                          6,772,246 (15)                   39.9%
(ii) Directors and Executive Officers
Mr. Fred Knoll (16)                                       117,529,442 (17)                 94.9%
Mr. Frederick Gluck (18)                                    235,000 (19)                    2.3%
Mr. Moshe Zarmi (20)                                        750,000 (21)                    6.8%

(iii) All directors and executive officers as a group     118,514,442(17)(19)(21)          94.9%
      (three persons)
</TABLE>

(1)   Percentage of ownership is based on 10,204,637 shares of Common Stock
      outstanding and has been determined in accordance with Rule 13d-3 under
      the Securities Exchange Act of 1934, as amended. All information is as
      of January 30, 2004 and is based upon information furnished by the
      persons listed or contained in filings made by them with the Securities
      and Exchange Commission.

(2)   The address of Mr. Galloway is c/o Burnham Securities, 1325 Sixth
      Avenue, New York, New York 10019.

(3)   Includes (i) 200,000 shares of Common Stock held by the Bruce Galloway
      IRA and (ii) 200,000 shares owned by Jacombs Investments, Inc., of which
      Mr. Galloway is the principal shareholder and President.

(4)   The address of Digital Creative Development Corp. is 200 East 82nd
      Street, New York, New York 10028.

(5)   The address of Engage, Inc. as 100 Brickstone Square, Andover,
      Massachusetts 01810

(6)   Includes warrants to purchase 584,399 shares of Common Stock at an
      exercise price of $.01 per share.

(7)   The address of Europa International, Inc. ("Europa") is P.O. Box 146,
      Road Town, Tortola, British Virgin Islands. Fred Knoll is the principal
      of Knoll Capital Management, L.P., which is the investment manager


<PAGE>


      for Europa.

(8)   All such shares are issuable upon conversion of that certain Demand
      Convertible Grid Note (the "Note") in the principal amount of up to
      $1,000,000, which was originally issued to Thinking Technologies, L.P.
      and transferred to Europa on January 4, 2002.

(9)   The address of Gem Management Limited is PO Box 860, 11 Bath Street, St.
      Helier, Jersey, JE4 0YZ.

(10)  The address of Global e-Markets, Inc. is 12-14 Finch Road, Douglas, Isle
      of Man IM99 1TT.

(11)  All of these shares are issuable upon exercise of warrants with an
      exercise price of $.50 per share.

(12)  The address of Thinking Technologies, L.P. is 200 Park Avenue, Suite
      3900, New York, New York 10016. Fred Knoll is the principal of Knoll
      Capital Management, L.P., which is the general partner of Thinking
      Technologies, L.P.

(13)  Includes (i) 3,850,414 shares of Common Stock; (ii) 468,242 shares of
      Common Stock issuable upon the exercise of warrants with an exercise
      price of $1.07 per share; and (iii) 425,066 shares of Common Stock
      issuable upon exercise of warrants with an exercise price of $0.375 per
      share.

(14)  Mr. Lee's address is 1008 Celestial Street, Cincinnati, Ohio 45202.

(15)  All such shares are issuable upon conversion of 677,224.6 shares of
      Series A Convertible Preferred Stock beneficially held by Mr. Lee.

(16)  The address of Mr. Knoll is c/o Knoll Capital Management, 200 Park
      Avenue, Suite 3900, New York, New York 10166.

(17)  Includes (i) the 4,743,722 shares beneficially owned by Thinking
      Technologies, L.P.; (ii) 111,682,820 beneficially owned by Europa; (iii)
      warrants to purchase 549,800 shares of Common Stock with an exercise
      price of $.50 per share; (iv) options to purchase 352,900 shares of
      Common Stock exercisable at $.50 per share; (v) options to purchase
      200,000 shares of Common Stock exercisable at $.50 per share; and (vi)
      200 shares of Series B Preferred Stock, $.001 par value per share, which
      are convertible into 200 shares of Common Stock.

(18)  The address of Mr. Gluck is c/o McKinsey & Co., 400 South Hope Street,
      Los Angeles, California 90071.

(19)  Includes (i) options to purchase 210,000 shares of Common Stock
      exercisable at $.50 per share, (ii) options to purchase 14,741 shares of
      Common Stock exercisable at $.79 per share, and (iii) options to
      purchase 10,259 shares of Common Stock exercisable at $1.00 per share.

(20)  The address of Mr. Zarmi is 215 Frankel Boulevard, Merrick, New York
      11566.

(21)  Consists of (i) warrants to purchase 550,000 shares of Common Stock with
      an exercise price of $.50 per share, and (ii) options to purchase
      200,000 shares of Common Stock exercisable at $.50 per share.

Change In Control
-----------------

      We anticipate that a "change in control" of Thinking Tools will occur in
the event the



<PAGE>


merger with GVI Security, Inc. contemplated by the letter of

intent described above is consummated.

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         In November 2000, in consideration of advances made by Technologies
to the Company, Technologies was issued a Demand Convertible Grid Note (the
"Note") in the principal amount of up to $1,000,000, bearing interest at the
rate of 10% per year. The Note was subsequently transferred by Technologies to
Europa. Fred Knoll is the principal of Knoll Capital Management, L.P., which
(i) is the general partner of Technologies, and (ii) is the investment manager
for Europa. The principal and interest outstanding under the Note was
originally convertible into shares of Common Stock at a price of $.375 per
share, and in February 2001, the Note was amended to change the conversion
price to $.12 per share. On January 4, 2002, in consideration of Technologies'
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 will convert
into 80% of the outstanding Common Stock of the Company on a fully-diluted
basis. At December 31, 2002, the principal amount outstanding under the Note
was approximately $1,215,000 consisting of principal of $1,000,000 and
interest of $215,000. In connection with the loans evidenced by the Note,
Technologies was issued five-year warrants to purchase 425,066 shares of
Common Stock at a price of $.375 per share. In February 2001, the warrant was
amended to change the exercise price to $.12 per share. In addition to the
loans evidenced by the Note, during the year ended December 31, 2002, Europa
advanced an additional $75,000 to the Company. Such advances bear interest at
the rate of the 10% per annum, and at December 31, 2002, the interest that had
accrued on such advances was approximately $6,000.

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

(a) The following documents are filed as part of this report:
Exhibit  Description
No.
3.1      Certificate of Incorporation of Thinking Tools, Inc. (1)
3.2      By-Laws of Thinking Tools, Inc. (1)
4.1      1996 Stock Option Plan (1)
4.2      Form of Stock Certificate (2)
4.3      Technologies Warrant (2)
4.4      Certificate of the Designations, Powers, Preferences and Rights of the
         Series A Convertible
         Preferred Stock of Thinking Tools, Inc. (3)

4.5      Certificate of the Designations, Powers, Preferences and Rights of the
         Series B Convertible
         Preferred Stock of Thinking Tools, Inc. (3)
4.6      1997 Stock Option Plan (4)
10.1     Demand Convertible Grid Note (as amended)(5)



<PAGE>


31       Certification pursuant to Rule 13a-14(a) of the Exchange Act
32       Certification pursuant to Rule 13a-14(b) of the Exchange Act

--------------------
(1)   Incorporated herein by reference to our Registration Statement on Form
      SB-2 (Registration No. 33-11321), as filed with the Securities and
      Exchange Commission (the "Commission") on September 3, 1996 (the
      "Registration Statement").

(2)   Incorporated herein by reference to Amendment No. 1 to the Registration
      Statement, as filed with the Commission on October 11, 1996.

(3)   Incorporated herein by reference to our Current Report on Form 8-K, as
      filed with the Commission on March 21, 2000.

(4)   Incorporated herein by reference to Exhibit A of our Proxy Statement,
      dated November 13, 1997.

(5)   Incorporated herein by reference to our Annual Report on Form 10-KSB for
      our fiscal year ended December 31, 2000, as filed with the Commission on
      May 2, 2001.

(b)  Reports on Form 8-K

         None.

Item 14.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures
------------------------------------------------

         The Company's chief executive officer, after evaluating the
effectiveness of the Company's "disclosure controls and procedures" (as
defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as
amended) as of a date (the "Evaluation Date") within 90 days before the filing
date of this annual report, has concluded that the Company's disclosure
controls and procedures are effective in ensuring that material information
required to be disclosed is included in the reports that it files with the
Securities and Exchange Commission.

Changes in Internal Controls
----------------------------

         There were no significant changes in the Company's internal controls
or, to the knowledge of the management of the Company, in other factors that
could significantly affect these controls subsequent to the Evaluation Date.

<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,  2002  and  2001,  and  the  related  statements  of  operations,
shareholders'  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,  2002 and 2001,  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

February 4, 2004

<PAGE>

                              THINKING TOOLS, INC.

                     YEARS ENDED DECEMBER 31, 2002 and 2001

<PAGE>

                              THINKING TOOLS, INC.

                          INDEX TO FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2002 and 2001

<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' Deficiency............................F-4-5

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

         Notes to Financial Statements....................................F-7-19
</TABLE>

<PAGE>

                              THINKING TOOLS, INC.

                                 BALANCE SHEETS

                           DECEMBER 31, 2002 and 2001

(In thousands, except share amounts)

<TABLE>
<CAPTION>
                                                   2002                  2001
                                             -----------------     -----------------
<S>                                          <C>                   <C>
ASSETS

CURRENT ASSET:
  Cash                                      $              1      $              1

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


LIABILITIES AND SHAREHOLDERS' DEFICIENCY

CURRENT LIABILITIES:
  Note payable - related party               $          1,000      $            967
  Loan payable - related party                             75                    --
  Accounts payable                                        244                 1,158
  Accrued expenses                                        360                   323
                                             ----------------      ----------------
       Total current liabilities                        1,679                 2,448
                                             ----------------      ----------------

SHAREHOLDERS' DEFICIENCY
  Preferred stock, Series A $.001 par value;
   3,000,000 shares authorized; 1,148,799
   shares issued and outstanding at 2002
   and 2001                                                  1                     1
  Preferred stock, Series B $.001 par value;
   200 shares authorized; 200 shares issued
   and outstanding at 2002 and 2001                          -                     -
  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 2002 and 2001                 10                    10
  Additional paid-in capital                            20,778                20,778
  Accumulated deficit                                  (22,467)              (23,236)
                                               -----------------     -----------------
       Total shareholders' deficiency                   (1,678)               (2,447)
                                               -----------------     -----------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY $             1       $             1
                                               =================     =================
</TABLE>







See notes to financial statements.                                          F-2

<PAGE>


                              THINKING TOOLS, INC.

                            STATEMENTS OF OPERATIONS

                     Years Ended December 31, 2002 and 2001

(In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                        2002                   2001
                                                 ------------------     -----------------
<S>                                              <C>                    <C>
REVENUES                                           $            --       $            --
                                                 ------------------     -----------------
OPERATING EXPENSES
 Selling, general and administrative                            41                   182
                                                 ------------------     -----------------
  Total operating expenses                                      41                   182
                                                 ------------------     -----------------
LOSS FROM OPERATIONS                                           (41)                 (182)

OTHER EXPENSE

 Interest                                                     (106)                 (218)
                                                 ------------------     -----------------
LOSS FROM CONTINUING OPERATIONS                               (147)                 (400)
                                                 ------------------     -----------------
DISCONTINUED OPERATIONS
 Gain from abandonment of liabilities of
     subsidiary (net of income tax effect of $0)               916                    --
                                                 ------------------     -----------------
NET INCOME (LOSS)                                  $           769      $           (400)
                                                  =================     =================
INCOME (LOSS) PER SHARE:
 Basic and diluted:

 Loss from continuing operations                   $         (0.01)      $         (0.04)
 Gain from discontinued operations                            0.09                     -
                                                 ------------------     -----------------
0.08                   (0.04)
                                                 ==================     =================

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

   Basic and diluted                                        10,205                10,205
                                                 ==================     =================
</TABLE>


See notes to financial statements.                                           F-3

<PAGE>


                              THINKING TOOLS, INC.
                     STATEMENTS OF SHAREHOLDERS' DEFICIENCY
                     Years Ended December 31, 2002 and 2001


(In thousands, except share amounts)

<TABLE>
<CAPTION>
                                                                   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, 2001       10,204,637         10     1,148,799           1       200         -         -         -
Net Loss                        -          -             -           -         -         -         -         -
                      ------------ ---------- -------------  ---------- ------------------- --------- ---------
BALANCES,

December 31,2001       10,204,637       $ 10     1,148,799         $ 1       200       $ -         -       $ -

Net Loss                        -          -             -           -         -         -         -         -
                      ------------ ---------- -------------  ---------- ------------------- --------- ---------
BALANCES,
December 31,2002       10,204,637       $ 10     1,148,799         $ 1       200       $ -         -       $ -
                      ============ ========== =============  ========== ========= ========= ========= =========
</TABLE>





See notes to financial statements.                                          F-4


<PAGE>


                              THINKING TOOLS, INC.
                     STATEMENTS OF SHAREHOLDERS' DEFICIENCY
                     Years Ended December 31, 2002 and 2001

<TABLE>
<CAPTION>
                                                                  Total
                                  Additional                   Shareholders'
                                   Paid-in      Accumulated       Equity
                                   Capital        Deficit      (Deficiency)
                                -------------  -------------- --------------
<S>                             <C>            <C>            <C>
 BALANCES,
 January 1, 2001                      20,778      (22,836)        (2,047)
Net Loss                                             (400)          (400)
                                -------------  -------------- --------------
BALANCES,
 December 31, 2001               $    20,778    $ (23,236)   $    (2,447)
Net Income                                            769            769
                                -------------  -------------- --------------
BALANCES,
 December 31, 2002               $    20,778    $ (22,467)   $    (1,678)
                                =============  =============  ==============
</TABLE>



See notes to financial statements.                                          F-5

<PAGE>


                              THINKING TOOLS, INC.
                            STATEMENTS OF CASH FLOWS
                     Years Ended December 31, 2002 and 2001


(In thousands, except share amounts)

<TABLE>
<CAPTION>
                                                                    2002          2001
                                                                 ----------    ----------
<S>                                                              <C>            <C>
CASH FLOWS FROM (USED) IN OPERATING ACTIVITIES

 Net Income (Loss)                                               $   769        $  (400)
 Adjustments to reconcile net loss to net cash used in
  operating activities
  Gain from abandonment of liabilities of subsidiary                (916)            --
  Interest expense and accretion of the discount
   attributable to note payable beneficial conversion
   features and to warrants issued and related party loan            106            218
 Changes in assets and liabilities:
  Accounts payable                                                     2             78
  Accrued expenses                                                   (69)            (5)
                                                                  -------         -------
 Net cash used by operating activities                              (108)          (109)
                                                                  -------         -------
CASH FLOWS FROM (USED) IN FINANCING ACTIVITIES
  Proceeds from note payable                                          33            107
  Proceeds from related party loan                                    75             --
                                                                  -------         -------
  Net cash provided by financing activities                          108            107
                                                                  -------         -------
  Net (decrease) increase in cash                                     --             (2)

CASH, beginning of year                                                1              3
                                                                  -------         -------
CASH, end of year                                                 $    1          $   1
                                                                  =======         =======
</TABLE>


See notes to financial statements.                                          F-6

<PAGE>


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


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 12.).

    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 to date has not  generated  substantial
    revenues from the sale of its products.

    The Company through its subsidiary,  StartFree, acquired substantially all
    of the assets and assumed  certain  liabilities of Tritium  Network,  Inc.
    ("Tritium")  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 12).

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

                                                                            F-7


<PAGE>


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

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    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.

    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.

    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 net
    loss, all convertible  securities,  options and warrants are antidilutive;
    hence  both basic and  diluted  loss per share are  computed  based on the
    weighted average number of shares of common stock  outstanding  during the
    period.

                                                                            F-8


<PAGE>


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


3.  ACCRUED EXPENSES

    Accrued  expenses  at  December  31,  2002  and 2001  are as  follows  (in
    thousands):

<TABLE>
<CAPTION>
                                                      2002                   2001
                                               ------------------     -----------------
<S>                                             <C>                    <C>
    Shutdown costs                              $              --      $             63
    Legal and professional fees                               139                   139
    Interest                                                  221                   115
    Payroll and related benefits                               --                     5
    Other                                                      --                     1
                                               ------------------     -----------------
                                                $             360      $            323
                                               ==================     =================
</TABLE>

4.  LEASES

    The  Company  leased  office  space  in  San  Jose,   California  under  a
    non-cancelable  operating lease,  which expired in March 2001. The Company
    sub-leased  the San Jose office in March 1998,  prior to expiration of the
    lease.  The sub-lease  expired in June 2001,  therefore  there are neither
    future minimum rental  commitments nor sublease  rentals to be received in
    the future for the San Jose facility at December 31, 2002.

    There was no rent expense for the years ended December 31, 2002 and 2001.

5.  INCOME TAXES

    Due to the Company's history of net losses, the Company has fully reserved
    its net deferred tax assets and, consequently, its tax provision (benefit)
    is nil.  Calculations  for deferred tax assets and liabilities at December
    31, 2002 and 2001, are as follows (in thousands):

<TABLE>
<CAPTION>
                                                         2002                  2001
                                                  -----------------     -----------------
<S>                                                <C>                   <C>
Deferred tax assets

    Net operating loss carry forwards              $         4,920       $         5,268
    Tax credits                                                261                   261
    Accruals and reserves not currently deductible              32                    32
    Stock compensation                                       1,926                 1,886
                                                  -----------------     -----------------
Total deferred tax assets                                    7,139                 7,447
Less valuation allowance                                    (7,139)               (7,447)
                                                  -----------------     -----------------
Net deferred tax assets                            $             -       $             -
                                                  =================     =================
</TABLE>




                                                                            F-9


<PAGE>


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


5.  INCOME TAXES (continued)

    As of December 31, 2002, the Company has net operating loss  carryforwards
    of  $12,299,000   and   $12,366,000   for  federal  and  state   purposes,
    respectively.  As of December  31,  2002,  the Company also has tax credit
    carryforwards  of $261,000 and  $133,000  for federal and state  purposes,
    respectively.  The losses expire beginning in 2009 and 2003, respectively.
    Federal and State of California tax laws impose  significant  restrictions
    on the utilization of net operating loss  carryforwards  in the event of a
    change in  ownership  as  defined by the  Internal  Revenue  Service  Code
    Section  382. In  addition,  in order to realize the benefits of the state
    net operating  carryforwards,  the Company will have to  re-establish  its
    business presence in the State of California.

6.  NOTES PAYABLE

    In  July  2000  the  Company   approved  bridge  financing  from  Thinking
    Technologies,  L.P.  ("Technologies"),  a related  party,  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, by instrument  of transfer,  Technologies  transferred
    the Note to Europa International Inc. ("Europa"), also a related party. 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 will 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  accumulates at
    10% per annum.  Through  December  31,  2002,  the  Company  had  received
    $1,000,000 in principal  (including  approximately  $33,000 from Europa in
    2002).  Through December 31, 2002, a liability of  approximately  $215,000
    for interest has accrued on the note and is included in accrued expenses.

    During the year ended  December 31, 2002,  the Company  received  advances
    approximating  $75,000 from Europa  International,  Inc., a related party.
    These  loans  bear  interest  at 10% per  annum  and are due upon  demand.
    Through  December  31,  2002,  a  liability  of  approximately  $6,000 for
    interest has accrued on the loan and is included in accrued expenses.

    For the year ended  December  31,  2002,  the  Company  recorded  non-cash
    interest expense  approximating  $100,000 for accrued interest on the note
    and related party loan.

    For the year ended  December  31,  2001,  the  Company  recorded  non-cash
    interest  expense  of  approximately   $127,000  in  connection  with  the
    amortization of the discount on the beneficial  conversion  feature of the
    convertible note (the earliest  conversion date was February 12, 2001) and
    approximately $91,000 for accrued interest on the note.

                                                                           F-11


<PAGE>


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

7.  SHAREHOLDERS' DEFICIENCY

    Stock

      On March 7, 2000,  200 shares of Series B Convertible  Preferred  Stock,
      $.001 par value per share,  were issued to the Company's  Chairman.  The
      Series B Preferred  Stock has certain  voting control rights until March
      7, 2005 (see Note 12.).

      In August 2000,  the Company  authorized  400,000 shares of new Series C
      preferred  stock.  At December 31, 2002, no Series C preferred stock has
      either been sold or distributed.

    Warrants

      The Company  consummated  a series of  financing  transactions  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 December
      2006.  Warrants to purchase 456,250 shares of the Company's common stock
      at $3.90 per share (156,250 to Thinking Technologies,  L. P. and 300,000
      to its  Underwriter),  were also  issued.  In August  2000, a partner in
      Technologies  liquidated  his  interest and received a warrant for 5,453
      shares  of  the  Company's  common  stock.  This  distribution   reduced
      Technologies'  warrants  to  purchase  common  shares  from  156,250  to
      150,797. The above 456,250 warrants all expired in August 2001.

      In addition,  in October and November  1996,  the Company  completed its
      initial public offering and issued  1,610,000  shares of common stock at
      $6.50  per  share  for net  proceeds  of  approximately  $8,470,000.  In
      connection with its initial public offering, the Company sold options to
      purchase  140,000 common shares to its underwriter for $.001 per option.
      These options expired during October and November of 2001.

      On December 10, 1999, in connection with the acquisition of Tritium, the
      Company issued 2,450,000 stock warrants at an exercise price of $.50 per
      share  to  an  acquisition   consultant  as  compensation  for  services
      provided. These warrants vested on March 7, 2000, and expire in December
      2004. At December 31, 2002 and 2001,  these  warrants had no value.  The
      warrants  are  subject to certain  anti-dilution  adjustments  (See Note
      12.).

      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.

      As  discussed  in Note 6.,  pursuant to the 2000 bridge  financing  from
      Technologies,  the Company granted a warrant 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 (see Note 6.).

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

                                                                           F-12


<PAGE>


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

7.  SHAREHOLDERS' DEFICIENCY (CONTINUED)

    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 of 35,518 and 45,777 at December 31, 2002 and
      2001,  respectively,  were  previously  granted  under the Plans to four
      Board members at an exercise  price of $1.00 per share.  During 2002 and
      2001, 10,259 options were forfeited each year due to the resignations of
      Board members.

      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 2002
      and 2001, three of the directors  resigned,  forfeiting their respective
      options.  Options  outstanding for the above were 29,741 at December 31,
      2002 and 2001.

      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.

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

                                                                           F-13


<PAGE>


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

7.  SHAREHOLDERS' DEFICIENCY (CONTINUED)

      A summary of the status of the  Company's  stock  options as of December
      31, 2002 and 2001,  and the changes  during the years ended December 31,
      2002 and 2001, is presented below:

<TABLE>
<CAPTION>
                                                      Number of         Range of
                                                      Shares            Exercise Prices
                                                  -----------------    -----------------
<S>                                               <C>                  <C>
Outstanding at January 1, 2001                            2,157,900      $   .50 - 1.000
Granted                                                          -       $            -
Exercised                                                        -       $            -
Forfeited                                                  (295,000)     $   .50 - 1.000
                                                  -----------------
Outstanding at December 31, 2001                          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
                                                  =================

Weighted-average fair value of options remaining exercisable
At December 31, 2002                                               $          1.48
                                                                  =================
</TABLE>





                                                                           F-14


<PAGE>


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


7. SHAREHOLDERS' DEFICIENCY (CONTINUED)

The following table summarizes information about stock options outstanding as of
December 31, 2002:

<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              2002              Life              Price             2002              Price
----------------    --------------    --------------    --------------    --------------    --------------
<S>                 <C>               <C>               <C>               <C>               <C>
         $ 1.00            35,518       3.6 years              $ 1.00            35,518            $ 1.00
           0.79            29,482       2.6 years                0.79            29,482              0.79
           0.50         1,502,900       6.9 years                0.50         1,502,900              0.50
                    --------------                                        --------------
                        1,567,900                                             1,567,900
                    ==============                                        ==============
</TABLE>

As  discussed  in Note 2, the Company  accounts  for its  stock-based  awards to
directors and employees  using the intrinsic value method in accordance with APB
Opinion No. 25,  "Accounting  for Stock  Issued to  Employees,"  and its related
interpretations.

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 tradeable, 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.  If the computed fair values of the
awards had been amortized to expense over the vesting period of the awards,  pro
forma net  income(loss)  would have been  $769,000  ($.08 per share) in 2002 and
$(400,000) ($(.04) per share) in 2001.


                                                                           F-15

<PAGE>



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


8.  PREFERRED STOCK

    In  January  2002,  Technologies  entered  into an  amendment  to a voting
    agreement  with  a  shareholder  of the  Company's  Series  A  Convertible
    Preferred Stock, whereby Technologies agreed to convert its note (see Note
    6), 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.

9.  FAIR VALUE OF FINANCIAL INSTRUMENTS

    The carrying amounts reflected in the financial statements at December 31,
    2002 and 2001 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,  2002 is based on the  current  rates and terms at which the
    Company could borrow funds.

10. ADVERTISING COSTS

    Advertising  costs are charged to operations  when incurred.  There was no
    advertising expense for the years ended December 31, 2002 and 2001.

11. 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.   Technologies  owned   approximately  38%  of  the  Company's
    outstanding  common  stock as of  December  31,  2002 and  2001,  and owns
    warrants to purchase  893,308  additional  shares of common  stock.  As of
    December  31,  2002,  Europa has a right to convert  the note  payable and
    accrued interest thereon to 113,862,820  shares of the common stock. As of
    December 31, 2002, Mr. Knoll,  as an individual,  owns options for 552,900
    shares and warrants for 549,800 shares of common stock as compensation for
    his  services  (see  Note  7.) 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  2002,  Knoll  Capital
    Management,  L.P.  advanced an  approximately  $75,000  demand loan to the
    Company, bearing interest at 10% per year.

12. BUSINESS ACQUISITION AND DISCONTINUED OPERATIONS

    On  March  6,  2000,  the  Company  formed  a  wholly  owned   subsidiary,
    StartFree.com,  Inc., a Delaware  corporation  ("StartFree").  On March 7,
    2000,  StartFree  acquired  substantially  all of the assets  and  assumed
    specified  liabilities  of  Tritium  Networks,   Inc.   ("Tritium").   The
    consideration  for the  acquisition  was  paid  through  the  issuance  of
    1,148,798.5  shares of a new Series A convertible  preferred  stock valued
    for approximately  $2,598,000,  as determined by an independent appraisal.
    The 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.

                                                                           F-16


<PAGE>



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

12. BUSINESS ACQUISITION AND DISCONTINUED OPERATIONS (CONTINUED)

    Tritium was an internet service provider based in Cincinnati,  Ohio at the
    time  of the  acquisition  transaction.  Tritium  provided  free  internet
    service for subscribers in exchange for the display of  advertisements  on
    the lower portion of the subscriber's  screen.  AdSmart Corporation agreed
    to provide  internet-based  advertising  and to pay  royalties  to Tritium
    based upon the number of individual  advertisements  viewed.  In addition,
    one supplier  provided  connectivity  for its internet  network  services.
    These  agreements  were assumed by StartFree and continued in effect until
    December 2000.

    In connection with the Tritium acquisition, the Company issued warrants to
    an acquisition  consultant to purchase  2,450,000  shares of the Company's
    common stock exercisable at $.50 per share.  These warrants were issued on
    December  10,  1999,  and  vested on March 7, 2000,  when all  contractual
    obligations   had  been  met.   The   warrants   are  subject  to  certain
    anti-dilution adjustments (see Note 7.).

    In  addition,  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 in order for  StartFree to deliver the warrant to
    AdSmart Corporation to obtain the right to Tritium's advertising agreement
    with AdSmart.  Beginning  March 7, 2000,  AdSmart was entitled to exercise
    warrants for 500,400 shares of common stock.  The remainder will vest upon
    the occurrence of certain events. The warrants are exercisable at $.01 per
    share. In October 2000, Engage,  Inc., a successor via a merger to AdSmart
    Corp.,  exercised  a warrant  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 part of the  Tritium  acquisition,  200 shares of Series B  Convertible
    Preferred  Stock,  $.001 par value per share were issued to the  Company's
    Chairman.  The Series B Preferred  Stock has voting  control  rights until
    March 7,  2005.  The  value of the  Series  B  Preferred  stock of $22 was
    determined by independent appraisal.

    In December 2000, the Company discontinued the operations of StartFree. In
    2000,  StartFree  earned  revenues   approximating  $46,000  and  incurred
    operating expenses  approximating  $2,306,000.  Assets that were abandoned
    were property and equipment  approximating  $39,000,  prepaid  advertising
    approximating $274,000 and goodwill approximating $2,664,000.  The Company
    recorded shutdown costs approximating $63,000, which were included in loss
    on  disposal  of  subsidiary.  Included  in  accounts  payable and accrued
    expenses at  December  31,  2001,  is  $916,000  related to the  remaining
    obligations and the shutdown costs of 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-17


<PAGE>


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

13. NEW ACCOUNTING PRONOUNCEMENTS

    Standards Implemented

    In April 2002, the Financial Accounting Standards Board (FASB) issued SFAS
    No. 145,  "Rescission of FASB  Statements  No. 4, 44 and 64,  Amendment of
    FASB Statement No. 13, and Technical Corrections," effective May 15, 2002.
    SFAS No. 145  eliminates  the  requirement  that gains and losses from the
    extinguishment  of debt be aggregated and  classified as an  extraordinary
    item, net of tax, and makes certain other technical corrections.  SFAS No.
    145 did not have a material effect on the Company's Financial Statements.

    In  October  2001,  the FASB  issued  SFAS No.  144,  "Accounting  for the
    Impairment  or  Disposal of  Long-Lived  Assets."  SFAS No. 144  addresses
    significant  issues  relating  to the  implementation  of  SFAS  No.  121,
    "Accounting  for the  Impairment of Long-Lived  Assets and for  Long-Lived
    Assets to Be Disposed Of," and develops a single accounting  model,  based
    on the framework  established in SFAS No. 121 for long-lived  assets to be
    disposed  of by sale,  whether  such  assets are or are not deemed to be a
    business.  SFAS No. 144 also modifies the accounting and disclosure  rules
    for  discontinued  operations.  However,  under this standard,  long-lived
    assets  (disposal  groups)  classified as held for disposal as a result of
    disposal  activities that were initiated prior to this Statement's initial
    application  shall  continue to be accounted  for in  accordance  with the
    prior  pronouncement  applicable for that disposal (for the Company, it is
    APB Opinion 30 - for Discontinued Operations). Therefore, the standard, as
    adopted  on  January  1,  2002,  did not  have a  material  impact  on the
    Company's Financial Statements.

    In July 2001, the FASB issued SFAS No. 141,  "Business  Combinations," and
    SFAS No.  142,  "Goodwill  and  Other  Intangible  Assets."  SFAS No.  141
    requires  the  use of the  purchase  method  of  accounting  for  business
    combinations  and  prohibits  the use of the pooling of interests  method.
    Under  the  previous  rules,  the  company  used the  purchase  method  of
    accounting.  SFAS No. 141 also refines the definition of intangible assets
    acquired in a purchase  business  combination.  As a result,  the purchase
    price  allocation of current  business  combinations may be different than
    the  allocation  that would have  resulted  under the old rules.  Business
    combinations  must be accounted for using SFAS No. 141  effective  July 1,
    2001.

                                                                           F-18


<PAGE>


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

13. NEW ACCOUNTING PRONOUNCEMENTS (continued)

    SFAS No. 142  eliminates the  amortization  of goodwill,  requires  annual
    impairment  testing of goodwill and  introduces  the concept of indefinite
    life  intangible  assets.  The company  adopted SFAS No. 142 on January 1,
    2002. The new rules also prohibit the amortization of goodwill  associated
    with business  combinations  that closed after June 30, 2001. The adoption
    of SFAS No.  141 and 142 did not have a material  effect on the  Company's
    Financial Statements.

    New Standards to be Implemented

    In June  2001,  the  FASB  issued  SFAS No.  143,  "Accounting  for  Asset
    Retirement  Obligations."  SFAS No. 143 provides  accounting and reporting
    guidance  for  legal   obligations   associated  with  the  retirement  of
    long-lived assets that result from the acquisition, construction or normal
    operation of a long-lived asset. SFAS No. 143 requires the recording of an
    asset and a liability  equal to the present value of the  estimated  costs
    associated  with the  retirement  of  long-lived  assets  where a legal or
    contractual  obligation  exists.  The asset is required to be  depreciated
    over the life of the related  equipment or facility,  and the liability is
    required to be accreted each year based on a present value  interest rate.
    The standard is effective for the company on January 1, 2003.  The company
    has  reviewed the  provisions  of this  standard,  and its adoption is not
    expected to have a material effect on the Company's Financial Statements.

14. SUBSEQUENT EVENT

    Pursuant to a letter of intent dated  November  12, 2003,  the Company has
    agreed with GVI Security, Inc. ("GVI") to enter into definitive agreements
    providing  for the merger of GVI with and into a newly formed wholly owned
    subsidiary of the Company.  A limited liability company of which Europa is
    a 50% member holds  approximately  38% of the outstanding  common stock of
    GVI.  Fred  Knoll,  our  Chairman,  is  the  principal  of  Knoll  Capital
    Management, L.P., which manages Europa's investments. GVI is the exclusive
    distributor of Samsung Electronics security products in North America, and
    distributes  video  surveillance and other security  products to wholesale
    distributors  and  consumers.  The letter of intent  provides that in such
    merger,  the  stockholders of GVI would be issued shares of a new class of
    our  preferred  stock that upon  conversion  would  constitute  95% of our
    outstanding shares of Common Stock on a fully-diluted basis,  resulting in
    substantial   dilution  to  our  current   stockholders.   The  definitive
    agreements would contain customary representations, warranties and closing
    conditions.  There can be no  assurance  that the merger  with GVI will be
    consummated.

                                                                           F-19




<PAGE>

                                  SIGNATURES

         In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                   THINKING TOOLS, INC.
Dated:  February 12, 2004

                                   By:   Moshe Zarmi
                                         ---------------------
                                   Name: Moshe Zarmi
                                   Title: President and Chief Executive Officer

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

                                   /s/ Fred Knoll
                                   ---------------------------
                                   Fred Knoll, Director

                                   Dated:  February 12, 2004

                                   /s/ Moshe Zarmi
                                   ---------------------------
                                   Moshe Zarmi, Director

                                   Dated:  February 12, 2004

                                   ----------------------------
                                   Frederick Gluck, Director

                                   Dated:  February 12, 2004