19

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549
                                   FORM 10-KSB

                     Annual Report under Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                   For the fiscal year ended JANUARY 31, 2002

                           ARS NETWORKS, INCORPORATED

                                    Formerly
                    (AMERI-CAN RAILWAY SYSTEMS, INCORPORATED)
                 (Name of Small Business Issuer in its charter)

                    New Hampshire                   14-1805077
             (State or other jurisdiction of     (I.R.S. Employer
            incorporation or organization)     Identification No.)

               100 Walnut Street, Champlain, New York     12919
            (Address of Principal Executive Offices)     (Zip Code)

Issuer's telephone number:  (518) 298-2042

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

                         Common Stock, $.0001 Par Value

Check  whether  the issuer (1) filed all reports required to be filed by section
13  or  15(d) of the Exchange Act during the past 12 months (or for such shorter
period  that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.  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 the Form 10-KSB or any
amendment  to  this  Form  10-KSB  [_x]

The Issuer's revenue for the fiscal year ended January 31, 2002 was $968,282.

State  the  aggregate  market  value  of the voting stock held by non-affiliates
computed  by  reference to the price at which the stock was sold, or the average
bid  and asked prices of such stock, as of April 24, 2002.  The aggregate market
value  of  the  voting  stock  held  by  non-affiliates  of  the  registrant  is
approximately  $1,908,511as  of  April  24,  2002.

State  the  number  of shares outstanding of each of the registrant's classes of
common  equity  as  of  the  latest  practicable  date:

                   Class            Outstanding as of  April 24, 2002
                   Common Stock     20,420,874

Transitional Small Business Disclosure Format (check one):

                        Yes [  ]       No  [ X ]


<PAGE>
                                       29

                                     PART I
ITEM 1.  DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
     ARS Networks, Incorporated formerly Ameri-can Railway Systems, Incorporated
("ARS"  or  the  "Company")  is  a corporation formed in New Hampshire on May 4,
1998.  In  return  for  50,000 shares of the common stock of the Company, on May
11, 1998, the Company acquired from Ameri-can Equipment Sales and Leasing, Inc.,
a  Canadian  corporation,  ("AEL") certain assets comprised of the rights to the
contractual  relationship  AEL  has  with  Geismar/Modern  Track  Machinery Inc.
(Geismar/MTM),  industry  relationships,  goodwill,  know  how  and  application
experience.  Although  AEL  and the Company had common ownership, the Company is
not,  in  management's  opinion,  a successor company to AEL.  AEL's business is
separate  and  apart  from  the  Company's  railway communications and signaling
business  described  below.

BUSINESS OF ISSUER
     The  focus  of  ARS's  private  wireless  network  (called CrosslogixTM) is
management  of railway traffic, control and public safety.  While the ARS system
and  its component parts were developed to improve safety at rail crossings, the
ARS  system  can  support  numerous  applications  in real time data collection,
processing, monitoring and information analysis.  The system has evolved into an
integrated service information system that is the foundation of the ARS wireless
private  network.
Railway  signaling  and  control  systems are used to provide advance warning of
oncoming  trains  and  maintain  adequate  separation between trains on the same
track  and in switching areas where tracks cross or merge.  They also facilitate
train movements under centralized dispatcher control, classify freight cars, and
provide  warning  systems  for  rail  and  highway  grade  crossings.
The  ARS  Service  Information  System  is  composed  of  five  modules:
-     Web  Sensors  -  that  perform  the  wheel  sensing  functions;
-     Rail Sensor Processors - to control and process the signals from the
      sensors and interface to the communications system;
-     Digital Communications Sub-System - that may be a data radio, dedicated
      wire lines or multi-drop system;
-     Application (Crossing) Processor - to collect and interpret sensor data
   from Remote Sensor Processors and perform the specific application functions;
      and
-     Optional PC based Diagnostics and Monitoring System - to maintain, monitor
      and analyze the application system.

     Two  important  advances have been secured in the ARS system by eliminating
the  need  for  insulated joints used in conventional systems.  Insulated joints
work much the same way as a light switch, turning the crossing on when the train
arrives  in  the  crossing  zone and off when the train leaves.  In conventional
systems,  a  signal  is  triggered  when  the axle of a carriage creates a shunt
across  the  insulated  sections  of  rail.  Because the ARS system does not use
insulated  joints  it  is  not  prone  to  false  triggering  caused  by  broken
insulation, foreign objects shorting the circuit, or adverse climate conditions.
Traditional competing railway crossing systems use insulated joints installed in
the  tracks,  which contribute to shifting rails caused by loose joint bars that
bolt  the  sections  of track together, and battered joints that damage rail car
wheels  when  they  hit  defective  joints.

Because  the  ARS  system  eliminates  insulated joints, the Company believes it
reduces  wheel  damage,  premature  wheel  wear, damaged tracks and, ultimately,
potential  derailments.  It  is estimated that each insulated joint costs $1,000
per  year  to maintain.  With each crossing requiring at least one set of joints
per  track  savings  on  maintenance  add  up  very  quickly.
ARS's  first  information  service  system  application  is  the ARS level grade
crossing.  Unlike  traditional  systems,  ARS  can add other applications to the
system  such  as  hot  bearing  detectors  and  flat  wheel detectors.  ARS then
transmits  the  information  recorded  over its private network to alert railway
officials  and  service  providers of problems related to safety or maintenance.
The  Company  believes that the ARS system benefits railway operating efficiency
because  it  can  give  virtually  instant  feedback on the location of cars and
freight,  which  includes  capturing  information and time-stamping it as trains
pass  through  a  crossing.  Plus,  this  innovative system is expected to allow
communication between trains and crossing signals to provide motorists with more
complete  information  on  train  movements.  The Company believes that improved
information  creates  safer  conditions  and benefits for the railways and their
customers,  as  well  as  motorists  and  pedestrians.

ARS's product development and growth strategy position the company in the data
communications business. During 2001, this expanded architecture was so
well-received by the market that it became clear that our ultimate business
would comprise four separate but interdependent cornerstones:

-     CROSSLOGIX (the railroad crossing entry product and node upgrade)
-     NETWORK (the technical expansion of the system to provide monitoring data
      for many other functions in addition to crossing control, in real time)
-     DATA COLLECTION AND SUPPLY to customers and
-     DATA  PROCESSING/INFORMATION  MANAGEMENT

     ARS has completed the design, technical development, and laboratory testing
of the Advanced Warning System and is currently undergoing a comprehensive
technical and safety audit in the fall of 2001. Currently, Phase II, the final
phase of the system safety vital audit, is under way and is expected to be
complete by Q3 2002, when we will begin the marketing of our technology. We are
participating in on-going talks with three major railways that have indicated
that they will purchase ARS technology once the third-party vital system audit
is completed.

     Despite  growing public pressure, potential civil penalties, and the threat
of  government  imposed  penalties,  there  are  still over 250,000 inadequately
protected passive and private crossings in North America.  Passive crossings are
those  which  typically  do not have warning lights or active mechanical arms or
other  devices  to warn of pending rail traffic.  Private crossings are those on
private  property,  often with extremely low vehicular traffic, and have at most
signs  warning  oncoming  traffic  that a rail crossing exists.  These crossings
remain  unprotected  as  a  result  of the extremely high cost of installing and
maintaining  available  crossing  systems.  While  the  railways  would  like to
provide  warning  systems  at  every  crossing,  the  expense  (estimated at $39
billion)  of  doing  so  is  beyond  their means in a competitive transportation
industry.  Substantial  government subsidies are available, but they do not come
close to covering the cost of installing so many crossing systems. On the tracks
operated  by Class 1 railways there are 205,000 passive and/or private crossings
in  the  United  States  and  45,000  in  Canada.  Based  on an average cost per
crossing  of  U.S.  $40,000  plus  installation,  the  250,000 passive crossings
indicate  a  potential  market  of  $10  billion for the ARS basic system.  This
estimate excludes the approximately 80,000 public crossings in the United States
and  15,000 in Canada which have some form of active warning system in place, as
well  as  the  crossings  for the approximately 60 transit or passenger railways
across  North  America.  (Source:  Operation  Lifesaver)

The  Company  believes  that  there  is  a  strong market for a crossing advance
control system which is substantially less expensive (less than 50 percent) than
the  presently  available  systems  from  the  four major suppliers.  This price
advantage,  combined  with  the  technical  advantages  described  earlier,  in
management's  opinion,  provides  a substantial market opportunity.  The Company
does  not  believe  that  traditional  customers  will  readily abandon existing
systems due to the high costs associated with removing already installed systems
and  replacing  them  with  new  ARS systems.  Therefore, the Company intends to
focus  its  marketing efforts on educating the public and traditional customers,
emphasizing  the  benefits  of  ARS's technology and addressing the potential of
providing  level  crossing protection at the 250,000 passive, private and public
railway  crossings  that  do not have automated protection systems at this time.
The  ARS  Crosslogix  network  provides  the  railways  with  the  tools  to  be
competitive  in  today's  transportation  markets.  ARS's vision is to provide a
strategically  placed  network  comprising  4,183 railway crossings up-graded to
multi-functional  information  nodes.  Located  at  50-mile  intervals along the
railways'  151,646  miles of mainline track and at the entrance and exits of the
550  short  line  railways  that  feed  the  mainline. Crosslogix meets the most
critical  challenge  facing  the  railway  industry  in the new millennium. This
challenge  will  be the integration of individual railway operator's information
to create a seamless information security and safety management network to serve
rail  shippers  and  ensure  public  safety.

PLAN  OF  OPERATION

ARS was formed in 1998 to design and develop advanced railway communications and
data  management  systems  and as such has a limited operating history.  In July
2000,  ARS  completed  the purchase of T&T Diesel Power, Ltd., which has been in
business  for  20  years.  In  spite  of this acquisition, ARS faces significant
obstacles  with  regard  to  customer  acceptance  of  ARS'  products.

The  prime  focus of ARS' Crosslogix   private wireless network is management of
railway traffic and public safety.  While the ARS system and its component parts
were developed to improve safety at rail crossings, the ARS system supports many
applications  in  real  time  data  collection,  processing,  monitoring  and
information  analysis.  The  system  has evolved into Crosslogix , an integrated
service  information system, the foundation of the ARS wireless private network.
ARS'  objective  is  to build and design state of the art communications systems
that  meet  customer demands, that are cost competitive, and that are capable of
standing  up  to the tough conditions of continuous use in the railway industry.
The  Advance  Warning System for railway level crossings is the first commercial
application  to  be offered by ARS on its integrated service information system.
ARS'  Crosslogix  technology  provides  a  portal  for  the  integration  of  an
extensive  family  of  wayside  warning  and  wayside  to  train  communications
applications.  The  ability  to integrate other applications to ARS' system adds
considerable  value  for  the  railways  and  yet  is  relatively inexpensive to
implement.  ARS'  development  effort with respect to the Crosslogix  technology
consists  of:
-     Completion  of  the third party vital system audit of the crossing control
feature.  Phase  1  of  the  audit  was completed in November 2001 with positive
results  and recommendations. Phase 2 is now under way and a preliminary phase 2
report  has  been  received  from the third party auditor. This report indicates
that ARS has advanced substantially since phase 1. As a result, ARS expects that
the  system  should  receive  certification  by  Q3  2002.
-     Creation  of  the  wide  area  network  application  in  parallel  to  the
completion  of the vital system audit. The wide area network application will be
used  to  collect data from the deployed crossing control product and distribute
it  to  users.
-     Creating the software to interface the crossing control feature to be used
in  connection  with  other  commercially  available  applications  such  as:
-     Hotbox  detector.  This  is  a non-contact temperature measurement system,
which  we  will  integrate as an application onto our information network. These
sensors  on  the  track  will  allow  the  bearing  journal  temperatures  to be
accurately  monitored  as  the  train  rolls  by at high speed.  This is a major
safety  issue for the railway since the detection of a hot bearing can prevent a
derailment.
-     Flat  wheel  detector.  A  vibration  impact  sensor can be used to detect
wheels  with  flat  spots.  The detection of flat spots will allow the offending
cars  to  be  decommissioned  and  repaired before additional damage to the rail
occurs.
-     Wide area networking.  ARS Crosslogix  technology can be linked together
to provide a higher speed communications capability to monitor locomotive and
work equipment in dark territories.  Dark territories are sections of railway
track where there are currently no communication systems in place.
-     Hazardous Materials Monitoring.  Constant monitoring of tank cars or other
vessels transporting hazardous materials (e.g., measures of temperature,
pressure, evaporation, volatility, decomposition, and so forth).
-     Inter-modal Reefer Monitoring Systems.  This is a wireless monitoring
application for refrigerated railway cars (Reefers), which communicate with each
ARS service information system via wireless radio.  This allows the Reefers to
report such things as cooling temperature, fuel levels and the condition of the
engine generators that run the refrigerator cars, etc., allowing the railway to
determine where the cars are located, define the problem with the refrigerated
unit and take the appropriate action to correct problems before the goods being
transported are damaged.

     Many  of the above applications are currently available in the market place
while  others  will need to be developed.  For those commercially available, ARS
will need to develop software to integrate the functionality into the Crosslogix
system.  Other  applications  such as inter-modal reefer monitoring will need to
be  adapted  from  currently available products so that the information obtained
can  be  easily  communicated  over  the  ARS  network.

BUSINESS  OF  T  &  T

T & T was founded in 1980 and is in the business of customizing power generating
systems  for  a  variety  of  uses.  T  &  T  purchases base systems from diesel
equipment  manufacturers,  modifies  and  houses  them  and  then  resells  the
customized  units  to their customers.  The units are assembled in the Company's
facilities  in  Georgetown,  Ontario  and  shipped  directly  to customers.  The
Company  sources  the base units from a variety of suppliers, including Perkins,
Yanmar,  John  Deere and Detroit Diesel.  Units manufactured range in size up to
600  kilowatts.

Sales  to  four  customers in the year ended January 31, 2002 were approximately
70%  of  total sales.  At January 31, 2002, accounts receivable from these major
customers  represented approximately 39% of total accounts receivable.  Sales to
one  customer in the year ended January 31, 2001 were approximately 71% of total
sales.  At  January  31,  2001,  accounts  receivable  from  this major customer
represented  approximately  98%  of  total  accounts  receivable.

T&T's  core  customer  base  includes  large  equipment  rental  companies,
telecommunications  companies,  the  film  industry,  construction  and  other
manufacturing companies. There are several competitors to T&T ranging from large
international  suppliers  to  smaller  independent  companies.

The  Company  believes  there  is  opportunity  to  expand  its revenue base and
increase  profitability.  To  this  end,  T&T has contracted with an experienced
salesman with a track record of success in the diesel power industry. Management
expects  that  this  additional  salesman will identify new customers and market
opportunities  that  will enhance revenue and profit of the company. The company
is  also  seeking  to  expand the service portion of the business and as such is
working  with  a major customer on a service program which includes refurbishing
equipment  at  periodic  intervals.

INDUSTRY

There  are  four  major  suppliers of railway crossing systems, all of which are
well  connected  with  the  railway  industry  and  government,  and  control
collectively  80%  to  90%  of the market today.  However, the crossings systems
offered  by  these  competitors  remain  deeply rooted in traditional technology
developed  as  far  back  as  1890.  Most  train  control  and  crossing systems
currently  in use are based on principals developed in the last century, such as
insulated  joints.  The  railways  have  continued to use traditional approaches
because,  in  the  Company's  opinion,  there has never been a reliable and cost
effective  alternative.  ARS  believes  its  approach will be successful because
railways,  their  employees  and the population in general are more educated and
comfortable with the use of today's modern computer technology.  ARS uses modern
day  secure wireless communications and computer technology as the basis for its
level  crossing  system  and  the  growth  of its system approach to support the
railways'  need  to  develop  a  safer,  more  efficient  railway  safety  and
communications  system.  The  competitors  are:
-     Safetran  Systems  Corporation,  Minneapolis,  MN.
-     General Railway Signal Corporation, Rochester, NY.
-     United  Switch  &  Signal  Inc.,  Columbia,  SC.
-     Harmon  Industries  Inc.,  Blue  Springs,  MO.

EMPLOYEES

     The Company currently has seven employees, of which two are full-time.  The
Company  expects  to  hire  one  additional employee in the current fiscal year.

RESEARCH AND DEVELOPMENT

     In the years ended January 31, 2002 and 2001, the Company estimates that it
spent  $190,000  and  $90,000,  respectively,  on  research  and  development.

INTELLECTUAL PROPERTY

     ARS  has  patent  protection,  under  a license agreement, for an Automated
Railway  Crossing.  The  patent  was  granted  in  June 2001.  The Company is in
negotiations  to license a second patent filed on April 6, 2001 for an Automated
Railway  Monitoring  System.

GOVERNMENT APPROVAL

     The  federal  government  regulated private crossings in the past and there
were  no  specifications  for  passive crossings.  In 1994, the Federal Railroad
Administration  ("FRA") held an informal safety inquiry to review the concept of
defining  minimum  safety  standards  for  private  crossings,  or  for  certain
categories  of  private crossings, up to and including standards for closure and
consolidation under certain conditions.  The inquiry addressed the allocation of
responsibilities  and  costs  associated with private crossings and the need for
dispute  resolution mechanisms regarding that allocation.  The FRA has authority
in  all  matters  concerning  railroad safety, and can set standards for private
crossings.  States and local highway agencies frequently have no involvement in,
or  responsibility  for,  private  crossings.  In  January  1995, the FRA issued
regulations requiring periodic maintenance, testing, and inspection of automatic
warning devices at all highway crossings over tracks of railroads which are part
of  the  United  States'  general  railroad system, including private crossings.
Every  year  accidents  at  railway  crossings  claim the lives of more than 600
people  in North America.  Railways are facing significant potential liabilities
from  these  accidents.  In addition, mounting pressure from the public, as well
as  municipalities,  states,  provinces and the federal government in the United
States  and Canada is beginning to demand that the all passive/private crossings
have  adequate  advance  warning  systems.

REPORTS TO SECURITY HOLDERS

     ARS  is  a  reporting  company with the Securities and Exchange Commission.
ARS's  common  stock  is quoted on the Over-the-Counter Bulletin Board under the
symbol  "ARSN.".

The  public  may  read  and  copy  all  materials  filed with the Securities and
Exchange  Commission  at  the  Public  Reference  Room  at  450 Fifth St., N.W.,
Washington,  D.C.,  20549  or  may  obtain a information on the operation of the
public  Reference  Room  by  calling  the  SEC  at  1-800-SEC-0330,  and the SEC
maintains  an  internet  site  that  contains the reports, proxy and information
statements  ,  and  other information regarding issuers that file electronically
with  the  SEC  at  http://www.sec.gov. The company files electronically and its
internet  address  is  arnetworks.com.

ITEM 2.  DESCRIPTION OF PROPERTY

     The  Company  leases  space  for  its  corporate  offices  at the following
address:

ARS Networks, Incorporated
100 Walnut Street
Champlain, New York 12919
Tel:  (518) 298- 2042
Fax:  (518) 298-2813


The Company also leases office space at

ARS Networks, Incorporated
21 Armstrong Avenue
Georgetown, Ontario
L7G 4S1
Tel: (905) 702-9967

The Company's wholly-owned subsidiary, T & T, leases space located at the
following address:

T & T Diesel Power, Ltd.
23 Armstrong Avenue
Georgetown, Ontario, Canada
L7G 4SI
Tel:  (905) 877-8900
Fax:  (905) 877-3995

     These  properties  are leased on a month-to-month basis.  The property used
by  T  &  T  consists  of 7,200 square feet.  T & T is currently negotiating the
terms  of  a  three-year  lease  at  a monthly rate expected to be approximately
$1,600.  All  properties  are  in  good  condition and the Company believes such
properties  should  be  adequate for the foreseeable future.  The Company has no
investments  in  any  plant  or  property.

ITEM 3.  LEGAL PROCEEDINGS

     ARS has commenced litigation against certain individuals ("the
respondents").  The case involves a claim by ARS for shares issued in error to
the respondents. The shares were to be issued upon the completion of certain
consulting work to be performed by the respondents.  ARS claims that by not
completing the work, the respondents breached the contract.  The respondents
claim that there is no breach of contract and that the shares have been earned.
The respondents claimed damages of an unknown amount.  ARS intends to vigorously
pursue its position in this matter, and management believes that it will be
resolved without a material effect on the Company's financial position or
results of operations.

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

     No  matters  were  submitted  to  a  vote  of  security-holders through the
solicitation  of  proxies or otherwise during the three months ended January 31,
2002.

<PAGE>

                           FORWARD-LOOKING STATEMENTS
     Information  included  or  incorporated  by  reference  in  this filing may
contain  forward-looking  statements  within  the  meaning of Section 27A of the
Securities  Act  and  Section  21E  of  the  Exchange Act.  This information may
involve known and unknown risks, uncertainties and other factors which may cause
our  actual results, performance or achievements to be materially different from
the  future  results,  performance  or  achievements expressed or implied by any
forward-looking  statements.  Forward-looking  statements,  which  involve
assumptions  and  describe  our  future  plans, strategies and expectations, are
generally  identifiable  by  use of the words "may," "will," "should," "expect,"
"anticipate,"  "estimate,"  "believe,"  "intend" or "project" or the negative of
these  words  or  other  variations  on  these  words or comparable terminology.
This filing contains forward-looking statements, including statements regarding,
among other things, (a) the Company's projected sales and profitability, (b) the
Company's  growth  strategies, (c) anticipated trends in the Company's industry,
(d) the Company's future financing plans and (e) the Company's anticipated needs
for  working  capital. These statements may be found under "Management's Plan of
Operation"  and  "Business," as well as in this filing generally.  Actual events
or  results  may  differ  materially  from  those  discussed  in forward-looking
statements  as  a  result  of  various  factors.  In  light  of  these risks and
uncertainties,  there  can  be  no assurance that the forward-looking statements
contained  in  this  filing  will in fact occur.  In addition to the information
expressly  required to be included in this filing, the Company will provide such
further  material  information, if any, as may be necessary to make the required
statements,  in  light  of  the  circumstances  under  which  they are made, not
misleading.



<PAGE>

                                     PART II
ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
     The  Company's  common stock has been quoted on the NASD's Over-the-Counter
Bulletin  Board  since  February  1,  2000.  Since  April 7, 2000, the Company's
common  stock  has  been  quoted  under  the  symbol "ARSN."  Prior to that, the
Company's  symbol  was  "ARWA."
<TABLE>
<CAPTION>



<S>                                    <C>          <C>
                                       Price Per Share
                                       ----------------
                                       High         Low
                                       -----------  -----
  February 1, 2000 - March 31, 2000 .  $      5.75  $1.50
  April 1, 2000 - June 30, 2000 . . .  $      3.75  $0.97
  July 1, 2000 - September 30, 2000 .  $      1.34  $0.56
  October 1, 2000 - December 31, 2000  $      0.69  $0.22
  January 1, 2001 - March 31, 2001. .  $      1.47  $0.25
  April 1, 2001 - June 30, 2001 . . .  $      1.05  $0.45
  July 1, 2001 - September 30, 2001 .  $      1.10  $0.30
  October 1, 2001 - December 31, 2001  $      0.46  $0.09
  January 1, 2002 - March 31, 2002. .  $      0.24  $0.09
  April 1, 2002 - April 30, 2002. . .  $      0.19  $0.10
</TABLE>



   The  above  prices  were  obtained  from Nasdaq Inc. The quotations represent
inter  dealer  quotations  without retail markup, markdown or commission and may
not necessarily represent actual transactions. As of April 24, 2002, the Company
believes  there were approximately 125 holders of record of the Company's common
stock.

The  Directors may from time to time declare, and the Company may pay, dividends
on  its  outstanding  shares  in  the  manner  and upon the terms and conditions
provided  by  law.  To  date,  no  dividends  have  been declared or paid by the
Company.

RECENT SALES OF UNREGISTERED SECURITIES

     In April 2002, the Company issued 59,460 shares to consultants as the final
payment  for  services  valued  at  $8,300.

In  March  2002,  ARS  issued  107,080  shares  for  services  valued at 21,400.
In February 2002, ARS issued 150,000 shares to two consultants to the company as
additional  compensation valued at $22,500 for their services. Also in February,
the  Company  issued  25,000 shares valued at $3,250 to Betty Harland, a related
party,  as  partial consideration for her promissory note.  ARS also sold 92,593
shares  for  gross  proceeds  of  $10,000.

In  January  2002,  the  Company  issued 1,020,000 shares for services valued at
$142,600.

In  December  2001, ARS sold 75,000 shares for gross proceeds of $7,500. Also in
December,  the  Company  issued  125,000  shares for services valued at $12,500.
In  November  2001,  ARS  sold  10,000  shares  for  consideration  of  $1,710.
In  October  2001,  ARS  sold  235,043 shares for $0.117 per share for aggregate
proceeds  of $27,500.  Also in October 2001, ARS issued 135,000 shares of common
stock  for  future  services, all of which are subject to vesting schedules.  In
addition, ARS issued 800,600 shares of common stock to officers and directors as
a  bonus.  These  shares  were  valued  at  $80,060.

In August 2001, ARS issued 48,049 of common stock for services valued at $40,000
in  aggregate.

     In  June  2001,  ARS  issued  135,000  shares  of  common  stock for future
services.  Of  the total number of shares issued for services, 65,000 shares are
subject  to  vesting  schedules.  If  these  services  are  terminated, then any
unvested  shares will be forfeited.  The 70,000 shares of common stock that have
vested  had  a  value  of  $9,500.

          In  May  2001,  ARS  sold  50,000 shares of common stock for $0.77 per
share  or  aggregate  consideration  of  $38,500.  Also  in May 2001, ARS issued
270,740  shares  of  common  stock  for future services.  Of the total number of
shares issued for services, 191,740 shares are subject to vesting schedules.  If
these  services are terminated, then any unvested shares will be forfeited.  The
79,000  shares  that  had vested have a value of $68,000.  ARS also issued 5,000
shares  of  common  stock  for  services  valued  at  $4,250  in  May,  2001.

In  April  2001,  ARS sold 200,000 shares of common stock for $0.60 per share or
aggregate  consideration  of  $120,000.  Also  in  April 2001, ARS issued 23,303
shares  of  common stock for services valued at $20,000.  ARS also issued 12,000
shares  of  common  stock  for  services  valued  at  $4,438.

          In  March  2001,  ARS entered into the Equity Line of Credit Agreement
with  Cornell  Capital  Partners,  L.P.  To date, ARS received gross proceeds of
$300,000  ($270,000  net  proceeds)  under  the  Equity  Line of Credit upon the
issuance  of  2,780,617  common  shares.  Under the equity line, Cornell Capital
Partners is committed to purchase up to $5,000,000 of ARS' common stock over the
course  of  24  months  from  the effective date of ARS's registration statement
registering  the  sale  of  the  shares  by Cornell Capital Partners.  Under the
equity line, ARS may request an advance by Cornell Capital Partners.  The number
of  shares  of common stock that Cornell Capital Partners shall receive for each
advance  shall  be  determined  by  dividing  the  amount  of the advance by the
purchase  price.  The  purchase  price  is 90% of the market price.  The maximum
advance amount shall be equal to 150% of the average daily volume of ARS' common
stock  multiplied  by  the  purchase  price.  The  average daily volume shall be
computed  by using the forty trading days prior to the advance notice date.  The
advance  notice  date  is  the  date Cornell Capital Partners receives a written
notice  from ARS requesting an advance amount under the equity line.  The market
price  is  the average of the lowest closing bid prices of the common stock over
the  ten  trading day period beginning on the first trading day after an advance
notice  date  and  ending on the trading day prior to the relevant advance date.
The  foregoing  description  of  the  Equity  Line of Credit is qualified in its
entirety  by  the  terms  of  the  agreements  set  forth  in exhibit 10 hereto.

     There  will  be  a  minimum  of  eleven trading days between advance notice
dates.  The  Company  has  the right to withdraw that portion of an advance that
does  not  meet  the  minimum acceptable price.  The minimum acceptable price is
defined  as  75%  of  the  lowest closing bid price of ARS' common stock for the
fifteen  trading  days  prior  to  a  relevant  advance  notice  date.

     Upon  each advance date, ARS will pay to Yorkville Advisors Management, LLC
an amount equal to 8.4% of the amount of the advance.  Upon the execution of the
equity  line,  ARS  issued  450,000  restricted  shares  of ARS' common stock to
Yorkville  Advisors  Management that were reflected as a cost of raising capital
and  recorded  at par in the accompanying financial statements.  Such restricted
shares  as  well as the shares under the Equity Line have demand and "piggyback"
registration  rights.

 Also in March 2001, the Company sold 2,500 shares of common stock for $1.12 per
share,  or  aggregate consideration of $2,800.  The Company issued 45,000 shares
of  common  stock  for  services  valued at $47,813.  The Company issued 140,000
shares  of  common stock to National Financial Communications Corp. for services
valued  at  $131,250.

     In  February  2001,  ARS  sold  22,000 shares of common stock for $1.15 per
share,  or aggregate consideration of $25,300.  ARS also issued 41,300 shares of
common  stock to settle accounts payable of $10,325.  Also in February 2001, ARS
issued  152,700 shares of common stock in lieu of management compensation valued
at  $33,400.

     During  the year ended January 31, 2001, the company sold 430,000 shares of
common  stock  at  prices  ranging  from  $.25  per share to $1.50 per share for
aggregate  consideration  of  $259,705.

In  January 2001, the Company issued 1,000,900 shares of common stock in lieu of
management  compensation  valued at $219,000.  Also in January 2001, the Company
issued  40,000  shares  of  common  stock  for  services  valued  at  $16,876.
In  December  2000,  the  Company  issued  1,000  shares  of  common  stock  for
transportation  services  valued  at  $375.

In  November  2000, the Company issued 5,000 shares of common stock for printing
services  valued  at  $2,656.

In  October  2000,  the  Company  issued 50,000 shares of common stock valued at
$25,000 in connection with the appointment of an advisory board member.  Also in
October  2000,  the  Company  issued  45,000 shares of common stock for investor
relations  services  valued  at  $22,500.

In  September  2000,  the  Company  issued  7,000  shares of common stock to two
directors in satisfaction of an outstanding loan in the amount of $4,760 owed by
the  Company.

In  August  2000,  the Company issued 50,000 shares of common stock for services
valued  at  $33,587.

In  July  2000,  the Company issued 200,000 shares of common stock to the former
shareholders  of  T  &  T in connection with the Company's acquisition of T & T.
These  shares were valued at $200,000 and were redeemable.  See "Purchase of T &
T  Diesel  Power,  Ltd."

In May 2000, the Company issued 20,000 shares of common stock for legal services
valued  at  $52,500.

In February 2000, the Company issued 150,000 shares of common stock for services
valued  at  $225,000.

In  January  2000,  the Company issued 362,500 shares of common stock in lieu of
management  compensation  valued at $362,500.  Also in January 2000, the Company
issued  82,500 shares of common stock for consulting services valued at $82,500.

During  the  year  ended  January  31,  1999, the Company sold 187,500 shares of
common  stock  for  $1.00 per share or aggregate consideration of $187,500.  The
Company  also  issued  options  to  purchase 41,500 shares of common stock at an
exercise  price  of  $1.25  per  share  and options to purchase 41,500 shares of
common  stock  at  an  exercise  price  of  $1.75  per share.  These options are
exercisable  at  any  time after May 1, 1999, subject to certain conditions, and
expire  60  months  after  that  date.

In  April,  1999,  the  Company issued 250,000 common shares under stock options
exercised  by  certain  consultants  to  the  company  for  $25.
With  respect  to  the  sale  of  unregistered  securities referenced above, all
transactions  were  exempt  from  registration  pursuant  to Section 4(2) of the
Securities  Act of 1933 (the "1933 Act"), and Regulation D promulgated under the
1933  Act.  In each instance, the purchaser had access to sufficient information
regarding  our  company  so  as  to  make an informed investment decision.  More
specifically,  the Company had a reasonable basis to believe that each purchaser
was  an  "accredited  investor"  as  defined in Regulation D of the 1933 Act and
otherwise  had  the  requisite  sophistication  to  make  an  investment  in the
Company's  common  stock.

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

     The  following  information  should  be  read  in  conjunction  with  the
consolidated  financial  statements  of  ARS  and  the  notes  thereto appearing
elsewhere  in  this  filing.  Statements  in  this  Management's  Discussion and
Analysis  or  Plan of Operation that are not statements of historical or current
fact  constitute  "forward-looking  statements."

OVERVIEW

          ARS  was  formed  in  1998  to  design  and  develop  advanced railway
communications  and  data management systems and as such has a limited operating
history.  In  July 2000, ARS completed the purchase of T & T Diesel Power, Ltd.,
which has been in business for 20 years. In spite of this acquisition, ARS faces
significant  obstacles  with  regard  to  customer  acceptance of ARS' products.

     Since  January  31,  2001,  ARS  has  been successful in raising capital of
approximately  $522,000  in  aggregate  through  April  30, 2002 including gross
proceeds  from  the  sale  of $300,000 ($270,000 net) of common stock under ARS'
Equity  Line  of Credit and other sources.  Under the Equity Line of Credit, ARS
may sell to Cornell Capital Partners up to $5.0 million of common stock over the
two-year  period  following commencing on the earlier of (I)  the effective date
of  a  registration statement relating to the sale of the common stock purchased
by  Cornell  Capital  Partners under the Equity Line of Credit or (ii) as agreed
upon  in  writing.  On July 20, 2001, ARS borrowed $150,000 from Cornell Capital
Partners.  This  loan  was  fully  repaid  in  December  2001.

RESULTS  OF  OPERATIONS  ADD  DISCUSSION  RE  T&T
TWELVE MONTHS ENDED JANUARY 31, 2002 COMPARED TO TWELVE MONTHS ENDED JANUARY 31,
2001

          Sales.  ARS  had  sales  of  $968,282and  $562,304in the twelve months
ended  January  31,  2002  and 2001, respectively.  All of these sales relate to
ARS'  wholly owned subsidiary, T&T Diesel Power, Ltd. ARS acquired T&T Diesel on
July 31, 2000 (see financial statements attached).  As a result, ARS' results of
operations  for  the  corresponding  period  in the prior year only included six
months of T&T Diesel's results of operations.  This accounts for the increase in
sales  for  the  twelve months ended January 31, 2002 compared to the comparable
period  in  the  prior  year.

     Cost of Sales.  ARS had cost of sales of $805,837, or 83% of sales, for the
twelve  months  ended January 31, 2002 compared to $411,289, or 73% of sales, in
the  corresponding  period  in the prior year.  Such cost of sales relate to the
sale  of  products  from  our  wholly  owned  subsidiary,  T&T  Diesel.

     Total  Operating  Expenses.  ARS'  total  operating  expenses  increased
$350,000, or 36% of sales, from $1,493,882in the twelve months ended January 31,
2001 to $1,843,923 in the comparable period in the current period.  The increase
in  operating  expenses  is  due  to  increases  in advertising and promotional,
development,  office  rent  and  telecommunications, travel expense and interest
expense.

Net  Loss.  ARS  had a net loss of $1,681,478, or $$0.11per share, in the twelve
months ended January 31, 2002 compared to a net loss of $1,359,867, or $0.12 per
share, in the comparable period in the prior year.  This increase in net loss is
primarily  due  to the increase in operating expenses and reduced margins at T&T
Diesel  Power.

The  prime  focus of ARS' Crosslogix   private wireless network is management of
railway traffic and public safety.  While the ARS system and its component parts
were developed to improve safety at rail crossings, the ARS system supports many
applications  in  real  time  data  collection,  processing,  monitoring  and
information  analysis.  The  system  has evolved into Crosslogix , an integrated
service  information system, the foundation of the ARS wireless private network.
ARS'  objective  is  to build and design state of the art communications systems
that  meet  customer demands, that are cost competitive, and that are capable of
standing  up  to the tough conditions of continuous use in the railway industry.
The  Advance  Warning System for railway level crossings is the first commercial
application  to  be offered by ARS on its integrated service information system.
ARS'  Crosslogix  technology  provides  a  portal  for  the  integration  of  an
extensive  family  of  wayside  warning  and  wayside  to  train  communications
applications.  The  ability  to integrate other applications to ARS' system adds
considerable  value  for  the  railways  and  yet  is  relatively inexpensive to
implement.  ARS'  development  effort with respect to the Crosslogix  technology
consists  of:

-     Completion  of  the third party vital system audit of the crossing control
feature.  Phase  1  of  the  audit  was completed in November 2001 with positive
results  and recommendations. Phase 2 is now under way and a preliminary phase 2
report  has  been  received  from the third party auditor. This report indicates
that ARS has advanced substantially since phase 1. As a result, ARS expects that
the  system  should  receive  certification  by  Q3  2002.
-     Creation  of  the  wide  area  network  application  in  parallel  to  the
completion  of the vital system audit. The wide area network application will be
used  to  collect data from the deployed crossing control product and distribute
it  to  users.
-     Creating the software to interface the crossing control feature to be used
in  connection  with  other  commercially  available  applications  such  as:
-     Hotbox  detector.  This  is  a non-contact temperature measurement system,
which  we  will  integrate as an application onto our information network. These
sensors  on  the  track  will  allow  the  bearing  journal  temperatures  to be
accurately  monitored  as  the  train  rolls  by at high speed.  This is a major
safety  issue for the railway since the detection of a hot bearing can prevent a
derailment.
-     Flat  wheel  detector.  A  vibration  impact  sensor can be used to detect
wheels  with  flat  spots.  The detection of flat spots will allow the offending
cars  to  be  decommissioned  and  repaired before additional damage to the rail
occurs.
-     Wide area networking.  ARS Crosslogix  technology can be linked together
to provide a higher speed communications capability to monitor locomotive and
work equipment in dark territories.  Dark territories are sections of railway
track where there are currently no communication systems in place.
-     Hazardous Materials Monitoring.  Constant monitoring of tank cars or other
vessels transporting hazardous materials (e.g., measures of temperature,
pressure, evaporation, volatility, decomposition, and so forth).
-     Inter-modal Reefer Monitoring Systems.  This is a wireless monitoring
application for refrigerated railway cars (Reefers), which communicate with each
ARS service information system via wireless radio.  This allows the Reefers to
report such things as cooling temperature, fuel levels and the condition of the
engine generators that run the refrigerator cars, etc., allowing the railway to
determine where the cars are located, define the problem with the refrigerated
unit and take the appropriate action to correct problems before the goods being
transported are damaged.

          Many  of  the above applications are currently available in the market
place while others will need to be developed.  For those commercially available,
ARS  will  need  to  develop  software  to  integrate the functionality into the
Crosslogix  system.  Other  applications  such  as inter-modal reefer monitoring
will  need  to  be  adapted  from  currently  available  products  so  that  the
information  obtained  can  be  easily  communicated  over  the  ARS  network.
Railway  crossing  systems  are one of the most important safety systems used by
railroads.  Canadian  Pacific  Railroad (CPR) has cooperated in the installation
of  the ARS Advance Crossing System application on its main line in Mississauga,
Ontario,  Canada.  ARS  intends  to offer to sell/lease/rent crossing systems to
each  of  its  customers  in  an  effort to install test systems at all targeted
railways  as  soon as possible.  Certification of the ARS Advance Warning System
by  selected  Class  I  railways  may lead to opportunities for installations at
Class  II  and  Class III railways. Many Class II and III railways traditionally
forego  testing  if  Class  I  railways  have  certified a technology.  However,
certification  does  not  guarantee  market  acceptance of ARS' technology.  The
Surface  Transportation  Board  (STB) defines Class I railroads as those with an
average  annual  operating revenue of $256.4 million or more; Class II railroads
are  those  with  average  operating  revenues  between $20.5 million and $256.4
million;  and  Class  III railroads are those with average operating revenues of
less  than  $20.5  million.

     ARS is currently looking for distribution channels related to the signaling
and  communications  business  in  order  to  market the Crosslogix system.  ARS
expects  to  build a field support group to service the railways directly, which
is expected to provide further brand recognition to ARS and its products.  It is
anticipated  that  the  railways will demand a strong technical service group to
support  systems  sold.  ARS  believes  growth  in this area will be ongoing and
dependent  on  future  sales.

LIQUIDITY AND EQUITY LINE OF CREDIT

     The  Company  is  dependent  on  external cash to fund its operations.  Our
independent  auditors have noted there is substantial doubt about our ability to
continue  as  a  going  concern.  See  Note  2  to  the  Consolidated  Financial
Statements.  This  "going concern" opinion is due, in part, to our need to raise
capital  to  continue  operations,  including  the  development of the Company's
railway  communications  and data management systems business, marketing efforts
and  potential  acquisitions.

In  March  2001, ARS entered into the Equity Line of Credit with Cornell Capital
Partners,  L.P.  To  date,  ARS  has raised gross proceeds of $300,000 ($270,000
net)  under  the  Equity  Line of Credit.   ARS anticipates that it will require
additional funding to fund development, operations and marketing of its product.
Such  funding  may  come  from  the  Equity  Line  of  Credit and the Company is
exploring  other  financing  options  to  raise  the  required  capital

In  an  attempt  to  meet its working capital needs, the Company entered into an
equity  line of credit agreement on March 27, 2001 with the Investor.  Under the
equity  line,  the  Investor  is  committed  to purchase up to $5,000,000 of the
Company's common stock over the course of 24 months commencing on the earlier of
(i)  effective registration of the shares or (ii) as mutually agreed in writing.
Under  the equity line, the Company may request an advance by the Investor.  The
number  of  shares  of  common  stock  that the  Investor shall receive for each
advance  is  determined  by  dividing  the amount of the advance by the purchase
price.  The  purchase  price  is  90%  of the market price.  The maximum advance
amount  is  equal  to  150%  of the average daily volume of the Company's common
stock multiplied by the purchase price.  The average daily volume is computed by
using the forty (40) trading days prior to the advance notice date.  The advance
notice  date is the date the investor receives a written notice from the Company
requesting  an  advance  amount  under the equity line.  The market price is the
average  of  the lowest closing bid prices of the common stock over the ten (10)
trading  day  period  beginning on the first trading day after an advance notice
date  and  ending  on  the  trading  day  prior  to  the  relevant advance date.
There  is  a  minimum  of eleven (11) trading days between advance notice dates.
The  Company  has  the right to withdraw that portion of an advance that is less
than  75%  of the lowest closing bid price of the Company's common stock for the
fifteen  (15)  trading  days  prior  to  a  relevant  advance  notice  date.
Upon each advance, Yorkville Advisors Management, LLC (the "Investment Manager")
is entitled to receive an amount equal to 8.4% of the amount of the advance.  At
the time of the equity line, the Company issued 450,000 restricted shares of the
Company's  common  stock  to  the Investment Manager.  Such restricted shares as
well  as  the shares under the Equity Line of Credit have demand and "piggyback"
registration  rights.  In connection with the equity line of credit, the Company
obtained  from certain officers and directors, a lock-up agreement, which limits
the  ability  of  the  officers and directors to sell securities of the Company.
The  equity  line  contains certain negative covenants that prohibit the Company
from  merging or consolidating with another entity or transferring substantially
all  of  the  assets  of  the  Company into another entity, unless the successor
assumes  the  Company's  obligations  under  the  equity  line.

MARKET DEVELOPMENT

     On  October  23,  2001,  the  Company  entered  into  a marketing relations
contract  Pursuant  to  the  contract  the marketing firm will provide marketing
services  in  exchange  for  19,000  shares  of  ARS common stock issued monthly
through  October  2002.  The  contract  can  be terminated on a quarterly basis.
As part of its sales and marketing strategies, ARS will:

-     Install  a  mini  network  and  crossing  showcase.

-     Make  real  time live network presentations to railway industry executives
and  their  Boards.

-     Negotiate  purchase  contracts  with  customers  (subject  to  successful
results)  during  the show case phase for delivery and installation beginning in
2003.

-     Establish  awareness of and interest in the ARS Crosslogix network and its
various information system products in the remainder of the market (687 railways
and  60  rapid  transit  operations  across  North  America).

-     Appoint  a  Vice  President  Sales  and Service in the ARS organization to
co-ordinate  efforts  under 1) and 2) above to immediately start building a full
support  and  service  network.

-     During  the  show  case phase of the crossing product launch, build strong
personal relationships with key decision makers in each company in order to both
understand  their  information  transfer  needs  more thoroughly and effectively
position  the  ARS  Crosslogix network system and all its potential products for
future  sales  and  service.

KEY CUSTOMER

     Sales  to  four  customers  in  the  year  ended  January  31,  2002  were
approximately 70% of total sales.  At January 31, 2002, accounts receivable from
these  major  customers  represented  approximately  39%  of  total  accounts
receivable.  Sales  to  one  customer  in  the  year ended January 31, 2001 were
approximately 71% of total sales.  At January 31, 2001, accounts receivable from
this  major customer represented approximately 98% of total accounts receivable.

PUBLICITY AND ADVERTISING

     The  Company  intends  to  aggressively  pursue  the  leading  industry
publications  for  editorial  coverage,  publicity  and  trade advertising.  The
objective  will  be  to  create  awareness  of  the  Company's  products.

BROCHURES AND TECHNICAL BRIEFS

     ARS  has  developed  a  web  site  (http:www.arsnetworks.com) that provides
on-line information about the Company and allows the Company to communicate with
railway  executives,  governments,  transportation  authorities  and rail safety
lobby  groups.  The Company is in the process of building a customer database to
contact  customers  and direct them to the Company's web site.  In addition, the
Company  intends  to  use  the  web  site in direct marketing campaigns to build
customer  awareness  from  the  ground  up.
ARS  intends  to publish Technical Briefs that provide technical and operational
details  and to distribute these briefs over the web and in hard copy to railway
engineering  groups  to  keep  them  informed and in a knowledgeable position to
evaluate  and  promote  the  advantages  of  ARS'  technology.

DIRECT MAIL

     The  Company  intends to use direct mail to build awareness of the Advanced
Warning  System. The Company intends to target senior officials at each railway,
as  well  as  officials  at  municipal,  state, provincial and Canadian and U.S.
transportation  authorities.  By targeting these officials and directing them to
the  Company's  website,  the Company hopes to be able to "pull" product through
the  distribution  channel.

FINANCIAL  CONSULTING  SERVICES

On  January  6,  2001,  the Company entered into a financial consulting services
agreement.  In  exchange  for  such  consulting services, the Company will issue
shares  to  a  consultant on a monthly basis with value of $10,000.  The term of
the  agreement  is  for  twelve  months.  Beginning  in the seventh month of the
agreement,  either  party  can terminate the agreement by giving 60 days written
notice.  This  contract  expired  in  January  2002  and  has  not been renewed.

MANUFACTURING PLAN

     The  Company  intends  that  to  use  contractors for its manufacturing and
assembly  for  the  foreseeable  future,  with  care  taken  to  ensure that ISO
standards  are  maintained.  ISO  is  a  series  of  international standards for
quality  management  systems.  The  ISO  family  of  standards  recognizes  four
generic  product  categories,  hardware,  software,  processed  materials,  and
services.

PROCUREMENT

     All  hardware  will  be  specified  to  meet  railway standards and will be
procured  by  ARS' engineering staff.  This critical function will be controlled
to  ensure  that  only  optimal hardware from the most reliable vendors is used.
The Company intends to maintain a database of hardware component failures, which
occur  during  manufacturing  and  test  in  order  to  keep vital statistics on
component  failure  rate  for  each  part  and  for  each  vendor.  This quality
assurance  program  is  expected  to  meet  ISO  standards.

COMPONENT ASSEMBLY

     To avoid the high cost of establishing an assembly plant, the Company plans
to  contract  its  assembly  to  a qualified assembly house. Future assembly may
require  in-house  facilities  to  control  production  and reduce product cost.

FUNCTIONAL TESTING

     ARS'  Crosslogix  system  will  be tested by the Company's design engineers
who  have developed the product in cooperation with third party contractors that
provide such test and certification services.  The tests will be conducted in an
environmentally  controlled  test  chamber at temperature ranges from -40 to +85
degrees  celsius.  In addition, vibration tables will be used to test the boards
and  sensors  at  variable  vibration  levels  to  detect assembly and component
mechanical  problems.  Thermal  Cycling  is  a well-documented process proven to
expose  failures  in  electronic  components.
Circuit  boards  will  be  monitored  during  extended  temperature cycling by a
computer  system,  which  will  record the calibration, drift, induced noise and
functionality  over  several  thermal  cycles. Each board is serialized and this
data  will  be  saved  permanently.

FINAL QUALITY ASSURANCE

     The  Company  plans  to engage contract manufacturers will assemble the ARS
Crosslogix  system.  Company  personnel  will approve all product tests in order
to  control  the  final  acceptance  and  quality  assurance  operations  before
shipping.

The  Company  intends to operate this manufacturing area under the principles of
"Improved  Product  Reliability  through  Continuous  Process  Improvement"  in
accordance  with  ISO  standards.

PRODUCT RESEARCH AND DEVELOPMENT

     During  the  current fiscal year, the Company plans to complete the initial
pre-production  testing  of  its  Crosslogix  service  information  system  and
complete the first rail carrier system audit and gain certification for the base
Advance  Crossing  application  configuration  using  a  single-track  system.
Thereafter,  multiple track systems are expected to be deployed with the ability
to  permanently  record  (log) and time stamp rail data information and transfer
this to other computers for analysis.  Additional releases are expected to alert
vehicular  traffic  of  train  direction and speed, and provide support for wide
area  network  capability,  and  internet  communications  protocol.
The  Company  expects that future Crosslogix  service information system product
releases  planned  over  the  next  two  years  at  installed  level  crossing
applications  will  be  expanded to include other devices and functions that can
build on the installed user-base.  For example, the applications described above
(hot box detector, flat wheel detector, wide area networking, hazardous material
monitoring,  inter-modal  reefer  monitoring)  add  considerable  value  for the
railway,  yet  are  relatively  inexpensive  to  add-on  to  the  system.

PURCHASE OR SALE OF PLANT AND SIGNIFICANT EQUIPMENT

     During  the current fiscal year, the Company does not anticipate purchasing
or  selling  any  plant  or  significant  equipment.

SIGNIFICANT CHANGES IN NUMBERS OF EMPLOYEES
     The Company currently has seven employees, of which two are full-time.  The
Company  expects  to  hire  one  additional employee in the current fiscal year.

PATENTS

     ARS  has  patent  protection,  under  a license agreement, for an Automated
Railway  Crossing.  The  patent  was  granted  in  June  2001The  Company is in
negotiations  to license a second patent filed on April 6, 2001 for an Automated
Railway  Monitoring  System.

EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS

     In  June 2001, the FASB finalized SFAS No. 141, "Business Combinations" and
SFAS No. 142, "Goodwill and Other Intangible Assets".  SFAS No. 141 requires the
use  of  the  purchase  method  of  accounting  and  prohibits  the  use  of the
pooling-of-interests  method  of  accounting for business combinations initiated
after  June  30,  2001.  SFAS  No.  141 also requires that the Company recognize
acquired intangible assets apart from goodwill if the acquired intangible assets
meet  certain  criteria.  SFAS  No.  141  applies  to  all business combinations
initiated  after  June 30, 2001 and for purchase business combinations completed
on or after July 1, 2001.  It also requires, upon adoption of SFAS No. 142, that
the  Company  reclassify  the carrying amounts of intangible assets and goodwill
based  on  the  criteria  in  SFAS  No.  141.

SFAS  No.  142  requires,  among other things, that companies no longer amortize
goodwill,  but  instead  test  goodwill  for  impairment  at least annually.  In
addition,  SFAS  No.  142 requires that the Company identify reporting units for
the purposes of assessing potential future impairments of goodwill, reassess the
useful  lives  of  other  existing  recognized  intangible  assets,  and  cease
amortization of intangible assets with an indefinite useful life.  An intangible
asset  with  an  indefinite  useful  life  should  be  tested  for impairment in
accordance  with  the  guidance in SFAS No. 142.  SFAS No. 142 is required to be
applied  in  fiscal  years beginning after December 15, 2001 to all goodwill and
other  intangible assets recognized at the date, regardless of when those assets
were  initially  recognized.  SFAS  No.  142  requires the Company to complete a
transitional goodwill impairment test six months from the date of adoption.  The
Company is also required to reassess the useful lives of other intangible assets
within  the  first  interim  quarter  after  adoption  of  SFAS  No.  142.

The  acquisition  of  T  & T was accounted for using the purchase method.  As of
January 31, 2002, the net carrying amount of goodwill is $329,200.  Amortization
expense  during  the  year  ended  January 31, 2002 was $57,528.  Currently, the
Company is assessing but has not yet determined how the adoption of SFAS No. 141
and  SFAS  No. 142 will impact its financial position and results of operations.
In  August 2001, the FASB issued SFAS No. 143, "Accounting for Assets Retirement
Obligations," which addresses financial accounting and reporting for obligations
associated  with the retirement of tangible long-lived assets and the associated
asset retirement costs.  SFAS No. 143 is required to be applied for fiscal years
beginning  after June 15, 2002.  The adoption of SFAS No. 143 is not expected to
have  a  material  effect  on  the  Company's  financial  statements.

In  October,  2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or  Disposal of Long-Lived Assets," which addresses financial accounting for the
impairment  or  disposal  of  long-lived assets.  SFAS No. 144 requires that one
accounting  model  be  used for long-lived assets to be disposed of by sale, and
broadens  the  presentation  of discontinued operations to include more disposal
transactions.  SFAS No. 144 is required to be applied for fiscal years beginning
after December 15, 2001.  The adoption of SFAS No. 144 is not expected to have a
material  effect  on  the  Company's  financial  statements.

ITEM 7.  FINANCIAL STATEMENTS

     The  Company's  consolidated  financial  statements  are  attached  to this
filing.

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

     Effective September 6, 2000, the Company has engaged the accounting firm of
Lougen,  Valenti,  Bookbinder  &  Weintraub, LLP as independent certified public
accountants for the Company.  Previously, the Company had engaged the accounting
firm  of BDO Seidman, LLP.  Effective July 1, 2000, the partners in the Buffalo,
New York office of BDO Seidman, LLP purchased the Buffalo accounting practice of
BDO  Seidman,  LLP  and  are  continuing  the practice under the name of Lougen,
Valenti,  Bookbinder & Weintraub, LLP.  Lougen, Valenti, Bookbinder & Weintraub,
LLP  is  an  independent  member  of the BDO Seidman Alliance.  A resolution was
passed  by  the  board  on  August  24,  2000  to  accept  the audit committee's
recommendation and dismiss BDO Seidman, LLP and a motion was passed by the board
to allow the audit committee to engage the firm of Lougen, Valenti, Bookbinder &
Weintraub,  LLP  as  the Company's new accounting firm.  The Company advised the
former  accountant  of its decision to dismiss them on September 6, 2000 and the
former  accountant  resigned  on  the  same  date.




<PAGE>

                                    PART III
ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
     The  Company's  present  directors  and  executive officers are as follows:
<TABLE>
<CAPTION>



<S>                   <C>        <C>
NAME . . . . . . .    AGE        POSITION
------------------  ---------  -----------------------------------------------
Sydney A. Harland.     50      Chief Executive Officer, President and Director
Mark P. Miziolek .     45      Chief Financial Officer
Donald B. Hathaway     66      Director
Dale F. Sisel. . .     64      Director
Michael J. Kirby .     60      Director
Robert M. Esecson.     51      Director and Secretary
Peter J. Hoult . .     58      Chairman of the Board of Directors
</TABLE>



On  October  15,  2001  Patrick  Shea who has been a director of ARS since 1998,
resigned  from  the  Board  of  Directors  because other business interests were
limiting his availability to ARS.  As ARS had one vacant Board seat prior to Mr.
Shea's  resignation,  the Board appointed two new directors on October 15, 2001.
Dale  F.  Sisel and Senator Michael J.L. Kirby accepted appointments to the ARS'
Board  bringing  the  number  of  Directors  to  six.

The  following  is  a  brief  description of the background of the directors and
executive  officers  of  the  Company.

SYDNEY  A. HARLAND has been Chief Executive Officer and President and a director
of  the  Company since inception.  He is a co-founder of the Company.  From 1987
to  2002,  Mr.  Harland was President, founder and sole shareholder of Ameri-can
Equipment Sales and Leasing Inc., a product development and sales company.  From
1995  to  December  2000, he was a consultant to Ontario Hydro Technologies.  He
has  over  20 years of business experience, primarily in sales and marketing, in
the  railway,  telecommunications,  nuclear  utility  and mining industries.  He
received a four-year Electrical Diploma from C.P Tech., Montreal, Quebec, Canada
and  studied  Business  Administration and Marketing at Dawson College Montreal,
Quebec,  Canada.  He  has  been  elected  a  member of the Canadian Institute of
Marketing,  and  the  American  Railway  Engineering  and  Maintenance-of-Way
Association.

MARK  P.  MIZIOLEK  has been the Vice President Finance, Chief Financial Officer
and  Treasurer  of  the  Company  since  May  20,  1998.  From 1994 to 1998, Mr.
Miziolek  became  the  Treasurer  and  Chief  Financial  Officer  and  later the
President,  Treasurer  & CFO of Thornmark Holdings Inc./Thornmark Corporation, a
privately  held  investment  holding  company  with  interests in industrial and
residential  real  estate  development and Great Lakes and ocean shipping.  From
1981  to  1994,  Mr.  Miziolek  was  first the Assistant Controller and then the
Controller  of Upper Lakes Group Inc., one of Canada's largest dry bulk shipping
companies with 21 vessels operating on the Great Lakes and in 4 vessels in ocean
trades.  Mr.  Miziolek received a B. Com. from the University of Toronto in 1983
and  became  a  Certified  General  Accountant  in  1989.

DONALD  B.  HATHAWAY  has  been  a  Director  of the Company since June 3, 1998.
While  pursuing  a  career in electronics design and manufacturing, academia and
management  consulting  over  the  last thirty years, he has also been an active
entrepreneur,  with interests in several small companies.  He has been a partner
in  two  national  consulting firms and the president of two others, and he is a
Past  President  and  a  Fellow  of  the  Institute of Management Consultants of
Ontario,  and  a  Past  President  of the Institute of Management Consultants of
Canada.  He is active on several other Boards, including Qnetix Inc. (Chairman);
Wordwrap  Associates  Inc.  (Chair);  Organization  and  Systems  Design  Inc.
(Chairman);  The  Uxmal  Group;  Keystone  Enterprizes Inc. (Secretary); Nu-wave
Photonics  Inc.,  and  NetFX  Concepts  Inc.  He  is  a  former Governor of York
University  and  he  is currently on the University of Waterloo Advisory Council
and  The  Financial  Post's  selection  committee  for the Leaders in Management
Education  Award.  He  has  a  B.Eng.  (electrical)  from  Sir  George  Williams
University (now Concordia), a B.Sc. in mathematics from the same university, and
an  MBA  from  York  University.

ROBERT  M.  ESECSON  has been a Director of the Company since June 3, 1998.  Mr.
Esecson  is  the founder, Senior Managing Director and CEO of The Esmarox Group,
LLC,  an  investment  banking  and  business  advisory  firm  specializing  in
comprehensive  services  to  public  and  private  middle-market companies.  The
Esmarox  Group  provides  merger  and  acquisition,  corporate  finance, private
placement  and  mezzanine  financing  services  to  middle  market firms located
throughout  North  America.  Its  consulting  division  develops  and implements
creative  marketing  programs  and  strategic  growth  plans  to  increase  the
profitability  of  client  firms  and  provide  exit  strategy  development  and
implementation.  Trained  as a lawyer, and an entrepreneur in his own right, Mr.
Esecson  has  a  comprehensive background in finance, management, and consulting
businesses.  He  has  held  senior  executive  positions  at  a  merchant  and
investment-banking  firm  and at several financial services firms.  He earned BS
in  Management and Accounting from Bentley College in Waltham, Massachusetts and
a  JD  from  the  New  England  School  of  Law  in  Boston.

PETER  J. HOULT has been a Director of the Company since June 3, 1998.  In 1993,
Peter Hoult formed the international strategic marketing and consulting practice
which  he operates from North Carolina and Toronto, Ontario.  In 1965, he joined
Unilever  in  London, England as a management trainee while attending the London
School  of Economics in the doctoral program.  In 1967, he formed his own market
research company in London with an American partner and conducted studies in all
parts  of  the  world.  In  1972,  he  joined  RJR  Tobacco as the International
Research  Director,  and  moved  through  successively  more senior positions to
become  President  and  CEO,  RJR  Canada  and  Executive  Vice  President  U.S.
Operations.  He  joined  Northwest  Airlines in 1990 as Executive Vice President
Marketing,  Sales, and Strategic Planning.  He teaches marketing and strategy at
the  Fuqua  Graduate  School  of  Business at Duke University in North Carolina,
while  continuing  to  serve  his  key  clients.  Mr.  Hoult  graduated from the
University  of Reading with an Upper Second Honours degree in Psychology in 1965
and  he  has  completed  the course work for a doctorate at the London School of
Economics.

     DALE  F.  SISEL,  was appointed a Director of the Company October 15, 2001.
Dale spent the better part of his professional career with R.J. Reynolds Tobacco
International,  advancing through a series of successively more senior positions
to  President  and CEO, retiring In 1995. Dale currently resides in Chapel Hill,
NC  and  Ennis,  MT  and  is  active  in  ranching and as a principal in Madison
Investments  LLC,  a  property  development  and management firm. Dale is member
(former  Chairman)  of  the  Board  of Vistors of the Babcock Graduate School of
Management  at Wake Forest University. Dale served as an officer in the U.S. Air
Force  and attended the University of Texas (Arlington), graduating in 1969 with
a  BS  degree  in  Business  and  a  MA  degree  in  Economics.

     SENATOR  MICHAEL  J.  KIRBY,  was  appointed  to  the Board of Directors on
October 15, 2001. He has B.Sc. and M.A. in Mathematics from Dalhousie University
and  in  1965  received  a  Ph.D.  in  Applied  Mathematics  from  Northwestern
University.  In  1997,  he  received  an  honorary degree of Doctor of Laws from
Dalhousie  University prior to being summoned to the Senate on January 13, 1984.
Senator Kirby was Principal Assistant to the Premier of Nova Scotia from 1970 to
1973 and served as Assistant Principal Secretary to the Prime Minister from 1974
to  1976.  He  was President of the Institute for Research on Public Policy from
1977  to 1980. From 1980 to 1983, Senator Kirby was Secretary to the Cabinet for
Federal-Provincial  Relations  and  Deputy  Clerk  of the Privy Council. In this
capacity,  he was deeply involved in the negotiations that led to the patriation
of  the  Canadian Constitution and the inclusion of the Charter of Rights in the
Constitution.  From  1982  to 1984, Senator Kirby also served as Chairman of the
Task  Force  on  Atlantic  Fisheries.  This  task  force was responsible for the
restructuring  of  Canada's  east coast fishing industry. In 1983, Senator Kirby
was appointed Senior Corporate Vice-President of Canadian National. From 1984 to
1994, Senator Kirby was Vice-President of Goldfarb Consultants, an international
market  research firm headquartered in Toronto. From 1994 to 1999, Senator Kirby
was  the  Chairman  of  the  Standing  Senate  Committee  on Banking, Trade, and
Commerce.  He  is  currently  the  Chairman  of the Standing Senate Committee on
Social  Affairs, Science and Technology. He also serves as a member of the Board
of Directors of several companies. Prior to entering government in 1970, Senator
Kirby  was  a  professor  in  the  Schools of Business Administration and Public
Administration  at  Dalhousie  University.  He  was also a faculty member at the
Business  Schools  of  the  University  of  Chicago  and the University of Kent,
England.

DIRECTORSHIPS HELD IN REPORTING COMPANIES
     Donald  B.  Hathaway  serves on the Board of Directors of Rodin Networks, a
public  company  with  an application to trade on the Canadian Venture Exchange.
OTHER KEY EMPLOYEES
     In  addition to the persons identified above, the Company has the following
key  employees:
<TABLE>
<CAPTION>



<S>                     <C>  <C>
NAME . . . . . . . . .  AGE  POSITION
----------------------  ---  -----------------------------------
Shabir Gova              34  Vice President, Technology
Gary S. Johnson          40  Vice President, Marketing
Susan Boyd MacStravick   51  Director, Investor Relations
Ronald Moodie            65  Controller and Advisory Board Chair

</TABLE>



The  following  is  a brief description of the background of these key employees
who  occupy  their  positions  on  a  part  time  basis.

SHABIR  GOVA has been Vice President, Technology of the Company since inception.
From  1990  to  1998,  Mr. Gova worked for Shlumberger Systems & Services Canada
Limited,  and  has held the following positions:  Design engineer, Senior Design
Engineer,  Manager,  Systems  Services  &  Development,  Manager, Technology and
Development  -  Canada, Director, Information Technology - Canada.  Mr. Gova has
progressive  experience  in  Software/  Firmware systems design and development,
Interactive  DOS  and  Windows  based  software  applications  (employing  an
object-oriented  framework)  used  to  remotely  program,  read  and  provide  a
graphical  analysis  of  data  gathered  by  monitoring  devices,  real  time
multitasking  embedded systems used for high-speed data acquisition and storage,
Graphical  User  Interfaces  used  as  a front-end for various existing software
applications  and  C++  Class Libraries used as the core technology for software
under  development.  From  1989  to  1990,  Mr.  Gova was Software Development &
Systems  Support  Analyst, for IBM Canada Limited.  Mr. Gova was responsible for
automation  of  the SIMM prototype fabrication laboratory.  Mr. Gova received an
Honours  Bachelor  of  Applied Science in Systems Design Engineering, Options in
Management  Science  and  Computer Engineering, from the University of Waterloo,
Ontario,  Canada.  Mr.  Gova  is  a  member  of  the  IEEE.

GARY  S.  JOHNSON  has  been  Vice  President,  Marketing  of  the Company since
inception.  From  1996 to 1998, Mr. Johnson was Marketing Manager, Ontario Hydro
Technologies,  responsible  for  developing  technology  services  marketing
opportunities  to  the electric utility industry in the U.S., Mexico and Canada.
From  1989  to  1996,  Mr.  Johnson worked for Schlumberger Limited, Electricity
Division a world leader in the metering industry.  He started as Product Manager
Core  Products  and Automatic Meter Reading Technology and by 1994 he became the
Director,  Utility  Services  Group,  responsible  for  P&L,  142 employees, and
contracting  services  to  electricity,  water  and gas utilities across Canada.
From 1988 to 1989, Mr. Johnson was the Marketing Manager Semi-conductors Philips
electronics  Limited.  Mr.  Johnson  received  his  MBA,  and  B.Sc.  Electrical
Engineering  from  Queens  University  in  Kingston,  Ontario,  Canada.

SUSAN  BOYD  MACSTRAVICK  has  been  the  Director  of Investor Relations of the
Company  since inception.  Ms. Boyd MacStravick has been President of Susan Boyd
&  Associates  for  12  years  and  has  over 20 years of experience in investor
relations  and  communications, advisor work for the Toronto Stock Exchange, and
pre and post offering phases for new equity issues aimed at gaining national and
international  media  coverage  for Canadian and American high tech and resource
companies.  She  has  organized  and  orchestrated international conferences and
events.  Ms. Boyd MacStravick received her Hon. B.A., from University of Toronto
1971,  Postgrad  Journalism  Diploma,  from University of Western Ontario 1972.

RONALD  MOODIE  has  been on the Company's Advisory Board since June 5, 1998 and
was  appointed  Controller  in  June 2000.  From 1989 to present, Mr. Moodie has
been  President  of  Moodie  Consulting,  providing  management  and  investment
services  to  commercial real estate developers and heavy equipment suppliers to
the  railway  and  construction industries.  From 1953 to 1989, Mr. Moody was in
the  precious  and  non-precious  metals  and the ferrous and non-ferrous metals
manufacturing  industries  and  the  ferrous metals distribution industry mostly
with  what  are  now  Johnson  Matthey,  Jannock  and  Russel Metals.  Mr. Moody
finished  his  career at Vincent Steel, a division of the present Russel Metals,
as  Vice  President,  a  position  he  held  for  15  years.  Mr. Moodie studied
Registered  Industrial  Accounting  at the University of Toronto, and received a
real  estate  license  to  sell  commercial  real  estate  from Ryerson Polytech
University.


<PAGE>

ITEM 10.  EXECUTIVE COMPENSATION
     The following table shows all the cash compensation paid by the Company, as
well  as  certain  other  compensation  paid or accrued, during the fiscal years
ended January 31, 2002, 2001 and 2000to the Company's two highest paid executive
officers.  No restricted stock awards, long-term incentive plan payouts or other
types  of  compensation,  other  than  the  compensation identified in the chart
below,  were  paid  to  these  executive officers during these fiscal years.  No
other  executive  officer  earned  a  total annual salary and bonus for the year
ended  January  31,  2002  in  excess  of  $100,000.
<TABLE>
<CAPTION>



<S>                      <C>                  <C>                       <C>             <C>       <C>         <C>
                         ANNUAL COMPENSATION                            LONG-TERM COMPENSATION
                         -------------------                            ------------------------
                                                                  AWARDS                   PAYOUTS
                                                           -------------------     ------------------------
                                                                                        RESTRICTED
                                   ANNUAL COMPENSATION     OTHER           STOCK     OPTIONS/    LTIP
NAME AND. . . . . . . .          SALARY          BONUS     COMPENSATION    AWARD(S)  SARS        PAYOUTS
                         ------  ------------------------  --------------  --------  ----------  ----------
PRINCIPAL POSITION       YEAR             ($)                   ($)         ($)         ($)         (#)
-----------------------  ------  ------------------------  --------------  --------  ----------  ----------

Sydney A. Harland,       2002    $     180,000  $  90,000       -0-         -0-      2,226,923       -0-
President and Chief      2001    $     107,000         -0-      -0-         -0-      1,236,860       -0-
Executive Officer        2000    $     100,000  $  17,000       -0-         -0-      1,130,069       -0-


Mark P. Miziolek, Vice   2002    $      84,000  $  42,000       -0-         -0-        969,231       -0-
President Finance and    2001    $      51,000         -0-      -0-         -0-         35,500       -0-
Chief Financial Officer  2000    $      45,000  $   8,000       -0-         -0-         15,750       -0-


<S>                      <C>            <C>

                         ALL
                         OTHER
NAME AND. . . . . . . .  COMPENSATION
                         -------------
PRINCIPAL POSITION             ($)
-----------------------  -------------

Sydney A. Harland,                 -0-
President and Chief                -0-
Executive Officer                  -0-


Mark P. Miziolek, Vice             -0-
President Finance and         113,000(1)
Chief Financial Officer            -0-
</TABLE>



     ___________________
 (1)     These amounts relate to the extension of stock options granted in 1999
that  were  due  to  expire  in  April  2000.
     The following table contains information regarding options exercised in
the year ended January 31, 2002, and the number of shares of common stock
underlying options held as of January 31, 2002, by the Company's two highest
paid executive officers.
                       AGGREGATED OPTIONS/SAR EXERCISES
                            IN LAST FISCAL YEAR AND
                     FISCAL YEAR END OPTIONS/SAR VALUES(1)

<TABLE>
<CAPTION>



<S>                           <C>                      <C>                       <C>                           <C>
                              NUMBER OF SECURITIES     VALUE OF UNEXERCISED
                              SHARES                   UNDERLYING UNEXERCISED    IN-THE-MONEY
                              ACQUIRED ON              VALUE                     OPTIONS/SAR'S AT              OPTIONS/SAR'S AT
NAME . . . . . . . . . . . .  EXERCISE                 REALIZED ($)              FISCAL YEAR END(1)            FISCAL YEAR END(2)
----------------------------  -----------------------  ------------------------  ----------------------------  -------------------
Sydney A. Harland, President                                                     Exercisable:  4,593,852
and Chief Executive Officer.                      -0-                       -0-  Unexercisable :           0   $            41,538
----------------------------  -----------------------  ------------------------  ----------------------------  -------------------
Mark P. Miziolek, Vice
President Finance and Chief                                                      Exercisable:  1,057,481
 Financial Officer . . . . .                      -0-                       -0-  Unexercisable :           0   $            24,931
</TABLE>





_______________________________
(1)     These grants represent options to purchase common stock.  No SAR's have
been granted.
(2)     The value of the unexercised in-the-money options were calculated by
determining the difference between the fair market value of the common stock
underlying the options and the exercise price of the options as of January 31,
2001.
EQUITY INCENTIVE PLAN
     On  June  20,  1998,  the  Company  adopted  the Equity Incentive Plan (the
"Equity  Plan").  The  purpose  of  the  Equity  Plan  is  to provide directors,
officers  and  certain  key  employees  with additional incentives by increasing
their  proprietary interest in the Company.  The Company has 4,500,000 shares of
common stock reserved for issuance under the Equity Plan.  Options granted under
the  Equity  Plan  may  be  either  Incentive  Stock  Options (as defined in the
Internal  Revenue  Code  of  1986, as amended) or Options that do not qualify as
incentive  stock  options  ("Non-Qualified Options").  The exercise price of all
Incentive  Stock  Options granted under the Equity Plan may not be less than the
fair  market  value of the underlying common stock at the date of grant.  In the
event  that  an  optionee owns more than 10% of the voting power or value of all
classes  of  stock  of  the Company, the minimum exercise price of the Incentive
Stock  Option  may  not  be less than 110% of the market value of the underlying
common  stock  at  the date of grant.  No Option may be exercised after 10 years
from  the  date  of  grant  (5  years  for  optionees  who  are greater than 10%
stockholders).  A committee of two or more non-employee members of the Company's
Board  of  Directors  will administer the Equity Plan.  Options are transferable
only  with  the  written  approval  of  the  Committee.

Under  the  Equity Plan, each non-employee director is granted in each year that
he  serves  as a director, a Non-Qualified Option to purchase common stock at an
exercise  price equal to the fair market value of the underlying common stock at
the  date  of  grant.  Each  option  is for a term of up to ten years and can be
exercised immediately.  Except for the foregoing, non-employee directors are not
otherwise  eligible  to receive options, awards or other rights under the Equity
Plan.

The  Equity  Plan  also  provides  that  the  officers, independent contractors,
consultants and employees of the Company may receive, without payment, awards of
common  stock,  cash  or  a  combination thereof in respect of the attainment of
certain  performance  goals  determined  by  the  Board  of Directors, under the
Incentive  Compensation  Plan  or  otherwise.

The  Equity  Plan  also provides that stock appreciation and depreciation rights
may  be  granted  in tandem with, or independently of, options granted under the
Equity  Incentive  Plan  (except  for  non-employee  directors).  However, stock
appreciation  rights  granted  in  tandem  with an Incentive Stock Option may be
granted  only  at the time such option is granted, and stock depreciation rights
may  not  be  granted  in  connection  with  an  Incentive  Stock  Option.
Under  the  Equity  Plan,  participants other than non-employee directors may be
granted  the  right to exercise their options by surrendering all or part of the
option  (to  the  extent  then  exercisable)  and  receive in exchange an amount
payable  by  the Company in cash or common stock (valued at the then fair market
value)  or  a  combination  thereof  equal to the excess of the then fair market
value  of  the  shares  issuable  upon exercise of the option or portion thereof
surrendered  over  the  exercise  price  of  the  option  or  portion  thereof
surrendered.  Generally,  options that are exercisable at death or disability or
termination  for  cause  may be exercised at any time prior to the expiration of
the  option but not more than three months after the date of termination, unless
the  option  has  vested.

On  June  20,  1998  the  Company  adopted  the Incentive Compensation Plan (the
"Incentive  Plan").  The  purpose  of the Incentive Plan is to attract, motivate
and  retain  key  employees  of  the  Company.  The  Company  has not reserved a
specific  number  of shares of common stock under the Incentive Plan.  Employees
of  the  Company  are  eligible  to  participate  in  the  Incentive Plan.  Each
participant  is  eligible  to  receive  a  performance  award  under the plan as
computed  on  measured performance equal to a predetermined percentage of annual
salary  at  the  beginning  of  the Company's fiscal year.  The maximum eligible
award  by  component  is:  profit  performance  -  50%, budget discipline - 30%,
subjective  -  20%.  The  profit  performance  segment  relates  directly to the
achievement  of  certain  goals  set  at  the beginning of the year.  The budget
discipline segment is based on the approved budget for the year.  The subjective
segment relates to the total performance of the participant as determined by the
Chief  Executive  Officer  and/or the Board of Directors.  No profit performance
award  will  be given if the Company does not achieve at least 80% of its profit
plan  for the year.  The Board of Directors reserves the right to modify, change
and/or delete components or the entire Incentive Plan.  Consultants and/or other
independent  contractors  may  be eligible to participate in the Incentive Plan.
The  following table contains information regarding grants of stock options made
during  the  year ended January 31, 2002 to the Company's highest paid executive
officers.


                             OPTION/SAR GRANTS TABLE
<TABLE>
<CAPTION>



<S>                           <C>                 <C>              <C>                      <C>
                                         % TOTAL
                              OPTIONS/SARS
                              NO. OF SECURITIES   GRANTED TO
                              UNDERLYING          EMPLOYEES IN
                              OPTIONS/SARS        FISCAL YEAR (%)  EXERCISE OR BASE PRICE
                                                  ---------------
NAME . . . . . . . . . . . .  GRANTED (#)            ($PER SHARE)  EXPIRATION DATE
----------------------------  ------------------  ---------------  -----------------------
Sydney A. Harland, President           2,076,923              46%                      .50  January 10, 2007
and Chief Executive Officer.             150,000               3%                      .13  April 10, 2006
----------------------------  ------------------  ---------------  -----------------------  ----------------
Mark P. Miziolek,
VicePresident Finance and
Chief Financial Officer. . .             969,231              22%  $                  0.13  January 10, 2007
----------------------------  ------------------  ---------------  -----------------------  ----------------

</TABLE>


________________________
COMPENSATION OF DIRECTORS
     The shareholders elect all directors for a two-year term.  No directors are
paid for their services on the Board, except that non-employee directors will be
granted  options  to  purchase shares of the Company's common stock on an annual
basis.  These  options  have an exercise price equal to the fair market value of
such  stock  on  the date of grant, are immediately exercisable and have up to a
ten-year term.  In addition, each director may purchase for each year of service
on  the  Board  up to 50,000 shares of common stock at a price equal to the fair
market  value  of  such  stock  on  the  date  of  purchase.

MANAGEMENT AGREEMENTS

     On  January  1,  2001, the Company entered into a Management Agreement with
Ameri-can  Equipment  Sales  and Leasing.  Under the terms of the Agreement, Mr.
Harland,  President  of  Ameri-can  Equipment  Sales  and  Leasing, will provide
employment services as the Company's President and Chief Executive Officer.  The
Agreement  has a three year term and pays Mr. Harland $180,000 per year, subject
to  an  annual  review by the Company's Board of Directors.  Mr. Harland is also
entitled  to  a  bonus  of  up  to  50% of his base compensation based on annual
performance  criteria  established  annually  by  the  Board  of  Directors.  In
addition,  Mr.  Harland  will  receive a monthly automobile allowance of $1,000.
The  Company  can  terminate  this Agreement at any time upon the payment of two
times  Mr.  Harland's  then-existing  compensation,  plus  $1,000,000.

On  January  1,  2001, the Company entered into a Management Agreement with Mark
Miziolek.  Under  the  terms  of  the  Agreement, Mr. Miziolek will serve as the
Company's Vice President Finance and Chief Financial Officer.  The Agreement has
a  three  year term and pays Mr. Miziolek $84,000 per year, subject to an annual
review  by the Company's Board of Directors.  Mr. Miziolek is also entitled to a
bonus of up to 50% of his base compensation based on annual performance criteria
established  annually by the Board of Directors.  The Company can terminate this
Agreement at any time upon the payment of two times Mr. Miziolek's then-existing
compensation.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

     The  following  table  sets  forth,  as of April 24, 2002, information with
respect  to the beneficial ownership of our common stock by (i) persons known by
us  to  beneficially  own more than five percent of the outstanding shares, (ii)
each director, (iii) each executive officer and (iv) all directors and executive
officers  as  a  group.

<TABLE>
<CAPTION>



<S>                                       <C>                  <C>
                                          COMMON STOCK
                                          BENEFICIALLY OWNED
NAME/ADDRESS . . . . . . . . . . . . . .  NUMBER               PERCENT(1)
-------------------------------------------------------------------------
Sydney A. Harland
2155 Winchester Court
Burlington, Ontario, Canada
L7P 3M7                                         10,024,291(2)       40.4%
Donald B. Hathaway
5964 Nine Line
Erin, Ontario, Canada
N0B 1T0                                          1,241,625(3)        6.1%
Mark P. Miziolek
1450 Bayshire Drive
Oakville, Ontario, Canada
L6H 6E7                                          1,519,281(4)        7.2%
Peter Ross
50 Park Avenue
Oakville, Ontario, Canada
L6J 3X8                                            397,323(5)        2.0%
Patrick R. Shea
100 Walnut Street
Champlain, New York 12919                          429,125(6)        2.1%
Robert M. Esecson
100 Walnut Street
Champlain, New York 12919                          425,625(7)        2.1%
Peter J. Hoult
100 Walnut Street
Champlain, New York 12919                          425,625(8)        2.1%
Dale Sisel
84 Bear Creek Road
Cameron, MT  59720                                    50,300          .3%
Michael Kirby
43 Waterford Drive
Ottawa, Ontario R2E 7V4
Canada                                                50,300          .3%
-------------------------------------------------------------------------
All Officers and Directors as a Group(9)       15,482,403(10)       56.5%
-------------------------------------------------------------------------

</TABLE>



(1)     Applicable  percentage  of  ownership  is based on 20,094,694 shares of
common  stock outstanding as of April 24, 2002, together with applicable options
for each shareholder.  Beneficial ownership is determined in accordance with the
rules  of  the Commission and generally includes voting or investment power with
respect  to  securities.  Shares  of  common  stock  subject to options that are
currently exercisable or exercisable within 60 days of April 24, 2002 are deemed
to  be  beneficially owned by the person holding such options for the purpose of
computing  the  percentage  of  ownership of such person, but are not treated as
outstanding  for  the purpose of computing the percentage ownership of any other
person.  The  common stock is the only outstanding class of equity securities of
our  company.
(2)     Includes  options to purchase 4,693,852 shares of common stock that can
be  acquired  within  sixty  days  of  April  24,  2002.
(3)     Includes options to purchase 387,625 shares of common stock that can be
acquired within sixty days of April 24, 2002.
(4)     Includes options to purchase 857,481 shares of common stock that can be
acquired within sixty days of April 24, 2002.
(5)     Includes options to purchase 146,773 shares of common stock that can be
acquired within sixty days of April 24, 2002.
(6)     Includes options to purchase 225,125 shares of common stock that can be
acquired within sixty days of April 24, 2002.
(7)     Includes options to purchase 225,125 shares of common stock that can be
acquired within sixty days of April 24, 2002.
(8)     Includes options to purchase 225,125 shares of common stock that can be
acquired within sixty days of April 24, 2002.
(9)     Ten persons.
(10)     Includes options to purchase 7,290,914 shares of common stock that can
be acquired within sixty days of April 24, 2002.
Mr. Harland and the Company's other executive officers and directors hold
approximately 56.5% of the Company's outstanding common stock.  As such, these
people have the ability to approve any action required by the shareholders,
including the election of the directors.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The Company has entered into management agreements with Messrs. Harland and
Miziolek.  See  "Management  Agreements."
On  July  31,  2000,  Mr.  Harland's wife loaned the Company a total of $100,000
Canadian dollars.  This loan was due in July 2001 and bears interest at 8.5% per
year.

The  Company  entered into a License Agreement dated as of May 20, 1998 with Mr.
Sydney  A.  Harland, the Company's President and Chief Executive Officer.  Under
the terms of this agreement, Mr. Harland has granted the Company a non-exclusive
license  to  certain  intellectual  property, a trade name and patents owned and
developed  by Mr. Harland.  In exchange for this license, the Company issued Mr.
Harland  a  total  of  4,520,239  shares  of  common  stock.

ITEM 13.  EXHIBITS, LISTS AND REPORTS ON FORM 8-K.
     (a)     The  following  exhibits  are  filed  as part of this registration
statement:

<TABLE>
<CAPTION>


<S>          <C>                                           <C>
EXHIBIT NO.  DESCRIPTION                                   LOCATION
-----------  --------------------------------------------  ------------------------------------------
2.1          Share Purchase Agreement dated as of          Incorporated by reference  in Registration
             July 31, 2000 among the former                Statement on Form SB-2 filed with the
             shareholders of T & T Diesel Power, Ltd.      Commission on September 19, 2001, as
             and the Company                               amended,
2.2          Escrow Agreement dated as of July 31,         Incorporated by reference  in Registration
             2000 among the Pallet Valo, the former        Statement on Form SB-2 filed with the
             shareholders of T & T Diesel Power, Ltd.      Commission on September 19, 2001, as
             and the Company                               amended,.
2.3          Promissory Note dated as of July 31, 2000     Incorporated by reference  in Registration
             given by the Company to the former            Statement on Form SB-2 filed with the
             shareholders of T & T Diesel Power, Ltd.      Commission on September 19, 2001, as
                                                           amended,
3.1          Certificate of Incorporation                  Incorporated by reference to Amendment No. 5
                                                           to the Company's Registration Statement on
                                                           Form 10-SB filed with the Securities and
                                                           Exchange Commission on September 7, 1999.
3.2          Articles of Amendment to the Articles of      Incorporated by reference in Registration
             Incorporation                                 Statement on Form SB-2 filed with the
                                                           Commission on September 19, 2001, as
                                                           amended,.
3.3          Bylaws                                        Incorporated by reference to Amendment No. 5
                                                           to the Company's Registration Statement on
                                                           Form 10-SB filed with the Securities and
                                                           Exchange Commission on September 7, 1999.
4.1          Lockup Agreement with Sydney Harland          Incorporated by reference in Registration
                                                           Statement on Form SB-2 filed with the
                                                           Commission on September 19, 2001, as
                                                           amended,
4.2          Lockup Agreement with Donald Hathaway         Incorporated by reference in Registration
                                                           Statement on Form SB-2 filed with the
                                                           Commission on September 19, 2001, as
                                                           amended,.
4.3          Lockup Agreement with Robert Esecson          Incorporated by reference in Registration
                                                           Statement on Form SB-2 filed with the
                                                           Commission on September 19, 2001, as
                                                           amended,.
4.4          Lockup Agreement with Peter Hoult             Incorporated by reference in Registration
                                                           Statement on Form SB-2 filed with the
                                                           Commission on September 19, 2001, as
                                                           amended,
4.5          Lockup Agreement with Mark Miziolek           Incorporated by reference in Registration
                                                           Statement on Form SB-2 filed with the
                                                           Commission on September 19, 2001, as
                                                           amended,.
4.6          Lockup Agreement with Patrick Shea            Incorporated by reference in Registration
                                                           Statement on Form SB-2 filed with the
                                                           Commission on September 19, 2001, as
                                                           amended,.
10.1         Consulting Agreement dated as of              Incorporated by reference in Registration
             February 9, 2001 between National             Statement on Form SB-2 filed with the
             Financial Communications Corp. and the        Commission on September 19, 2001, as
             Company                                       amended.
10.2         Equity Line of Credit Agreement dated as      Incorporated by reference in Registration
             of March 22, 2001 between Cornell             Statement on Form SB-2 filed with the
             Capital Partners, L.P. and the Company        Commission on September 19, 2001, as
                                                           amended.
10.3         Escrow Agreement dated as of March 22,        Incorporated by reference in Registration
             2001 among Butler Gonzalez LLP, First         Statement on Form SB-2 filed with the
             Union National Bank and the Company           Commission on September 19, 2001, as
                                                           amended.
10.4         Registration Rights Agreement dated as of     Incorporated by reference in Registration
             March 22, 2001 between Cornell Capital        Statement on Form SB-2 filed with the
             Partners LP and the Company                   Commission on September 19, 2001, as
                                                           amended.
10.5         Consulting Services Agreement dated as        Incorporated by reference in Registration
             of March 22, 2001 between Yorkville           Statement on Form SB-2 filed with the
             Advisors Management, LLC and the Company      Commission on September 19, 2001, as amended.
10.6         Management Agreement for Vice                 Incorporated by reference in Registration
             President Finance and Chief Financial         Statement on Form SB-2 filed with the
             Officer dated as of January 1, 2001           Commission on September 19, 2001, as
             between Mark P. Miziolek and the              amended.
             Company
10.7         Management Agreement for President and        Incorporated by reference in Registration
             Chief Executive Officer dated as of           Statement on Form SB-2 filed with the
             January 1, 2001 between Sydney Harland        Commission on September 19, 2001, as
             and the Company                               amended.
10.8         License Agreement dated as of May 20,         Incorporated by reference in Registration
             1998 between Sydney Harland and the           Statement on Form SB-2 filed with the
             Company                                       Commission on September 19, 2001, as
                                                           amended.
10.9         Promissory Note dated as of July 31, 2001     Incorporated by reference in Registration
             in the original principal amount of           Statement on Form SB-2 filed with the
             100,000 Canadian Dollars given by the         Commission on September 19, 2001, as
             Company to Betty Harland                      amended
10.10        Consulting services contract with Inc         2002  Provided herewith
             Financial Group LLC dated January 29,
11.1         Statement re: Computation of Per Share        Provided herewith
             Earnings
21.1         Subsidiaries of the Registrant                Provided herewith.
23.1         Consent of Experts and Counsel                Provided herewith.

             Form S-8 registration Statement               Incorporated by reference in
                                                           registration
                                                           statement filed on form S-8
                                                           February 28, 2002
</TABLE>



(b) Form 8-k filed August 9, 2001. On August 9, 2001, ARS Networks, Incorporated
consummated the purchase of T&T Diesel Power Limited, satisfying all terms of
the Purchase Agreement and Promissory Note. In completing this transaction, ARS
Networks, Incorporated paid in full the promissory note in the amount of
$125,000 plus accrued interest and all items under escrow were released.
T&T Diesel Power Limited is an Ontario Corporation engaged in the business of
assembling and selling diesel powered generators.


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



<TABLE>
<CAPTION>


<S>                                       <C>
Date: May 14, 2002 . . . . . . . . . . .  ARS NETWORKS, INCORPORATED

  By: /s/ Sydney A. Harland
----------------------------------------
      Sydney A. Harland
      Chief Executive Officer and President
</TABLE>


     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>



<S>                     <C>                                     <C>
NAME                    TITLE                                   DATE
----------------------



/s/ Sydney A. Harland   Chief Executive Officer, President and  May 14, 2002
----------------------
Sydney A. Harland. . .  Director


/a/ Mark P. Miziolek    Chief Financial Officer                 May 14, 2002
----------------------
Mark P. Miziolek


/s/ Donald P. Hathaway  Director                                May 14, 2002
----------------------
Donald P. Hathaway


/s/ Dale F. Sisel       Director                                May 14, 2002
----------------------
Dale F. Sisel


/s/ Robert M. Esecson   Director                                May 14, 2002
----------------------
Robert M. Esecson


/s/ Peter J. Hoult      Chairman of the Board of Directors      May 14, 2002
----------------------
Peter J. Hoult
</TABLE>


FINANCIAL STATEMENTS

EPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS         F-3


FINANCIAL STATEMENTS
     Consolidated Balance Sheet                           F-4
     Consolidated Statements of Operations                F-5
     Consolidated Statements of Stockholders' Deficit     F-6
     Consolidated Statements of Cash Flows                F-7


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS             F-8-20



REPORT  OF  INDEPENDENT  CERTIFIED  PUBLIC  ACCOUNTANTS

To  the  Board  of  Directors  and  Stockholders  of
ARS  Networks,  Incorporated  and  Subsidiary
Champlain,  New  York

We  have  audited  the  accompanying consolidated balance sheet of ARS Networks,
Incorporated  and Subsidiary as of January 31, 2002 and the related consolidated
statements  of  operations, stockholders' deficit and cash flows for each of the
two  years in the period ended January 31, 2002.  These financial statements are
the  responsibility  of  the  Company's  management.  Our  responsibility  is to
express  an  opinion  on  these  financial  statements  based  on  our  audits.

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

In  our opinion, the consolidated financial statements referred to above present
fairly,  in  all  material  respects,  the  financial  position of ARS Networks,
Incorporated  and  Subsidiary  at  January  31,  2002,  and the results of their
operations  and  their  cash flows for each of the two years in the period ended
January 31, 2002 in conformity with  accounting principles generally accepted in
the  United  States  of  America.

The  accompanying  financial  statements  have  been  prepared assuming that ARS
Networks  Incorporated  and  Subsidiary  will  continue  as a going concern.  As
discussed  in Note 2 to the financial statements, ARS Networks, Incorporated and
Subsidiary  has  incurred losses since inception.  The Company is dependent upon
the successful development of its advanced railway level communications and data
management  systems  business  and  its  ability  to raise capital utilizing its
equity line of credit or from other sources.  These conditions raise substantial
doubt  about  its ability to continue as a going concern.  Management's plans in
regard  to these matters are also described in Note 2.  The financial statements
do  not  include  any  adjustments  that  might  result from the outcome of this
uncertainty.



/s/  Lougen,  Valenti,  Bookbinder  &  Weintraub,  LLP
Lougen,  Valenti,  Bookbinder  &  Weintraub,  LLP



Amherst,  New  York
April  30,  2002



<TABLE>
<CAPTION>

                      ARS NETWORKS, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEET
                                     AS OF
                                 January 31, 2002
<S>                                                            <C>

ASSETS

CURRENT

Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 34,707
Accounts receivable (Note 10) . . . . . . . . . . . . . . . .    80,809
Due from officer. . . . . . . . . . . . . . . . . . . . . . .     6,499
Inventories . . . . . . . . . . . . . . . . . . . . . . . . .    45,628
Prepaid expenses (Note 4) . . . . . . . . . . . . . . . . . .   143,818
                                                            -----------
TOTAL CURRENT ASSETS. . . . . . . . . . . . . . . . . . . . .   311,461
                                                            -----------



OTHER ASSETS

Equipment, net of accumulated depreciation of $6,393 (Note 5)    11,165
Goodwill, net of accumulated amortization of $86,004 (Note 3)   329,200
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .       646
                                                             ----------
TOTAL                                                        $  652,472
                                                             ==========
</TABLE>
See accompanying notes to consolidated financial statements.




<TABLE>
<CAPTION>
                        ARS NETWORKS, INC. AND SUBSIDIARY
                         CONSOLIDATED BALANCE SHEET (CONT')
                                      AS OF
                                 January 31, 2002

<S>                                                     <C>
January 31, 2002

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT
Accounts payable . . . . . . . . . . . . . . . . . . .  $   238,702
Accrued management compensation. . . . . . . . . . . .      716,243
Accrued expenses (Note 7). . . . . . . . . . . . . . .       13,938
Note payable - related party (Note 7). . . . . . . . .       63,800
Current maturities of long-term debt (Note 5). . . . .        1,258
                                                      --------------
TOTAL CURRENT LIABILITIES. . . . . . . . . . . . . . .    1,033,941
                                                      --------------
COMMITMENTS AND CONTINGENCIES (NOTES 2, 7, 9 AND 12)

STOCKHOLDERS' DEFICIT (NOTES 3, 4, 7, 8, 9 AND 12)
Preferred stock, $.0001 par value - 25,000,000 shares
Authorized; none outstanding . . . . . . . . . . . . .            -
Common stock - $.0001 par value - 50,000,000 shares
Authorized; 18,995,001 outstanding . . . . . . . . . .        1,900
Additional paid in capital . . . . . . . . . . . . . .    3,888,386
Deficit. . . . . . . . . . . . . . . . . . . . . . . .   (4,271,755)
                                                      --------------
TOTAL STOCKHOLDERS' DEFICIT. . . . . . . . . . . . . .     (381,469)
                                                      ==============
TOTAL                                                    $  652,472
</TABLE>

See accompanying notes to consolidated financial statements.






                        ARS NETWORKS, INC. AND SUBSIDIARY
                       CONSOLIDATED STATEMENTS OF OPERATIONS
                              FOR THE YEARS ENDED
                           January 31, 2002 and 2001

<TABLE>
<CAPTION>
                                                               2001           2002
<S>                                                      <C>           <C>
SALES (NOTE 10) . . . . . . . . . . . . . . . . . . . .  $   562,304   $   968,282
                                                       -------------    -----------
Cost of sales . . . . . . . . . . . . . . . . . . . . .      411,289       805,837
                                                       -------------    -----------
GROSS PROFIT. . . . . . . . . . . . . . . . . . . . . .      151,015       162,445
                                                       -------------    -----------
EXPENSES:
 Officers' and directors' compensation (Note 7) . . . .      732,445       731,827
 Professional fees. . . . . . . . . . . . . . . . . . .      419,508       355,324
 Advertising and promotion. . . . . . . . . . . . . . .      179,140       254,838
 Interest expense (Notes 7 and 12). . . . . . . . . . .       11,935       150,078
 Development expenses . . . . . . . . . . . . . . . . .       42,817       120,999
 Depreciation and amortization. . . . . . . . . . . . .       30,795        62,555
 Travel . . . . . . . . . . . . . . . . . . . . . . . .       13,001        53,261
 Insurance. . . . . . . . . . . . . . . . . . . . . . .       24,513        36,961
 Telecommunications and utilities . . . . . . . . . . .       10,502        27,124
 Financing expenses (Note 7). . . . . . . . . . . . . .            -        22,345
 Rent . . . . . . . . . . . . . . . . . . . . . . . . .       19,214        17,851
 Other. . . . . . . . . . . . . . . . . . . . . . . . .       10,012        10,760
                                                       -------------    -----------
TOTAL EXPENSES. . . . . . . . . . . . . . . . . . . . .    1,493,882     1,843,923
                                                       -------------    -----------
LOSS BEFORE INCOME TAXES. . . . . . . . . . . . . . . .   (1,342,867)   (1,681,478)
                                                       -------------    -----------
Income taxes (Note 6) . . . . . . . . . . . . . . . . .       17,000             -
                                                       -------------    -----------
NET LOSS. . . . . . . . . . . . . . . . . . . . . . . .  $(1,359,867)  $(1,681,478)
                                                       =============   ============
LOSS PER SHARE (BASIC AND DILUTED):
 Net loss . . . . . . . . . . . . . . . . . . . . . . .  $      (.12)  $      (.11)
                                                       =============   ============

WEIGHTED AVERAGE SHARES OUTSTANDING (BASIC AND DILUTED)   11,049,462    14,740,828
                                                       =============   ============
</TABLE>
See accompanying notes to consolidated financial statements.



<TABLE>
<CAPTION>

                                          ARS NETWORKS, INC. AND SUBSIDIARY
                                  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                                              FOR THE YEARS ENDED
                                           January 31, 2002 and 2001


<S>                                          <C>         <C>      <C>          <C>           <C>
                                                Common Shares     Additional
                                                                  Paid-In
                                             Shares      Amount   Capital      Deficit       Total
---------------------------------------------------------------------------------------------------------
BALANCE, January 31, 2000 . . . . . . . . .  10,608,989  $ 1,061  $1,209,368   $(1,230,410)  $   (19,981)

Net loss for the year . . . . . . . . . . .           -        -           -    (1,359,867)   (1,359,867)

Sales of common stock . . . . . . . . . . .     430,000       43     259,662             -       259,705

Common stock issued for services. . . . . .     361,000       36     378,458             -       378,494

Common stock issued for officers'
 Compensation . . . . . . . . . . . . . . .   1,000,900      100     218,900             -       219,000

Common stock issued to satisfy advances due
 to directors . . . . . . . . . . . . . . .       7,000        1       4,759             -         4,760

Redeemable stock issued for acquisition of
 T & T Diesel Power, Ltd. . . . . . . . . .     200,000        -           -             -             -

Officers' compensation recognized for
 Modifications of stock options . . . . . .           -        -     375,922             -       375,922
---------------------------------------------------------------------------------------------------------
BALANCE, January 31, 2001 . . . . . . . . .  12,607,889    1,241   2,447,069    (2,590,277)     (141,967)

Net loss for the year . . . . . . . . . . .           -        -           -    (1,681,478)   (1,681,478)

Sales of common stock . . . . . . . . . . .   3,375,160      338     492,972             -       493,310

Reclass of redeemable common stock
 Into equity. . . . . . . . . . . . . . . .           -       20     199,980             -       200,000

Common stock issued for services. . . . . .     415,352       42     290,993             -       291,035

Common stock issued for directors'
 Compensation . . . . . . . . . . . . . . .     800,600       80      79,980             -        80,060

Common stock issued for prepaid consulting
 Services . . . . . . . . . . . . . . . . .   1,000,000      100     139,900             -       140,000

Common stock issued to settle accounts
 Payable. . . . . . . . . . . . . . . . . .     346,000       34      93,007             -        93,041

Common stock issued to investment manager
 And recorded at par. . . . . . . . . . . .     450,000       45         (45)            -             -

Common stock options and warrants issued in
 Connection with financing activities . . .           -        -     144,530             -       144,530
---------------------------------------------------------------------------------------------------------

BALANCE, January 31, 2002                    18,995,001  $  1,900 $  3,888,386  $(4,271,755)   $(381,469)
---------------------------------------------------------------------------------------------------------

</TABLE>
See accompanying notes to consolidated financial statements.



<TABLE>
<CAPTION>

                                            ARS NETWORKS, INC. AND SUBSIDIARY
                                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  FOR THE YEARS ENDED
                                              January 31, 2002 and 2001


<S>                                                                       <C>           <C>
                                                                                2001          2002
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $(1,359,867)  $(1,681,478)

Adjustments to reconcile net loss to net cash
   (used in) operating activities:
 Professional fees settled in stock. . . . . . . . . . . . . . . . . . .      378,494       291,035
 Interest imputed on note payable - investor . . . . . . . . . . . . . .            -       136,530
 Officers' and directors' compensation settled in stock. . . . . . . . .      219,000        80,060
 Depreciation and amortization . . . . . . . . . . . . . . . . . . . . .       30,795        62,555
 Finance expense recognized for issuance of stock options. . . . . . . .            -         8,000
 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            -        (4,700)
 Officers' compensation recognized for modifications of stock options. .      375,922             -
 Changes in assets and liabilities net of effects from purchase of T & T
   Diesel Power, Ltd.:
   (Increase) decrease in accounts receivable. . . . . . . . . . . . . .      (70,684)      156,903
   (Increase) decrease in inventories. . . . . . . . . . . . . . . . . .      (35,277)       87,320
   (Increase) decrease in prepaid expenses . . . . . . . . . . . . . . .       (8,333)        5,887
   (Increase) in due from officer. . . . . . . . . . . . . . . . . . . .       (2,320)       (4,179)
   Increase in accounts payable and accrued expenses . . . . . . . . . .      245,677       399,031
TOTAL ADJUSTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .    1,133,274     1,218,442
------------------------------------------------------------------------  ------------  ------------

NET CASH (USED IN) OPERATING ACTIVITIES. . . . . . . . . . . . . . . . .     (226,593)     (463,036)

CASH FLOWS FROM INVESTING ACTIVITIES:
 Acquisition of T & T Diesel Power Ltd., net of cash acquired. . . . . .      (95,267)            -
 Capital expenditures. . . . . . . . . . . . . . . . . . . . . . . . . .       (1,779)            -
NET CASH (USED IN) INVESTING ACTIVITIES. . . . . . . . . . . . . . . . .      (97,046)            -
------------------------------------------------------------------------  ------------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from the sale of common stock. . . . . . . . . . . . . . . . .      259,705       493,310
 Proceeds from note payable - investor . . . . . . . . . . . . . . . . .            -       150,000
 Payments of note payable - investor . . . . . . . . . . . . . . . . . .            -      (150,000)
 Payments of note payable - former shareholders of T & T
   Diesel Power, Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . .            -      (115,516)
 Payments of long-term debt. . . . . . . . . . . . . . . . . . . . . . .       (2,539)       (5,417)
 Proceeds from note payable - related party. . . . . . . . . . . . . . .       68,500             -
 Advances (to) directors . . . . . . . . . . . . . . . . . . . . . . . .      (15,240)            -
NET CASH PROVIDED BY FINANCING ACTIVITIES. . . . . . . . . . . . . . . .      310,426       372,377
------------------------------------------------------------------------  ------------  ------------

NET (DECREASE) IN CASH . . . . . . . . . . . . . . . . . . . . . . . . .      (13,213)      (90,659)
Cash, beginning of year. . . . . . . . . . . . . . . . . . . . . . . . .      138,579       125,366
------------------------------------------------------------------------  ------------  ------------

CASH, end of year                                                          $  125,366      $  34,707
------------------------------------------------------------------------  ------------  ------------

</TABLE>
See accompanying notes to consolidated financial statements.

                             ARS NETWORKS, INCORPORATED
                                   AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  ORGANIZATION

ARS  Networks, Incorporated ("ARS"), incorporated on May 4,
1998  in  New  Hampshire,  was  formed  to  design  and develop advanced railway
communications  and  data  management  systems.  ARS's  first  product  under
development  is  Crosslogix  ,  an  advanced  warning  system  for railway level
crossings.  The  Company  is devoting most of its efforts to this business line.

     On July 31, 2000, ARS acquired the stock of T & T Diesel Power, Ltd.  ("T &
T").          T  & T manufactures custom diesel power generating equipment. As a
result  of  this  acquisition,  ARS  began  to  earn  revenue  and  is no longer
considered  a  development  stage  enterprise.

2.  SUMMARY  OF     BASIS  OF  PRESENTATION SIGNIFICANT
 ACCOUNTING   POLICIES

The  accompanying  consolidated  financial statements
have  been  prepared  in  accordance  with  U.S.  generally  accepted accounting
principles  and  are  presented  in  U.S.  dollars.




                              ARS NETWORKS, INCORPORATED
                                     AND SUBSIDIARY
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



     PRINCIPLES  OF  CONSOLIDATION

     The  consolidated  financial statements include the accounts of ARS and its
wholly  owned  subsidiary,  T  &  T.  All  material  intercompany  accounts  and
transactions  are  eliminated.

     GOING  CONCERN  AND  MANAGEMENT'S  PLANS

     The  Company  has  a  limited  operating  history with no revenues from its
railway  communications  and data management systems business.  Because of this,
the  Company  faces  significant  obstacles in regards to financing and customer
acceptance  of  the  Company's  products.  The Company's continuation as a going
concern  is dependent upon its ability to raise capital under its equity line of
credit  (Note  12)  or  from  other  external  sources  to  fund  the  remaining
development,  operations  and  marketing of Crosslogix .  In connection with the
equity  line  of  credit,  the Company has registered additional shares for sale
with  the  Securities  and  Exchange  Commission.

     These factors create uncertainty about the Company's ability to continue as
a  going  concern.  The  financial  statements do not include any adjustments to
reflect  the  possible  future  effect  on  recoverability and classification of
assets  or  the classification of liabilities that might result from the outcome
of  this  uncertainty.

     INVENTORIES

     Inventories  are  stated  at  lower  of cost or market.  Cost is determined
using  the  specific  identification  method.

     EQUIPMENT

    Equipment is carried at cost.  Depreciation is computed using the
straight-line method over 3 - 7 years.

     INTANGIBLE  ASSETS

     Goodwill represents the excess of the cost of T & T over the fair value of
the net assets acquired.  Amortization is computed using the straight-line
method over 7 years.

     EVALUATING  RECOVERABILITY  OF  LONG-LIVED  ASSETS

     The Company reviews the carrying values of its long-lived and identifiable
intangible assets for possible impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be
recoverable.  The Company assesses recoverability of these assets by estimating
future nondiscounted cash flows.  Any long-lived assets held for disposal are
reported at the lower of their carrying amounts or fair value less cost to sell.
No impairments have been recorded through January 31, 2002.

     REVENUE  RECOGNITION

     Revenue  from  the  sale  of products is recorded at the time the goods are
shipped.

     In December 1999, the Securities and Exchange Commission (the "SEC") issued
Staff  Accounting  Bulletin  ("SAB")  No. 101, "Revenue Recognition in Financial
Statements."  SAB  No.  101  summarizes  certain  of the SEC's views in applying
generally  accepted  accounting  principles  to revenue recognition in financial
statements.  In  October  2000,  the  SEC  issued  additional written guidelines
supplementing  SAB  No. 101.  The adoption of this bulletin and these guidelines
did  not  have  an  effect  on  the  Company's  financial  statements.

     FREIGHT

     The  Company  follows  the  classification  requirements  for freight costs
required  by  Emerging  Issues  Task  Force  ("EITF") No. 00-10, "Accounting for
Shipping  and Handling Fees and Costs."  This pronouncement, issued in September
2000, requires that all such costs billed to customers be classified as revenue.
     EARNINGS  PER  SHARE

     The  Company  follows  Statement of Financial Accounting Standards ("SFAS")
No. 128, "Earnings per Share," which requires presentation of basic earnings per
share  and  diluted earnings per share by all entities that have publicly traded
common  stock  or  potential  common  stock  (options,  warrants,  convertible
securities  or  contingent  stock  arrangements).  Basic  earnings  per share is
computed  by  dividing  income  available to common stockholders by the weighted
average number of common shares outstanding during the period.  Diluted earnings
per  share  gives  effect to dilutive potential common shares outstanding during
the  period.  Assumed  exercise  of  options  has  not  been  included  in  the
calculation  of  diluted  earnings  per  share  since  the  effect  would  be
anti-dilutive.  The  number of potential common shares excluded from the diluted
loss  per  share  calculations,  since  the  effect  would  be antidilutive, was
3,543,947  and  8,440,284  for  the  years  ended  January  31,  2001  and 2002,
respectively.  Accordingly,  basic  and diluted net loss per share do not differ
for  any  period  presented.

     STOCK  BASED  COMPENSATION

     The  Company  accounts  for  stock  options  granted to employees under the
provisions  of  Accounting  Principles Board ("APB") Opinion No. 25, "Accounting
for  Stock  Issued  to Employees", as permitted by SFAS No. 123, "Accounting for
Stock-Based  Compensation."  Since  the Company has elected to continue to apply
the  provisions  of  APB  No.  25,  they  have  provided the proforma disclosure
provisions  of  SFAS  No.  123.

     In  March,  2000,  the  Financial  Accounting  Standards Board ("the FASB")
issued  Interpretation  No.  44  to APB 25, "Accounting for Certain Transactions
Involving  Stock  Compensation,"  which,  among  other  things,  addressed  the
accounting  consequences  of  modifications  of  stock  option  awards.

     USE  OF  ESTIMATES

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

     INCOME  TAXES

     Deferred income taxes are recognized for the tax consequences of temporary
differences between the financial reporting and the tax bases of the Company's
assets and liabilities in accordance with SFAS No. 109.  Valuation allowances
are established when necessary to reduce deferred tax assets to the amount
expected to be realized.

<PAGE>

     RESEARCH  AND  DEVELOPMENT

     Research  and  development costs are expensed as incurred.  Such costs were
approximately  $90,000  and  $190,000  for  the years ended January 31, 2001 and
2002,  respectively.

     FOREIGN  CURRENCY  TRANSLATION

     The  Company  remeasures  foreign  currency denominated monetary assets and
liabilities  at  year-end exchange rates and non-monetary assets and liabilities
at  historical  exchange  rates.  Exchange  gains  and  losses  arising  from
transactions  denominated  in  foreign  currencies  are  translated  at  average
exchange  rates.  The  effects  of  these  exchange  adjustments are included in
operations  for  the  years  ended January 31, 2001 and 2002 and are immaterial.

     COMPREHENSIVE  INCOME

     The  Company  has  adopted  SFAS No. 130, "Reporting Comprehensive Income",
which  establishes  standards for reporting and display of comprehensive income,
its  components  and  accumulated  balances.  Comprehensive income is defined to
include  all changes in equity except those resulting from investments by owners
and  distributions  to  owners.  Among  other disclosures, SFAS No. 130 requires
that  all  items  that  are  required  to be recognized under current accounting
standards  as  components  of  comprehensive  income  be reported in a financial
statement  that  is  displayed  with  the  same  prominence  as  other financial
statements.

     Total  comprehensive  loss for the years ended January 31, 2001 and 2002 is
the  same  as  the  reported  net  loss.

     EFFECT  OF  RECENT  ACCOUNTING  PRONOUNCEMENTS

     In  June 2001, the FASB finalized SFAS No. 141, "Business Combinations" and
SFAS No. 142, "Goodwill and Other Intangible Assets".  SFAS No. 141 requires the
use  of  the  purchase  method  of  accounting  and  prohibits  the  use  of the
pooling-of-interests  method  of  accounting for business combinations initiated
after  June  30,  2001.  SFAS  No.  141 also requires that the Company recognize
acquired intangible assets apart from goodwill if the acquired intangible assets
meet  certain  criteria.  SFAS  No.  141  applies  to  all business combinations
initiated  after  June 30, 2001 and for purchase business combinations completed
on or after July 1, 2001.  It also requires, upon adoption of SFAS No. 142, that
the  Company  reclassify  the carrying amounts of intangible assets and goodwill
based  on  the  criteria  in  SFAS  No.  141.

<PAGE>
     SFAS  No.  142  requires,  among  other  things,  that  companies no longer
amortize  goodwill,  but instead test goodwill for impairment at least annually.
In addition, SFAS No. 142 requires that the Company identify reporting units for
the purposes of assessing potential future impairments of goodwill, reassess the
useful  lives  of  other  existing  recognized  intangible  assets,  and  cease
amortization of intangible assets with an indefinite useful life.  An intangible
asset  with  an  indefinite  useful  life  should  be  tested  for impairment in
accordance  with  the  guidance in SFAS No. 142.  SFAS No. 142 is required to be
applied  in  fiscal  years beginning after December 15, 2001 to all goodwill and
other  intangible assets recognized at the date, regardless of when those assets
were  initially  recognized.  SFAS  No.  142  requires the Company to complete a
transitional goodwill impairment test six months from the date of adoption.  The
Company is also required to reassess the useful lives of other intangible assets
within  the  first  interim  quarter  after  adoption  of  SFAS  No.  142.

     The  acquisition  of T & T was accounted for using the purchase method.  As
of  January  31,  2002,  the  net  carrying  amount  of  goodwill  is  $329,200.
Amortization  expense  during  the  year  ended  January  31,  2002 was $57,528.
Currently,  the Company is assessing but has not yet determined how the adoption
of  SFAS No. 141 and SFAS No. 142 will impact its financial position and results
of  operations.

     In  August  2001,  the  FASB  issued  SFAS  No. 143, "Accounting for Assets
Retirement  Obligations," which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated  asset  retirement costs.  SFAS No. 143 is required to be applied for
fiscal years beginning after June 15, 2002.  The adoption of SFAS No. 143 is not
expected  to  have  a  material  effect  on  the Company's financial statements.

     In  October,  2001,  the  FASB  issued  SFAS  No.  144, "Accounting for the
Impairment  or  Disposal  of  Long-Lived  Assets,"  which  addresses  financial
accounting  for  the  impairment or disposal of long-lived assets.  SFAS No. 144
requires  that one accounting model be used for long-lived assets to be disposed
of  by sale, and broadens the presentation of discontinued operations to include
more  disposal  transactions.  SFAS No. 144 is required to be applied for fiscal
years  beginning  after  December 15, 2001.  The adoption of SFAS No. 144 is not
expected  to  have  a  material  effect  on  the Company's financial statements.

     RECLASSIFICATIONS

     Certain  reclassifications  have been made to prior year amounts to conform
to  current  year  presentation.

2.  ACQUISITION  OF T & T

On  July  31,  2000,  ARS  purchased  all of the outstanding stock of T & T. The
acquisition  was accounted for as a purchase. The purchase price was $418,266 of
which  $102,750  was  paid  in cash at closing, with notes payable to the former
shareholders  of  T & T ("the sellers") of $115,516, and the issuance of 200,000
shares  of  ARS  common  stock  valued  at  $200,000.  The notes payable accrued
interest  at  8%  and  were  paid on August 9, 2001. The acquisition resulted in
goodwill  of  approximately  $415,000,  including  approximately  $31,000  of
acquisition  costs  which  is  being  amortized  on a straight-line basis over 7
years.

<PAGE>
     In  conjunction with the acquisition of T & T, the stock of T & T was being
held  in  escrow subject to an escrow agreement dated July 31, 2000.  The escrow
agreement provided certain remedies to the sellers in the event of default under
the  notes  payable to the sellers or if on July 31, 2001, the ARS shares issued
to  the sellers are not freely tradable to the public without restriction or are
trading  for  a  price of less than $1.00 per share.  Such remedies included the
right to require ARS to purchase the 200,000 ARS shares for $1.00 per share.  As
such,  the  200,000  ARS  shares were classified as redeemable common stock.  On
August  9,  2001,  ARS  satisfied  all  conditions  under  the escrow agreement.
Accordingly,  the  200,000  ARS  shares previously recorded as redeemable common
stock  were  reclassified  into  equity.

     Pro  forma  results  of  operations,  assuming the acquisition of T & T had
occurred  on  February  1,  2000,  are unaudited and presented below.  Pro forma
adjustments  primarily  relate  to  depreciation,  additional  interest  on debt
incurred  for  the  acquisition,  and  amortization  of goodwill.  The pro forma
information  is  presented for comparative purposes only and does not purport to
be indicative of what would have occurred had the acquisition actually been made
at  such  date,  nor  is  it necessarily indicative of future operating results:

                                       Unaudited
                                       ---------
                              Year Ended January 31, 2001

     Sales                                   $  1,342,491
     Net loss                                  (1,369,357)
     Net loss per share (basic and diluted)          (.12)

3.  PREPAID EXPENSES

Prepaid expenses include 1,000,000 common shares valued at $140,000 based on the
market  price  of  the  stock  on  the  date of the agreement, which were issued
pursuant to a consulting agreement for services to be rendered by the consultant
to  the  company  during  the  six  month  period  commencing  January 29, 2002.


5.  LONG-TERM   DEBT

Current  maturities  of  long-term debt consists of the following at January 31,
2002:

     Loan  payable  - finance company, maturing in monthly installments of  $446
through  April,  2002,  including interest at 2.8%, collateralized by a specific
vehicle           $  1,258
                 ---------

<PAGE>
6.  INCOME TAXES

ARS  did  not  have taxable income for the years ended January 31, 2001 and 2002
and,  therefore,  does  not  have any current income tax expense. The income tax
provision  for  the year ended January 31, 2001 consists solely of foreign taxes
(Canada)  on  the  operations  of  T  &  T.

     At  January  31, 2002, the significant components of the Company's deferred
income  tax  assets  are  as  follows:


     Start up and operating costs deferred for tax purposes, expensed for
financial reporting purposes      $  1,400,000
     Less:  Valuation allowance     (1,400,000)

     Net deferred income tax asset      $  -

     The net change during the year ended January 31, 2002 in the total
valuation allowance was an increase of $640,000.

                                              2001     2002
                                              ----     ----

     Tax expense at U.S. statutory rate      (34.0)%   (34.0)%
     Change in Federal valuation allowance    34.0      34.0
     Foreign income taxes                      1.3        -
     Effective income tax rate                 1.3%       -%

7.  RELATED PARTY TRANSACTIONS

The  Company has entered into management agreements with its executive officers.
The  terms  of the agreements provide for provisions to terminate the parties at
any  time  as  stipulated  under  the conditions of their individual agreements,
including  termination  payments  ranging  from three months salary to twice the
annual  compensation  rate.  In addition to the stipulated termination payments,
the  agreement  with the President requires the Company to pay $1,000,000 to the
President if the agreement is terminated. These agreements, which expire through
2003,  provide  minimum  salary  levels,  as well as incentive bonuses and stock
options.  The  aggregate  commitment  for future minimum salaries at January 31,
2002,  excluding  bonuses  and  stock  options,  was  approximately  $730,000.

     ARS  has  a License Agreement dated May 20, 1998 with its President.  Under
the  terms  of  this  agreement,  the  President has granted ARS a non-exclusive
license  to  certain  intellectual  property, a trade name and patents owned and
developed  by  the  President.

     The  note payable - related party is for $100,000 (Canadian).  The note was
due  July  31,  2001  and  bears interest at 8.5% per annum.  The balance due in
United  States  currency  on  this  note  is $63,800 as of January 31, 2002.  In
January,  2002,  the  Company  issued  options  to  purchase  100,000 shares and
authorized  the issuance of 25,000 common shares which were issued subsequent to
year  end to the related party in connection with the note payable.  The options
and  shares  were  assigned  a  value  of $11,250 which is included in financing
expenses.

<PAGE>
     At January 31, 2001 and 2002, accrued expenses include approximately $9,000
and $1,000, respectively, for interest due to related parties.  Interest expense
to  related  parties  was  approximately  $12,000 and $9,000 for the years ended
January  31,  2001  and  2002,  respectively.

8.  STOCK INCENTIVE PLANS

On  June  20, 1998 the Company adopted the Equity Incentive Plan ("the
Equity  Plan")  to  provide  directors,  officers and certain key employees with
additional  incentives.  Under the Equity Plan, 4,500,000 shares of common stock
have been reserved for issuance pursuant to stock options and stock awards.  The
Equity  Plan provides for the grant of incentive stock options and non-qualified
stock  options.  The  exercise  price of all incentive stock options granted may
not  be  less  than  the fair market value of the underlying common stock at the
date  of  grant.  The  Equity Plan is administered by a committee of two or more
non-employee  members  of  the  Company's  Board  of  Directors.

     On  June  20, 1998 the Company also adopted the Incentive Compensation Plan
("the  Incentive  Plan").  The  purpose  of  the  Incentive  Plan is to attract,
motivate  and  retain  key  employees of the Company.  Under the Incentive Plan,
each participant shall be eligible to receive a performance award as computed on
measured  performance.  Consultants  and  other  independent  contractors may be
eligible  to  participate  in  the  Incentive  Plan.

     The Company applies APB 25, "Accounting for Stock Issued to Employees," and
related  interpretations  in  accounting  for  these  plans.  Under  APB  25, no
compensation  cost  was  recognized because the exercise price of employee stock
options was equal to or greater than the market price of the underlying stock on
the  date  of  grant. However, under FASB Interpretation No. 44, the Company did
recognize  $375,922  of  compensation  expense during the year ended January 31,
2001  related  to  extending  the  lives of certain existing stock option awards
which  caused  a  new measurement of compensation cost at the modification date.

     SFAS  No. 123, "Accounting for Stock-Based Compensation," requires that the
Company  provide  pro forma information regarding net loss and loss per share as
if the compensation cost for the Company's stock option plan had been determined
in  accordance  with  the  fair  value method prescribed in such statement.  The
Company estimates the fair value of each stock option at the grant date by using
the  Black-Scholes  option-pricing  model  with  the  following weighted average
assumptions  used  for  grants  as  follows:

                         Year Ended January 31,     2001     2002

     Dividend yield                                   0%       0%
     Expected volatility                             90%     108%
     Risk free interest rates                      6.16%     3.20 to 4.14%
     Expected lives                              2.5 years     2.5 years

     For the year ended January 31, 2001, the net loss would have been increased
by  approximately  $450,000  and  loss  per  share  by $.04.  For the year ended
January  31,  2002,  the  net  loss  would  have been increased by approximately
$606,000  and  loss  per  share  by  $.05.

A summary of the status of the Company's stock option plans for options held by
officers and directors as of January 31, 2001 and 2002 and changes during the
years ending on those dates is presented below



<TABLE>
<CAPTION>



<S>                               <C>                <C>                <C>         <C>
                                  January 31, 2001   January 31, 2002

                                  Weighted           Weighted
                                  Average            Average
                                  Shares             Exercise Price     Shares      Exercise Price
--------------------------------------------------------------------------------------------------
Outstanding, beginning of year .          1,592,717  $             .93  3,210,947   $           .81
Granted. . . . . . . . . . . . .          1,618,230                .69  4,488,462               .19
Exercised. . . . . . . . . . . .                  -                  -          -                 -
Cancelled. . . . . . . . . . . .                  -                  -    (25,125)             1.00

Outstanding at end of year . . .          3,210,947  $             .81  7,674,284   $           .45

Options exercisable at year-end.          3,210,947  $             .81  7,674,284   $           .45

Weighted average fair value of
 options granted during the year  $             .69  $             .19
</TABLE>

The following table summarizes information about stock options held by officers
and directors which are outstanding at January 31, 2002:


<TABLE>
<CAPTION>



<S>        <C>               <C>             <C>         <C>               <C>              <C>        <C>
           Weighted
           Average           Weighted
           Number            Remaining       Average     Number            Weighted
Exercise.  Outstanding at    Contractual     Exercise    Exercisable at    Average
Prices. .  January 31, 2002  Life            Price       January 31, 2002  Exercise Price
---------  ----------------  --------------  ----------  ----------------  ---------------

0.0001 .           122,750       39 months  $   0.0001           122,750  $        0.0001
0.13 . .         3,738,462       60 months      0.1300         3,738,362           0.1300
0.50 . .           750,000       51 months      0.5000           750,000           0.5000
0.6875 .         1,618,230       43 months      0.6875         1,618,230           0.6875
$1.00 to $1.01   1,444,842       25 months      1.0100         1,444,842
                   7,674,284                    1.0100         7,674,284

</TABLE>



     On July 1, 1998, options to purchase 500,000 shares of the Company's common
stock  were  granted  to certain consultants of the Company.  The options have a
term  of  five years and are vested upon the date of the grant.  In April, 1999,
options  for  250,000 shares of the Company's common stock were exercised by the
consultants.  The  remaining  options for 250,000 shares of the Company's common
stock  are  still  outstanding  at  January  31,  2002.

     During  the  year ended January 31, 2000, the Company sold 41,500 shares of
common stock which included an option to purchase one share of common stock at a
price  of $1.25 and one option for one share at a price of $1.75.  These options
are exercisable at any time after May 1, 1999, subject to certain conditions and
expire  60 months from that date.  These options for a total of 83,000 shares of
the  Company's  common  stock  are  still  outstanding  at  January  31,  2002.

     During  the  year  ended  January  31, 2002, the Company issued warrants to
purchase  333,000  shares  in  connection with its equity line of credit as more
fully described in Note 12.  The Company also issued options to purchase 100,000
shares  to  a related party in connection with the Company's note payable to the
related  party  (Note  7).  The options have a term of five years and are vested
upon  the  date  of  the  grant.

8.  COMMITMENTS AND CONTINGENCIES

At  January  31,  2002,  the  Company  is committed, under a marketing relations
contract dated October 23, 2001, to issue 19,000 shares monthly through October,
2002.  The  contract  can  be  terminated  on  a  quarterly  basis.

     ARS  has  commenced  litigation  against  certain  individuals  ("the
respondents").  The  case  involves a claim by ARS for shares issued in error to
the  respondents.  The  shares  were to be issued upon the completion of certain
consulting  work  to  be  performed  by the respondents.  ARS claims that by not
completing  the  work,  the  respondents breached the contract.  The respondents
claim  that there is no breach of contract and that the shares have been earned.
The  respondents  claim damages of an unknown amount.  ARS intends to vigorously
pursue  its  position  in  this  matter, and management believes that it will be
resolved  without  a  material  effect  on  the  Company's financial position or
results  of  operations.

10.  MAJOR CUSTOMER

Sales  to  four  customers in the year ended January 31, 2002 were approximately
70%  of  total  sales. At January 31, 2002, accounts receivable from these major
customers  represented  approximately 39% of total accounts receivable. Sales to
one  customer in the year ended January 31, 2001 were approximately 71% of total
sales.  At  January  31,  2001,  accounts  receivable  from  this major customer
represented  approximately  98%  of  total  accounts  receivable.

<PAGE>
11.  SEGMENT INFORMATION

The  Company  has  two  reportable  segments:  (i)  ARS  which  is designing and
developing  advanced railway communications and data management systems and (ii)
T  &  T which manufactures custom diesel power generating equipment. The Company
operates  these  segments  as  separate  strategic  business  units.  All of the
Company's sales and equipment relate to T & T and are in Canada. The majority of
T  & T's customers are located in Eastern Canada. T & T was acquired on July 31,
2000  and its operations are included in the Company's financial statements from
the  date  of acquisition. Management considers goodwill and its amortization to
be  part of the T & T segment for purposes of allocating resources and assessing
performance.  The  following  tables  set  forth  certain  performance and other
information  by  reportable  segment.

     Year Ended January 31, 2001        ARS        T & T        Total

     Sales                            $  -      $  562,304      $  562,304
     Segment net income (loss)     (1,365,585)       5,718      (1,359,867)
     Total assets                      65,149      846,468         911,617
     Interest expense                   7,361        4,574          11,935
     Depreciation and amortization       -          30,795          30,795
     Income taxes                        -          17,000          17,000
     Equipment acquisitions              -           1,779           1,779

     Year Ended January 31, 2002        ARS        T & T        Total

     Sales                           $  -       $  968,262      $  968,262
     Segment net loss              (1,628,781)     (52,697)     (1,681,478)
     Total assets                     147,922      504,550         652,472
     Interest expense and financing charges
                                      169,614        2,809         172,423
     Depreciation and amortization      -           62,555          62,555
     Income taxes                       -             -                -
     Equipment acquisitions             -             -                -

<PAGE>
12.  EQUITY LINE OF CREDIT

In March, 2001, the Company entered into an equity line of credit agreement "the
equity  line"  with  Cornell  Capital Partners, L.P. ("the investor"). Under the
equity  line,  the  investor  is  committed  to purchase up to $5,000,000 of the
Company's common stock over the course of 24 months commencing on the earlier of
(i) effective registration of the shares, or (ii) as mutually agreed in writing.
Under  the  equity line, the Company may request an advance by the investor. The
number  of  shares  of  common  stock  that  the investor shall receive for each
advance  shall  be  determined  by  dividing  the  amount  of the advance by the
purchase  price.  The  purchase  price  is  90% of the market price. The maximum
advance  amount  shall  be  equal  to  150%  of  the average daily volume of the
Company's  common  stock  multiplied  by  the  purchase price. The average daily
volume  shall  be  computed  by  using  the forty (40) trading days prior to the
advance notice date. The advance notice date is the date the investor receives a
written  notice  from  the Company requesting an advance amount under the equity
line.  The  market  price is the average of the lowest closing bid prices of the
common stock over the ten (10) trading day period beginning on the first trading
day  after  an  advance  notice  date and ending on the trading day prior to the
relevant  advance  date.

     There  will be a minimum of eleven (11) trading days between advance notice
dates.  The  Company  has  the right to withdraw that portion of an advance that
does  not  meet  the  minimum acceptable price.  The minimum acceptable price is
defined as 75% of the lowest closing bid price of the Company's common stock for
the  fifteen  (15)  trading  days  prior  to  a  relevant  advance  notice date.

     Upon  each  advance  date, the Company shall pay to the investor's business
manager, Yorkville Advisors Management, LLC ("the investment manager") an amount
equal  to  8.4%  of the amount of the advance.  Upon the execution of the equity
line, the Company issued 450,000 restricted shares of the Company's common stock
to  the investment manager which were reflected as a cost of raising capital and
recorded  at  par  in  the  accompanying  financial statements.  Such restricted
shares  have  demand  and  "piggyback"  registration  rights.

     In  connection  with  the  equity line of credit, the Company obtained from
certain officers and directors, a lock-up agreement, which limits the ability of
the  officers  and  directors  to  sell  securities  of  the  Company.

     Additionally, under the covenants of the equity line, the Company shall not
effect  any merger or consolidation, or transfer substantially all of the assets
of  the Company into another entity, unless the resulting successor or acquiring
entity  (if  not  the Company) assumes the obligation to deliver to the investor
such  shares  as  the  investor  is  entitled  to  pursuant  to the equity line.

<PAGE>
     On July 20, 2001, ARS borrowed $150,000 from the investor.  During the year
ended  January 31, 2002, ARS sold a total of 2,780,617 shares of common stock to
the  investor  under  the  equity line of credit for net proceeds of $270,000, a
portion  of  which was used to repay the loan from the investor in full prior to
January  31,  2002.  The  loan  accrued  interest  at an annual rate of 12%.  In
connection with the loan, ARS issued warrants to purchase 333,000 shares of ARS'
common  stock  at  an  exercise  price  of  $0.50  per share.  The warrants were
assigned  a  value  of  $136,530 which was recorded as a discount on the related
note  payable  to the investor.  The discount was amortized over the term of the
note  payable  (90  days)  to  interest  expense.  Such amortization included in
interest expense amounted to  $136,530 for the year ended January 31, 2002.  The
president  of  the  company had personally guaranteed the loan from the investor
and  had  pledged 3,000,000 shares of common stock to the lender as security for
the  loan.

13.  SUPPLEMENTAL CASH FLOW  INFORMATION

            Year Ended January 31,     2001           2002
                                                                            ----

     Interest paid                 $  7,000      $  10,000

     Income taxes paid            $  20,000      $  1,500

     Noncash financing activities consist of the following:



     Redeemable stock converted to common for former shareholders of T & T
(200,000 common shares)      $  -      $  200,000


     Common stock issued for prepaid consulting services (1,000,000 common
shares)      $  -      $  140,000


     Common stock issued to settle accounts payable (346,000 common shares)
$  -      $  93,041



     Common stock issued to investment manager and recorded at par (450,000
common shares)      $  -      $  -


     Common shares issued to settle advances from directors (7,000 common
shares)      $  4,760      $  -