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                    U. S. 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 (FEE REQUIRED)
---

     For the fiscal year ended December 31, 2002

                                       OR


___ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
    OF 1934 (NO FEE REQUIRED)

     For the transition period from _____ to _____


                          Commission File No. 000-24755
                                              ---------


                        UNIVERSAL GUARDIAN HOLDINGS, INC.
                 ----------------------------------------------
                 (Name of Small Business Issuer in its Charter)


          DELAWARE                                     33-0379106
-------------------------------            ------------------------------------
(State or Other Jurisdiction of            (I.R.S. Employer Identification No.)
Incorporation or Organization)


            5759 FLEET STREET, SUITE 110, CARLSBAD, CALIFORNIA   92008
            ----------------------------------------------------------
               (Address of Principal Executive Offices)        (Zip Code)

                                 (760) 579-0808
                ------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the Exchange Act:

                                                  Name of Each Exchange
         Title of Each Class                      on Which Registered
         -------------------                      -------------------

               None                                     None

Securities registered under Section 12(g) of the Exchange Act:


                          COMMON STOCK, PAR VALUE $.001
                          -----------------------------
                                (Title of Class)

Check whether the issuer:  (1) Filed all reports required to be filed by Section
13 or 14(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.

                                  Yes X No ____

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

State issuer's revenues for its most recent fiscal year:  $2,779,449.

The aggregate market value of the voting stock held by  non-affiliates  computed
by reference to the average bid and asked prices of such stock on April 11, 2003
was $22,451,554.

The number of shares  outstanding  of the issuer's  common stock as of April 11,
2003 was 16,288,014.

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


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                                     PART I

ITEM 1.    BUSINESS

CAUTIONARY  STATEMENT  FOR PURPOSES OF "SAFE HARBOR  PROVISIONS"  OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.

Certain  statements  contained in this Annual Report on Securities  and Exchange
Commission  ("SEC")  Form 10-KSB  ("Form  10-KSB")  constitute  "forward-looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of 1995. These  statements  involve known and unknown risks,  uncertainties  and
other factors that may cause our or our  industry's  actual  results,  levels of
activity,  performance  or  achievements  to be  materially  different  than any
expressed or implied by these forward-looking  statements.  These statements may
be contained in our filings with the Securities and Exchange  Commission,  press
releases,  and  written or oral  presentations  made by our  representatives  to
analysts, rating agencies,  stockholders, news organizations and others. In some
cases, you can identify forward-looking statements by terminology such as "may,"
"will,"  "should,"  "intend",  "expects,"  "plans,"  "anticipates,"  "believes,"
"estimates," "predicts," "potential," "continue," or the negative of these terms
or other  comparable  terminology.  Although we believe that the expectations in
the  forward-looking  statements  are  reasonable,  we cannot  guarantee  future
results, levels of activity, performance or achievements.

                                    OVERVIEW

Universal Guardian Holdings, Inc. (the "Company" or "UGHO") is a holding company
which was  incorporated  in  Delaware in 1989 under the name  Guideline  Capital
Corporation.  After its  incorporation,  the Company  engaged in the business of
locating an acquisition.  An acquisition was effected when,  effective September
13, 1999, pursuant to a Share Exchange and Reorganization Agreement, the Company
acquired all of the issued and outstanding shares of Hollywood Partners, Inc., a
California  corporation,  which  was  a  wholly  owned  subsidiary  of  Vitafort
International  Corporation  (OTCBB:  VRFT).  The  Company  changed  its  name to
Hollywood  Partners.com,  Inc. and traded under the OTCBB symbol HLYP. Until the
first  quarter of 2001, the Company was a marketing and promotions company using
entertainment-themed  Websites  which  presented  both  proprietary  and sourced
content,  while  seeking to build relationships with Website visitors to collect
their  demographic  and lifestyle information. This business model was abandoned
and the various web-related businesses were discontinued in the first quarter of
2001  due to the collapse of many Internet companies and the Company's inability
to  generate  significant revenues. The Company continued to seek an acquisition
and  find  a  new  business  model.  The Company then engaged in the business of
seeking  to develop entertainment properties, and although rights were obtained,
no  revenues  were  realized  and  that  business  was  disposed.

On December 31, 2002, a closing was held pursuant to a Share Exchange  Agreement
and Plan of  Reorganization  dated as of December 4, 2002 and the  Amendment  to
Share  Exchange  Agreement and Plan Of  Reorganization  dated as of December 16,
2002 (the "Plan"),  with Universal  Guardian  Corporation,  a Nevada corporation
founded  in March  2001  ("UGC"),  pursuant  to which a change of control of the
Registrant  occurred.  The  Company  changed  its  name  to  Universal  Guardian
Holdings,  Inc. and trades under the OTCBB symbol UGHO. Pursuant to the Plan, an
aggregate of 11,300,000  shares of the Registrant's  common stock were issued to
UGC's  shareholders in exchange for all of the issued and outstanding  shares of
UGC.  These shares  represented  approximately  70% of the Company's  issued and
outstanding  stock.  The  transaction  was accounted for as a reverse merger and
accordingly, the historical financial statements presented are those of UGC.


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Management  was  encouraged  by  our  first  full year of operations. During the
course  of  the  year,  we  recorded  revenue  of  $2,779,449  and net losses of
$1,331,111.  The  revenue reported during the year was derived from our progress
on the design and installation of Waterside Security Systems (WSS) for the eight
U.  S.  Navy  ports currently under contract. We are currently in the process of
completing final quality inspections and documentation on the first of four port
installations, and are now beginning installation staging for the remaining four
ports.  The  first  four ports are expected to be completed in April 2003. As of
December  31,  2002,  we  had a remaining contract backlog (related to the eight
original  ports)  of  approximately  $5.3  Million.

As a result of the U. S. Navy's findings and observations  during the design and
installation  of the  WSS at the  first  four  ports,  the  Navy  has  requested
additional  proposals for WSS maintenance  and training  programs and additional
ports. We expect these contract awards to be issued by the end of June 2003.

We believe  that we are  positioned  to be a  successful  player in the defense,
homeland and commercial security markets. Our expertise,  products, and services
include  harbor,  port and  coastal  security,  global  container  tracking  and
scanning,  explosives  and  weapons  detection  systems,  special  weapons,  and
facility   security.   Our  patent  pending   UniGuard   command,   control  and
communications platform integrates surveillance,  threat detection, asset/threat
tracking and response  capabilities  to provide  shared  situational  awareness,
coordinated  operational planning and execution,  and optimized force deployment
among   military,   law   enforcement,   government   and   emergency   services
organizations.

We currently  provide our  products  and  services to the United  States Navy to
protect its most important  assets around the world. We are rapidly  penetrating
the expanding  threat  mitigation,  anti-terrorism  and critical  infrastructure
protection markets and are working to establish  Universal Guardian as a premier
provider of  anti-terrorism,  threat analysis services and security products and
solutions worldwide.

                              PRODUCTS AND SERVICES

UNIGUARD

We develop  and  produce  modular  security  solutions  based on  UniGuard,  our
proprietary  platform  architecture.  UniGuard provides automated  surveillance,
tracking,  threat  identification,   development  of  coordinated  response  and
interdiction   plans,   and   secure   communications   interoperability   among
decision-makers and tactical  responders.  UniGuard  facilitates the delivery of
critical  information to key decision makers  throughout the entire  operational
network.

UniGuard   facilitates  the  integrated  delivery  of  relevant  information  to
appropriate  parties  throughout the entire  operational  network  utilizing the
following key components:

     o    High-resolution RADAR Systems
     o    Integrated SONAR Systems
     o    Unmanned Underwater Vehicles (UUV)
     o    Video and Thermal Camera Systems
     o    Explosives and Weapons Detection Systems
     o    Global Container Tracking Systems
     o    Shipboard Security and Safety Systems

The  UniGuard  platform is designed to be readily  adapted to various  security,
surveillance, threat mitigation, and asset management applications. Our UniGuard
systems can also be applied to  critical



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infrastructure  protection,  passenger  terminal security,  commercial  property
security, and high-profile event security. Current applications include:

     o    Waterside Security
     o    Petroleum Asset Management and Security
     o    Security and Surveillance for Property Managers
     o    Terminal and Facilities Security


UniPark, a variation of UniGuard,  provides multi-tenant facility asset security
and surveillance.  This system is marketed to apartment and condominium property
owners and managers,  and is sold on an annual and multi-year contract basis. We
have several  customers that have executed annual contracts and are scheduled to
install  systems  beginning  in late May of this year.  Based on current  market
enthusiasm, we anticipate very strong and continued demand for this product.

UniGuard  is an  evolving  product  and  commands a  significant  portion of our
development  efforts  and  engineering  resources.  We  will  continue  to  take
advantage   of  both   in-house   and  outside   expertise   to  ensure   rapid,
cost-effective, and market-sensitive product enhancements.

SECURITY ASSESSMENT AND VULNERABILITY EVALUATIONS (SAVE)

Our Security  Assessment and Vulnerability  Evaluations (SAVE) provide customers
with   complete   security   solutions   tailored  to  match  their   individual
environmental and budgetary requirements. Conducted by career anti-terrorism and
security  experts,  this proprietary  process  identifies and mitigates areas of
vulnerability and recommends  appropriate  solutions for immediate and follow-on
security improvements.

SAVE is  complemented  by a  proprietary  software  package  (validated  by U.S.
Government security agencies) that ensures rapid and accurate report generation.
Each  customer   receives  a  Security   Improvement   Baseline   Report  and  a
comprehensive Executive Security Report, both of which meet stringent government
reporting standards.

SAVE also  provides  a  program  plan for  ongoing  systems  diagnostics,  cyber
security,  network security,  information warfare and corporate profiling.  This
ensures the long-term  safety of the  information  and physical assets within an
organization, and effectively positions Universal Guardian as the ideal provider
of follow on security services and technology solutions.

As  an  optional  addition to SAVE, we also offer an Aggressor Intrusion Survey,
which provides physical penetration testing of installed security measures. This
survey  utilizes  the  extensive  experience  of  former  Special  Operations
professionals.  Once  existing  security  measures  have  been  stress-tested,
vulnerabilities  are  identified  and  necessary  improvements  are recommended.
Management  believes  that  no  other company is better suited to understand the
impact  and  application  of  technology  on  counter-terrorism  than  Universal
Guardian.

SPECIAL WEAPONS - ALTERNATIVE USE OF FORCE

Today's increasingly unstable worldwide political climate has created a need for
effective  non-lethal and  less-lethal  solutions.  Our Special  Weapons Systems
attempt to squarely address this need.  Currently under  development are a range
of  multi-market  non-lethal  personal  protection  and  riot  control  products
designed  for law  enforcement,  military,  government,  private  security,  and
consumer markets  worldwide.  These markets are demanding new and more effective
methods  to  defuse  civil  unrest  and  subdue  perpetrators   without  causing
life-threatening  injury to law enforcement personnel,  innocent bystanders,  or


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the  perpetrator.  Non-lethal  weapons  enhance  military  and  law  enforcement
capabilities  by  enabling  the  soldier  and police  officer  to  respond  with
proportionate force. The tactical flexibility achieved ensures that the delicate
balance between mission accomplishment,  force protection, public sentiment, and
equanimity of response remains stable.

The personal  and home  protection  market  offers the largest  opportunity,  as
recent  terrorist  attacks in the United  States have created a climate of fear.
Since the World Trade Center  attacks,  gun sales in the U.S. have  increased by
22%. However,  many homeowners are conflicted between defending their family and
possessing a deadly weapon.  Our non-lethal  weapons offer a viable  solution to
this  dilemma.  We are  nearing  the  launch  of  StunLight,  the  first  of our
proprietary  non-lethal  weapons  designed  to be safe  enough  for home use yet
effective  enough to  satisfy  the  stringent  requirements  of law  enforcement
personnel.

By leveraging our management's military, law enforcement, and weaponry expertise
with  leading-edge  proprietary  systems  and  our  developing  reputation  as a
preferred  provider of  state-of-the-art  security  systems to the U.S. Navy, we
intend to  successfully  and rapidly  penetrate  the $1.1 billion  international
market opportunity for non-lethal and less-lethal weapons.

TERMINAL SECURITY PRODUCTS

Due to heightened  customer  interest in screening and trace detection  devices,
Universal  Guardian recently added a comprehensive  selection of private-branded
metal detectors, cargo/parcel X-ray machines, and explosives/narcotics detectors
to its product  lineup.  These  products  are are  designed to be used as either
stand-alone devices or integrated into the Uniguard systems and are manufactured
for us by industry  leaders under OEM agreements that ensure the "best possible"
price points.

UNMANNED UNDERWATER VEHICLES (UUV)

We offer the Commando UUV as a complementary  product to our maritime solutions.
Over 10  years  in the  making,  this  unique  system  is  designed  to  perform
underwater inspection of dams, waterways, ships, and underwater structures. UUVs
provide cost-effective and safe alternatives to situations that normally require
human divers.

Designed  to meet the  needs of the most  demanding  government,  military,  and
commercial  customers,  the Commando UUV offers a comprehensive list of standard
features and unparalleled value.  Commando offers features and options not found
on similar systems,  including  side-scan  SONAR,  xenon auxiliary  lights,  and
integration into Universal Guardian's UniGuard platform.

Commando  is rated to depths up to 390 feet and is  capable of speeds up to 1.35
knots,  providing  reliable,  efficient  operation.  The  system can go from its
custom  aluminum  cases to full  operation in minutes and can be left  submerged
indefinitely,  ensuring  that  Commando  is ready to be called  into action when
needed.

                            STRATEGIC BUSINESS GROUPS

Recently,  we reorganized and streamlined our management team and business units
in order to focus on developing and expanding our core business beyond Waterside
Security  and into  broader  markets.  Additionally,  by reducing  the number of
strategic  business units (from five to three) and  corresponding  managers,  we
have  significantly  decreased  operational  overhead  and  increased  operating
efficiency.


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MARITIME SECURITY GROUP

The Maritime Security Group was initiated through the acquisition of The Harbour
Group, Inc. in August 2002. The Maritime Security Group has been capitalizing on
the  discernible  need,  especially  with  the  U.S.  Navy,  for a single-source
supplier  of  proprietary integrated maritime security solutions. Current target
markets  include  U.S. government agencies, all departments within the military,
corporations,  and  foreign  governments. This group seeks to become the premier
provider of maritime security assessments, surveillance, detection, and response
solutions  for the U.S. Navy. The systems and products currently being delivered
under  existing  contracts  with  the  Navy  include  proprietary  security
vulnerability  diagnostics  and  asset  protection  programs,  fully-integrated
waterside security systems, and command and control systems. We believe that the
credibility  of  our  U.S.  Navy  waterside security installations will generate
brand awareness to military, government, law enforcement, and commercial markets
worldwide.

Our Maritime  Security  Group provides  integrated  maritime  security  systems,
products and services  worldwide.  This group currently markets,  installs,  and
maintains UniGuard Waterside Security Systems, Unmanned Underwater Vehicles, and
Ocean Container Tracking and Scanning Systems.  We are currently  installing and
maintaining  port and harbor security  systems that protect the U.S. Navy's most
critical assets around the world.  The Maritime  Security Group and its UniGuard
Waterside   Security  System  are  major   components  of  the  Navy's  Critical
Infrastructure  Protection  program.  NATO  countries  have now begun to express
significant   interest  in  our  waterside  security  system  as  the  U.S  Navy
installations  begin  abroad.  In  addition,   the  U.S.  Coast  Guard  is  also
considering our Waterside Security Systems to protect its most valuable assets.

SECURITY PRODUCTS AND SYSTEMS GROUP

Our Security Products and Systems Group provides security products,  systems and
services that are designed to meet existing and future military,  government and
law enforcement  requirements.  Product offerings include explosives and weapons
detection systems,  vehicle tracking systems, and non-lethal weapons systems. In
addition,  this Group also  performs our  proprietary  Security  Assessment  and
Vulnerability  Evaluation  process  (SAVE),  which is  codified  in  proprietary
software  based  upon the U.S.  Department  of  Homeland  Defense  criteria  for
security  effectiveness.  The  Group may  perform  stand-alone  assessments  and
security  evaluations  for customers  who do not desire a full  security  system
installation due to budgetary  constraints or inopportune timing.  However,  the
primary objective is to perform  assessments and evaluations in conjunction with
a  fully-integrated  security  system  installation  utilizing  our products and
services.

TECHNOLOGIES AND ENGINEERING GROUP

Our Technologies  and Engineering  Group designs,  develops,  and integrates the
hardware,  databases,  software,  and  systems  that  make  up the  core  of our
proprietary  UniGuard  platform.   This  Group  also  researches  and  certifies
third-party  solutions for integration into UniGuard,  and develops training and
maintenance programs.


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                             THE MARKET OPPORTUNITY

Terrorist  attacks against the USS Cole, the Pentagon and the World Trade Center
made  apparent vast  vulnerabilities  in the methods and systems used to protect
homeland assets and assets abroad. The need to detect,  accurately  identify and
mitigate security risks requires immediate and effective security solutions. Our
comprehensive suite of proprietary and patented anti-terrorism, law enforcement,
military,  force protection,  and security  solutions provide our customers with
the tools  necessary to  significantly  deter critical  infrastructure  security
risks.

Market  awareness of domestic and foreign  security  platform  installations  is
creating  customer  demand  in a  number  of NATO  countries  and  international
commercial   organizations  that  require  comprehensive,   integrated  security
solutions.

We believe that our products and services  address the  unprecedented  expanding
national and  international  anti-terrorism  and  security  markets in military,
government and commercial market sectors worldwide. In the U.S. alone, new focus
on the  protection of interests  and assets has created an expanding  market for
security products and services to address new security  mandates.  With over $90
billion in funds relating to homeland security made available in 2002, the U. S.
Government  is  looking  for  immediate  providers  of  comprehensive   security
solutions.  We also believe that significantly larger market opportunities exist
in the areas of national and international infrastructure protection,  passenger
terminal security,  commercial asset protection,  law enforcement,  high-profile
event security, and consumer home security.  Management believes we are uniquely
equipped to fill the needs of this rapidly expanding market opportunity.

Military

Our initial focal point with the military has been the  installation of security
systems  in the U. S.  Navy's  most  vulnerable  ports,  each of  which  harbors
billions of dollars in assets, including nuclear warships and other materiel.

We are  expanding our initial  market focus to include the U.S.  Coast Guard and
other  branches of the U.S.  Armed Forces,  as well as foreign  governments  and
militaries. The addressable market for our services and proprietary technologies
is vast:  The target market  includes 42 U.S. Navy harbors  worldwide,  183 U.S.
Coast Guard harbors,  approximately  173 commercial  shipping ports in the U.S.,
and 919 international harbors.

While we are  presently  working  with the U.S.  Navy to  secure  the top  naval
harbors around the world, we are also focusing on the U.S. Coast Guard as one of
our  next  major   customers.   According  to  The  Center  for   Strategic  and
International  Studies' May 2002  publication,  "The Uncertain Costs of Homeland
Defense:  The Cost and Justification of the FY2003 Budget Submission," the Coast
Guard's  budget will rise from $5.4  billion to $6.9 billion in the near future.
This  includes an additional  $406 million  allocated to improve port security.



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Government

We already have targeted key federal,  state, and local  government  agencies in
the U. S. and abroad (particularly those that support critical  infrastructures)
as potential purchasers of our services and products. Examples include airports,
transportation  facilities,  government buildings,  communications,  and similar
highly visible assets.  These agencies need security  assessments to demonstrate
that they are in compliance with government security requirements and adequately
prepared for potential terrorist actions.

Commercial Assets

We have  identified  several  infrastructure  design,  management,  and  support
markets as  potential  channels  for our  products  and  services.  Using  local
infrastructure  partners to integrate  and install our  systems,  we will pursue
potential customers in the following worldwide markets:  oil and gas exploration
and processing  (drilling  platforms and  refineries),  power plants (fossil and
nuclear),  commercial shipping (vessels and ports),  telecommunications,  cruise
lines,  commercial real estate and property management,  commercial construction
(contractors  and  architects),   high-profile  events  (e.g.,  Olympics),   and
financial  institutions.  We are  working  with  several  strategic  partners to
rapidly penetrate these markets,  and we expect to commence performance on these
contracts by May of 2003.

Alternative Use-of-Force Products

Our non-lethal  weapons are designed for law enforcement  agencies,  corrections
facilities,  public and private  security,  military,  government,  and consumer
personal  protection  markets around the world.  The market for these weapons is
large and growing rapidly. The total market for smarter,  safer, and less-lethal
small  arms is  expected  to total $1.1  billion by 2004,  growing at an average
annual  growth rate of  approximately  40% from 1999 to 2004  (Source:  Business
Communications  Co.,  Study RGB-236:  Smarter,  Safer,  Less-lethal  Small Arms:
Technologies, Markets, and Futures 2000).

For the military and law  enforcement,  non-lethal  weapons enable  soldiers and
officers to respond in an urban environment with proportionate  force,  ensuring
the delicate balance between mission  accomplishment,  force protection,  public
sentiment  and  equanimity  of response is  preserved.  Thus,  military  and law
enforcement agencies markets worldwide have seen an increased demand for new and
more effective  methods to defuse civil unrest and subdue  perpetrators  without
causing permanent injury to enforcement  personnel,  innocent bystanders,  or to
the perpetrator. With 4.9 million police officers worldwide (over 900,000 in the
United States as of 1999),  the potential law enforcement  market for non-lethal
products is significant (Source: Bureau of Justice Statistics 2002: At a Glance,
U.S. Department of Justice, Office of Justice Programs).

Private Security

The private security market offers significant  opportunities for our non-lethal
products.  Of the estimated  800,000  security guards employed in the U.S., less
than 1% carry firearms (Source: Bill Cunningham, President of Hallcrest Systems,
Inc.,  Association of Security and  Intelligence  Specialists,  Law  Enforcement
Council Meeting, 2001). Private security guards generally lack adequate tactical
and weapons training.  Armed with lethal weapons but lacking adequate  training,
security   guards  pose   significant   risks.   Our  non-lethal   products  may
significantly mitigate the myriad of political,  legal, and personnel quandaries
associated  with   discharging  a  lethal  weapon  in  a  confined  and  crowded
environment.


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Consumer

Comprised  of more  than 100  million  households,  the U.S.  personal  and home
protection market offers us an expansive market for its non-lethal weapons. Many
citizens find themselves  conflicted between defending their family and having a
lethal  weapon  in the  home.  We are  positioning  our  non-lethal  weapons  as
alternatives  to  conventional  (lethal)  self-protection  devices  that  can be
successfully  targeted at the market for buyers of traditional  firearms such as
handguns,  rifles,  and  shotguns and those who are adverse to firearms but need
personal and home protection.

                                 OUR MANAGEMENT

Our  management,  Boards of Directors  and Advisors have  extensive  command and
leadership  experience  in military,  law  enforcement,  advanced  technologies,
international business practices and White House administration.

Management  and Board members have held  positions of Chief  Executive and Chief
Operating  Officers  in  the  private  sector,  as  well  as  Military  and  law
enforcement  assignments  including:   Chief  of  Police,  SWAT  Commander,  Law
Enforcement   Captain,   Navy  Captain,   FBI  Instructor  and  Chemical  Agents
Instructor.

Recently,  we reorganized and streamlined our management team and business units
in order to focus on developing and expanding our core business beyond Waterside
Security  and into  broader  markets.  Additionally,  by reducing  the number of
strategic  business units (from five to three) and  corresponding  managers,  we
have  significantly  decreased  operational  overhead  and  increased  operating
efficiency.

                                  RISK FACTORS

WE HAVE A NET LOSS FROM OUR INCEPTION AND HAVE A LIMITED  OPERATING HISTORY UPON
WHICH AN INVESTOR CAN EVALUATE OUR BUSINESS

To date,  we have had  limited  revenues  and has been  principally  engaged  in
research,  development,  organizational and startup activities. From the date of
our  inception  on March 28, 2001 to December  31,  2002 we have  experienced  a
cumulative net loss of $1,430,534.  We have limited operating history upon which
an  investor  may refer to for  performance  evaluation  and  assessment  of the
likelihood of our business  success must be considered in light of the expenses,
difficulties and delays  frequently  encountered in a first stage business.  Our
prospects must be considered speculative.

WE RECEIVED AN OPINION FROM OUR INDEPENDENT AUDITORS FOR THE YEAR ENDED DECEMBER
31, 2002 WHICH RAISED DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN

Our  consolidated  financial  statements  for the year ended  December 31, 2002,
which are  included in this Form  10-KSB,  indicate  that there was  substantial
doubt as of December  31, 2002 about our ability to continue as a going  concern
due to  our  need  to  generate  cash  from  operations  and  obtain  additional
financing.

WE ARE  DEPENDENT ON OUR PRESENT  MANAGEMENT TO EXPAND OUR BUSINESS AND THE LOSS
OF ANY OF THESE KEY EMPLOYEES COULD HAVE A NEGATIVE IMPACT ON OUR BUSINESS



                                       9
<PAGE>


Our success also depends in  significant  part on the continued  services of our
key officers. Current senior management,  Michael Skellern, Dennis Cole, Richard
Fields,  Michael  Briola,  Joseph  Celano and Lee Manko,  deliver  complementary
military,  law  enforcement,   consumer,  international  products  and  services
development,   and  financial  and  marketing  expertise.   We  have  employment
agreements  in place  with  these  individuals,  which may aid us with  employee
retention.  Losing one or more key  personnel  could harm our ability to operate
profitably,  since we would be  forced  to  expend  significant  time and  money
attempting to recover from the loss of one of any of our key officers. Diverting
working  capital to the pursuit of replacement  personnel could harm our ability
to move forward with our business plan resulting in reduced profits.

WE MAY  NEED  ADDITIONAL  FINANCING  TO  EXPAND  OUR  BUSINESS  AND  THERE IS NO
ASSURANCE THAT WE WILL BE ABLE TO OBTAIN ACCEPTABLE FINANCING IN THE FUTURE

If we are unable to generate  revenue and profits as  projected,  we may require
additional financing to fund our operations and our current plans for expansion.
A financing may involve  incurring  debt or selling  equity  securities to raise
money to pay for  increased  operating  expenses and the  implementation  of our
business  strategy.   Management  cannot  assure  an  investor  that  additional
financing will be available to us on commercially  reasonable  terms, or at all.
If we incur debt,  the risks  associated  with our  business and with owning our
stock could increase. If we raise capital through the sale of equity securities,
the  percentage  ownership  of our current  stockholders  would be  diluted.  In
addition,  any new equity securities may have rights,  preferences or privileges
senior to  current  holders  of our  common  stock.  If we are  unable to obtain
additional  financing,  our  ability  to fund our  operations  and  execute  our
business plan could be materially  and adversely  affected and an investor could
lose  all or a  significant  portion  of  their  investment.  Our  inability  to
adequately fund our operations would also harm our ability to earn revenues.

WE WILL NEED TO HIRE ADDITIONAL  QUALIFIED  PERSONNEL TO EXPAND OUR BUSINESS AND
THERE IS NO  ASSURANCE  THAT WE WILL BE ABLE TO  ATTRACT  AND  RETAIN  QUALIFIED
PERSONNEL

Our business  requires uniquely trained and experienced  professionals,  and our
success depends in large part upon our ability to attract, develop, motivate and
retain highly skilled personnel.  Qualified employees are a limited resource for
the foreseeable  future.  As a new Company with little history,  there can be no
assurance  that we will be able to engage  the  services  of such  personnel  at
competitive prices, or at all. If these qualified personnel are not successfully
attracted to our company, our business will suffer.

WE PLAN TO GROW VERY RAPIDLY, WHICH MAY PLACE STRAINS ON OUR MANAGEMENT TEAM AND
OTHER COMPANY RESOURCES

We expect to grow rapidly and significantly  expand our operations.  This growth
may place a significant strain on our management  systems and resources.  We may
not be able to implement  our  business  strategy in a rapidly  evolving  market
without an effective planning and management  process. We have a short operating
history  and have not  implemented  sophisticated  managerial,  operational  and
financial systems and controls. We are required to manage multiple relationships
with various strategic partners,  technology licensors,  users,  advertisers and
other third parties.  These  requirements will be strained in the event of rapid
growth and there can be no assurance  that our systems,  procedures  or controls
will be adequate to support our operations or that our  management  will be able
to manage growth  effectively.  To manage the expected  growth of our operations
and personnel,  we will be required to significantly improve or replace existing
managerial,  financial and operational systems,  procedures and controls, and to
expand,  train and  manage  our  growing  employee  base.  To  accomplish  these
objectives,  we will be  required  to expand  our  finance,  administrative  and
operations staff.  There can be no assurance that we will complete,  in a timely


                                       10
<PAGE>


manner,  the improvements to our systems,  procedures and controls  necessary to
support our future  operations,  that  management  will be able to hire,  train,
retain,  motivate and manage the required  personnel or that our management will
be able to  successfully  identify,  manage and exploit  existing and  potential
market opportunities.

WE WILL FACE INCREASED COMPETITION FROM COMPETITORS THAT HAVE GREATER FINANCIAL,
TECHNICAL AND MARKETING  RESOURCES AND THESE  COMPETITIVE  FORCES MAY IMPACT OUR
PROJECTED GROWTH

We may encounter a growing number of competitors in a rapidly changing industry.
Many of these competitors have substantially  greater  financial,  technical and
marketing resources, larger customer bases, longer operating histories,  greater
name recognition and more established  relationships in the industry than we do.
As a result,  certain of these  competitors  may be able to  develop  and expand
their service offerings more rapidly,  adapt to new or emerging technologies and
changes in customer requirements more quickly, take advantage of acquisition and
other opportunities more readily,  devote greater resources to the marketing and
sale of their products and services,  or aggressively  reduce their sales prices
below the our costs. There is no assurance we will be able compete  successfully
with existing competitors or new competitors.

THE  SECURITY,  INTELLIGENCE  AND  COUNTER  TERRORISM  MARKET MAY NOT DEVELOP AS
ANTICIPATED WHICH WOULD HAVE A NEGATIVE IMPACT ON OUR FUTURE GROWTH

The market for our products and services has only recently  begun to develop and
is evolving  rapidly.  We believe  that we will  continue  to grow as  potential
customers  assess  their  security  needs.  If the market for our  products  and
services does not grow or grows more slowly than we currently  anticipates,  our
business,   financial  condition  and  operating  results  would  be  materially
adversely affected.

WE  MAY  BE  ADVERSELY  AFFECTED  BY THE  LOSS  OF A  THIRD  PARTY  SUPPLIER  OR
MANUFACTURER WHICH WOULD HAVE A NEGATIVE IMPACT ON OUR BUSINESS

Our  business  strategy  depends to some  extent on third  party  suppliers  and
manufacturers of our products.  Our ability to deliver products to our customers
will require consistent performance of contracted  manufacturing  facilities and
their ability to operate,  produce and deliver  products in a timely manner.  In
the event that significant  disruptions in the manufacture of ours products,  we
could lose  customers  and fail to attract  new  customers,  and our  ability to
create  revenues  would  suffer.  Additionally,   existing  customers  may  lose
confidence in us, which could lead to lost business. Moreover, if our reputation
suffers because of such disruptions,  our ability to attract new customers could
be harmed.

OUR  BUSINESS IS AND WILL  CONTINUE TO BE SUBJECT TO  GOVERNMENTAL  REGULATIONS,
WHICH COULD IMPACT OUR TARGET MARKETS

We rely to some extent on revenue  generated from military,  law enforcement and
consumer markets worldwide. A substantial portion of our revenue is projected to
come from consumer markets which may require licenses,  permits,  or training in
certain states.  Unforeseen regulatory issues,  however, could hinder or prevent
entry into certain markets which would adversely affect our revenue projections.



                                       11
<PAGE>


OUR BUSINESS OPERATIONS MAY BE NEGATIVELY IMPACTED IF OUR INTELLECTUAL  PROPERTY
RIGHTS ARE NOT PROPERLY PROTECTED

We  rely on a  combination  of  copyright,  trademark  and  trade  secret  laws,
confidentiality  procedures and contractual  provisions to protect  intellectual
properties and we have applied for patents to protect our  proprietary  products
such as certain non-lethal weapons and the UniGuardTM  systems. We will continue
to apply for patents for products  currently under development for the military,
law enforcement and consumer  markets.  These  protections may not be sufficient
and they do not  prevent  independent  third-party  development  of  competitive
products or services. Further, the laws of many foreign countries do not protect
our  intellectual  property  rights to the same extent as the laws of the United
States.

We will enter into agreements with our employees giving us proprietary rights to
certain  technology  developed by such employees  while employed by us. However,
there can be no  assurance  that courts of competent  jurisdiction  will enforce
these agreements.

Our failure or  inability  to protect  our  intellectual  property  could have a
material  adverse  effect on our  business,  financial  condition and results of
operations.

In addition,  if we are successful in obtaining  patents,  there is no assurance
that our patents do not infringe on the patents or other  intellectual  property
rights  of  others.  Any form of  infringement  my  result  in the loss of sales
opportunities  or litigation and there is no assurance that litigation would not
have a severe adverse impact on operations.

TO DATE, WE HAVE NOT PAID ANY CASH  DIVIDENDS AND NO CASH DIVIDENDS WILL BE PAID
IN THE FORESEEABLE FUTURE.

We do not  anticipate  paying  dividends on our common stock in the  foreseeable
future and we cannot assure an investor that funds will be legally  available to
pay  dividends,  or that  even if the  funds  are  legally  available,  that the
dividends will be paid.

OUR COMMON STOCK HAS TRADED SPORADICALLY

Our common  stock has traded  sporadically  on the OTCBB.  If a regular,  active
trading market should develop, the price for our stock may prove to be volatile.
We cannot  make any  assurances  that our  common  stock  will trade at the same
levels of other stocks in our  industry,  or that stocks in general will sustain
their current market prices.

The following factors may add to our common stock price's volatility:

     o    actual or anticipated variations in our quarterly operating results,
     o    acceptance of our product as viable security and technology solutions,
     o    government regulations,
     o    announcements of significant  acquisitions,  strategic partnerships or
          joint ventures,
     o    our capital commitments,
     o    additions or departures of our key personnel, and
     o    sales of our common stock.

Many of these  factors are beyond our control and these factors may decrease the
market price of our common stock, regardless of our operating performance.



                                       12
<PAGE>


EMPLOYEES

As of March 31, 2003, we had 6 full-time  employees  and 2 part-time  employees.
None of our employees are represented by a labor union.

As of December 31, 2002, we had 10 full time and 1 part time  employees.  During
the  first  quarter  of 2003 we  implemented  a  functional  reorganization  and
terminated two employees and accepted the resignation of 2 employees. Management
believes the results of this reorganization and the changes in personnel will be
beneficial to us on the whole.

ITEM 2.       FACILITIES

We are  currently  leasing  12,279  square  feet  of  office  space  in a  prime
commercial office building at 5759 Fleet Street, Suite 110, Carlsbad, California
92008 at the currently monthly rent of $11,645. The lease expires in 2008.

ITEM 3.  LEGAL PROCEEDINGS

As a result of  actions  committed  by a former  employee,  we  recently  made a
self-disclosure  to the U.S. Navy regarding  overbillings  to the government and
excessive  business  pleasantries.  Each of  these  issues  is  currently  under
internal  investigation  and the results of our internal  investigation  will be
disclosed  to the  Government.  Management  does not believe that the outcome of
these matters will have a material  adverse effect on our financial  position or
results of operations. Subsequently an action was filed on March 7, 2003 by this
former  employee  in the  U.S.  District  Court  for  the  Central  District  of
California,  Zilles v. Universal Guardian, et al., C.D.Cal. Case No. SACV-03-231
(ANx) (GLT).  The complaint  alleges  claims  including but not limited to civil
RICO  violations,  securities  and  common  law fraud,  breach of  contract  and
rescission,  and wrongful  termination and seeks monetary and injunctive relief.
We question the validity of the claims alleged, have engaged independent counsel
and intend to vigorously defend against these claims.

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

Pursuant to an Information  Statement  mailed to  shareholders in November 2002,
written  consents had been  received from the holders of record of 35,166,407 of
the issued and outstanding  shares as to each proposal,  constituting a majority
of the issued and outstanding shares. Each outstanding share of Common Stock was
entitled to one vote on: (i) amending the Certificate of Incorporation to change
the  Company's  name to a name to be  selected by the Board of  Directors;  (ii)
effecting  a reverse  stock split of not less than one for ten and not more than
one for twenty,  the exact ratio to be in the discretion of the Company's  Board
of Directors  while leaving the number of shares which the Company is authorized
to issue  unchanged at 50,000,000;  (iii)  adopting the Hollywood  Partners.com,
Inc.  2002 Stock  Compensation  Program;  and (iv)  authorizing  the sale of the
Company's   subsidiaries,   Hollywood  Partners,   Inc.,  Avenue  of  the  Stars
Entertainment,   Inc.,  and  Hall  of  Fame  Pro,  Inc.,  and  the  domain  name
"HollywoodPartners.com."


                                       13
<PAGE>


PART II

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

Our common stock is traded on NASD  Electronic  Bulletin  Board under the symbol
UGHO.  Prior to December 6, 2002, it traded under the symbol HLYP. The following
table sets forth the range of high and low bid  quotations for each of the prior
nine (9) fiscal  quarter as  adjusted  to reflect a  one-for-twenty  stock split
effected  December 3, 2002. The  quotations  represent  inter-dealer  quotations
without  adjustment for retail  mark-ups,  mark-downs or commissions and may not
represent actual transactions.

<TABLE>
<CAPTION>
                  -----------------------------------------------------------
                                              High              Low
                  -----------------------------------------------------------
<S>                                          <C>               <C>
                  1st Quarter 2001           $ 40.00           $ 10.40
                  -----------------------------------------------------------
                  2nd Quarter 2001           $ 1.20            $ 2.80
                  -----------------------------------------------------------
                  3rd Quarter 2001           $ 4.40            $ 1.00
                  -----------------------------------------------------------
                  4th Quarter 2001           $ 1.00            $ 0.60
                  -----------------------------------------------------------
                  1st Quarter 2002           $ 0.80            $ 0.20
                  -----------------------------------------------------------
                  2nd Quarter 2002           $ 0.80            $ 0.20
                  -----------------------------------------------------------
                  3rd Quarter 2002           $ 0.60            $ 0.20
                  -----------------------------------------------------------
                  4th Quarter 2002           $ 4.00            $ 0.20
                  -----------------------------------------------------------
                  1st Quarter 2003           $ 4.00            $ 2.50
                  -----------------------------------------------------------
</TABLE>


As  of April 11, 2003, there were 61 shareholders of record of our common stock.
This  does  not  include  shares  held  in  street  names.

We have never declared dividends or paid any cash dividends on our capital stock
and  currently  intend  to  retain  all  future earnings, if any, for use in the
operation  and  development of our business. Therefore, you should not expect us
to  declare  or  pay  any  cash dividends on our Common Stock in the foreseeable
future.

In October 2002, we obtained two bridge loan notes from two of our stockholders.
The notes were dated  October 14, 2002 accrued  interest at 10% per annum,  were
secured by  virtually  all of our assets and were due on January  14,  2003.  In
January  2003 these  bridge  loans were  converted  into an aggregate of 560,000
shares of UGC Series A Preferred stock. In addition, as inducement to enter into
the bridge loans we issued 350,000 shares of UGC Series A Preferred stock to the
bridge loan holders.

Equity Compensation Plans

As of December 31, 2002, our equity compensation plans were as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                              Number of securities to be
                                 issue upon exercise of       Weighted average exercise
                             outstanding options, warrants   price of outstanding options,    Number of Securities remaining
Plan category                           and rights              warrants and rights            available for future issuance
----------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>                         <C>                          <C>
Equity compensation plans                   None                          N/A                          None
approved by security
holders
----------------------------------------------------------------------------------------------------------------------------
Equity compensation plans                2,500,000                        $0.08                      725,000
not approved by security
holders
----------------------------------------------------------------------------------------------------------------------------
Total                                    2,500,000
----------------------------------------------------------------------------------------------------------------------------
</TABLE>

ITEM 6.  MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION

THE COMPANY

We  are  a  holding  company that was incorporated in Delaware in 1989 under the
name  Guideline  Capital Corporation. After its incorporation, we engaged in the
business  of  locating an acquisition. An acquisition was effected September 13,
1999,  when  pursuant  to  a  Share  Exchange  and  Reorganization Agreement, we
acquired all of the issued and outstanding shares of Hollywood Partners, Inc., a
California  corporation  and we changed our name to Hollywood Partners.com, Inc.
On  December 31, 2002, a closing was held pursuant to a Share Exchange Agreement
and  Plan  of  Reorganization  dated as of December 4, 2002 and the Amendment to
Share  Exchange  Agreement  and  Plan Of Reorganization dated as of December 16,
2002,  with  Universal  Guardian  Corporation,  a  Nevada corporation founded in



                                       14
<PAGE>


March  2001,  and we  changed  our name to  Universal  Guardian  Holdings,  Inc.
Pursuant to the transaction with Universal Guardian Corporation, an aggregate of
11,300,000  shares  of our  common  stock  were  issued  to  Universal  Guardian
Corporation  shareholders  in  exchange  for all of the issued  and  outstanding
shares of Universal Guardian Corporation. The transaction was accounted for as a
reverse merger and accordingly,  the historical  financial  statements presented
are those of Universal Guardian Corporation.

On August 31, 2002,  Universal Guardian  Corporation acquired all the issued and
outstanding  shares of common stock of The Harbour  Group,  Inc.  for  1,700,000
shares  of  Universal  Guardian  Corporation  common  stock  to  leverage  a new
technology in waterside security. This transaction has been accounted for by the
purchase method of accounting.

Our corporate mission is clear: We are committed to the protection of human life
and military,  government and commercial assets by providing  services,  systems
and technologies to detect, assess, prevent, and mitigate security and terrorist
threats worldwide.  To accomplish this goal, we have established three strategic
corporate  divisions:  Maritime  Security Group,  Security  Products and Systems
Group, and Technology and Engineering Group.

Our  management  and  advisory  board have an  extensive  depth of  command  and
leadership  experience  in various areas of the  military,  special  operations,
counter terrorism,  law enforcement,  weaponry,  advanced security technologies,
intelligence, White House administration,  and international business. With this
uniquely  qualified  team working in concert,  we believe we have the  strategic
access necessary to develop products and services to meet the highly specialized
needs of city, state, national and international  organizations  responsible for
critical infrastructure and asset protection. In turn, management will implement
the commercial applications of those systems, technologies, and weapons.

CRITICAL ACCOUNTING POLOCIES AND EXTIMATES

Our discussion and analysis of our financial condition and results of operations
are  based upon our consolidated financials statements, which have been prepared
in accordance with accounting principles generally accepted in the United States
of  America.  The  preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues  and  expenses,  and  related  disclosures  of  contingent  assets  and
liabilities.  On  an  ongoing  basis, we evaluate our estimates, including those
related  to  reserves, impairment of long-lived assets and estimates of costs to
complete  contracts.  We  base  our  estimates  on  historical experience and on
various  other  assumptions  that  we  believe  to  be  reasonable  under  the
circumstances,  the  results  of which form the basis for making judgments about
the  carrying value of assets and liabilities that are not readily apparent from
other  sources.  Actual  results may differ from these estimates under different
assumptions  or  conditions;  however,  we believe that our estimates, including
those  for  the  above-described  items,  are  reasonable.


RESULTS OF OPERATIONS

Revenue for the year ended December 31, 2002 was  $2,779,449  compared to $0 for
the period from  inception  (March 28, 2001) to December  31,  2001.  We did not
commence generating  significant revenue until the 4th quarter of 2002. With the
contracts  that have already  been  awarded plus those that have been  initially
allocated and earmarked for the installation of our proprietary security systems
in eight of the U.S. Navy's critical harbors, we expect our revenues in 2003 and
2004 to increase dramatically over the revenue generated in 2002.

Cost of revenue for the year ended December 31, 2002 was $2,429,650  compared to
$0 for the period from  inception  (March 28, 2001) to December 31, 2001.  Gross
margin  for the year ended  December  31,  2002 was  12.6%.  We expect the gross
margin will improve as the business base expands, as we become more efficient in
fulfilling  our  contract  obligations  and focus on  improving  the bidding and
extimating procedures for new contracts.

Selling general and administrative expenses for the year ended December 31, 2002
was  $1,094,819  compared to $99,423 for the period  from  inception  (March 28,
2001) to December 31, 2001. Selling general and administrative expenses began to
increase  dramatically  during the 4th quarter of 2002 as we expanded  the staff
with core  competencies,  leased  office  space  and  incurred  other  operating
expenses to support contract performance and launch our operations.

Financing costs for the year ended December 31, 2002 was $559,770 compared to $0
for the period from  inception  (March 28, 2001) to December  31, 2001.  We paid
$122,270 in  commission,  fees and  expenses in  connection  with the two bridge
loans obtained in October 2002 totaling  $700,000.  Also, as inducement to enter
into the bridge loans we issued 350,000 shares of Universal Guardian Corporation
Series A Preferred stock to the bridge loan holders valued at $437,500.


                                       15
<PAGE>


Interest expense for the year ended December 31, 2002 was $26,321 compared to $0
for the period from  inception  (March 28, 2001) to December 31, 2001.  Interest
expense  relates to interest paid on the bridge loans,  the demand note from our
CEO and capital leases.

LIQUIDITY AND CAPITAL RESOURCES

During 2002,  Michael Skellern,  our CEO advanced us a total of $180,633 to help
fund operations. This debt is represented by a demand note that accrues interest
at 9% per annum and is unsecured.

In October 2002, we obtained two bridge loan notes from two of our stockholders.
The notes were dated  October 14, 2002 and the notes accrue  interest at 10% per
annum,  are secured by  virtually  all of our assets and were due on January 14,
2003.  In January 2003 these bridge  loans were  converted  into an aggregate of
560,000 shares of UGC Series A Preferred  stock.  In addition,  as inducement to
enter into the bridge loans we issued  350,000  shares of UGC Series A Preferred
stock to the bridge loan holders.

We are currently  offering  shares of UGC Series A Preferred stock to accredited
investors  at $1.25 per share.  In order to break  escrow,  we were  required to
obtain  subscriptions  for at least 1,000,000 shares or $1,250,000.  We obtained
the  minimum  amount of  subscriptions  in April 2003 and broke  escrow.  We are
continuing  the offering of UGC Series A Preferred  Stock and expect to raise an
additional $1,750,000. However, there is no assurance we will succeed in raising
the additional funds.

During the year ended December 31, 2002, we generated  $384,438 from  operations
principally a result of extending our payment term on our accounts payable.

We have  incurred net losses since our  inception  and at December 31, 2002 have
negative  working  capital.  To  continue  in  existence,  we will have to raise
additional  capital  through the sale of equity or debt or  generate  sufficient
profits from operations, or a combination of both.

ITEM 7.  FINANCIAL STATEMENTS

SEE "INDEX TO CONSOLIDATED FINANCIAL STATEMENTS" BEGINNING ON PAGE F-1.


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

On August 5,  2002,  the our Board of  Directors  authorized  and  approved  the
dismissal of Merdinger Fruchter Rosen & Company,  PC ("MFRC") as our independent
accountants  effective  that date.  On August 8, 2002,  we notified  MFRC of the
dismissal.

The report of MRFC on our financial  statements for the past two years contained
no adverse opinion, or disclaimer opinion, and were not qualified or modified as
to uncertainty,  audit scope or accounting principles.  During the Company's two
most recent fiscal years and through August 5, 2002, there were no disagreements
between us and MFRC regarding any matters with respect to accounting  principles
or practices,  financial statement disclosure or audit scope or procedure, which
disagreements  if not resolved to the satisfaction of MFRC, would have caused it
to make  reference  thereto in its reports on our financial  statements for such
years. During our two most recent fiscal years and through August 5, 2002, there
were no  reportable  events as that term is  defined  in Item 304  (a)(1)(v)  of
Regulation S-K.



                                       16
<PAGE>


We engaged Stonefield Josephson,  Inc. as our new independent  accountants as of
August 5, 2002.  During the two most recent  fiscal years and through  August 5,
2002, we have not consulted with Stonefield Josephson, Inc. regarding either (i)
the  application  of accounting  principles to a specified  transaction,  either
completed  or proposed,  or the type of audit  opinion that might be rendered on
our  financial  statements;  or (ii) any matter that was either the subject of a
disagreement, as that term is defined in Item 304 (a) (1) (iv) of Regulation S-K
and the related  instructions to Item 304 of the Regulation S-K, or a reportable
event, as that term is defined in Item 304 (a) (1) (iv) of Regulation S-K.

         The  decision  to  change  accountants  was  approved  by our  Board of
Directors.

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

DIRECTORS AND EXECUTIVE OFFICERS

         Our directors and executive officers as follows:

<TABLE>
<CAPTION>

     Name                         Age         Positions Held
     ----                         ---         --------------
<S>                               <C>         <C>
     Michael J. Skellern          54          Chairman of the Board,
                                              President and CEO

     Dennis M. Cole               55          Chief Operating Officer
                                              and Director

     Richard E. Fields            52          Chief Financial Officer

     Thomas J. Pernice            41          Director
</TABLE>



MICHAEL J.  SKELLERN  is the  founder and Chief  Executive  Officer of UGC.  Mr.
Skellern has been President and CEO of Pacific International,  Inc., since 1977.
Pacific International is a business development,  corporate re-structuring,  and
consulting  company that provides business  services to industrial,  government,
and military sectors.

When  additional  financial  resources  have  been  required  to  secure  growth
opportunities,  Mr.  Skellern  has  developed  appropriate  funding  strategies,
working with senior management of leading investment banks such as Salomon Smith
Barney  Schroeders  in London,  Salomon Nikko in Tokyo,  and Lehman  Brothers in
Asia/Pacific, US, and Europe.

Mr.  Skellern has been involved in the  development  of  non-lethal  and special
operations projects as well as tactical and special operations vehicles.  He has
worked  with  Defense  Advanced  Research  Projects  Agency  (DARPA),   and  the
Pentagon's  Joint Non-Lethal  Weapons Program.  He has also been a consultant to
international governments in the deployment of related projects.

Mr. Skellern has served on the Board of Directors for several private and public
companies.  He has been a featured speaker on international  business,  finance,
and  technology  with recent  speaking  engagements  at Hong Kong  Shanghai Bank
Corporation's  HSBC  Technology  Conference  and at HSBC's  Asian  Mutual  Funds
Conference.  He served in the United States Army in Asia and Europe from 1967 to
1970. Mr. Skellern holds an MBA from Knightsbridge University.

DENNIS M. COLE has experience in the domestic and  international law enforcement
field in Special Operations and Training.  Prior to joining Universal  Guardian,
Mr. Cole was a Captain on the San Diego  County  Sheriff's  Department  where he
developed many of the special  weapons and tactics (SWAT)


                                       17
<PAGE>


techniques currently used by law enforcement agencies around the world. Mr. Cole
has over 31 years of law enforcement experience.

Mr. Cole spent seventeen years assigned to a police special operations unit from
1973 to 1992.  He developed  and  implemented  the  technique of pre-event  site
assessments  of  high-risk  targets.  Mr.  Cole has worked  with a wide array of
government  agencies  including  the Central  Intelligence  Agency,  U.S.  Navy,
Transportation  Safeguards Division of the Department of Energy, Secret Service,
Federal  Bureau of  Investigations,  Bureau of  Alcohol  Tobacco  and  Firearms,
National  Institute of Justice,  and many others to develop  special tactics for
crisis  resolution.  During  the Gulf  War,  Mr.  Cole was  employed  to do risk
assessments on General Dynamic's  executives' homes and develop training for the
families  on how to  protect  themselves  from  potential  reprisals  from Iraqi
agents.

Mr.  Cole has  recently  been  employed  from 2000 to 2002 as  President  of the
Training Division of Jaycor Tactical Systems in San Diego, California,  where he
developed and implemented training programs for non-lethal weapons systems and a
worldwide training network.

During  his law  enforcement  career,  Mr.  Cole  served  from 1971 to 1973 as a
fireboat  captain  in San  Diego  Harbor,  Commander  of the  Sheriff's  Special
Enforcement  Detail  1980 to  1986,  Chief  of  Police  for the  City of  Vista,
California  from 1994 to 1999,  Director of the San Diego Regional Public Safety
Training Institute at Miramar College from 2000 to 2002, and many other tactical
assignments.  He is an  associate  professor  at  many  of the  San  Diego  area
community  colleges,  teaching  law  enforcement  subjects  relating  to  crisis
management.

Mr. Cole is recognized by the State of California as a subject  matter expert in
the  application  of  non-lethal  chemical  agents.  He has  served as an expert
witness on crisis management, tactical resolution of high-risk incidents and the
delivery of non-lethal  chemical agents in federal,  state and local courts. Mr.
Cole is often called upon to consult on crisis management issues nationwide.

Mr. Cole did his  undergraduate  work at  California  Western  University in San
Diego's Point Loma area. He attained a Master of Arts degree in Management  from
the  University of Redlands,  and completed  graduate work at the  University of
Virginia.  He is a graduate of the Federal  Bureau of  Investigation's  National
Academy  Class  186.  He has been  widely  published  in law  enforcement  trade
magazines and has authored three text journals on crisis  management  issues and
chemical  agents.  Mr. Cole served in the United  States Army in Southeast  Asia
1967-1968.

RICHARD E. FIELDS has more than 22 years  experience in finance and  accounting,
and business and  government  contract  consulting.  Prior to joining  Universal
Guardian Corporation, Mr. Fields has served as Chief Financial Officer for first
and second  stage  companies  in the software  development  and energy  services
industries.  As a Chief Financial  Officer,  he has been  responsible  financial
reporting,   economic   forecasting   and   product   pricing  and  has  managed
administrative  functions  including  accounting,   financial  reporting,  human
resources, information services, purchasing and contracts.

Prior to his  experience as a Chief  Financial  Officer in industry,  Mr. Fields
served  for 14  years as a  Director  in the  Financial  Advisory  Services  and
Government   Contractor   Consulting  Group  at  Pricewaterhouse   Coopers.   At
Pricewaterhouse  Coopers,  Mr. Fields was responsible for assisting  fortune 500
clients  with the  interpretation  and  application  of  Government  procurement
regulations,  development of business  processes and systems for compliance with
the  Government  procurement  regulations,  resolution of  contractual  disputes
between the Government and its contractors and commercial  litigation support in
both  domestic  and  international  litigations.  Mr.  Fields  also served as an
Auditor at the Defense  Contract  Audit  Agency,  where he was  responsible  for
performing  contract  pricing,  incurred  cost and  business  system  audits  at
numerous Southern California locations.


                                       18
<PAGE>


Prior to his accounting and consulting career, Mr. Fields spent 8 years a Deputy
Sheriff  with the San Diego  County  Sheriff's  Office.  He also  served 2 years
active duty,  including a tour in Viet Nam,  and 8 years in the active  reserves
where he was a  Counter-Intelligence  specialist  in the  United  States  Marine
Corps.  Mr. Fields earned his Bachelors'  Degree in  accounting,  with Magna cum
laude honors, from National University in San Diego, California.

THOMAS J. PERNICE has served as a senior  corporate  executive in government and
industry for more than 18 years.  He is President and founder of Modena  Holding
Corporation, a consulting services company. Mr. Pernice also currently serves on
the Board of Directors  and is Treasurer  and  Corporate  Secretary for Advanced
Biotherapy, Inc. (OTCBB: ADVB).

Most  recently,  Mr.  Pernice was Managing  Director of Cappello  Group Inc., an
affiliate of Cappello Capital Corp., a licensed  investment bank specializing in
direct investments of equity and convertible securities,  merger and acquisition
advisory services, and financial restructuring  services.  Prior to founding his
company,  Mr.  Pernice  served  as Vice  President,  Public  Affairs,  and was a
corporate  officer for Dole Food  Company,  Inc.,  reporting to the Chairman and
CEO,  David H. Murdock.  In this role, Mr.  Pernice  managed  investor and media
communications,  legislative and political  strategies,  crisis management,  and
corporate   philanthropy.   He  also  served  in  similar   capacities  for  the
conglomerate  of publicly and privately held business  interests of Mr. Murdock,
including Castle & Cooke, Inc., a real-estate company.

Prior to joining Dole Food Company,  Inc., Mr. Pernice served in The White House
for  over  seven   years  in  various   capacities   for  the  Reagan  and  Bush
Administrations.  In January of 1988, Mr. Pernice was appointed Assistant to the
Vice President and Director of Advance in the Bush/Quayle  Administration.  As a
member of the  Senior  White  House  Staff,  Mr.  Pernice  was chief  advisor on
planning  and  coordinating  the  Vice  President's   official,   political  and
diplomatic  activities,  which included visits to all 50 states and more than 80
countries and territories. In the Reagan Administration, Mr. Pernice served as a
presidential advance  representative where he coordinated press coverage for the
local and national White House Press Corps, including the U.S.-Soviet Summits in
Moscow,  Reykajavik,  and Washington,  D.C. and the annual Seven-Nation Economic
Summits.

Mr.  Pernice earned a Bachelor of Arts degree in Broadcast  Journalism  from the
University of Southern California in 1984.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section  16(a) of the  Securities  Exchange Act of 1934  requires our  officers,
directors, and persons who beneficially own more than 10% of our common stock to
file reports of  securities  ownership  and changes in such  ownership  with the
Securities and Exchange Commission ("SEC").  Officers,  directors and others who
own greater than 10% beneficial owners are also required by rules promulgated by
the SEC to furnish us with copies of all Section 16(a) forms they file.

Based  solely  upon a review of the  copies of such  forms  furnished  to us, or
written  representations  that no Form 5 filings were required,  we believe that
during the fiscal year ended December 31, 2002,  there was  compliance  with all
Section 16(a) filing  requirements  applicable  to our  officers,  directors and
other  with  greater  than  10%  beneficial  owners  except  as follows: Messrs.
Skellern, Cole, Fields, Briola and Pernice did not file Form 3 reports that were
due  January  5,  2003.

                                       19
<PAGE>


ITEM 10: EXECUTIVE COMPENSATION

The  following  table  sets  forth  information  the  remuneration  of our chief
executive officers and our four most highly  compensated  executive officers who
earned in excess of $100,000  per annum during any part of our last three fiscal
years:

<TABLE>
<CAPTION>

                           SUMMARY COMPENSATION TABLE
------------------ ----------------------------------------------- -------------------------------------- ------------
                                                                                                            ALL OTHER
                                ANNUAL COMPENSATION                       LONG TERM COMPENSATION          COMPENSA-TION($)
                   ----------------------------------------------- ------------------------- ------------ ------------
                                                                            AWARDS             PAYOUTS
                   -------- ------------ ------------ ------------ ------------------------- ------------ ------------
                                                         OTHER     Restricted   Securities
    NAME AND                                            ANNUAL        Stock     Underlying      LTIP
    PRINCIPAL      FISCAL                             COMPENSATION  Award(s)     Options/      PAYOUTS
    POSITION        YEAR     SALARY ($)    BONUS ($)       ($)          ($)       SARS (#)        ($)
------------------ -------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S>                <C>      <C>           <C>         <C>          <C>          <C>          <C>          <C>
   Michael J.       2002      65,000         -0-         4,700         -0-        150,000        -0-          -0-
    Skellern,
    Chairman,
President and CEO
------------------ -------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
 Dennis M. Cole,    2002      41,667         -0-          -0-          -0-        150,000        -0-          -0-
 Chief Operating
     Officer
------------------ -------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
   Richard E.       2002        -0-          -0-          -0-          -0-        600,000        -0-          -0-
  Fields, Chief
Financial Officer
------------------ -------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
   Michael A.       2002      41,667         -0-          -0-          -0-        150,000        -0-          -0-
Briola, Sr. Vice
    President
------------------ -------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
     Nikolas        2002        -0-          -0-          -0-          -0-          -0-          -0-          -0-
Konstant, former    2001      12,500         -0-          -0-          -0-          -0-          -0-          -0-
       CEO          1999        -0-          -0-          -0-          -0-          -0-          -0-          -0-
------------------ -------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
</TABLE>

<TABLE>
<CAPTION>

                                    OPTION/SAR GRANTS IN LAST FISCAL YEAR
----------------------------------------------------------------------------------------------------------------------
                                                INDIVIDUAL GRANTS
----------------------------------------------------------------------------------------------------------------------
                             NUMBER OF SECURITIES      PERCENT OF TOTAL
                                  UNDERLYING         OPTIONS/SARS GRANTED
     NAME                        OPTIONS/SARS        GRANTED TO EMPLOYEES     EXERCISE OR BASE
  NAME OPTIONS                       (#)                 FISCAL YEAR             PRICE ($/SH)          EXPIRATION DATE
--------------------------- ----------------------- ----------------------- ----------------------- ------------------
<S>                         <C>                     <C>                     <C>                     <C>
   Michael J. Skellern             150,000                   8.5%                   $0.01                7/1/07
--------------------------- ----------------------- ----------------------- ----------------------- ------------------
      Dennis M. Cole               150,000                   8.5%                   $0.01                7/1/07
--------------------------- ----------------------- ----------------------- ----------------------- ------------------
    Richard E. Fields              600,000                  33.8%                   $0.10               10/15/07
--------------------------- ----------------------- ----------------------- ----------------------- ------------------
    Michael A. Briola              150,000                   8.5%                   $0.01                7/1/07
--------------------------- ----------------------- ----------------------- ----------------------- ------------------
    Thomas J. Pernice              150,000                   8.5%                   $0.10                10/1/07
--------------------------- ----------------------- ----------------------- ----------------------- ------------------
</TABLE>


<TABLE>
<CAPTION>

                     AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
----------------------------------------------------------------------------------------------------------------------
                                                                        NUMBER OF SECURITIES
                                                                             UNDERLYING         VALUE OF UNEXERCISED
                                                                            UNEXERCISED             IN-THE-MONEY
                                                                          OPTIONS/SARS AT         OPTIONS/SARS AT
                                                                        FISCAL YEAR END (#)     FISCAL YEAR END ($)
------------------------ ---------------------- ---------------------- ----------------------- -----------------------
                          SHARES ACQUIERD ON                                EXERCISABLE/            EXERCISABLE/
         NAME                EXERCISE (#)        VALUE REALIZED ($)        UNEXERCISABLE           UNEXERCISABLE
------------------------ ---------------------- ---------------------- ----------------------- -----------------------
<S>                      <C>                    <C>                    <C>                     <C>
  Michael J. Skellern             -0-                    -0-                150,000/-0-             538,500/-0-
------------------------ ---------------------- ---------------------- ----------------------- -----------------------
    Dennis M. Cole                -0-                    -0-                150,000/-0-             538,500/-0-
------------------------ ---------------------- ---------------------- ----------------------- -----------------------
   Richard E. Fields              -0-                    -0-                -0-/600,000            -0-/2,100,000
------------------------ ---------------------- ---------------------- ----------------------- -----------------------
   Michael A. Briola              -0-                    -0-                150,000/-0--            538,500/-0-
------------------------ ---------------------- ---------------------- ----------------------- -----------------------
   Thomas J. Pernice              -0-                    -0-                525,000/-0-            1,318,750/-0-
------------------------ ---------------------- ---------------------- ----------------------- -----------------------
</TABLE>


                                       20
<PAGE>


COMPENSATION OF DIRECTORS

Directors do not receive  compensation but are reimbursed for their expenses for
each meeting of the board that they attend.

EMPLOYMENT CONTRACTS

Each of our officers and employees are required to execute employment  contracts
with us. As a rule,  the employment  contracts are for a term of 3 years.  Other
terms of  significance  in the employment  agreements  include  confidentiality,
intellectual  and  patent  rights,  non-compete  clauses.   Additionally,   each
employment  agreement  contains  provisions  that require the conduct of company
business in accordance with applicable laws and regulations and in a manner that
will not adversely impact our goodwill or reputation.

STOCK OPTION PLANS

In  October  2002,  the  board  of  directors  adopted  the  Universal  Guardian
Corporation  2002 Stock Option Plan.  Under the Stock Option Plan,  the board of
directors,  or its designated  administrators,  has the flexibility to determine
the type and amount of awards to be granted to eligible participants.  The Stock
Option  Plan is  intended  to secure for us and our  stockholders  the  benefits
arising from ownership of our common stock by  individuals  employed or retained
by us who will be responsible  for our future  growth.  The Stock Option Plan is
designed  to help  attract  and  retain  superior  personnel  for  positions  of
substantial  responsibility,  and to  provide  individuals  with  an  additional
incentive to contribute to our success.

We  authorized  and reserved  for  issuance an aggregate of 2,500,000  shares of
common stock under the Stock Option  Plan.  The shares of common stock  issuable
under the Stock Option Plan may be authorized but unissued shares, shares issued
and reacquired by us or shares purchased by us on the open market. If any of the
awards  granted  under the Stock Option Plan expire,  terminate or are forfeited
for any reason before they have been  exercised,  vested or issued in full,  the
unused shares  subject to those  expired,  terminated  or forfeited  awards will
again be available for purposes of the Stock Option Plan.



                                       21
<PAGE>


ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following  table sets forth certain  information  regarding our Common Stock
beneficially  owned on April 11,  2003 by (i) each  person who is known by us to
own  beneficially or exercise  voting or dispositive  control over 5% or more of
our Common  Stock,  (ii) each  Director  and (iii) all  executive  officers  and
Directors as a group. Except as otherwise indicated,  all stockholders have sole
voting and  investment  power with respect to the shares listed as  beneficially
owned by them,  subject  to the  rights of spouses  under  applicable  community
property laws.


<TABLE>
<CAPTION>
-------------------------------------------------- ------------------------------------ ------------------------------
                Name and Address                            Number of Shares
               of Beneficial Owner                           of Common Stock                    Percentage of
                Identity of Group                          Beneficially Owned               Beneficial Ownership
-------------------------------------------------- ------------------------------------ ------------------------------
<S>                                                       <C>                               <C>
Michael J. Skellern                                           4,625,000 (1)                        28.14%
Universal Guardian Holdings, Inc.
5759 Fleet Street, Suite 110
Carlsbad, CA  92008
-------------------------------------------------- ------------------------------------ ------------------------------
Dennis M. Cole                                                1,110,000 (1)                         6.75%
Universal Guardian Holdings, Inc.
5759 Fleet Street, Suite 110
Carlsbad, CA  92008
-------------------------------------------------- ------------------------------------ ------------------------------
Richard E. Fields                                                  -0- (2)                          0.00%
Universal Guardian Holdings, Inc.
5759 Fleet Street, Suite 110
Carlsbad, CA  92008
-------------------------------------------------- ------------------------------------ ------------------------------
Thomas J. Pernice                                            1,073,000 (3)                         6.38%
Universal Guardian Holdings, Inc.
5759 Fleet Street, Suite 110
Carlsbad, CA  92008
-------------------------------------------------- ------------------------------------ ------------------------------
Michael Zilles                                                1,700,000                            10.44%
20852 Trinity Square
Potomac Falls, VA 20852
-------------------------------------------------- ------------------------------------ ------------------------------
Michael A. Briola                                             1,100,000 (1)                         6.69%
Universal Guardian Holdings, Inc.
5795 Fleet Street, Suite 110
Carlsbad, CA  92008
-------------------------------------------------- ------------------------------------ ------------------------------
Nikolas Konstant                                              1,000,000 (4)                         6.14%
2121 Avenue of the Stars #1650
Los Angeles, CA  90067
-------------------------------------------------- ------------------------------------ ------------------------------
UG Trust                                                      2,715,000 (5)                        16.67%
c/o Leon Cooper
</TABLE>


                                       22
<PAGE>


<TABLE>
<CAPTION>
<S>                                                    <C>                                    <C>
600 Citadel Drive
Suite 105
Los Angeles, CA  90040
-------------------------------------------------- ------------------------------------ ------------------------------
All directors and officers as a group.                        6,933,200                            45.81%
(5 persons)
-------------------------------------------------- ------------------------------------ ------------------------------
</TABLE>

      (1)   Includes 150,000 purchase options underlying a currently exercisable
            option  with an exercise  price of $.01 per share  which  expires on
            July 1, 2007

      (2)   Mr. Fields was awarded  600,000 options to purchase shares of common
            stock with exercise price of $0.10 per share which expire on October
            15, 2007. The options do not begin to vest until October 2003

      (3)   Includes 150,000 purchase options underlying a currently exercisable
            option  with an exercise  price of $.10 per share  which  expires on
            October 1, 2007;  125,000  purchase  options  underlying a currently
            exercisable  option with an exercise  price of $1.20 per share which
            expires on December 3, 2012;  125,000 purchase options  underlying a
            currently  exercisable  option with an  exercise  price of $1.50 per
            share which expires on December 3, 2012 and 125,000 purchase options
            underlying a currently  exercisable option with an exercise price of
            $1.75 per share which expires on December 3, 2012

      (4)   Includes  800,000  common shares that have been issued as part of an
            employment  agreement,  and 200,000 shares that have been granted as
            part of an employment agreement but are not yet issued.

      (5)   Includes  1,200,000  shares  returned  to  the  Trust  in  2003  for
            employees who are no longer with the Company

The following  table sets forth the ownership of the Series A Preferred Stock by
each  Director and by each entity or person known to us to own  beneficially  in
excess  of 5% of such  class of stock and by all  officers  and  directors  as a
group. To our knowledge,  all stockholders have sole voting and investment power
with  respect  to the  shares  listed as owned by them,  subject  to  applicable
community property laws.

<TABLE>
<CAPTION>
------------------------------------ ----------------------------------------------- ------------------ --------------
Title of Class                       Name and Address of                             Number of          Percentage
                                     Beneficial Owner                                Shares             of Class
                                                                                     Owned
------------------------------------ ----------------------------------------------- ------------------ --------------
<S>                                  <C>                                             <C>                <C>
1999 Series A                        All officers and directors as a group
Preferred Stock                      (4 persons)                                     0                  0%
------------------------------------ ----------------------------------------------- ------------------ --------------
1999 Series A                        Triple Tree
Preferred Stock                      Bahnhofplatz 9
                                     P. O. Box 6139                                  600                100%
                                     8023 Zurich
                                     Switzerland
------------------------------------ ----------------------------------------------- ------------------ --------------
</TABLE>


                                       23
<PAGE>


ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS.

In October 2002, we obtained two bridge loan notes from two of our stockholders.
The notes were dated October 14, 2002,  accrued interest at 10% per annum,  were
secured by  virtually  all of our assets and were due on January  14,  2003.  In
January  2003,  these bridge loans were  converted  into an aggregate of 560,000
shares of UGC Series A preferred stock. In addition, as inducement to enter into
the bridge loans we issued 350,000 shares of UGC Series A Preferred stock to the
bridge loan holders.

During 2002 we obtained a demand note in the amount of $180,633  from Michael J.
Skellern,  our CEO. The note accrues  interest at 9% per annum, is unsecured and
is payable on demand.

PART IV

ITEM 13. EXHIBITS LIST

(a)      The following exhibits are submitted herewith:

         2.0      Share Exchange Agreement and Plan of Reorganization (i)

         3.0      Restated and Amended Certificate of Incorporation (i)

         10.01    Employment  Agreement  dated September 22, 1999 between Lee M.
                  Lambert and the Registrant (ii)

         10.02    Administrative   Services  Agreement  dated  October  1,  1999
                  between Vitafort International  Corporation and the Registrant
                  (ii)

         10.03    Distribution  Agreement dated October 1, 1999 between Vitafort
                  International Corporation and the Registrant (ii)

         10.04    Consulting  Agreement  dated  October  1,  2000  between  Mark
                  Beychok and the Registrant(iii)

         10.05    Employment  Agreement  dated  October  1,  2000  between  John
                  Coppolino and the Registrant (iii)

         10.06    Employment  Agreement dated October 1, 2000 between Valerie A.
                  Broadbent and the Registrant (iii)

         10.07    Employment  Agreement  dated November 30, 2001 between Nikolas
                  Konstant  and  the  Registrant  filed  as an  Exhibit  to  the
                  Registrant's Report on Form 8-K filed December 5, 2001

         10.08    Share  Exchange  Agreement and Plan of  Reorganization  by and
                  among  Hollywood   Partners.com,   Inc.   Universal   Guardian
                  Corporation  and  the   stockholders  of  Universal   Guardian
                  Corporation as an Exhibit to the  Registrant's  Report on Form
                  8-K filed January 15, 2003


(i)     Incorporated   by  reference  to  the  same  numbered   exhibit  to  the
        Registrant's Information Statement on Form 15c2-11

(ii)    Incorporated   by  reference  to  the  same  numbered   exhibit  to  the
        Registrant's December 31, 1999 Form 10-K

(iii)   Incorporated   by  reference  to  the  same  numbered   exhibit  to  the
        Registrant's December 31, 2000 Form 10-K


                                       24
<PAGE>

ITEM 14. CONTROLS AND PROCEDURES

         Under the  supervision  and with the  participation  of our management,
including our Chief Executive Officer and Chief Financial Officer,  we conducted
an evaluation of the effectiveness of our disclosure  controls and procedures as
defined in Rule 13a-14(c)  promulgated under the Securities Exchange Act of 1934
within 90 days of the filing date of this report. Based on their evaluation, our
Chief Executive  Officer and Chief Financial  Officer  concluded that the design
and operation of our disclosure controls and procedures were effective as of the
date of the evaluation.

There have been no significant changes (including corrective actions with regard
to significant  deficiencies or material weaknesses) in our internal controls or
in other factors that could  significantly  affect these controls  subsequent to
the date of the evaluation referenced in the preceding paragraph.



                                       25
<PAGE>


                                   SIGNATURES

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

                                        UNIVERSAL GUARDIAN HOLDINGS, INC.


Date:  April 15, 2003                   By: /s/ Michael J. Skellern
                                            ------------------------------------
                                            Michael J. Skellern, Chairman,
                                            President and Chief Executive
                                            Officer

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


<TABLE>
<CAPTION>

SIGNATURE                                         TITLE                                  DATE
---------                                         -----                                  ----
<S>                                               <C>                                 <C>

/s/ Michael J. Skellern                           Chairman, President and
--------------------------------------------      Chief Executive Officer
Michael J. Skellern                               (Principal Executive Officer)       April 15, 2003


/s/ Richard E. Fields                             Chief Financial Officer
--------------------------------------------      (Principal Financial
Richard E. Fields                                 and Accounting Officer)             April 15, 2003



/s/ Dennis M. Cole                                 Chief Operating Officer
--------------------------------------------       and Director
Dennis M. Cole                                                                        April 15, 2003


/s/ Thomas J. Pernice
--------------------------------------------
Thomas J. Pernice                                 Director                            April 15, 2003

</TABLE>



                                       26
<PAGE>



                                 CERTIFICATIONS

I, Michael J. Skellern, certify that:


1.       I have reviewed this annual report on Form 10-KSB of Universal Guardian
         Holdings, Inc.;

2.       Based on my  knowledge,  this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances  under which
         such  statements  were made, not misleading  with respect to the period
         covered by this annual report;

3.       Based on my knowledge,  the financial  statements,  and other financial
         information  included  in this  annual  report,  fairly  present in all
         material  respects the financial  condition,  results of operations and
         cash flows of the  registrant as of, and for, the periods  presented in
         this annual report;

4.       The registrant's  other  certifying  officers and I are responsible for
         establishing  and  maintaining  disclosure  controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         have:

         a)       designed  such  disclosure  controls and  procedures to ensure
                  that  material   information   relating  to  the   registrant,
                  including its consolidated  subsidiaries,  is made known to us
                  by others  within  those  entities,  particularly  during  the
                  period in which this annual report is being prepared;

         b)       evaluated the  effectiveness  of the  registrant's  disclosure
                  controls and  procedures  as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date");
                  and

         c)       presented  in this  annual  report our  conclusions  about the
                  effectiveness of the disclosure  controls and procedures based
                  on our evaluation as of the Evaluation Date;

5.       The registrant's other certifying officers and I have disclosed,  based
         on our most recent  evaluation,  to the  registrant's  auditors and the
         audit  committee  of  registrant's   board  of  directors  (or  persons
         performing the equivalent functions):

         a)       all  significant  deficiencies  in the design or  operation of
                  internal   controls   which   could   adversely   affect   the
                  registrant's ability to record, process,  summarize and report
                  financial  data  and  have  identified  for  the  registrant's
                  auditors any material weaknesses in internal controls; and

         b)       any fraud,  whether or not material,  that involves management
                  or  other  employees  who  have  a  significant  role  in  the
                  registrant's internal controls; and

6.       The registrant's other certifying officers and I have indicated in this
         annual  report  whether  there were  significant  changes  in  internal
         controls or in other factors that could  significantly  affect internal
         controls  subsequent  to  the  date  of  our  most  recent  evaluation,
         including   any   corrective   actions   with  regard  to   significant
         deficiencies and material weaknesses.

Date: April 15, 2003

                                 /s/ Michael J. Skellern
                                 -----------------------------------------------
                                 Chairman, President and Chief Executive Officer



                                       27
<PAGE>



                                 CERTIFICATIONS

I, Richard E. Fields, certify that:


1.       I have reviewed this annual report on Form 10-KSB of Universal Guardian
         Holdings, Inc.;

2.       Based on my  knowledge,  this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances  under which
         such  statements  were made, not misleading  with respect to the period
         covered by this annual report;

3.       Based on my knowledge,  the financial  statements,  and other financial
         information  included  in this  annual  report,  fairly  present in all
         material  respects the financial  condition,  results of operations and
         cash flows of the  registrant as of, and for, the periods  presented in
         this annual report;

4.       The registrant's  other  certifying  officers and I are responsible for
         establishing  and  maintaining  disclosure  controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         have:

         a)       designed  such  disclosure  controls and  procedures to ensure
                  that  material   information   relating  to  the   registrant,
                  including its consolidated  subsidiaries,  is made known to us
                  by others  within  those  entities,  particularly  during  the
                  period in which this annual report is being prepared;

         b)       evaluated the  effectiveness  of the  registrant's  disclosure
                  controls and  procedures  as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date");
                  and

         c)       presented  in this  annual  report our  conclusions  about the
                  effectiveness of the disclosure  controls and procedures based
                  on our evaluation as of the Evaluation Date;

5.       The registrant's other certifying officers and I have disclosed,  based
         on our most recent  evaluation,  to the  registrant's  auditors and the
         audit  committee  of  registrant's   board  of  directors  (or  persons
         performing the equivalent functions):

         a)       all  significant  deficiencies  in the design or  operation of
                  internal   controls   which   could   adversely   affect   the
                  registrant's ability to record, process,  summarize and report
                  financial  data  and  have  identified  for  the  registrant's
                  auditors any material weaknesses in internal controls; and

         b)       any fraud,  whether or not material,  that involves management
                  or  other  employees  who  have  a  significant  role  in  the
                  registrant's internal controls; and

6.       The registrant's other certifying officers and I have indicated in this
         annual  report  whether  there were  significant  changes  in  internal
         controls or in other factors that could  significantly  affect internal
         controls  subsequent  to  the  date  of  our  most  recent  evaluation,
         including   any   corrective   actions   with  regard  to   significant
         deficiencies and material weaknesses.

Date: April 15, 2003


                                                         /s/ Richard E. Fields
                                                         -----------------------
                                                         Chief Financial Officer



                                       28
<PAGE>


               UNIVERSAL GUARDIAN HOLDINGS, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                    FOR THE YEAR ENDED DECEMBER 31, 2002 AND
                          FOR THE PERIOD FROM INCEPTION
                      (MARCH 28, 2001) TO DECEMBER 31, 2001

<TABLE>
<CAPTION>
                                     INDEX

                                                                            Page
<S>                                                                     <C>
INDEPENDENT AUDITORS' REPORT

     Report on audited consolidated financial statements                     F-1

FINANCIAL STATEMENTS

     Consolidated Balance Sheet as of December 31, 2002                      F-2

     Consolidated Statements of Operations for the Year
       Ended December 31, 2002 and for the Period From
       Inception (March 28, 2001) to December 31, 2001                       F-3

     Consolidated Statement of Stockholders' Deficit for the Year
       Ended to December 31, 2002 and for the Period From
       Inception (March 28, 2001) to December 31, 2001                       F-4

     Consolidated Statements of Cash Flows for the Year
       Ended December 31, 2002 and for the Period From
       Inception (March 28, 2001) to December 31, 2001                   F-5 to F-6

     Notes to Consolidated Financial Statements                          F-7 to F-23

</TABLE>


<PAGE>


                          INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
UNIVERSAL GUARDIAN HOLDINGS, INC.

CARLSBAD, CALIFORNIA

We have  audited  the  accompanying  consolidated  balance  sheet  of  Universal
Guardian  Holdings,  Inc. and  Subsidiaries  as of December  31,  2002,  and the
related consolidated  statements of operations,  stockholders'  deficit and cash
flows for the year then ended and for the period from inception (March 28, 2001)
to  December  31,  2001.  These  consolidated   financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated 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 consolidated
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  consolidated  financial  statements.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall  consolidated  financial  statement  presentation.  We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Universal Guardian Holdings,  Inc. and Subsidiaries as of December 31, 2002, and
the consolidated results of their operations and consolidated cash flows for the
year then ended and from the period from inception  (March 28, 2001) to December
31, 2001, in conformity with  accounting  principles  generally  accepted in the
United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going  concern.  As discussed in Note 1, the
Company has incurred net losses since its  inception  and has a working  capital
deficit. These conditions raise substantial doubt about the Company's ability to
continue as a going concern.  Management's  plans in regard to these matters are
also described in Note 1. The consolidated  financial  statements do not include
any adjustments that might result from the outcome of this uncertainty

/s/ Stonefield Josephson, Inc.
STONEFIELD JOSEPHSON, INC.
Certified Public Accountants


Irvine, California
April 11, 2003


<PAGE>


               UNIVERSAL GUARDIAN HOLDINGS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2002

<TABLE>
<CAPTION>
                                     ASSETS
<S>                                                                       <C>
CURRENT ASSETS
   Cash and cash equivalents                                              $     1,042,812
   Accounts receivable, less allowance for
     doubtful accounts of $0                                                      809,924
   Inventory                                                                      116,487
   Deposits and other current assets                                               56,871
                                                                          ---------------
     Total current assets                                                       2,026,094

PROPERTY AND EQUIPMENT, net                                                        27,077
SOFTWARE DEVELOPMENT COSTS                                                         98,213
GOODWILL                                                                           29,912
                                                                          ---------------
TOTAL ASSETS                                                              $     2,181,296
                                                                          ===============

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
   Accounts payable                                                       $     1,654,365
   Accrued expenses                                                               619,090
   Capital lease obligations, current portion                                       5,223
   Notes payable, related parties                                                 880,633
                                                                          ---------------
     Total current liabilities                                                  3,159,311

CAPITAL LEASE OBLIGATION, less current portion                                      9,570
                                                                          ---------------
TOTAL LIABILITIES                                                               3,168,881
                                                                          ---------------

MINORITY INTEREST                                                                 437,500

COMMITMENTS AND CONTINGENCIES (Note 5)                                                 --

STOCKHOLDERS' DEFICIT
   Series A Convertible Preferred Stock, cumulative 7%,
     $0.001 par value, 5,000,000 shares authorized:
     600  shares issued and outstanding ($64,750 of
     dividends in arrears)                                                              1
   Common Stock, $0.001 par value, 50,000,000 shares
     authorized, 16,148,014 shares issued and outstanding                          16,148
   Additional paid-in capital                                                           -
   Accumulated deficit                                                         (1,441,234)
                                                                          ---------------

     Total stockholders' deficit                                               (1,425,085)
                                                                          ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                               $     2,181,296
                                                                          ===============
</TABLE>


                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                      F-2
<PAGE>


               UNIVERSAL GUARDIAN HOLDINGS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    FOR THE YEAR ENDED DECEMBER 31, 2002 AND
       FOR THE PERIOD FROM INCEPTION (MARCH 28, 2001) TO DECEMBER 31, 2001

<TABLE>
<CAPTION>
                                                       2002             2001
                                                    -----------     -----------
<S>                                                 <C>             <C>
REVENUE                                             $ 2,779,449     $        --


COST OF REVENUE                                       2,429,650              --
                                                    -----------     -----------

GROSS PROFIT                                            349,799              --
                                                    -----------     -----------

SELLING GENERAL AND
  ADMINISTRATIVE EXPENSES                             1,094,819          99,423
                                                    -----------     -----------

LOSS FROM OPERATIONS                                   (745,020)        (99,423)
                                                    -----------     -----------

OTHER EXPENSES:
  Financing costs                                       559,770              --
  Interest expense                                       26,321              --
                                                    -----------     -----------

          TOTAL OTHER EXPENSES                          586,091              --
                                                    -----------     -----------

LOSS BEFORE INCOME TAXES                             (1,331,111)        (99,423)

 INCOME TAXES                                                --              --
                                                    -----------     -----------

NET LOSS                                            $(1,331,111)    $   (99,423)
                                                    ===========     ===========

PREFERRED STOCK DIVIDENDS                                (5,469)             --
                                                    -----------     -----------

NET LOSS ATTRIBUTED TO COMMON STOCKHOLDERS          $(1,336,580)    $   (99,423)
                                                    ===========     ===========

NET LOSS PER SHARE:
     BASIC AND DILUTED                              $     (0.17)    $     (0.02)
                                                    ===========     ===========
WEIGHTED AVERAGE SHARES OUTSTANDING:
     BASIC AND DILUTED                                7,978,096       4,475,000
                                                    ===========     ===========
</TABLE>


                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                      F-3
<PAGE>


               UNIVERSAL GUARDIAN HOLDINGS, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
                    FOR THE YEAR ENDED DECEMBER 31, 2002 AND
       FOR THE PERIOD FROM INCEPTION (MARCH 28, 2001) TO DECEMBER 31, 2001

<TABLE>
<CAPTION>
                                          Series A, Convertible
                                             Preferred Stock           Common Stock         Additional                     Total
                                         -----------------------  -----------------------    Paid-in     Accumulated  Stockholder's
                                            Shares      Amount     Shares        Amount      Capital       Deficit        Deficit
                                         -----------  ---------   ----------   ----------  -----------   -----------    -----------
<S>                                      <C>          <C>         <C>          <C>         <C>           <C>            <C>
Balance at March 28, 2001 (inception)             --  $      --           --   $       --  $        --   $        --    $       --
Common stock issued for compensation                               4,475,000        4,475                                    4,475
Net loss                                          --         --           --           --           --       (99,423)      (99,423)
                                         -----------  ---------   ----------   ----------  -----------   -----------    -----------

Balance at December 31, 2001                      --         --    4,475,000        4,475           --       (99,423)      (94,948)
Common stock issued for compensation              --         --    5,125,000        5,125       28,935            --         34,060
Common stock issued for the acquisition
  of The Harbour Group, Inc. (Note 2)             --         --    1,700,000        1,700       15,300            --         17,000
Stock options issued to consultants,
  at fair value -                                 --         --           --           --       14,883            --         14,883
Warrants issued to consultants,
  at fair value                                   --         --           --           --       38,886            --         38,886
Shares issued in connection with merger
  transaction with Universal Guardian
  Holdings, Inc. on December 31, 2002            600          1    4,848,014        4,848      (98,004)      (10,700)     (103,855)
Net loss                                          --         --           --           --           --    (1,331,111)   (1,331,111)
                                         -----------  ---------   ----------   ----------  -----------   -----------    -----------

Balance at December 31, 2002                     600  $       1   16,148,014   $   16,148           --   $(1,441,234)  $(1,425,085)
                                         ===========  =========   ==========   ==========  ===========   ===========    ===========
</TABLE>


                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                      F-4
<PAGE>

               UNIVERSAL GUARDIAN HOLDINGS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                    FOR THE YEAR ENDED DECEMBER 31, 2002 AND
       FOR THE PERIOD FROM INCEPTION (MARCH 28, 2001) TO DECEMBER 31, 2001

<TABLE>
<CAPTION>
                                                              2002           2001
                                                           -----------    -----------
<S>                                                        <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                $(1,331,111)   $   (99,423)
   Adjustments to reconcile net loss to net cash
     provided by operating activities:
     Depreciation expense                                        1,460             --
     Common stock issued for compensation                       34,060          4,475
     Value of options and warrants issued to consultants        53,769             --
     Issuance of Series A preferred stock for
       financing costs                                         437,500             --
     Debt issuance costs                                       122,270             --

   (Increase) decrease in:
     Accounts receivable                                      (774,333)            --
     Inventory                                                (116,487)            --
     Deposits and other current assets                         (55,121)            --

   Increase (decrease) in:
     Accounts payable                                        1,596,117         94,948
     Accrued expenses                                          416,314             --
                                                           -----------    -----------

Net cash provided by operating activities                      384,438             --
                                                           -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                           (7,364)            --
   Payments for software development costs                     (98,213)            --
   Cash acquired with acquisition of subsidiary                  5,936             --
                                                           -----------    -----------

Net cash used in investing activities                          (99,641)            --
                                                           -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from bridge loans                                  700,000             --
   Payment of debt issuance costs                             (122,270)            --
   Proceeds from note payable - officer                        223,633             --
   Repayments on notes payable - officer                       (43,000)            --
   Payment on capital lease obligations                           (348)            --
                                                           -----------    -----------

Net cash provided by financing activities                      758,015             --
                                                           -----------    -----------

NET INCREASE IN CASH AND CASH EQUIVALENTS                    1,042,812             --

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD                     --             --
                                                           -----------    -----------

CASH AND CASH EQUIVALENTS - END OF PERIOD                  $ 1,042,812    $        --
                                                           ===========    ===========
</TABLE>


                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                      F-5
<PAGE>

               UNIVERSAL GUARDIAN HOLDINGS, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                    FOR THE YEAR ENDED DECEMBER 31, 2002 AND
       FOR THE PERIOD FROM INCEPTION (MARCH 28, 2001) TO DECEMBER 31, 2001


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

During the year ended December 31, 2002 and the period from inception (March 28,
2001)  to  December  31,  2001,  the  Company  paid  income  taxes of $0 and $0,
respectively and interest of $26,321 and $0, respectively.

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING TRANSACTIONS:

During the year ended December 31, 2002 the Company (1) issued  5,125,000 shares
of common stock for compensation valued at $34,060;  (2) issued 1,700,000 shares
of common stock for the acquisition of The Harbour Group, Inc. valued at $17,000
(see Note 2); and (3) entered into capital  lease  obligations  of $15,141.  The
Company's  subsidiary  issued  350,000  shares  of Series A  preferred  stock in
connection with two bridge loans valued at $437,500.

During the period  from  inception  (March 28,  2001) to  December  31, 2001 the
Company  issued  4,475,000  shares of common  stock for  compensation  valued at
$4,475.

In connection  with the merger  transaction  with Hollywood  Partners.com,  Inc.
(renamed  Universal  Guardian  Holdings,  Inc.) the Company issued 600 shares of
Series  A  preferred  stock,  4,848,014  shares  of  common  stock  and  assumed
liabilities of $103,855. (See Note 1)


                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                      F-6
<PAGE>


               UNIVERSAL GUARDIAN HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE YEAR ENDED DECEMBER 31, 2002 AND
       FOR THE PERIOD FROM INCEPTION (MARCH 28, 2001) TO DECEMBER 31, 2001


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

         Organization and Line of Business

         Universal Guardian Holdings,  Inc. (the "Company" or "UGHO"),  formerly
         known as Hollywood  Partners.com,  Inc. was incorporated under the laws
         of Delaware during 1989 under the name Guideline  Capital  Corporation.
         Effective  September  13,  1999,  pursuant  to  a  Share  Exchange  and
         Reorganization  Agreement,  the Company  acquired all of the issued and
         outstanding shares of Hollywood Partners,  Inc. and changed its name to
         Hollywood Partners.com, Inc.

         Effective  December  31,  2002,   pursuant  to  a  Share  Exchange  and
         Reorganization   Agreement,   between  UGHO  and   Universal   Guardian
         Corporation ("UGC"), the former shareholders of UGC acquired 11,300,000
         newly  issued   shares  of  common  stock  of  UGHO.  At  the  date  of
         consummation  of  this  transaction,   these  shareholders  effectively
         controlled  approximately  69.1% of the issued and  outstanding  common
         stock of UGHO.  Since the shareholders of UGC obtained control of UGHO,
         according to FASB  Statement  No. 141 - "BUSINESS  COMBINATIONS,"  this
         acquisition  has been  treated  as a  recapitalization  for  accounting
         purposes,  in a manner similar to reverse  acquisition  accounting.  In
         accounting for this transaction:

         o        UGC is deemed to be the purchaser  and  surviving  company for
                  accounting purposes.  Accordingly, its net assets are included
                  in the balance sheet at their  historical  book values and the
                  results  of  operations  of UGC have  been  presented  for the
                  comparative prior period;

         o        Control of the net assets and  business  of UGHO was  acquired
                  effective   December  31,  2002.  This  transaction  has  been
                  accounted for as a purchase of the assets and  liabilities  of
                  UGHO  by UGC.  The  historical  cost  of the  net  liabilities
                  assumed was $103,855.

         UGC was incorporated under the laws of the state of Nevada on March 28,
         2001.  UGC is in the business of  protecting  human life and  military,
         government and commercial  assets, by providing  services,  systems and
         technology to detect, assess and defend against security and terrorists
         threats  worldwide.  UGC's  corporate  office is located  in  Carlsbad,
         California.

         Prior to the  transaction,  UGHO had 4,848,014 and 600 shares of common
         and series A preferred stock outstanding,  respectively,  and 1,779,875
         options/warrants  to purchase shares of common stock  outstanding.  UGC
         had  11,300,000  and  350,000  shares of common and series A  preferred
         stock  outstanding,  respectively,  and  2,175,000  option/warrants  to
         purchase   shares  of  common  stock   outstanding.   Pursuant  to  the
         transaction,  the 11,300,000 UGC shares were converted into  11,300,000
         shares of UGHO,  the  350,000  UGC  series A  preferred  shares  can be
         converted  on a one for one  basis  into  common  shares of UGHO at the
         option of the  holder  and the  2,175,000  UGC  option/warrants  can be
         exercised for common shares of UGHO.


                                      F-7
<PAGE>

               UNIVERSAL GUARDIAN HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE YEAR ENDED DECEMBER 31, 2002 AND
       FOR THE PERIOD FROM INCEPTION (MARCH 28, 2001) TO DECEMBER 31, 2001


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

         Basis of Presentation

         The accompanying  consolidated  financial statements have been prepared
         in conformity  with  accounting  principles  generally  accepted in the
         United States of America, which contemplate continuation of the Company
         as a going concern.  However, the Company has incurred a net loss since
         its  inception  and as of  December  31,  2002  had a  working  capital
         deficit.  These  matters  raise  substantial  doubt about the Company's
         ability to continue as a going concern.  These  consolidated  financial
         statements   do  not   include   any   adjustments   relating   to  the
         recoverability and classification of recorded asset amounts, or amounts
         and  classification  of liabilities  that might be necessary should the
         Company be unable to continue as a going concern.

         Management  plans to take the following  steps that it believes will be
         sufficient  to provide  the  Company  with the  ability to  continue in
         existence. Management plans to raise additional capital through private
         equity  financing by selling shares of UGC's Series A preferred  stock,
         to continue to obtain new profitable  contracts to install its security
         systems and to continue to perform on its current contracts. Management
         believes that being a public company as a result of the above mentioned
         merger  will  provide  more  opportunities  for the  Company  to  raise
         additional debt and equity capital.

         Principles of Consolidation

         The accompanying consolidated financial statements include the accounts
         of the Company and its wholly  owned  subsidiary,  UGC and UGC's wholly
         owned subsidiary,  The Harbour Group, Inc. from its date of acquisition
         (see Note 2). All  inter-company  accounts and  transactions  have been
         eliminated.

         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 disclosures of contingent assets and liabilities at the
         date of the financial  statements  and the reported  amounts of revenue
         and expenses during the reporting periods.  As of December 31, 2002 and
         2001, the Company used estimates in determining  the realization of its
         accounts  receivable,  inventory  and  its  intangible  assets.  Actual
         results could differ from these estimates.

         Fair Value of Financial Instruments

         For certain of the Company's  financial  instruments,  including  cash,
         accounts  receivable,  inventory,  deposits,  and other current assets,
         accounts payable and accrued expenses, the carrying amounts approximate
         fair value due to their short  maturities.  The amounts shown for notes
         payable and  capital  lease  obligations  also  approximate  fair value
         because  current  interest  rates and terms  offered to the Company for
         similar debt are substantially the same.



                                      F-8
<PAGE>

               UNIVERSAL GUARDIAN HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE YEAR ENDED DECEMBER 31, 2002 AND
       FOR THE PERIOD FROM INCEPTION (MARCH 28, 2001) TO DECEMBER 31, 2001


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

         Cash and Cash Equivalents

         For purposes of the statements of cash flows,  the Company defines cash
         equivalents  as all highly  liquid debt  instruments  purchased  with a
         maturity of three months or less, plus all certificates of deposit.

         Concentration of Credit Risk

         Financial  instruments,  which  potentially  subject  the  Company  to
         concentrations  of  credit  risk,  consist  of  cash  and  accounts
         receivables.  The  Company places its cash with high quality financial
         institutions  and  at  times  may  exceed  the FDIC $100,000 insurance
         limit.  The  Company's  current operations consist of fulfilling seven
         government  contracts.  The  government  awards  contracts  to a prime
         contractor  who will in turn enter into a contract with the Company to
         be  a  sub-contractor. The Company invoices and receives payments from
         the  prime  contractor.  At  December  31,  2002,  the entire accounts
         receivable  balance  was  due  from  the prime contractor. The Company
         extends  credit  based  on  an  evaluation of the customer's financial
         condition,  generally  without  collateral.  The  Company  has  not
         established  an  allowance  for  doubtful  accounts  since  all of its
         receivables  are  ultimately  from  governmental entities. Exposure to
         losses  on  receivables  is  principally  dependent on each customer's
         financial  condition.  The  Company  monitors  its exposure for credit
         losses  and  maintains allowances for anticipated losses, if required.

         Inventory

         Inventory  consisting  principally of products purchased for resale and
         are stated at the lower of cost (determined by the first-in,  first-out
         method) or market.

         Property and Equipment

         Property and  equipment  are stated at cost.  Depreciation  is computed
         using the  straight-line  method based on estimated useful lives from 3
         to 7 years.  Expenditures  for  maintenance  and repairs are charged to
         operations as incurred while renewals and betterments are  capitalized.
         Gains  and  losses  on  disposals   are  included  in  the  results  of
         operations.

         Software Development Costs

         Software development costs are capitalized in accordance with Statement
         of Financial  Accounting Standards ("SFAS") No. 86, "Accounting for the
         Cost of Computer Software to be Sold,  Leased, or Otherwise  Marketed."
         Capitalization   of  software   development   costs   begins  upon  the
         establishment of technological feasibility and is discontinued when the
         product is  available  for sale.  The  establishment  of  technological
         feasibility   and  the  ongoing   assessment  for   recoverability   of
         capitalized software development costs require considerable judgment by
         management with respect to certain external factors including,  but not
         limited  to,  technological   feasibility,   anticipated  future  gross
         revenues, estimated economic life, and changes in software and hardware
         technologies.  Capitalized  software  development  costs are  comprised
         primarily of external development costs associated with the development
         of the  Company's  software  products.  As of December  31,  2002,  the
         Company had not begun selling any software products.



                                      F-9
<PAGE>

               UNIVERSAL GUARDIAN HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE YEAR ENDED DECEMBER 31, 2002 AND
       FOR THE PERIOD FROM INCEPTION (MARCH 28, 2001) TO DECEMBER 31, 2001


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

         Software Development Costs, Continued

         Amortization of capitalized software development costs is provided on a
         product-by-product basis on the straight-line method over the estimated
         economic  life of the  products  (not to  exceed  three  years).  As of
         December 31, 2002, amortization has not begun since the Company has not
         begun to sell any software products.  Management  periodically compares
         estimated net  realizable  value by product with the amount of software
         development  costs  capitalized  for that  product to ensure the amount
         capitalized  is not in excess of the  amount  to be  recovered  through
         revenues.  Any such excess of capitalized software development costs to
         expected net realizable value is expensed at that time.

         Impairment of Long-Lived Assets

         Long-lived  assets  to be held  and used are  analyzed  for  impairment
         whenever events or changes in  circumstances  indicate that the related
         carrying amounts may not be recoverable.  The Company evaluates at each
         balance sheet date whether events and circumstances  have occurred that
         indicate possible  impairment.  If there are indications of impairment,
         the Company uses future undiscounted cash flows of the related asset or
         asset grouping over the remaining life in measuring  whether the assets
         are  recoverable.  In the event such cash flows are not  expected to be
         sufficient to recover the recorded asset values, the assets are written
         down to their estimated fair value. Long-lived assets to be disposed of
         are  reported  at the lower of  carrying  amount or fair value of asset
         less cost to sell.

         Goodwill

         Goodwill  represents the excess of the consideration over the estimated
         fair value of the net tangible assets acquired. The Company continually
         monitors its goodwill  assets to determine  whether any  impairment has
         occurred.  In making such  determination  with respect to these assets,
         the Company  evaluates the  performance  on an  undiscounted  cash flow
         basis,  of the  assets  or  group of  assets,  which  gave  rise to the
         goodwill's  carrying amount.  Should  impairment be identified,  a loss
         would be reported to the extent that the carrying  value of the related
         goodwill  exceeds  the fair value of the asset or group of assets  that
         gave rise to the goodwill using the discounted cash flow method.

         Revenue Recognition

         The Company  recognizes  revenue for the sale of purchased  parts under
         its  firm  fixed  price  contracts  after  the  customer  inspects  the
         purchased  parts and  agrees to take title to the  parts.  Revenue  for
         services  performed  under its firm fixed price  contracts is generally
         recognized as services are performed.

         The Company will  recognize  revenue  related to software  products and
         licenses  and  software  maintenance  in  compliance  with the American
         Institute  of  Certified  Public  Accountants  ("AICPA")  Statement  of
         Position No. 97-2, "Software Revenue Recognition."



                                      F-10
<PAGE>

               UNIVERSAL GUARDIAN HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE YEAR ENDED DECEMBER 31, 2002 AND
       FOR THE PERIOD FROM INCEPTION (MARCH 28, 2001) TO DECEMBER 31, 2001


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

         Advertising and Marketing Costs

         The Company  expenses costs of  advertising  and marketing as incurred.
         Advertising and marketing  expense for the year ended December 31, 2002
         and the period from inception (March 28, 2001) to December 31, 2001 was
         $12,624 and $0, respectively.

         Income Taxes

         The Company  accounts for income taxes in accordance with SFAS No. 109,
         "Accounting  for Income  Taxes."  Deferred  taxes are  provided  on the
         liability  method  whereby  deferred  tax  assets  are  recognized  for
         deductible  temporary  differences,  and deferred tax  liabilities  are
         recognized for taxable temporary differences. Temporary differences are
         the differences  between the reported amounts of assets and liabilities
         and their tax bases.  Deferred  tax assets are  reduced by a  valuation
         allowance  when, in the opinion of  management,  it is more likely than
         not  that  some  portion  or all of the  deferred  tax  assets  will be
         realized.  Deferred  tax assets and  liabilities  are  adjusted for the
         effects of changes in tax laws and rates on the date of enactment.

         Earnings Per Share

         In accordance  with SFAS No. 128,  "Earnings Per Share," the basic loss
         per common share is computed by dividing  net loss  available to common
         stockholders   by  the  weighted   average   number  of  common  shares
         outstanding. Diluted loss per common share is computed similar to basic
         loss per common  share  except that the  denominator  is  increased  to
         include  the number of  additional  common  shares that would have been
         outstanding  if the potential  common shares had been issued and if the
         additional common shares were dilutive.  At December 31, 2002 and 2001,
         the only dilutive  securities  were 1,775,000 and 0 (zero) common stock
         options and 2,629,875 and 0 (zero) common stock warrants/other options,
         respectively.

         Comprehensive Income

         SFAS No. 130, "Reporting  Comprehensive  Income," establishes standards
         for  the  reporting  and  display  of  comprehensive   income  and  its
         components in the financial statements. For the year ended December 31,
         2002 and for the period from inception (March 28, 2001) to December 31,
         2001,  the  Company  has no items that  represent  other  comprehensive
         income and,  accordingly,  has not included a schedule of comprehensive
         income in the financial statements.

         Recently Issued Accounting Pronouncements

         In July 2001, the Financial  Accounting Standards Board ("FASB") issued
         SFAS  No.  141  "Business   Combinations."   SFAS  No.  141  supersedes
         Accounting  Principles  Board  ("APB")  No.  16 and  requires  that any
         business combinations initiated after June 30, 2001 be accounted for as
         a  purchase;  therefore,  eliminating  the  pooling-of-interest  method
         defined  in APB  16.  The  statement  is  effective  for  any  business
         combination  initiated  after  June  30,  2001 and  shall  apply to all
         business  combinations  accounted for by the purchase  method for which
         the date of  acquisition  is July 1, 2001 or  later.  The  Company  has
         implemented this pronouncement.



                                      F-11
<PAGE>


               UNIVERSAL GUARDIAN HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE YEAR ENDED DECEMBER 31, 2002 AND
       FOR THE PERIOD FROM INCEPTION (MARCH 28, 2001) TO DECEMBER 31, 2001


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

         Recently Issued Accounting Pronouncements, Continued

         In July  2001,  the FASB  issued  SFAS No.  142,  "Goodwill  and  Other
         Intangibles."   SFAS  No.  142  addresses   the  initial   recognition,
         measurement and amortization of intangible assets acquired individually
         or with a group of other  assets (but not those  acquired in a business
         combination) and addresses the amortization  provisions for excess cost
         over fair value of net assets  acquired  or  intangibles  acquired in a
         business  combination.  The  statement  is  effective  for fiscal years
         beginning  after  December 15, 2001, and is effective July 1, 2001, for
         any intangibles acquired in a business combination initiated after June
         30, 2001. The Company has implemented this pronouncement.

         In October 2001,  the FASB issued SFAS No. 143,  "Accounting  for Asset
         Retirement  Obligations,"  which requires  companies to record the fair
         value of a liability for asset retirement  obligations in the period in
         which they are  incurred.  The statement  applies to a company's  legal
         obligations  associated  with the  retirement of a tangible  long-lived
         asset that results from the acquisition,  construction, and development
         or through the normal operation of a long-lived asset. When a liability
         is initially  recorded,  the company would capitalize the cost, thereby
         increasing the carrying  amount of the related asset.  The  capitalized
         asset  retirement  cost is depreciated  over the life of the respective
         asset  while the  liability  is accreted  to its  present  value.  Upon
         settlement of the liability,  the obligation is settled at its recorded
         amount or the company incurs a gain or loss. The statement is effective
         for fiscal years  beginning  after June 30, 2002.  The Company does not
         expect  the  adoption  to  have a  material  impact  to  the  Company's
         financial position or results of operations.

         In October  2001,  the FASB issued SFAS No.  144,  "Accounting  for the
         Impairment or Disposal of Long-Lived  Assets."  Statement 144 addresses
         the  accounting  and  reporting  for  the  impairment  or  disposal  of
         long-lived assets. The statement provides a single accounting model for
         long-lived  assets  to be  disposed  of.  New  criteria  must be met to
         classify  the  asset as an asset  held-for-sale.  This  statement  also
         focuses  on  reporting  the  effects  of a  disposal  of a segment of a
         business.  This statement is effective for fiscal years beginning after
         December 15, 2001. The Company has implemented this  pronouncement  and
         has concluded that the adoption has no material impact to the financial
         statements.

         In April 2002, the FASB issued  Statement No. 145,  "Rescission of FASB
         Statements  No. 4, 44, and 64,  Amendment of FASB Statement No. 13, and
         Technical  Corrections."  This Statement rescinds FASB Statement No. 4,
         "Reporting  Gains and  Losses  from  Extinguishment  of  Debt,"  and an
         amendment of that Statement, FASB Statement No. 64, "Extinguishments of
         Debt Made to Satisfy Sinking-Fund  Requirements" and FASB Statement No.
         44,   "Accounting  for  Intangible  Assets  of  Motor  Carriers."  This
         Statement  amends FASB  Statement No. 13,  "Accounting  for Leases," to
         eliminate  an  inconsistency   between  the  required   accounting  for
         sale-leaseback  transactions  and the required  accounting  for certain
         lease  modifications  that have  economic  effects  that are similar to
         sale-leaseback  transactions.  The Company does not expect the adoption
         to have a  material  impact  to the  Company's  financial  position  or
         results of operations.



                                      F-12
<PAGE>

               UNIVERSAL GUARDIAN HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE YEAR ENDED DECEMBER 31, 2002 AND
       FOR THE PERIOD FROM INCEPTION (MARCH 28, 2001) TO DECEMBER 31, 2001


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

         Recently Issued Accounting Pronouncements, Continued

         In June 2002, the FASB issued Statement No. 146,  "Accounting for Costs
         Associated with Exit or Disposal  Activities." This Statement addresses
         financial  accounting and reporting for costs  associated  with exit or
         disposal  activities and nullifies  Emerging Issues Task Force ("EITF")
         Issue No. 94-3, "Liability Recognition for Certain Employee Termination
         Benefits and Other Costs to Exit an Activity  (including  Certain Costs
         Incurred in a  Restructuring)."  The  provisions of this  Statement are
         effective  for exit or disposal  activities  that are  initiated  after
         December 31, 2002, with early application encouraged.  The Company does
         not expect the  adoption  to have a  material  impact to the  Company's
         financial position or results of operations.

         In October 2002, the FASB issued  Statement No. 147,  "Acquisitions  of
         Certain Financial  Institutions-an  amendment of FASB Statements No. 72
         and 144 and FASB  Interpretation No. 9," which removes  acquisitions of
         financial  institutions  from  the  scope  of  both  Statement  72  and
         Interpretation 9 and requires that those  transactions be accounted for
         in accordance with Statements No. 141, Business  Combinations,  and No.
         142, Goodwill and Other Intangible Assets. In addition,  this Statement
         amends  SFAS No.  144,  Accounting  for the  Impairment  or Disposal of
         Long-Lived    Assets,    to    include    in   its   scope    long-term
         customer-relationship  intangible assets of financial institutions such
         as depositor- and  borrower-relationship  intangible  assets and credit
         cardholder intangible assets. The requirements relating to acquisitions
         of financial  institutions are effective for acquisitions for which the
         date of  acquisition  is on or after  October 1, 2002.  The  provisions
         related  to  accounting  for the  impairment  or  disposal  of  certain
         long-term  customer-relationship  intangible  assets are  effective  on
         October 1, 2002. The adoption of this Statement did not have a material
         impact to the Company's  financial position or results of operations as
         the Company has not engaged in either of these activities.

         In December 2002, the FASB issued  Statement No. 148,  "Accounting  for
         Stock-Based  Compensation-Transition and Disclosure," which 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  transition  guidance  and  annual  disclosure
         provisions of Statement 148 are effective for fiscal years ending after
         December  15,  2002,  with  earlier  application  permitted  in certain
         circumstances.  The interim  disclosure  provisions  are  effective for
         financial reports containing  financial  statements for interim periods
         beginning  after  December 15, 2002. The adoption of this statement did
         not have a  material  impact on the  Company's  financial  position  or
         results of  operations  as the Company has not elected to change to the
         fair  value  based  method  of  accounting  for  stock-based   employee
         compensation.



                                      F-13
<PAGE>

               UNIVERSAL GUARDIAN HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE YEAR ENDED DECEMBER 31, 2002 AND
       FOR THE PERIOD FROM INCEPTION (MARCH 28, 2001) TO DECEMBER 31, 2001


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

         Recently Issued Accounting Pronouncements, Continued

         In May 2000,  the Emerging  Issues Task Force (EITF)  issued EITF Issue
         No.  00-14,  Accounting  for Certain Sales  Incentives.  EITF Issue No.
         00-14  addresses the  recognition,  measurement,  and income  statement
         classification for sales incentives that a vendor voluntarily offers to
         customers (without charge),  which the customer can use in, or exercise
         as a result of, a single exchange  transaction.  Sales  incentives that
         fall  within the scope of EITF Issue No.  00-14  include  offers that a
         customer  can use to receive a  reduction  in the price of a product or
         service at the point of sale. The EITF changed the transition  date for
         Issue 00-14,  concluding  that a company should apply this consensus no
         later than the company s annual or interim financial statements for the
         periods  beginning  after  December  15, 2001.  In June 2001,  the EITF
         issued EITF Issue No. 00-25,  Vendor Income Statement  Characterization
         of Consideration Paid to a Reseller of the Vendor s Products, effective
         for periods  beginning  after  December 15, 2001.  EITF Issue No. 00-25
         addresses whether  consideration  from a vendor to a reseller is (a) an
         adjustment  of  the  selling  prices  of  the  vendor's  products  and,
         therefore,  should be deducted  from  revenue  when  recognized  in the
         vendor's  statement of  operations or (b) a cost incurred by the vendor
         for assets or  services  received  from the  reseller  and,  therefore,
         should be included as a cost or expense when recognized in the vendor s
         statement of operations.  Upon  application  of these EITFs,  financial
         statements for prior periods presented for comparative  purposes should
         be   reclassified   to  comply  with  the  income   statement   display
         requirements  under these Issues. In September of 2001, the EITF issued
         EITF Issue No. 01-09, Accounting for Consideration Given by Vendor to a
         Customer  or  a  Reseller  of  the  Vendor's   Products,   which  is  a
         codification  of EITF  Issues  No.  00-14,  No.  00-25  and  No.  00-22
         Accounting  for Points and Certain  Other  Time-or  Volume-Based  Sales
         Incentive  Offers  and  Offers  for Free  Products  or  Services  to be
         Delivered in the Future.  The Company has adopted  these issues in 2002
         which  did  not  have a  material  impact  on the  Company's  financial
         statements.

         In January 2003, the FASB issued  Interpretation No. 46, "Consolidation
         of Variable Interest Entities."  Interpretation 46 changes the criteria
         by which  one  company  includes  another  entity  in its  consolidated
         financial  statements.  Previously,  the criteria were based on control
         through voting interest. Interpretation 46 requires a variable interest
         entity to be  consolidated by a company if that company is subject to a
         majority  of the  risk of loss  from  the  variable  interest  entity's
         activities  or entitled to receive a majority of the entity's  residual
         returns or both. A company that consolidates a variable interest entity
         is called the primary  beneficiary  of that entity.  The  consolidation
         requirements  of   Interpretation  46  apply  immediately  to  variable
         interest  entities  created after January 31, 2003.  The  consolidation
         requirements  apply to  older  entities  in the  first  fiscal  year or
         interim period beginning after June 15, 2003. Certain of the disclosure
         requirements apply in all financial statements issued after January 31,
         2003,  regardless of when the variable interest entity was established.
         The Company does not expect the  adoption to have a material  impact to
         the Company's financial position or results of operations.



                                      F-14
<PAGE>

               UNIVERSAL GUARDIAN HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE YEAR ENDED DECEMBER 31, 2002 AND
       FOR THE PERIOD FROM INCEPTION (MARCH 28, 2001) TO DECEMBER 31, 2001


NOTE 2 - ACQUISITIONS

         On August 31, 2002, the Company acquired all the issued and outstanding
         shares of common stock of The Harbour Group,  Inc. for 1,700,000 shares
         of the Company's  common stock.  The fair market value of the shares of
         the  Company's  common stock issued in this  transaction  was $0.01 per
         share,  or $17,000,  as determined by the Company's board of directors.
         This  transaction  has been  accounted  for by the  purchase  method of
         accounting;  accordingly,  the purchase price has been allocated to the
         assets  acquired and  liabilities  assumed based on the estimated  fair
         values at the date of  acquisition.  The excess of the  purchase  price
         over the  estimated  fair value of  tangible  net assets  acquired  was
         attributed to goodwill.  The Harbour Group, Inc. was incorporated under
         the laws of the state of Virginia  on  December  5, 2001,  but had just
         commenced operations prior to its acquisition by the Company.

         The fair  value of the  assets  acquired  and  liabilities  assumed  is
summarized as follows:

<TABLE>
<CAPTION>
<S>                                                             <C>
                  Cash                                          $    5,936
                  Accounts receivable                               35,591
                  Other current assets                               1,750
                  Equipment                                          6,032
                  Goodwill                                          29,912
                  Accounts payable                                 (55,518)
                  Accrued expenses                                  (6,703)
                                                                ----------

                  Purchase price                                $   17,000
                                                                ==========
</TABLE>


         The  following   table  presents  the  unaudited  pro  forma  condensed
         statement  of  operations  for the year  ended  December  31,  2002 and
         reflects the results of operations of the Company as if the acquisition
         of The Harbour Group,  Inc. had been effective January 1, 2002. The pro
         forma amounts are not necessarily indicative of the combined results of
         operations  had the  acquisition  been effective as of that date, or of
         the  anticipated  results of  operations,  due to cost  reductions  and
         operating   efficiencies   that  are   expected  as  a  result  of  the
         acquisition.

<TABLE>
<CAPTION>
<S>                                                          <C>
                  Net sales                                  $     2,905,243
                                                             ===============
                  Gross profit                               $       370,552
                                                             ===============
                  Selling, general, and
                    administrative expenses                  $     1,128,484
                                                             ---------------
                  Net loss                                   $    (1,344,023)
                                                             ===============
                  Basic and diluted loss per share           $         (0.14)
                                                             ===============
                  Weighted average shares                          9,322,400
                                                             ===============
</TABLE>



                                      F-15
<PAGE>

               UNIVERSAL GUARDIAN HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE YEAR ENDED DECEMBER 31, 2002 AND
       FOR THE PERIOD FROM INCEPTION (MARCH 28, 2001) TO DECEMBER 31, 2001


NOTE 3 - PROPERTY AND EQUIPMENT

         The cost of property and  equipment  at December 31, 2002  consisted of
the following:

<TABLE>
<CAPTION>
<S>                                                           <C>
         Computer equipment                                   $    19,831
         Furniture and fixtures                                     8,706
                                                              -----------

                                                                   28,537
                                                              -----------

          Less accumulated depreciation                            (1,460)
                                                              -----------

                                                              $    27,077
                                                              ===========
</TABLE>


         Depreciation  expense  for the year  ended  December  31,  2002 and the
         period from inception  (March 28, 2001) to December 31, 2001 was $1,460
         and $0, respectively.

NOTE 4 - NOTES PAYABLE, RELATED PARTIES

         Notes payable at December 31, 2002 consist of the following:

<TABLE>
<CAPTION>
<S>                                                                               <C>
         Bridge loan notes to  stockholders  of UGHO (See Note 8), dated October
         14,  2002 - these two  notes  accrue  interest  at 10% per  annum,  are
         secured  by  virtually  all the  assets of the  Company  and a personal
         guarantee issued by the CEO are due on January 14, 2003.  Subsequent to
         December 31, 2002,  these bridge loans were converted into an aggregate
         of 560,000 shares of UGC Series A preferred stock
         (See Note 9); and                                                        $       700,000

         Demand note to officer - the note accrues interest at 9%
         per annum, is unsecured and is payable on demand.                                180,633
                                                                                  ---------------

                                                                                  $       880,633
                                                                                  ===============
</TABLE>



                                      F-16
<PAGE>

               UNIVERSAL GUARDIAN HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE YEAR ENDED DECEMBER 31, 2002 AND
       FOR THE PERIOD FROM INCEPTION (MARCH 28, 2001) TO DECEMBER 31, 2001


NOTE 5 - COMMITMENTS AND CONTINGENCIES

         The  Company  leases  a  facility  for  its  corporate  office  under a
         non-cancelable  operating lease.  Total rent expense for the year ended
         December  31, 2002 and the period from  inception  (March 28,  2001) to
         December  31, 2001 was $18,998 and $0,  respectively.  The Company also
         leases  certain  equipment  under  capital  lease  obligations.  Future
         minimum  lease  payments  under  non-cancelable  capital and  operating
         leases  with  initial  or  remaining  terms  of one year or more are as
         follows:

<TABLE>
<CAPTION>
                                                                      Capital       Operating
                                                                      Leases          Leases
                                                                      -------       ---------
<S>                                                                <C>             <C>
                  Year ending December 31,
                  2003                                             $     6,087     $     128,095
                  2004                                                   6,087           204,794
                  2005                                                   5,072           218,812
                  2006                                                                   227,653
                  2007                                                                   236,493
                  Thereafter                                                              19,769
                                                                   -----------     -------------

                  Net Minimum Lease Payments                            17,246     $   1,035,616
                                                                   ------------    =============
                  Less: Amounts Representing Interest                   (2,453)
                                                                   -----------
                  Present Value of Net Minimum Lease Payments           14,793
                  Less: Current Portion                                 (5,223)
                                                                   -----------
                  Long-Term Portion                                $     9,570
                                                                   ===========
</TABLE>


         Included in property and equipment is  capitalized  lease  equipment of
         $15,141 with  accumulated  amortization  of $421 and $0 at December 31,
         2002 and 2001, respectively.

         Litigation

         As a result of actions  committed  by a former  employee,  the  Company
         recently made a self-disclosure to the U.S. Navy regarding overbillings
         to the government and excessive  business  pleasantries.  Each of these
         issues is currently under internal  investigation  and the Company will
         disclose the results of its internal  investigation  to the Government.
         Management does not believe that the outcome of these matters will have
         a  material  adverse  effect on the  Company's  financial  position  or
         results of operations. Subsequently, an action was filed by this former
         employee  on March 7, 2003 in the U.S.  District  Court for the Central
         District of California,  Zilles v. Universal Guardian, et al., C.D.Cal.
         Case  No.   SACV-03-231  (ANx)  (GLT).  The  complaint  alleges  claims
         including  but not  limited to civil RICO  violations,  securities  and
         common law fraud,  breach of  contract  and  rescission,  and  wrongful
         termination  and seeks  monetary  and  injunctive  relief.  The Company
         questions the validity of the claims alleged,  has engaged  independent
         counsel and intends to vigorously defend against these claims.

         The Company is involved in certain  legal  proceedings  and claims that
         arise in the normal  course of  business.  Management  does not believe
         that the outcome of these matters will have a material  adverse  effect
         on the Company's financial position or results of operations.



                                      F-17
<PAGE>

               UNIVERSAL GUARDIAN HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE YEAR ENDED DECEMBER 31, 2002 AND
       FOR THE PERIOD FROM INCEPTION (MARCH 28, 2001) TO DECEMBER 31, 2001


         NOTE 6 - STOCKHOLDERS' EQUITY

         Common Stock

         For the period from inception (March 28, 2001) to December 31, 2001 and
         for the year ended December 31, 2002, the Company issued  4,475,000 and
         5,125,000 shares of the Company's common stock for compensation  valued
         at $4,475 and  $34,060,  respectively.  The fair market  value of these
         shares issued as compensation  was determined by the Company's board of
         directors (see Note 2).

         On August 31, 2002, the Company issued 1,700,000 shares of common stock
         for the acquisition of The Harbour Group,  Inc. valued at $17,000.  The
         fair  market  value of  these  shares  issued  in  connection  with the
         acquisition was determined by the Company's board of directors.

         Stock Options

         In October 2002, the board of directors adopted the Company's Universal
         Guardian  Corporation  2002 Stock  Option Plan ("Stock  Option  Plan").
         Under the Stock Option Plan, the board of directors,  or its designated
         administrators, has the flexibility to determine the type and amount of
         awards to be granted to eligible participants. The Stock Option Plan is
         intended to secure for the Company and its  stockholders  the  benefits
         arising from  ownership of the  Company's  common stock by  individuals
         employed or retained  by the  Company who will be  responsible  for the
         future growth of the Company. The Stock Option Plan is designed to help
         attract and retain  superior  personnel  for  positions of  substantial
         responsibility, and to provide individuals with an additional incentive
         to contribute to the Company's success.

         The Company  authorized  and  reserved  for  issuance an  aggregate  of
         2,500,000  shares of common  stock  under the Stock  Option  Plan.  The
         shares of common  stock  issuable  under the Stock  Option  Plan may be
         authorized  but unissued  shares,  shares issued and  reacquired by the
         Company or shares  purchased by the Company on the open market.  If any
         of the awards granted under the Stock Option Plan expire,  terminate or
         are forfeited for any reason before they have been exercised, vested or
         issued in full, the unused shares subject to those expired,  terminated
         or forfeited  awards will again be available  for purposes of the Stock
         Option Plan.

         The Company has adopted only the disclosure provisions of SFAS No. 123,
         "Accounting  for  Stock-Based   Compensation."  It  applies  Accounting
         Principles  Bulletin  ("APB")  Opinion  No. 25,  "Accounting  for Stock
         Issued to Employees," and related interpretations in accounting for its
         Stock Option Plan and does not recognize  compensation  expense for its
         Stock Option Plan other than for restricted stock and options issued to
         outside  third  parties.  If  the  Company  had  elected  to  recognize
         compensation  expense  based  upon the fair value at the grant date for
         awards  under the Stock  Option Plan  consistent  with the  methodology
         prescribed  by SFAS No. 123, the  Company's net loss and loss per share
         would be reduced to the pro forma amounts  indicated below for the year
         ended December 31, 2002. There were no options issued during the period
         from inception (March 28, 2001) to December 31, 2001:


                                      F-18
<PAGE>

               UNIVERSAL GUARDIAN HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE YEAR ENDED DECEMBER 31, 2002 AND
       FOR THE PERIOD FROM INCEPTION (MARCH 28, 2001) TO DECEMBER 31, 2001


NOTE 6 - STOCKHOLDERS' EQUITY, CONTINUED

         Stock Options, Continued

<TABLE>
<CAPTION>

                                                                      2002
                                                                -------------
<S>                                                             <C>
                  Net loss
                      As reported                               $  (1,331,111)
                        Pro forma                               $  (1,354,575)

                  Basic loss per common share
                      As reported                               $       (0.17)
                        Pro forma                               $       (0.17)

                  Diluted loss per common share
                      As reported                               $       (0.17)
                        Pro forma                               $       (0.17)
</TABLE>


         For purposes of computing  the pro forma  disclosures  required by SFAS
         No.  123,  the fair  value of each  option  granted  to  employees  and
         directors is estimated using the  Black-Scholes  option-pricing  model.
         The fair value is computed as of the date of grant using the  following
         assumptions for grants in 2002: (i) dividend yield of 0%, (ii) expected
         volatility of 233%, (iii)  weighed-average  risk-free  interest rate of
         approximately 3.5%, and (iv) expected life of 5 years.

         The following is table summarizes the options outstanding:

<TABLE>
<CAPTION>
                                                                  Weighted-
                                                    Stock          Average
                                                   Option         Exercise
                                                    Plan           Price
                                                    ----           -----
<S>                                             <C>             <C>
            Balance, December 31, 2001                 --        $      --
              Granted                            1,775,000       $    0.08
                                                                 ---------
            Balance, December 31, 2002           1,775,000       $    0.08
                                                                 =========

            Exercisable, December 31, 2002         725,000       $    0.08
                                                                 =========
</TABLE>


         There were 725,000  options  available for future grant at December 31,
         2002 under the Company's Stock Option Plan.


                                      F-19
<PAGE>

               UNIVERSAL GUARDIAN HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE YEAR ENDED DECEMBER 31, 2002 AND
       FOR THE PERIOD FROM INCEPTION (MARCH 28, 2001) TO DECEMBER 31, 2001


NOTE 6 - STOCKHOLDERS' EQUITY, CONTINUED

         Stock Options, Continued

         The weighted average remaining  contractual life of options outstanding
         issued  under the Stock Option Plan is 4.68 years at December 31, 2002.
         The exercise price for the options  outstanding  under the Stock Option
         Plan at December 31, 2002 were as follows:

<TABLE>
<CAPTION>
                     Number of
                      Options                            Exercise Price
                      -------                            --------------
<S>                                                      <C>
                         700,000                           $     .01
                       1,050,000                           $     .10
                          25,000                           $    1.25
                  --------------
                       1,775,000
                  ==============
</TABLE>


         No  compensation  expense was recognized as a result of the issuance of
         stock  options  issued to employees of the Company.  However,  the fair
         value of options  issued to consultants  during 2002 was $39,144.  This
         expense is being  recognized  over the vesting period of the respective
         options as follows: $14,883, $8,933, $8,933 and $6,395 during the years
         ended December 31, 2002, 2003, 2004 and 2005, respectively.

         For options  granted  during the year ended December 31, 2002 where the
         exercise  price  equaled the stock price at the date of the grant,  the
         weighted-average   fair  value  of  such  options  was  $0.07  and  the
         weighted-average  exercise price of such options was $0.06. For options
         granted  during the year ended  December  31,  2002 where the  exercise
         price was greater  than the stock  price at the date of the grant,  the
         weighted-average   fair  value  of  such  options  was  $0.10  and  the
         weighted-average  exercise price of such options was $1.25.  No options
         were  granted  during  the year  ended  December  31,  2002,  where the
         exercise price was less than the stock price at the date of the grant.

         Warrants/Other Options

         In October 2002, the Company granted  400,000  warrants to a consultant
         to purchase  shares of the Company's  common stock at $1.25 per shares.
         The Company  determined  the fair value of these  warrants using Black-
         Scholes  pricing model to be $38,886 which is recorded as an expense in
         the accompanying  statement of operations.  The fair value was computed
         as of the date of grant using the following  assumptions:  (i) dividend
         yield of 0%, (ii) expected  volatility of 233%,  (iii)  weighed-average
         risk-free  interest rate of approximately  3.5%, and (iv) expected life
         of 5 years.



                                      F-20
<PAGE>

               UNIVERSAL GUARDIAN HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE YEAR ENDED DECEMBER 31, 2002 AND
       FOR THE PERIOD FROM INCEPTION (MARCH 28, 2001) TO DECEMBER 31, 2001


NOTE 6 - STOCKHOLDERS' EQUITY, CONTINUED

         Warrants/Other Options, Continued

         The  following  is  table   summarizes   the   warrants/other   options
outstanding:

<TABLE>
<CAPTION>
                                                                                       Weighted-
                                                                     Warrants/           Average
                                                                       Other           Exercise
                                                                      Options            Price
                                                                      -------            -----
<S>                                                               <C>                   <C>
                  Balance, December 31, 2001                                 --         $        -
                    Carryforward from UGHO merger transaction         1,779,875         $     3.23
                    Granted                                             400,000         $     1.25
                                                                   ------------
                  Balance, December 31, 2002                          2,179,875         $     2.87
                                                                   ============

                  Exercisable, December 31, 2002                      2,179,875         $     2.87
                                                                   ============
</TABLE>

         The weighted average remaining  contractual life of the  warrants/other
         options  outstanding  is 6.55 years at December 31, 2002.  The exercise
         price for the warrants/other  options  outstanding at December 31, 2002
         were as follows:

<TABLE>
<CAPTION>

                              Number of
                          Warrants/Other
                              Options                   Exercise Price
                              -------                   --------------
<S>                                                     <C>
                                    28,375               $0.20
                                 1,737,500               $1.00 - $1.25
                                   300,000               $2.00 - $4.00
                                    30,000               $5.00 - $10.00
                                    73,000               $21.40 - $27.40
                                    11,000               $60.00 - $100.00
                          ----------------
                                 2,179,875
                          ================
</TABLE>


NOTE 7- INCOME TAXES

         The  reconciliation  of the  effective  income tax rate to the  federal
         statutory rate for the year ended December 31, 2002 and the period from
         inception (March 28, 2001) to December 31, 2001 is as follows:

<TABLE>
<CAPTION>
                                                         2002          2001
                                                      ----------     ---------
<S>                                                   <C>            <C>
         Federal income tax rate                           34.0%         34.0%
         State taxes, net of federal benefit                6.0%          6.0%
         Effect of net operating loss                    (40.0)%       (40.0)%
                                                      ----------     ---------

         Effective income tax rate                          0.0%          0.0%
                                                      ==========     =========
</TABLE>


                                      F-21
<PAGE>

               UNIVERSAL GUARDIAN HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE YEAR ENDED DECEMBER 31, 2002 AND
       FOR THE PERIOD FROM INCEPTION (MARCH 28, 2001) TO DECEMBER 31, 2001


NOTE 7- INCOME TAXES, CONTINUED

         Deferred tax assets and liabilities reflect the net effect of temporary
         differences  between the carrying  amount of assets and liabilities for
         financial  reporting purposes and amounts used for income tax purposes.
         Significant  components  of  the  Company's  deferred  tax  assets  and
         liabilities at December 31, 2002 are as follows:

<TABLE>
<CAPTION>
<S>                                                        <C>
         Loss carry forwards                               $  520,000
         Less valuation allowance                            (520,000)
                                                           ----------

                                                           $        -
                                                           ==========
</TABLE>


         At December  31, 2002,  the Company has provided a valuation  allowance
         for the  deferred  tax  asset  since  management  has not been  able to
         determine  that the  realization of that asset is more likely than not.
         The net change in the valuation  allowance for the year ended  December
         31, 2002 was an increase of approximately  $480,000. Net operating loss
         carry forwards of approximately $1,300,000 expire starting in 2016.

NOTE 8 - MINORITY INTEREST

         Minority  interest  represents  the  carrying  amount of the  Company's
         wholly  owned  subsidiary,  UGC's  Series A Preferred  Stock issued and
         outstanding as of December 31, 2002.

         UGC is authorized to issue up to 10,000,000  shares of preferred  stock
         and has authorized  the issuance of up to 3,000,000  shares of Series A
         Preferred Stock. The Series A Preferred Stock is senior to UGC's common
         stock  with   respect  to  payment  of   dividends   and  amounts  upon
         liquidation,  dissolution  or winding  up of UGC.  Holders of shares of
         Series A Preferred Stock will be paid cumulative dividends,  payable at
         the option of UGC in Series A  Preferred  Stock  ("PIK") or cash out of
         funds legally  available at an annual rate of 6%. The holders of Series
         A  Preferred  Stock  will be  entitled  to  receive in the event of any
         liquidation,  dissolution  or winding up of UGC,  whether  voluntary or
         involuntary,  payment  of $1.25 for each  share of  Series A  Preferred
         Stock,  plus an amount for each share of Series A Preferred Stock equal
         to all dividends accumulated, accrued and unpaid thereon to the date of
         final distribution to such holders.

         As  inducement  to enter into the bridge  loans (See Note 4) UGC issued
         350,000  shares of its  Series A  Preferred  stock  valued at $1.25 per
         share to the bridge loan  holders.  A financing  charge of $437,500 has
         been reflected in the accompanying statement of operations. Pursuant to
         the terms of the  designation  of Series A Preferred,  the Series A now
         converts into common shares of Universal Guardian Holdings, Inc.

         UGC began offering  shares of its Series A Preferred Stock to investors
         in late 2002, and has received  approximately  $1,250,000  (included in
         this amount is the  conversion  of the  $700,000 in bridge  loans - see
         Note 9), and to date has broken escrow.



                                      F-22
<PAGE>

               UNIVERSAL GUARDIAN HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE YEAR ENDED DECEMBER 31, 2002 AND
       FOR THE PERIOD FROM INCEPTION (MARCH 28, 2001) TO DECEMBER 31, 2001


NOTE 9 - SUBSEQUENT EVENTS

         On January 14,  2003,  the holders of the bridge  loans  converted  the
         entire $700,000 balance into 560,000 shares of UGC's Series A preferred
         stock (see Note 4).

         On March 7, 2003, the Company converted an outstanding accounts payable
         balance with a significant  vendor into a promissory note for $301,496.
         This outstanding balance was included in an accounts payable balance of
         $518,000 to this vendor at December 31, 2002.  The  difference  between
         these amounts is accrued  interest of $8,496 less a required payment of
         $225,000  due on the  date  of the  note.  The  $301,496  note  balance
         requires  payment  in full over four  monthly  installments  commencing
         April 17, 2003. The note carries an interest rate of 6%.

         As a result of actions  committed by a former  employee of the Company,
         the Company recently made a self-disclosure to the U. S. Navy regarding
         overbillings to the government and other matters  committed by a former
         employee.   Each  of  these   issues  is   currently   under   internal
         investigation and the Company will disclose the results of its internal
         investigation  to the Government.  Management does not believe that the
         outcome of these  matters  will have a material  adverse  effect on the
         Company's financial position or results of operations. Subsequently, an
         action was filed by this  former  employee on March 7, 2003 in the U.S.
         District  Court  for the  Central  District  of  California,  Zilles v.
         Universal Guardian,  et al., C.D.Cal. Case No. SACV-03-231 (ANx) (GLT).
         The complaint  alleges  claims  including but not limited to civil RICO
         violations,  securities  and common law fraud,  breach of contract  and
         rescission,  and wrongful termination and seeks monetary and injunctive
         relief.  The Company questions the validity of the claims alleged,  has
         engaged  independent  counsel and intends to vigorously  defend against
         these claims.

         As of  December  31,  2002,  the  Company  10 full time and 1 part time
         employees.  During the first quarter of 2003 the Company  implemented a
         functional reorganization and terminated two employees and accepted the
         resignation  of 2  employees.  Management  believes the results of this
         reorganization  and the changes in personnel  will be beneficial to the
         Company on the whole.


                                      F-23
<PAGE>