CONFORMED COPY

                                FORM 10-KSB

                    SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON DC. 20549

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

For the twelve month period ending December 31, 1997

Commission file number:  0-28348

                             DBS INDUSTRIES, INC.
            (Exact name of registrant as specified in its charter)

      DELAWARE                                          84-1124675
(State or other jurisdiction of              (IRS Employer Identification No.)
incorporation or organization)

100 SHORELINE HWY., SUITE 190 A,  MILL VALLEY  CA                      94941
(Address of principal executive offices)                           (Zip Code)

                                (415) 380-8055
             (Registrant's telephone number, including area code)

          FORMER ADDRESS:  495 MILLER AVENUE, MILL VALLEY  CA  94941
(Former  name,  former  address  and  former fiscal year, if changed since last
report)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

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

Yes     X    No

      Indicate  by check mark if disclosure of delinquent  filers  pursuant  to
Item 405 of Regulation  S-K is not contained herein, and will not be contained,
to the best of registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by reference in Part III of this Form 10-KSB  or  any
amendment to this Form 10-KSB.     X

      As of March 31, 1998 the  aggregate  market value for the 4,245,147 shares
of the common stock, par value $.0004 per share,  held  by  non-affiliates  was
approximately $11,143,511.

      The  number  of  shares  outstanding of registrant's only class of common
stock, as of March 31, 1998 was 5,910,236 shares of its common stock, par value
$.0004 per share.

      DOCUMENTS INCORPORATED BY REFERENCE:

      Portions of the Company's  definitive  Proxy  Statement for the Company's
Annual Meeting of Stockholders to be held on  May 12,  1998 are incorporated by
reference into Part III.

      Exhibit Index is located at Page 13



<PAGE>


                                      PART I

ITEM 1. BUSINESS

A.    GENERAL

      DBS  Industries,  Inc.  ("DBSI"  or  the  "Company")  is   designing  and
developing an automated meter reading ("AMR") service utilizing low earth orbit
("LEO")  satellites.  LEO satellites orbit the earth at regular intervals  and,
with the Company's  technology,  are  capable  of  collecting  data from energy
meters in many hard-to-access locations and at a substantial reduction  in  the
costs  of  manually  retrieving such information. The Company is developing the
hardware and software  to  accomplish  these tasks as well as the potential for
additional data collection applications  such  as  the  monitoring  of  vending
machines.   The AMR business is primarily conducted by the Company through  its
wholly-owned  subsidiary  Global Energy Metering Service, Inc. ("GEMS") and its
20%  investment in E-Sat, Inc.,  a  Colorado  corporation  ("E-Sat").   Further
reference  to the Company will also include its subsidiary, GEMS, unless stated
otherwise.

      The Company's  primary  strategy  is the development of the AMR business,
targeting public utilities in the United  States.  The Company may also promote
AMR  and  build additional value through various  direct  and  indirect  equity
investments in communication technologies.

A1.   OWNERSHIP IN E-SAT AND LEO SATELLITE INDUSTRY BACKGROUND

      The technology  of  using  LEO  satellites  to  gather  data  has been in
existence for over 20 years and has been used extensively in weather  satellite
applications worldwide.  The commercial use of LEO satellites is in its infancy
worldwide.   Competition  will  be likely driven by the ability of each license
holder to build and launch their  LEO  satellites and by the data services they
propose to provide.

      E-Sat was incorporated in 1994 and  is currently owned 20% by the Company
and 80% by EchoStar Communications Corporation ("EchoStar").  In November 1994,
E-Sat filed an application with the Federal  Communications  Commission ("FCC")
for  a  license  to  develop  a  commercial  LEO  satellite  system  for   data
transmission.

      In  April,  1998  the  Federal Communications Commission ("FCC") formally
approved E-Sat's application for  a  LEO  satellite  license.  E-Sat was one of
five applicants requesting approval for essentially the same frequency band but
proposing  a  different use.  The applicants mutually agreed  upon  a  spectrum
sharing plan (the "Joint Proposal") which, essentially, requires the applicants
to share an uplink and downlink frequency band with other satellite systems and
terrestrial users of the band and to coordinate their operations with the other
users.  In October  1997,  the  FCC released a report and order which concluded
that   with  use  of  appropriate  transmission   techniques,   proper   system
coordination,  the  time-sharing  of  frequencies and the adoption of the Joint
Proposal,  there  was  sufficient spectrum  to  license  all  five  applicants.
Thereafter, E-Sat filed  an  amendment  conforming its application to the rules
and policies adopted by the FCC report and order which, ultimately, resulted in
the FCC's approval of E-Sat's application.   The total capital requirements for
E-Sat's  proposed  data  transmission  system, including  the  anticipated  six
satellites and other start up costs, are  estimated  to exceed $60 million.  In
1997, the Company funded E-Sat expenses of $385,671, which  represents  greater
than  20% of E-Sat's total expenses for the year and includes advances made  on
behalf  of  EchoStar.   The  Company's  percentage of ownership in E-Sat may be
subject  to  dilution  if it cannot meet future  funding  requirements  and  no
assurances can be given that the Company will have sufficient resources to meet
the financial requirements  of  E-Sat  to maintain a leased interest in E-Sat's
satellite capacity.

B.    GLOBAL ENERGY METERING SERVICES, INC.

      GEMS  was  incorporated  in  December   1994   to   provide  the  service
applications of the commercial LEO satellite technology developed  through  its
predecessor  company  JPS  Systems,  Inc.("JPS").   In  1995,  JPS was formally
consolidated  with  GEMS and dissolved as a corporate entity.  During  the  two
years prior to consolidation,  JPS  developed  the  basic technology of reading
data  remotely by LEO satellites and conducted a proof  of  concept  trial  for
Pacific Gas & Electric Co. ("PG&E") in California.  This trial was completed in
April 1995  and  led  to  the  development  of  a  plan for GEMS to provide AMR
solutions for hard-to-access meters owned by public  utilities.   This  plan is
intended  to  provide  suppliers  and  consumers  of  the utility and petroleum
industries  worldwide  remote  data  collection  capabilities   utilizing   LEO
satellite technology.



<PAGE>

      In  1996,  GEMS  received  a purchase order for LEO transmitters from ABB
Power  T&D  Company,  Inc.  ("ABB") for  its  development  of  electric  meters
utilizing the Company's LEO satellite  AMR technology.  The Company also had an
agreement with North American CLS, Inc.  ("NACLS"),  which  provided  a limited
amount  of  LEO satellite capacity for trials of the Company's AMR applications
with the Argos System, a satellite location and data collection system operated
and controlled  by  the  Centre  National  d' Etudes Spatiales (France) and the
National  Oceanic  and  Atmospheric  Administration  ("NOAA").   The  Company's
agreement for use of the Argos System  expired on December 31, 1997 and certain
governmental agencies have proposed limits  on  future  commercial  use  of the
Argos  System.   The  expiration of the NACLS agreement and the proposed future
limits have caused GEMS  and  ABB to suspend the purchase order.  No assurances
can be given that the purchase order will be reinstated or whether the terms of
any future purchase order will be acceptable to the Company.

B1.   GEMS TECHNOLOGY BACKGROUND

      LEO satellites are particularly  suited  for  AMR, especially in hard-to-
access  and  rural  applications.   Many  AMR applications  require  data  only
transmission at pre-scheduled intervals and  the  capacity requirements for AMR
applications  are  relatively  small  compared  to  the  requirements  for  the
transmission of voice or video.  LEO satellites require less  power  to operate
than  the larger geostationary satellites, such as DBS, translating into  lower
capital costs and smaller radios that can be integrated in the actual meter.  A
LEO satellite  system  is  also  generally less expensive to place into service
than a DBS satellite system.

      GEMS has shown the viability  of  its technology and its proposed service
through the JPS/PG&E proof of concept trial  completed in April 1995 and with a
series  of pilot demonstrations conducted in conjunction  with  ABB,  in  which
prototype  satellite  radios  and electric meters were installed at 31 electric
utilities in the Continental United  States  and  1  utility  in South America.
Typical trial demonstrations lasted for a 30 day period, and the demonstrations
were completed in late 1996.

B2.   GEMS' MARKET AND COMPETITION

      GEMS  has  focused  on  electric and gas utilities in the United  States,
targeting their high-cost-to-read  metering  segment.   Since  meter  data  has
historically  been retrieved by utility personnel, logistical issues such as 1)
significant travel  time  to a meter site, 2) rugged terrain, 3) physical risk,
4)  restricted sites,  5) environmental  issues,  and  6)  mis-reads  requiring
additional site visits can contribute to higher costs for utilities.

      A  number  of competitors are currently developing proposals to implement
AMR at electric and  natural gas utilities throughout the United States.  Other
proposed  AMR  technology   solutions   include   terrestrial   wireless  radio
technologies  such  as Specialized Mobile Radio, Cellular and Multiple  Address
Service  licenses, unlicenced  radios  operating  under  Part  15  of  the  FCC
Regulations, and hard wired technologies such as telephone, fiber optics, cable
and power  line  carriers.   While  terrestrial wireless technology may be cost
effective in the densely populated urban areas, it may not be cost effective to
automate rural and hard-to-access areas;  and  it  is  in  these  niche  market
locations  that  GEMS intends to compete effectively by utilizing LEO satellite
technology.

C.    OWNERSHIP IN SEIMAC LIMITED

      In November  1995,  the Company purchased a 20% equity ownership interest
in Seimac Limited ("Seimac"),  a privately-held Canadian satellite radio design
and manufacturing company, in exchange  for  165,519  shares  of  the Company's
common stock.  Since 1994, GEMS has been working closely with Seimac to develop
a  satellite  radio  which  is  intended  to  be  integrated  into  ABB's Alpha
Stars<trademark>  automated  electric  utility  meter. Founded in 1975 in  Nova
Scotia, Canada, Seimac specializes in the development of remote data collection
devices used primarily by global ocean research and  military organizations for
use  in  harsh, rugged environments.  The Company has worked  extensively  with
Seimac to  develop  a  transmitter  that  will fit inside an electric meter and
periodically transmit its data to a LEO satellite

D.    EMPLOYEES

      The Company and its subsidiary currently employ 9 people full-time.


<PAGE>


E.    "SAFE HARBOR" STATEMENT UNDER THE PRIVATE  SECURITIES  LITIGATION  REFORM
ACT

      With  the  exception  of  historical  facts  stated  herein,  the matters
discussed  in  this report are "forward looking" statements that involve  risks
and uncertainties  that  could  cause  actual results to differ materially from
projected results.  Such "forward looking"  statements  include,  but  are  not
necessarily  limited  to,  statements  regarding  anticipated  levels of future
revenue  and earning from the operations of the Company, and its  wholly  owned
subsidiary GEMS  (collectively the "Company"), projected costs and expenditures
relating to  the  Company's  interest in and development of its automated meter
reading ("AMR") business including  funding  requirements,  the availability of
future debt and equity capital on commercially reasonable terms, and consulting
costs  in connection with FCC licenses and permits.  Factors that  could  cause
actual results  to  differ  materially,  include,  in addition to other factors
identified in this report, requirements for additional capital for the proposed
AMR service, the availability of capital on commercially  acceptable terms, the
completion of a commercially viable AMR service, the dependence and uncertainty
of  utility  companies  to utilize such an AMR service, the reliance  on  third
parties for the advancement  of  the design, manufacturing and marketing of the
service, the fulfillment of contract  obligations  by suppliers and other third
parties, the availability of qualified personnel and  equipment,  delays in the
receipt of or failure to receive necessary governmental approvals,  permits and
licenses  or  renewals  thereof,  risks  and  uncertainties relating to general
economic  and  political  conditions,  both domestically  and  internationally,
changes in the law and regulations governing  the  Company's  activities in the
AMR  technology,  results  of  the  Company's  financing efforts and  marketing
conditions,  and  other  risk factors related to the  Company's  AMR  business.
Readers of this report are  cautioned  not  to  put  undue reliance on "forward
looking"  statements  which  are,  by  their  nature,  uncertain   as  reliable
indicators  of  future  performance.   The  Company  disclaims  any  intent  or
obligation to publicly update these "forward looking" statements, whether  as a
result of new information, future events, or otherwise.


ITEM 2. PROPERTIES

      On  March  1,  1997, the Company and GEMS entered into a three year lease
for approximately  2,300  square  feet  for  their  principal  offices  at  100
Shoreline Highway, Suite 190-A, Mill Valley, California, which expires in March
2000.  The current monthly rent is approximately $5,900.


ITEM 3. LEGAL PROCEEDINGS

      None


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

      None


                                     PART II.

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

      To  the Company's knowledge, trading in its Common Stock commenced in the
over-the-counter  market  in  January 1993.  The table which follows sets forth
the high and low bid quotations  for  its  Common Stock during each of the last
eight fiscal quarters, as reported by the National  Quotation  Bureau, Inc.  As
of the period ended September 30, 1996, High/Low bids were no longer  available
to  the Company.  All stock prices marked with * reflect the closing bid  price
as of the date shown.


<PAGE>
                                                Common
            QUARTER ENDED                 HIGH BID  LOW BID

            March 31, 1996                  6.00      5.75
            June 30, 1996                   4.00      3.75
            September 30, 1996              2.38*     N/A
            December 31, 1996               2.00*     N/A
            March 31, 1997                  1.625*    N/A
            June 30, 1997                   1.125*    N/A
            September 30, 1997               .968*    N/A
            December 31, 1997                .531*    N/A

      These  quotations  reflect  inter-dealer  prices,  without retail markup,
mark-down  or commission, and may not represent actual transactions.   All  per
share prices  have been adjusted to reflect the Company's 40-to-1 reverse stock
split effected in February, 1996.

      As of March  31,  1998, the Company had approximately 502 stockholders of
record.  This number does  not  include  stockholders  who  hold  the Company's
securities in street name.


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

GENERAL

      In  April, 1998 the FCC approved E-Sat's application for a LEO  satellite
license.  E-Sat is owned 20% by the Company and 80% by EchoStar.  E-Sat was one
of five applicants  requesting approval for essentially the same frequency band
but proposing a different  use.  The applicants mutually agreed upon a spectrum
sharing plan (the "Joint Proposal") which, essentially, requires the applicants
to share an uplink and downlink frequency band with other satellite systems and
terrestrial users of the band and to coordinate their operations with the other
users of the bands.  In October 1997, the FCC released a report and order which
concluded that with use of appropriate  transmission  techniques, proper system
coordination,  time-sharing  of  frequencies  and  the adoption  of  the  Joint
Proposal,  there  was  sufficient  spectrum  to  license the  five  applicants.
Thereafter, E-Sat filed an amendment conforming its  application  to  the rules
and policies adopted by the FCC report and order which, ultimately, resulted in
the FCC approval of E-Sat's application

LIQUIDITY AND CAPITAL RESOURCES

      The Company has been in the development stage since its inception and has
not  recognized  any  significant revenues or capital resources other than  the
receipt,  of  (i) a minimal  amount  of  inside  capitalization  funds  at  its
inception, (ii)  net  proceeds  in  the  amount  of  $166,175  from  its public
offering,  (iii)  gross  proceeds  of  $70,000  from a sale of debentures, (iv)
subscriptions representing gross proceeds of $2,024,588 in connection with five
private placements of common stock, (v) gross proceeds  of $342,750 from bridge
loans made by the Company's president and two shareholders, (vi) gross proceeds
of $1,056,500 from the sale of the Company's interest in the stock of a company
holding a DBS license, (vii) gross proceeds of $4,747,501  from  the  sale of a
seven  convertible  debentures,(viii) $100,000 from the issuance of a note  and
(ix) gross proceeds of  approximately $3.5 million settlement for the Company's
interest in Continental Satellite Corp.

      Stockholders' equity  at  December  31,  1997  was  $872,039  compared to
stockholders'  deficit  of  $2,273,169 at December 31, 1996.  This increase  is
attributed primarily to a net  gain  of  approximately  $3.9  million  for  the
EchoStar  shares  received  by  the  Company  on January 8, (as reported in the
statement of operations for the quarter ended March  31, 1997) and subsequently
divested  (for  approximately  $4.4  million)  as part of an  August  29,  1997
agreement to repay all debentures with EchoStar. During the year ended December
31, 1997 the Company incurred approximately $200,000 of monthly operating costs
which  acted to reduce stockholders' equity further.  Current  operating  costs
have been  reduced significantly with the repayment of the Company's Debentures
as well as the  settlement  of  the Loral Litigation. (See the Company's 10-QSB
dated September 30, 1997.)  Operating  expenses for fiscal 1998 are expected to
average $100,000 per month, which will continually  act to reduce stockholders'
equity in the absence of the sale of additional equity.



<PAGE>


      The consolidated balance sheet as of December 31,  1997 reflects $383,054
of cash and cash equivalents compared to $402,588 as of December 31, 1996.  The
Company has insufficient cash to meet its needs in the near  term  and  further
resources  will  be  needed  to continue ongoing development of GEMS' automated
meter reading ("AMR") business  and  the  Company's  operating  activities. The
Company anticipates monthly expenses of approximately $100,000 to  continue for
the  balance  of  1998.   This  includes  approximately  $75,000 per month  for
operating, legal and consulting expenses, and $25,000 per  month  for GEMS' and
E-SAT research & development. Cash resources presently available to the Company
are  insufficient  to continue operations at their projected level through  the
end of 1998 and additional  capital will be necessary to continue operations at
their current level or to expand  operations during 1998.  No assurances can be
given that additional capital financing  will  be available when required or it
if will be on terms favorable to the Company. The  Company  does not expect its
automated meter reading operations to produce any significant  revenue  in 1998
or  become profitable until 2001, due in part to delays in the approval of  the
Company's  application  for  a  LEO  satellite license, at the earliest, and no
assurance  can  be given as to this estimate.   Beginning  in  July  1996,  the
Company began to  receive  milestone payments under the terms of a $1.2 million
purchase order for 10,000 satellite  radio  units.   Under  this agreement, the
Company was eligible to receive up to $500,000 towards development  costs  upon
meeting  the milestone requirements of the contract.  The Company met the first
four milestones  of  the contract and has received $400,000 in cash. Currently,
the Company and ABB have  suspended  their development under this agreement due
to the expiration of the Company's agreement  for  use  of  the Argos system on
December  31, 1997, and the proposed limit placed on future commercial  use  of
the Argos system.   Therefore,  such  milestone  payments  could  be subject to
refund,  in  whole or in part.  Unless and until the Company is able  to  raise
additional capital  or  become  profitable  through  its subsidiary's automated
meter reading operations, the Company's liquidity and  capital  resources  will
continue  to be depleted.   Historically, the Company has funded its operations
and  obligations  through  the  private  placement  of  equity  securities  and
convertible  debentures.   The  Company  may  continue  to fund its commitments
through these financing methods.  However, no assurances  can be given that the
Company  will be able to raise the necessary capital to meet  its  commitments.
In the event the Company is unable to raise the necessary capital, its business
objectives will be adversely affected.

      Total  assets at December 31, 1997 were $1,785,543 compared to $4,629,177
at December 31,  1996.   This  change  in  assets  is  primarily  attributed to
elimination  of  the  Company's   interest in Continental Satellite Corporation
based on the settlement with Loral,  as well as the return of 270,414 shares of
EchoStar Class A Common Stock as part  of  an  agreement  to  redeem all of the
Company's debentures held by EchoStar. The largest components of  total  assets
at  December  31,  1997  represent  investments  in  and advances to affiliated
companies  of  $1,248,649 and cash of $383,054. This compares  to  December  31
,1996  when the largest  components  of  total  assets  were  Other  Assets  of
$2,292,409  (Continental  Satellite Corporation)and Investments in and advances
to  affiliated  companies  of  $1,496,524.  Advances  to  affiliated  companies
decreased due to the elimination  of  the  Company's interest in DBSC valued at
approximately $539,080 after a merger between  EchoStar  and  DBSC  in  January
1997.    (see  the  Company's  10-QSB  dated  March 31, 1997) and the Company's
contributions  and  advances  to  E-Sat in the amount  of  $385,671,  of  which
approximately $77,000 represented the Company's equity portion of E-Sat losses.

      Net cash used in operating activities was $2,972,153 during 1997 compared
to net cash used of $1,639,464 during 1996 and net cash used of $7,786,293 since
inception.  There was net cash provided by investing activities of $3,883,565 
during the year ended December 31, 1997, compared to net cash used by investing 
activities of $2,596,694 for the year ended December 31, 1996, and net cash
provided by investing activities of $1,357,717 since inception.  Net cash used
by financing activities was $930,944 for the year ended December 31, 1997 
compared to net cash provided by financing activities of $4,635,002 for the year
ended December 31, 1996, and  $6,811,630  since  inception.  The net cash used
by financing activities during 1997 resulted from the cash repayment of
debentures totaling $1,043,501, offset by a loan to the Company.

RESULTS OF OPERATIONS

      The  Company  remains in the development stage and did not  generate  any
significant revenues  or  net interest earnings during 1997 compared to $11,420
in 1996.  Revenues from inception were $161,420.

      The Company's net profit  for  the  year  ended  December  31,  1997  was
$3,068,917,  compared  to  a net loss of $3,752,583 for the year ended December
31, and a net loss of $3,839,129  since  inception. The net profit for the year
ended December 31, 1997 was due to the net  gain  on  the  sale  of  marketable
equity  securities  and  the Company's equitable interest in a DBS licensee  of
approximately $5.2 million  offset  by a $1.7 million loss from operations, and
$308,094 net interest expense for the  year ended December 31, 1997.  Loss from
operations was $1,682,277 for the year ended  December  31, 1997, compared to a
loss  of  $3,323,765  for the year ended December 31, 1996.   Total  loss  from
operations from inception  was  $8,598,719.   General  and administrative costs
("G&A")  were  $1,472,162  for  year  ended  December  31,  1997,  compared  to


<PAGE>


$2,245,588  for  the  year  ended December 31, 1996.  Total G&A from  inception
through  December 31, 1997 was  $6,462,988.   Research  and  development  costs
associated with GEMS was $210,115 for the year ended December 31, 1997 compared
to $1,078,747  for  the  year  ended  December  31,  1996, and $2,216,950 since
inception.

      The  Company's accumulated deficit at December 31,  1997  was  $3,839,129
compared to $6,908,046 at December 31, 1996. This decrease was due to a onetime
gain on the  sale  of  marketable equity securities and the Company's equitable
interest in a DBS licensee of approximately $5.2 million and offset by the loss
from  operations  and  interest   expense  of  approximately  $3  million.  The
accumulated deficit will continue to  increase  unless  and  until  the Company
generates revenues from the operations of GEMS in such amounts so as  to  cover
the  Company's  expenses.  Revenues  substantial  enough  to  make  the Company
profitable  are not expected to be generated until 1999, and no assurances  can
be given as to  that  estimate.  The  Company  has  been devoting a substantial
amount of its financial and personnel resources toward developing the Company's
AMR business.


ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

      The response to this item is being submitted as  a  separate  section  of
this report beginning on page F-1.


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

      None


                                     PART III.

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

      The present directors and executive officers of the Company,  their ages,
positions held in the Company, and duration as such, are as follows:

NAME                POSITION                           AGE   PERIOD

Fred W. Thompson    Chairman of the Board, President,  55    December 1992 - 
                    Chief Executive Officer and                present
                    Chief Financial Officer                  November 1993 -
                                                               present

Michael T. Schieber Director                           58    December 1992 -
                    Secretary                                  present

E.A. James Peretti  Director, President and            55    February 1996 - 
                    Chief Executive Officer, GEMS              present

H. Tate Holt        Director                           46    February 1996 - 
                                                               present

Jerome W. Carlson   Director                           61    May 1997 - present

The  Company  has adopted staggered terms for its Board of Directors.   Messrs.
Schieber and Holt  will  serve until the 1998 annual meeting of stockholders or
until their successors have  been  elected,  Messrs.  Thompson and Peretti will
serve until the 1999 annual meeting of stockholders or  until  their successors
have  been  elected,  Mr. Carlson will serve until the 2000 annual  meeting  of
stockholders or until his successor has been elected.



<PAGE>


CERTAIN SIGNIFICANT EMPLOYEES

      While the following  person  does  not  serve  as a director or executive
officer of the Company, he does serve as an executive  officer  or  director of
the Company's subsidiary and is considered to be a significant employee of that
subsidiary.

Randall L. Smith  Executive vice-president, Chief   43  January 1996 - present
                  Engineer,
                  Director of GEMS
                  President and Director of GEMS        July 1995 - January 1996
                  President of JPS                      July 1993 - June 1995

BUSINESS EXPERIENCE

      The following is a brief account of the education and business experience
during  at  least the past five years of each director, executive officer,  and
key employee,  indicating  the  principal occupation and employment during that
period, and the name and principal  business  of the organization in which such
occupation and employment were carried out.

BIOGRAPHICAL INFORMATION

      FRED W. THOMPSON, serves as CHAIRMAN OF THE  BOARD, PRESIDENT, AND CEO of
the  Company.  He  has over thirty years experience in  the  telecommunications
industry.  From 1983  to 1986, Mr. Thompson managed Inter Exchange Consultants,
Inc.,  a  company he founded,  providing  management,  design  and  engineering
services for  initial  cellular  telephone  operations  in  New  York City, San
Francisco, Los Angeles and other major cities in the U.S.  From 1986  to  1990,
Mr.  Thompson  devoted  his  time  to  consulting  on various telecommunication
matters as an independent contractor.  His career of  over  20  years with AT&T
included  various  management  positions in the Long Lines Department,  Western
Electric Company, Bell Labs and  with  several  operating  telephone companies.
Mr.  Thompson  received a BS degree in Electrical Engineering  from  California
Polytechnic.

      MICHAEL T.  SCHIEBER,  DIRECTOR,  has served as a Director of the Company
since December 1992. From 1987 to December 1992, Mr. Schieber was the Managing
Partner  of  Amador  Telecommunications  and  since  1990 has been a partner in
Columbia Communications, both investors in nation-wide  paging  licenses.   Mr.
Schieber  also  holds  minority  interests  in  two Illinois cellular telephone
licenses.   He  retired  from the Department of Fisheries  with  the  State  of
Washington in May 1993 where  he had served as a civil engineer since 1984.  He
is also a retired Air Force Major  and Command Pilot.  Mr. Schieber received an
MA degree in International Relations  and  Government  from  the  University of
Notre  Dame,  a  BS  in  Engineering  from  the Air Force Academy, and a BA  in
Business from The Evergreen State College.

      E.A. JAMES PERETTI, DIRECTOR appointed  in  February  1996, and President
and Chief Executive Officer of Global Energy Metering Service,  Inc.,  a wholly
owned  subsidiary  of  DBSI.   Previously,  Mr.  Peretti served as President of
Westinghouse Electric Supply Company (WESCO), a business  unit  of Westinghouse
Electric Corp.  He also served as a Vice President and officer of  Westinghouse
Electric  Corp.   During  his 30 year tenure with WESCO, Mr. Peretti also  held
positions as Vice President  and  General Manager of its Pacific Division.  Mr.
Peretti holds a BS degree from Purdue  University in Electrical Engineering and
a MBA from the University of Hawaii.

      H. TATE HOLT, DIRECTOR appointed in February 1996, is currently President
of Holt & Associates, a growth management  consulting  firm,  and has held that
position since July 1990.  Previously, from 1987 to 1990, Mr. Holt was a Senior
Vice President at Automatic Data Processing, Inc. in Roseland,  New  Jersey and
Santa  Clara,  California.   Mr.  Holt  has over twenty years of experience  in
various  senior sales, marketing and general  management  positions  with  IBM,
Triad Systems,  and  ADP.   He  has  participated  in  major  restructuring and
strategic planning in these and other companies.  Since 1990, Holt & Associates
has assisted its clients in developing and achieving aggressive growth targets,
both  domestically  as  well  as internationally.  Mr. Holt is also  an  active
director of several private and  publicly  traded  companies  including  Onsite
Energy and has been nominated to serve on the Board of Directors of Holiday  RV
Superstores.  Mr. Holt holds an AB from Indiana University.



<PAGE>


      JEROME W. CARLSON, DIRECTOR appointed in May 1997, is currently President
of  Raljer,  Inc., management consulting firm, and has held that position since
January 1995.   Previously,  from  1984  to  1995,  Mr.  Carlson  was the Chief
Financial Officer, Vice President of Finance and Corporate Secretary  for Triad
Systems  Corporation  in  Livermore,  California.   Mr. Carlson has over twenty
years experience in both finance and general management  positions with Hewlett
Packard.  Since 1995 he has assisted a number of businesses  in  developing and
achieving  certain  strategic  and  tactical  goals  in their industries.   Mr.
Carlson  is also an active director and advisor in several  private  companies.
He holds a B.S. degree from the University of California at Davis and an M.B.A.
from the Stanford Graduate School of Business.

      RANDALL  L.  SMITH, EXECUTIVE VICE PRESIDENT AND CHIEF ENGINEER OF GLOBAL
ENERGY METERING SERVICE,  INC.  joined the Company in July 1993 as President of
JPS Systems, Inc.  Mr. Smith has been a key person in the development of the
Automated Meter Reading Technology being adopted by the Company.  During his
previous 14 years at PG&E, his experience included managemet of energy, gas and
electric automation, automatic meter reading and time use control, real-time 
pricing,  tamper  detection,  and  distribution  generation  dispatch.  Mr. 
Smith is a licensed professional engineer in California and received  a BS 
degree in Electrical Engineering from Michigan Technological University.

FAMILY RELATIONSHIPS

      There are no family relationships between any director, executive officer
or key employee.


ITEM 10. EXECUTIVE COMPENSATION

      (A)   CASH COMPENSATION

      The following table provides  certain  summary  information  for the year
ended December 31, 1997, concerning compensation in excess of $100,000  paid or
accrued  by  the  Company  and  its subsidiary to or on behalf of the Company's
executives and/or employees.

                                    SUMMARY COMPENSATION TABLE

                                ANNUAL COMPENSATION     LONG-TERM COMPENSATION
<TABLE>
<CAPTION>
<S>                  <C>         <C>            <C>         <C>                 <C>
                                                               OTHER               SECURITIES
NAME AND                                                       ANNUAL              UNDERLYING
PRINCIPAL POSITION      YEAR        SALARY         BONUS       COMPENSATION {(1)}  OPTIONS{(2)}

Fred W. Thompson        1997        $180,000{(3)}              $6,705              185,000
Chief Executive Officer 1996        $180,000{(4)}              $4,245              319,375{(5)}
                        1995{(6)}   $  30,000                  $2,577                4,500
                        1995        $  72,000                  $6,521                  0

E.A. James Peretti
CEO GEMS                1997        $155,000                   $3,732              150,000
                        1996        $155,000                   $  971              375,000
Randall Smith
Executive VP GEMS       1997        $125,000                   $2,385               75,000
                        1996        $125,000                   $2,216              131,875{(5)}

</TABLE>


(1) Consists entirely of payment of insurance premiums.


<PAGE>


(2) Common stock of DBS Industries, Inc.
(3) $80,000 paid in cash, $100,000 deferred pursuant to his employment 
    agreement.
(4) $72,000  paid  in cash,  $108,000  deferred  pursuant  to  his  employment
    agreement.
(5) Includes 6,875 shares  granted  in April 1996 with vesting commencing as of
    December 31, 1995.
(6) For the transition period from August 1, 1995 to December 31, 1995.

      Mr. Thompson entered into an employment agreement with the Company on 
April 18, 1996 effective January 1, 1996. His annual salary under the agreement
is $180,000, and includes non-qualified stock options to purchase 312,500 shares
of the Company's  common  stock.   Pursuant  to the agreement, the Company paid
$80,000 of Mr. Thompson's salary and the remaining  portion  has  been deferred
until  certain  financing requirements of the Company have been achieved.   The
Company has maintained  a key person insurance policy on Mr. Thompson's life in
the face amount of $2,000,000, and is the sole beneficiary of such policy.  The
Company also entered into  employment contracts with E.A. James Peretti, CEO of
GEMS,  and  Randall Smith, Executive  VP  of  GEMS  and  Chief  Engineer.   Mr.
Peretti's agreement  includes  an  annual  salary of $155,000 and non-qualified
stock  options  to  purchase  375,000  shares of  common  stock.   Mr.  Smith's
agreement includes an annual salary of $125,000 and non-qualified stock options
to purchase 125,000 shares of common stock.

      (B)   COMPENSATION PURSUANT TO STOCK OPTION PLAN

      The Company has established a 1996 Stock Option Plan (the "Plan") to serve
as a vehicle to attract and retain the services of key employees and to help 
such key employees realize a direct proprietary interest in the Company.  The 
Plan provides  for  the  grant  of non-statutory and incentive stock  options.  
The exercise price of any incentive  stock option granted under the Plan may not
be less than 100% of the fair market  value  of the common stock of the Company 
on the date of grant.  The fair market value for which an option may be granted
incentive stock options in any calendar year may not exceed  $100,000.   Shares
subject  to options under the Plan may be purchased for cash.  Unless otherwise
provided by  the  Board,  an option granted under the Plan is exercisable for a
term of ten years (or for a  shorter  period  up  to  ten  years).  The Plan is
administered  by the Board of Directors and its Compensation  Committee,  which
has discretion  to  determine  optionees, the number of shares to be covered by
each option, the exercise schedule,  and  other terms of the options.  The Plan
may be amended, suspended, or terminated by  the  Board, but no such action may
impair rights under a previously granted option.  Each  option  is exercisable,
only so long as the optionee  remainsemployed by the Company.  No option  is 
transferable by the optionee other than by will or the laws of descent and 
distribution.

      During fiscal 1997 there was a substantial decrease in the market price of
the Company's Common Stock due, in part, to regulatory delays including a delay
in the approval of E-Sat's LEO satellite license application.  As a result, the
Compensation Committee repriced stock options in February and December of 1997.
The  repricing was done in an effort to retain the Company's quality  employees
and directors who had lost a significant portion of their financial interest in
the Company  because their options were  "out of the money."  In February 1997,
the  Company completed  the  first  stock  option  repricing  program  for  the
Company's  directors  and employees in which stock options for 1,119,646 shares
of Common Stock, originally  issued  with exercise prices ranging from $1.60 to
$6.00 per share, were reissued with an exercise price of $1.375 per share, which
approximated the fair market value on the date of repricing.  In December 1997,
the Company completed a second stock option repricing program for the Company's
employees  (including  employee  directors)   in   which   stock   options  for
approximately  1,135,726  shares  of  Common  Stock, with  an exercise price of
$1.375, were reissued with exercise  prices ranging from $0.531 to $0.584 per
share, which approximated the fair market  value  on  the  date of repricing.
The Company  maintained the original vesting schedules.

      The Company intends to file one or more registration statements on Form 
S-8 under the Securities Act to register shares of common stock subject to stock
options  that  will permit the  resale  of  such  shares,  subject  to  vesting
restrictions with the Company.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

      The General Corporation Law of the State of Delaware permits 
indemnification of directors, officers, and  employees of corporations under 
certain conditions subject to certain limitations.  Article XII of the Company's
certificate of incorporation states that the Company may provide indemnification
ofits agents, including its officers and directors, for breach of duty to the 
Company to the maximum extent permitted by the General Corporation Law.   
Article VI of the Bylaws provide that the Company shall, to the maximum extent 
and in the manner permitted in the Corporations Laws, indemnify each of its 


<PAGE>


agents, including its Officers and Directors, against expenses, judgments, 
fines, settlements, and  other  amounts actually and reasonably incurred in
connection with any proceeding arising  by reason of the fact any such person is
or was an agent of the Company.

                 OPTION GRANTS IN THE YEAR ENDED DECEMBER 31, 1996

                                 Individual Grants

                   Number of   % of Total
                   Securities  Options
                   Underlying  Granted to    Exercise
                   Options     Employees     or Base
                   Granted     in Fiscal     Price       Expiration
NAME                1997         YEAR        ($/SH)      DATE

Fred W. Thompson   185,000        25%        $0.584      12/31/02
President, CEO

E.A. James Peretti 150,000        20%        $0.531      12/31/07
CEO GEMS

Randall Smith       75,000        10%        $0.531      12/31/07
Exec. VP GEMS

                          FISCAL YEAR-END OPTION VALUE *

                     Number of Securities           Value of Unexercised 
                     Underlying Unexercised         In-the-Money
                     Options/SARS at FY End (#)     Options/SARS at FY End ($)

NAME                 EXERCISABLE/UNEXERCISABLE      EXERCISABLE/UNEXERCISABLE
                     Options at December 31, 1997   Options at December 31, 1997

Fred W. Thompson     169,971 / 347,029                  $82,969 / $82,969
President, CEO

E.A. James Peretti   225,000 / 300,000                  $119,475 / $159,300
CEO GEMS

Randall Smith        105,074/ 133,676                   $55,795 / $70,982
Exec. VP GEMS

* Includes options which were repriced in February and December 1997. (See Item
10(b).)

COMPENSATION OF DIRECTORS

      The Company reimburses directors for expenses incurred in connection with
attending Board meetings but does not pay director's fees or other compensation
for  services  rendered as a director.  In lieu of fees the Company  grants  to
each director options  to  purchase 37,500 shares of Common Stock for each year
of service successfully completed,  under  a non-qualified stock option plan as
approved by a shareholder vote in 1996.



<PAGE>


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


(A) & (B) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     As of March 31, 1998, the persons listed in the table set forth below were
known by the Company to own or control beneficially more than  five  percent of
the Company's outstanding Common Stock, par value $.0004 per share.  The  table
also  sets  forth  the total number of shares of these securities owned by each
director, director nominee  and  officer  of  the Company and of all directors,
director nominees and officers as a group as of March 31, 1998, and all options
and warrants exercisable through May 30, 1998.


                 NAME AND ADDRESS OF         BENEFICIALLY AND   PERCENT
TITLE OF CLASS   BENEFICIAL OWNER            RECORD OWNED*      OF CLASS

Common Stock     Fred W. Thompson            848,471 (1)          14.3%
                 109 William Avenue
                 Larkspur, CA  94939

Common Stock     Michael T. Schieber         316,489 (2)           5.4%
                 5520 Beverly Drive NE
                 Olympia, WA  98506

Common Stock     E.A. James Peretti          300,000 (3)           5.1%
                 8613 Paradise Lagoon Drive
                 Lucerne, CA  95458

Common Stock     H. Tate Holt                125,129 (4)           2.1%
                 240 Wilson Way
                 Larkspur, CA  94939

Common Stock     Jerome W. Carlson            75,000 (5)           1.3%
                 95 Mt. Vernon Lane
                 Atherton, CA 94027

Common Stock     Officers, Directors and   1,665,089              28.2%
                 Nominees as a Group 
                 (5 persons)


* Includes options which were repriced in February and December 1997. (See Item
10(b).)

(1) Includes (i) 599,558 held in Thompson 1996 Revocable Trust and (ii) options
    to purchase 234,375 shares at $0.531 expiring January 1, 2006,  and 4,375,
    3,750,  3,663  and  2,750  common shares exercisable at $0.584 per share and
    expiring February 8, 1999, February 8, 1999, February 15, 2000, and December
    31, 2000 respectively.

(2) Includes (i) 193,125 shares held jointly with spouse, Arlene Schieber, (ii)
    6,505 held solely by Mr. Schieber, (iii) 3,075  held solely by Ms. Schieber,
    of which shares Mr. Schieber disclaims beneficial ownership, and (iv)
    options to purchase 6,250, 13,750, 6,250, 12,534 and 37,500 common shares  
    all exercisable at $1.4375 per share which expire on  November 22, 2003,
    February 15, 2005, December 31, 2005, February 15, 2006 and April 30, 2006,
    respectively, and 37,500 common shares exercisable at $1.00 which expire May
    13, 2007.

(3) Options to purchase 300,000 common shares exercisable at $0.531  per share,
    which expire January 1, 2006.



<PAGE>


(4) Includes  (i)  4,821 held solely by Mr. Holt, and (ii) options to purchase
    7,808 and 75,000 common shares all exercisable at $1.4375 per share which
    expire December 31, 2006 and April 30, 2006, respectively, and 37,500 common
    shares exercisable at $1.00 per share which expire May 13, 2007.

(5) Options to purchase common shares exercisable  at  $1.00  per  share, which
    expire May 13, 2007.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     During 1996 and 1997, the Company has not been a party to any transaction,
proposed transaction,  or  series  of transactions in which the amount involved
exceeds $60,000, and in which, to the knowledge of the Company, any director or
executive officer, nominee, five percent  beneficial  security  holder,  or any
member  of  the immediate family of the foregoing persons have, or will have  a
direct or indirect material interest.


                                      PART IV

ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

      The following Financial Statements pertaining to the Company are filed as
part of this report:

           Report of Independent Accountants                         F-1

           Consolidated Balance Sheets                               F-2

           Consolidated Statements of Operations                     F-3

           Consolidated Statements of Stockholders' Equity (Deficit) F-4 to F-6

           Consolidated Statements of Cash Flows                     F-7

           Notes to Consolidated Financial Statements                F-8 to F-22


      (A)   EXHIBITS

The following Exhibits are filed with this report:

      NAME OF EXHIBIT

*     (2.1) Plan  and Agreement of Reorganization, dated  September  30,  1992,
            entered into with DBS Network, Inc. and certain of its Shareholders
            which was  previously  filed  in,  and  is  hereby  incorporated by
            reference  to,  the Company's Current Report on Form 8-K,  date  of
            report, December 2, 1992.

*     (3.0) Certificate of Incorporation, which was previously filed in, and is
            hereby incorporated  by  reference  to,  the Company's Registration
            Statement on Form S-18, No. 33-31868-D, effective May 11, 1990.

*     (3.1)   Bylaws, which was previously filed in, and is hereby incorporated
              by reference to, the Company's Registration Statement on Form 
              S-18, No. 33-31868-D, effective May 11, 1990.

*     (3.2)   Restated  Certificate  of Incorporation, as adopted on August  8,
              1996.

*     (4.1)   Form of Unit Warrant Agreement, which was previously filed in, and
              is hereby incorporated by reference to, the Company's Registration
              Statement on Form S-18, No. 33-31868-D, effective May 11, 1990.


<PAGE>


*     (4.2)   Specimen Stock Certificate.

*     (10.2)  Employment Agreement between Fred W.  Thompson  and  DBS  Network,
              Inc., dated September 1, 1992.

*     (10.3)  Employment  Agreement  between  Randall L. Smith and JPS Systems,
              Inc., dated July 1, 1993.

*     (10.4)  Employment Agreement between Ellen  D.  Coll  and  DBS Industries,
              Inc., dated March 1, 1993.

*     (10.5)  Stockholder Line of Credit and Investment Agreement  between  DBSN
              and Direct  Broadcasting  Satellite Corporation, dated January 24,
              1993.

*     (10.5A) Promissory Note January 29,  1993  executed  by  Direct Broadcast
              Satellite Corporation issued pursuant to Stockholder Line of 
              Credit and Investment Agreement.

*     (10.5B)  Promissory  Note  April  19,  1993 executed by Direct  Broadcast
               Satellite Corporation issued pursuant to Stockholder Line of 
               Credit and Investment Agreement.

*     (10.5C)  Promissory  Note  August 1, 1993 executed  by  Direct  Broadcast
               Satellite Corporation issued pursuant to Stockholder Line of
               Credit and Investment Agreement.

*     (10.6)   1993 Incentive Stock Option Plan for DBS Industries, Inc.

*     (10.7)   1993 Non-Qualified Stock Option Plan for Non-Employee Directors 
               of DBS Industries, Inc.

*     (10.8)   1993 Non-Qualified Stock  Option  Plan  for  Consultants  of  DBS
               Industries, Inc.

*     (10.9)   Commercial Lease and Sublease and Consent pertaining to Mill
               Valley, California office space.

*     (10.12)  Satellite  Construction  Contract, dated as of March  12,  1990,
               between Direct Broadcast Satellite  Corporation and Martin 
               Marietta as successor to General Electric Company, Astro-Space
               Division.

*     (10.13)  Contract Modification No. 1, dated  as  of  March  30,  1992,  to
               Exhibit 10.12.

*     (10.14)  Contract  Modification  No. 2, dated as of November 12, 1992, to
               Exhibits 10.12 and 10.13.

*     (10.15)  Contract Modification No.  3,  dated  as  of  April  2,  1993, to
               Exhibits 10.12, 10.13 and 10.14.

*     (10.16)  Contract  Modification  No.  4,  dated  as  of June 10, 1993, to
               Exhibits 10.12, 10.13, 10.14 and 10.15.

*     (10.17)  Contract  Modification  No.  5, dated as of July  30,  1993,  to
               exhibits 10.12, 10.13, 10.14, 10.15 and 10.16.

*     (10.18)  DSAT Sale Agreement incorporated  by  reference  to the Company's
               Current Report on Form 8-K dated July 21, 1994.

*     (10.19)  AXION Sale Agreement incorporated by reference to  the  Company's
               Current Report on Form 8-K dated May 16, 1994.

*     (10.20)  AXION  Royalty  Agreement  incorporated  by  reference  to  the
               Company's Current Report on Form 8-K dated May 16, 1994.

*     (10.21)  Burlingame  Bank  Line  of Credit Agreement comprised of Business
               Loan Agreement and Promissory Note, both dated September 6, 1994.

*     (10.22)  Burlingame Bank Line of Credit Change in Terms Agreement.


<PAGE>


*     (10.23)  Stock Purchase Agreement  between  Intraspace Corporation and DBS
               Industries, Inc. incorporated by reference to the Company's
               Current  Report on Form 8-K dated 2/01/96.

*     (10.24)  DBS Industries, Inc. $3,000,000, Three Year Convertible Debenture
               Series B due January 12, 1999 incorporated by reference to the
               Company's Current Report on Form 8-K dated 2/01/96.

*     (10.25)  Memorandum of Understanding between ABB Power T&D Company, Inc.
               and Global Energy Metering Service, Inc. dated February 9, 1996.

*     (10.26)  Stock purchase Agreement between Seimac Limited and DBS 
               Industries, Inc., comprised of Common Stock Exchange Agreement
               and Shareholders Agreement both dated December 13, 1995.

*     (10.27)  DBS Industries, Inc. $1,000,000, Three Year Convertible
               Debenture, Series A due July 1, 1998.

*     (10.28)  NACLS Contract No. 95/2475 and Schedule A dated 12/01/95.

*     (10.29)  Letter dated November 8, 1996 to Donald H. Gips, Chief,
               International Bureau, Federal Communications Commission, from
               William L. Fishman, Corporate Counsel to Direct Broadcasting
               Satellite Corporation.

*     (10.30)  DBS Industries, Inc. $640,000 Three Year Convertible Debenture,
               Series C, due December 31, 1999.

*     (10.31)  Employment Agreement between Fred W. Thompson and the Company,
               dated April 18, 1996.

*     (10.32)  Employment Agreement between Randall L. Smith and GEMS (the
               Company's subsidiary), dated March 1, 1996.

*     (10.33)  Employment Agreement between E.A. James Peretti and GEMS (the
               Company's subsidiary) dated April 18, 1996.

*     (10.34)  1996 Stock Option Plan.

      (21.1)   List of Subsidiaries of DBS Industries, Inc.


*Previously filed in, and incorporated by reference to, Form 10-K for Fiscal
Years July 31, 1993 July 31, 1994, July 31, 1995, and December 31, 1995 and
December 31, 1996 or Form 8-K where indicated.


      REPORTS ON FORM 8-K

      None.


<PAGE>


                                    SIGNATURES


      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form
10-KSB to be signed on its behalf by the undersigned, duly authorized.

Date:  April 14, 1998                     DBS INDUSTRIES, INC.



                                          By:   FRED W. THOMPSON
                                                Fred W. Thompson, President


      Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons, which include the
Principal Executive Officer, the Principal Financial Officer and a majority of
the Board of Directors on behalf of the Registrant and in the capacities and on
the dates indicated.


            NAME                          TITLE                  DATE


FRED W. THOMPSON
Fred W. Thompson                    President, Director,          April 14,1998
                                    Principal Executive Officer

E.A. JAMES PERETTI
E.A. James Peretti                  Director                      April 14,1998


MICHAEL T. SCHIEBER
Michael T. Schieber                 Director, Secretary           April 14, 1998


JEROME W. CARLSON                   Director                      April 14, 1998
Jerome W. Carlson


H. TATE HOLT                        Director                      April 14, 1998
H. Tate Holt



Supplemental Information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant
to Section 12 of the Act.


<PAGE>


                           DBS INDUSTRIES, INC. AND SUBSIDIARY
                               (A DEVELOPMENT STAGE COMPANY)












                              CONSOLIDATED FINANCIAL STATEMENTS


<PAGEF-1>

                            REPORT OF INDEPENDENT ACCOUNTANTS




To the Board of Directors and Stockholders of
    DBS Industries, Inc.:

We   have  audited  the  accompanying  consolidated  balance  sheets  of  DBS
Industries,  Inc. and subsidiary (a development stage company) as of December
31, 1997 and 1996,  and  the  related  consolidated statements of operations,
stockholders' equity (deficit) and cash  flows  for  the years then ended and
for the period from April 25, 1990 (date of inception)  to December 31, 1997.
These  consolidated  financial  statements  are  the  responsibility  of  the
Company's management.  Our responsibility is to express  an  opinion on these
consolidated financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of DBS Industries,
Inc.  and  subsidiary  as  of December 31, 1997 and 1996 and the consolidated
results of their operations  and  their  cash flows for the years then ended,
and for the period from April 25, 1990 (date  of  inception)  to December 31,
1997, in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern.  As discussed in Note 1 to the consolidated
financial statements, the Company has incurred losses and negative cash flows
from  operating  activities  since  inception  and  will  require  additional
financing.  These factors raise substantial doubt about the Company's ability
to  continue as a going concern.  Management's plans as to these matters  are
also  described  in  Note  1.   The  financial  statements do not include any
adjustments that might result from the outcome of this uncertainty.





San Francisco, California
March 13, 1998, except for the second
paragraph of Note 13 as to which the
date is April 1, 1998


<PAGEF-2>

                      DBS INDUSTRIES, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)
                          CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
<S>                                                           <C>              <C>          <C>
                                                                       DECEMBER 31,
                              ASSETS                              1997              1996
Current assets:
  Cash and cash equivalents                                   $  383,054       $  402,588
  Restricted cash                                                   -             300,000
  Prepaid and other current assets                               119,265           68,944
                                                              ----------       ---------- 
      Total current assets                                       502,319          771,532
                                                              __________       __________  

Furniture and equipment                                           73,277           73,277
Less accumulated depreciation                                     47,828           34,406
                                                              __________       __________
                                                                  25,449           38,871
                                                              ----------       ---------- 
Other assets:
  Investments in and advances to affiliated companies          1,248,649        1,496,524
  Goodwill, net of accumulated amortization of $81,864
    and $61,149 at December 31, 1997 and 1996,
    respectively                                                   9,126           29,841
  Other assets                                                      -           2,292,409
                                                              __________       __________
                                                               1,257,775        3,818,774
                                                              __________       __________ 
            Total assets                                      $1,785,543       $4,629,177
                                                              ==========       ==========
          LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
  Convertible debentures                                      $     -          $4,640,000
  Line of credit                                                    -             295,000
  Accounts payable                                               152,485          960,277
  Accrued liabilities                                            145,019          499,070
  Deferred compensation payable to officer                       216,000          108,000
  Deferred revenues                                              400,000          400,000
                                                              __________       __________ 
          Total current liabilities                              913,504        6,902,347
                                                              ----------       ----------
Commitments (Note 6).

Stockholders' equity (deficit):
  Preferred stock, $.0004 par value; 5,000,000 shares
    authorized; none issued and outstanding                         -                -
  Common stock, $.0004 par value; 20,000,000 shares
    authorized; 5,882,928 and 5,827,509 shares
    issued and outstanding at December 31, 1997 and                2,373            2,351
    1996, respectively
  Capital in excess of par value                               4,681,295        4,605,026
  Warrants                                                       112,500          112,500
  Deficit accumulated during the development stage            (3,839,129)      (6,908,046)
  Less cost of common stock held in treasury (51,562
    shares as of December 31, 1997 and 1996)                     (85,000)         (85,000)
                                                              ___________      ___________ 

        Total stockholders' equity (deficit)                     872,039       (2,273,169)
                                                              ___________      ___________ 
           Total liabilities and stockholders'                $1,785,543       $4,629,177
                equity (deficit)
                                                              ===========      =========== 
</TABLE>


<PAGEF-3>

                    DBS INDUSTRIES, INC. AND SUBSIDIARY

                       (A DEVELOPMENT STAGE COMPANY)


                   CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>

<S>                                     <C>                <C>               <C>
                                                                             April 25, 1990
                                                                             (Inception) to 
                                        December 31,       December 31,      December 31, 
                                           1997                1996              1997
Revenue                                      -             $    11,420       $   161,420
                                        ------------       -----------       -----------   
Costs and operating expenses:
  Cost of revenue                            -                  10,850           127,580
  Selling, general and                 $1,472,162            2,245,588         6,462,988
    administrative
  Research and development                210,115            1,078,747         2,169,571
                                       ----------           ----------       -----------
                                        1,682,277            3,335,185         8,760,139
                                       ----------           ----------       -----------
        Loss from operations           (1,682,277)          (3,323,765)       (8,598,719)
                                       ----------           ----------       ----------- 
Other income (expenses):
  Interest, net                          (308,094)            (395,298)         (741,880)
  Equity in loss of investments, net      (80,975)             (31,920)         (412,777)
  Gain on sale of investments           5,221,063                 -            6,057,541
  Other, net                                 -                    -              (56,634)
                                       ----------           -----------
                                        4,831,994             (427,218)        4,846,250
                                       ----------           -----------      -----------   
    Income (loss) before provision 
      for income taxes and minority 
      interests                         3,149,717           (3,750,983)       (3,752,469)

Provision for income taxes                 80,800                1,600            95,235
                                       ----------          -----------  
    Income (loss) before minority       3,068,917          (3,752,583)        (3,847,704)
      interests
                           
Minority interests in losses of
  consolidated subsidiaries                  -                   -                 8,575
                                       ----------           -----------      ----------- 

Net income (loss)                      $3,068,917          $(3,752,583)      $(3,839,129)
                                       ==========          ===========       ===========

Basic income (loss) per share             $0.5234             $(0.6484)
                                      ===========          ===========

Diluted income (loss) per share           $0.4922             $(0.6484)
                                      ===========          ===========

Basic - shares used in per share        5,863,261            5,787,185
  computations                        ===========          ===========

Diluted - shares used in per share      6,235,144            5,787,185
  computations                        ===========          =========== 

</TABLE>


<PAGEF-4>

                      DBS INDUSTRIES, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)
                          CONSOLIDATED STATEMENTS OF

                        STOCKHOLDERS' EQUITY (DEFICIT)
          FOR THE PERIOD FROM DECEMBER 31, 1990 TO DECEMBER 31, 1997




<TABLE>
<CAPTION>
<S>                                           <C>          <C>        <C>          <C>         <C>        <C>           <C>
                                                                                                           DEFICIT      TOTAL
                                                                                                           ACCUMULATED  STOCK-
                                                  COMMON STOCK        CAPITAL                              DURING THE   HOLDERS'    
                                                            PAR       EXCESS OF                TREASURY    DEVELOPMENT  EQUITY
                                                SHARES      VALUE     PAR VALUE    WARRANT     STOCK       STAGE        (DEFICIT) 
Balance at December 31, 1990 of DBSN as
  restated pursuant to the merger on
  December 2, 1992                              301,000     $  120    $  46,375      -           -         $(219,990)   $(173,495)
  
Issuance of common stock for professional
  services at $.01 to $2.14 per share           520,000        208       47,542                                            47,750 

Issuance of common stock for cash at $.01
  to $1.00 per share                            244,500         98      124,507      -           -              -         124,605

Stock issue costs for the twelve months
  ended December 31, 1991                          -           -        (15,774)     -           -              -         (15,774)

Net loss for the twelve months ended 
  December 31, 1991                                -           -           -         -           -          (115,339)    (115,339)
                                              ---------       ----     --------    -----      ------        ---------    ---------

Balance at December 31, 1991                  1,065,500        426      202,650      -           -          (335,329)    (132,253)

Issuance of common stock for cash at $.01
  to $1.00 per share                          1,317,290        527      538,998      -           -              -         539,525

Issuance of common stock for professional
  services at $.01 to $.10 per share            214,240         86       12,338                                            12,424

Issuance of common stock in payment of 
  stockholder loans:  June 1992 at $.01
  per share                                     230,000         92        2,208      -           -               -          2,300

Net loss for the seven months ended July 31,
  1992                                             -          -            -         -           -           (90,750)     (90,750)
                                              ---------      -----      -------    -----      ------        ---------     --------

Balance at July 31, 1992                      2,827,030      1,131      756,194      -           -          (426,079)     331,246

Shares of Fi-Tek IV, Inc. from August 3,
  1989, (inception) through December 2,
  1992                                          817,540        327      155,450      -           -              -         155,777

Issuance of common stock for cash at $.01
  to $3.20 per share                          1,313,926        527      998,088      -           -              -         998,615

Issuance of common stock for interest at
  $5.00 per share                                10,000          4        4,996      -           -              -           5,000

Issuance of common stock for JPS common
  stock on September 11, 1992 at $.80
  per share                                      61,447         24       49,134      -           -              -          49,158

Issuance of common stock for professional
  services on September 11, 1992 at $.10
  per share                                       6,679          3          665      -           -              -             668

CONTINUED;
</TABLE>

<PAGEF-5>
                      DBS INDUSTRIES, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)
                          CONSOLIDATED STATEMENTS OF

                   STOCKHOLDERS' EQUITY (DEFICIT), CONTINUED


          FOR THE PERIOD FROM DECEMBER 31, 1990 TO DECEMBER 31, 1997


<TABLE>
<CAPTION>
<S>                                        <C>          <C>        <C>           <C>         <C>        <C>           <C>
                                                                                                        DEFICIT       TOTAL
                                                                                                        ACCUMULATED   STOCK-
                                              COMMON STOCK         CAPITAL IN                           DURING THE    HOLDERS'
                                                        PAR        EXCESS OF                 TREASURY   DEVELOPMENT   EQUITY
                                           SHARES       VALUE      PAR VALUE     WARRANTS     STOCK     STAGE         (DEFICIT)

Issuance of common stock in exchange
  for DBSC common stock on October 9,
  1992 at $2.00 per share                     6,375     $    2     $    12,748       -             -            -      $   12,750

Redemption of 97,450 common stock
  warrants on October 2, 1992 at
  $8.00 per share                              -           -           (19,490)      -             -            -         (19,490)

Issuance of common stock on December 2,
  1992 at closing of acquisition of 
  DBSN as a finder's fee at $.0004
  per share                                 25,000           10           -          -             -            -              10

Issuance of common stock for Axion
  common stock during March 1993 at
  $1.60 per share                           50,000           20         79,980       -             -            -          80,000

Issuance of common stock for DBSC
  common stock on July 2, 1993 at
  $1.60 per share                          133,307           53        213,238       -             -            -         213,291

Stock issue costs for the period
  from August 1, 1992 through
  July 31, 1993                               -            -            (6,374)      -             -            -          (6,374)

Net loss for the twelve months
  ended July 31, 1993                         -            -              -          -             -       $(755,040)    (755,040)
                                         ---------       -----       ---------     ------        ------    ----------    ---------

Balance at July 31, 1993                 5,251,303       2,101       2,244,529       -             -       (1,181,119)  1,065,611

Issuance of common stock for
  1993 through April 1994)                 102,257          41         411,943       -             -             -        411,984

Stock issued in exchange for 46% of
  JPS stock on November 3, 1993              3,379           1          10,137       -             -             -         10,138

Stock issued for professional services:
  January 28, 1994, at $3.60 per share       5,331           2          19,188       -             -             -         19,190
  July 29, 1994, at $2.00 per share          3,833           2           7,663       -             -             -          7,665

Stock issued due to exercise of
  warrants, at $2.00 per share
  (March and April 1994)                     2,500           1           4,999       -             -             -          5,000

Stock issued for interest on July 31,
  1994, at $2.00 per share                   1,000        -              2,000       -             -             -          2,000

Purchase of shares of common stock
  on January 28, 1994, at $3,20 per
  share                                    (1,563)        -               -          -        $  (5,000)         -         (5,000)

Reacquisition of common stock pursuant
  to sale of investment in Axion in
  May 1994, at $1.60 per share            (50,000)        -               -          -          (80,000)         -        (80,000)

Net loss for the twelve months ended
  July 31, 1994                              -            -               -          -             -          (26,909)    (26,909)
                                         ---------      ------       ---------    -------      ---------    ----------  ----------

Balance at July 31, 1994                 5,318,039      $2,148       2,700,559                  (85,000)    (1,208,028)  1,409,679
</TABLE>


<PAGEF-6>


                     DBS INDUSTRIES, INC. AND SUBSIDIARY

                         (A DEVELOPMENT STAGE COMPANY)
                          CONSOLIDATED STATEMENTS OF

                   STOCKHOLDERS' EQUITY (DEFICIT), CONTINUED


          FOR THE PERIOD FROM DECEMBER 31, 1990 TO DECEMBER 31, 1997

<TABLE>
<CAPTION>
<S>                                    <C>         <C>      <C>            <C>          <C>          <C>             <C>
                                                                                                     DEFICIT         TOTAL  
                                                                                                     ACCUMULATED     STOCK-
                                          COMMON STOCK      CAPITAL IN                               DURING THE      HOLDERS'  
                                                   PAR      EXCESS OF                   TREASURY     DEVELOPMENT     EQUITY 
                                       SHARES      VALUE    PAR VALUE      WARRANTS       STOCK      STAGE           (DEFICIT) 
Stock issued for services:
  November 30, 1994, at $1.88 
    per share                             10,000   $   4    $  18,796        -             -              -          $    18,800
  May 15, 1995, at $2.00 per share        10,724       4       21,443        -             -              -               21,447
  July 15, 1995, at $1.60 per share       11,373       5       18,192        -             -              -               18,197

Net loss for the twelve months ended                                                                      
  July 31, 1995                             -         -          -           -             -         $(1,284,558)    $(1,284,558)
                                       ---------   -----    ---------      -----       --------      ------------

Balance at July 31, 1995               5,350,136   2,161    2,758,990                  $(85,000)      (2,492,586)        183,565

Issuance of common stock for 1% JPS
  common stock on September 21,
  1995 at $1.20 per share                 9,450        4       11,336        -             -                -             11,340

Issuance of common stock for 20% 
  Seimac Limited common stock on
  December 13, 1995 at $4.00 per
  share                                 165,519       66      662,010        -             -               -  662,076
Issuance of common stock for
  professional services at
  $5.60 per share                         2,934              1 16,427               -            -                   -  16,428

Net loss for the five months ended                                                                     (662,877)       (662,877)
  December 31, 1995                            -          -           -             -            -

Balance at December 31, 1995             5,528,039   2,232    3,448,763           -            -85000 (3,155,463)     ( 210,532)

Warrants issued on January 13, 1996, to
  purchase 75,000     shares of common
  stock for services rendered at an
  exercise price of $7.30 per share
                                             -          -           -          $ 112,500       -             -         112,500
Issuance of common stock for cash:
  January 15, 1996, at $4.00 per
    share, less noncash
    issuance cost of $63,900              200,000         80     736,020            -          -             -         736,100
  February 15, 1996, at $5.20
    per share, less noncash
    issuance cost of $19,999               38,462         15     179,988            -          -             -         180,003

Stock issued for services:
  January 1 - June 30, 1996, at            22,743          9      85,277            -          -             -          85,286
    $3.75 per share
  August 15, 1996, at $4.80 per             6,018          2      28,884            -          -             -          28,886
    share
  September 21, 1996, at $5.60
    per share                               4,821          2      26,996            -          -             -          26,998
  July 1 - December 31, 1996, at            7,605          3      15,207            -          -             -          15,210
    $2.00 per share
  Placement fee associated with
    January 15 and February 15,
    1996, issuances settled through
    issuance of common stock               19,821          8      83,891            -          -             -          83,899

Net loss for the twelve months ended                                                                   
  December  31, 1996                         -          -           -               -          -       (3,752,583)     (3,752,583)
                                         ---------     -----   ---------         -------    --------   -----------     -----------
Balance at December 31, 1996             5,827,509     2,351   4,605,026         112,500    (85,000)   (6,908,046)     (2,273,169)

Stock issued for services:
  January 31, 1997 at $1.69 per share        5,088         2       8,586            -          -             -              8,588
  February 14, 1997 at $1.75 per
    share                                    4,701         2       8,225            -          -             -              8,227
  February 28, 1997 at $2.00 per
    share                                    7,918         3      15,834            -          -             -             15,837
  March 31, 1997 at $1.63 per share            302      -            491            -          -             -                491
  April 10, 1997 at $2.00 per share          7,500         3      14,997            -          -             -             15,000
  April 30, 1997 at $1.50 per share            332      -            498            -          -             -                498
  June 30, 1997 at $1.13 per share          14,578         6      16,394            -          -             -             16,400
  July 9, 1997 at $0.75 per share           15,000         6      11,244            -          -             -             11,250

Net income for the twelve months ended                                                                   
  December 31, 1997                           -         -           -               -           -       3,068,917       3,068,917 
                                         ---------    ------  ----------        --------    ---------  ----------       ---------
                                         5,882,928    $2,373  $4,681,295        $112,500    $(85,000) $(3,839,129)      $ 872,039
                                         =========    ======  ==========        ========    ========= ============      =========
</TABLE>


<PAGEF-7>



                  DBS INDUSTRIES, INC. AND SUBSIDIARY

                     (A Development Stage Company)
                 CONSOLIDATED STATEMENTS OF CASH FLOWS




<TABLE>
<CAPTION>
<S>                                                 <C>                  <C>                 <C>
                                                                                             APRIL 28,
                                                                                             1990
                                                                                             (INCEPTION) TO
                                                    DECEMBER 31,         DECEMBER 31,        DECEMBER 31,
                                                    1997                 1996                1997

Reconciliation of net income (loss) to net cash
  used in operating activities:
    Net income (loss)                               $   3,068,917        $   (3,752,583)     $    (3,839,129)
    Adjustments to reconcile net loss to net
      cash used in operating activities:
         Depreciation and amortization                    126,989               124,086              358,128
         Minority interest's share of net loss               -                     -                  (8,575)
         Noncash charges                                   76,293               268,878              510,546
         Equity in loss of investees, net                  80,875                31,920              429,829
         Gain on sale of investments                   (5,221,063)                 -              (6,057,541)
         Common stock issued as payment for                                                                       
           interest                                          -                     -                   7,000
         Decrease (increase) in accounts                                  
           receivable and other assets                    (50,000)               49,416             (115,299)      
         Increase (decrease) in accounts payable   
           and accrued liabilities                     (1,053,843)            1,238,819              528,748
         Increase in deferred revenues                       -                  400,000              400,000
                                                       -----------          -----------         ------------ 

           Net cash used in operating activities       (2,972,153)           (1,639,464)          (7,786,293)

Cash flows from investing activities:                         
  Proceeds from sale of investment                           -                     -                 900,000
  Proceeds from Loral settlement                        3,573,677                  -               3,573,677
  Purchase of fixed assets                                   -                  (20,499)            (105,524)
  Organization costs                                         -                     -                 (28,526)
  Advances to officer                                        -                     -                 (31,187)
  Purchase of interest in Continental                        -               (2,292,409)          (2,292,409)
  Advances to affiliates                                     -                  (56,757)           (213,160)
  Investments in affiliates                               309,888              (227,029)           (588,274)
  Net assets of purchased subsidiaries                       -                     -               (147,500)
  Cash transferred from Fi-Tek IV, Inc.                                                       
    pursuant to the merger and reorganization                -                     -                156,648
  Purchase of patents and other                              -                     -                (18,251)
  Proceeds from repayment of advances to                                                      
    affiliate                                                -                     -                152,500
  Cash of divested subsidiary                                -                     -                   (277)
  Restricted cash on line of credit                       300,000                  -                300,000 
                                                        ---------            ------------         ----------
           Net cash provided by (used in)
             investing activities                       4,183,565            (2,596,694)          1,657,717
                                                        ---------            ------------         ----------
Cash flows from financing activities:
  Proceeds from (payment on) line of credit              (295,000)               (5,000)           (300,000)
  Issuance of debentures                                  107,501             3,640,000           4,817,501
  Issuance of common stock                                   -                1,000,002           3,153,516
  Redemption of common stock warrants                        -                     -                (19,490)
  Stock issue costs                                          -                     -                (57,235)
  Proceeds from stockholders' loans                       149,750                  -                442,750
  Payment of debentures                                (1,043,445)                 -             (1,168,445)
  Payment of stockholders' loans                         (149,750)                 -               (351,967)
  Purchase of shares                                         -                     -                 (5,000)
                                                       -----------           -----------         -----------
         Net cash provided by (used in) financing
           activities                                  (1,230,944)            4,635,002           6,511,630
                                                       -----------           -----------         -----------
            Net increase (decrease) in cash               (19,534)              398,844             383,054

Cash and cash equivalents, beginning of period            402,588                 3,743                -
                                                       ----------            -----------         -----------

Cash and cash equivalents, end of period              $   383,054            $  402,588          $  383,054
                                                      ===========            ==========          ===========
   SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the period for:
  Interest                                            $    11,456            $   40,695          $   57,651
                                                      ===========            ==========          ===========

  Income taxes                                        $     1,600            $    3,200          $   15,955
                                                      ===========            ==========          ==========
Supplemental Disclosures of Noncash Investing and Financing
  Activities (Note 11).

</TABLE>


<PAGEF-8>



                      DBS INDUSTRIES, INC. AND SUBSIDIARY

                        (A DEVELOPMENT STAGE COMPANY)


                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




1.  ORGANIZATION AND BASIS OF PRESENTATION:

These consolidated financial statements include the accounts of DBS Industries,
Inc.  (the  Company),  and  its  wholly owned    subsidiary,    Global   Energy
Metering    Service,   Inc.   ("GEMS").  Intercompany  transactions and balances
have been eliminated in consolidation.

The Company was organized as a Delaware corporation on  August  3, 1989.  Since
inception the Company has  been  in thedevelopment   stage.    The   Company's
financial statements have been prepared assuming the Company will continue as a
going  concern.   Since inception,  the Company has devoted  substantially  all
of   its   efforts  to  developing  its business.  The  Company  has  therefore
incurred    substantial    losses   and negative   cash  flows  from  operating
activities  as   reflected   in   these financial statements.  Accordingly, the
Company   has   relied  primarily  upon obtaining  equity   capital   and  debt
financing to support its operations.

The Company does not expect revenue  to exceed  costs and expenses in 1998 and,
accordingly,  will  continue  to  incur losses  and  negative  cash  flows from
operating   activities.    To   address financing   needs,   the   Company   is
pursuing        various       financing  alternatives.    These    circumstances
raise   substantial  doubt  about   the Company's  ability  to  continue  as  a
going    concern.     These   financial statements    do   not   reflect    any
adjustments that  might result from the outcome of this uncertainty.

On  January  13,  1996,  the  Company's Board of Directors  approved a one-for-
forty  reverse  stock  split   of   the Company's  common  stock.   The reverse
stock split was consummated in February 1996.  All shares and per share amounts
have  been  restated  to  retroactively reflect the reverse stock split.

In 1996, in connection with the reverse stock  split,  the Company amended  its
Articles of Incorporation  to  decrease its  authorized shares of common  stock
and preferred  stock to 100,000,000 and 5,000,000     shares,     respectively.
Additionally, the  par  values  of  the common   and   preferred   stock   were
increased  from  $.00001  to $.0004 per share.   These changes have  also  been
retroactively    reflected   in   these financial statements.  In May 1997, the
Company   amended   its   Articles   of Incorporation    to    decrease     its
authorized  shares  of  common stock to 20,000,000.

The Company changed its fiscal year-end from July 31 to December  31, effective
January 1, 1996.

On  September  11, 1992, the  Company's subsidiary,  DBSN   (dissolved  in  May
1995),  acquired  51%  of   the  voting shares   in  JPS  Systems,  Inc.  (JPS)
pursuant to  a Stock Exchange Agreement in exchange for shares of DBSN's common
stock which equated to 61,447 shares of the Company's  common stock (the fiscal
1993 transaction). In  November  1993, the  Company  acquired, from its
president,  additional  shares  of JPS  common  stock  representing 46% of the 
issued and outstanding stock of JPS, pursuant  to a stock exchange agreement  in
exchange for  3,379 shares of the Company's common stock (the fiscal 1994 
transaction). In January 1994, DBSN transferred its 51% interest in JPS to the



<PAGEF-9>


                              DBS INDUSTRIES, INC. AND SUBSIDIARY

                                 (A DEVELOPMENT STAGE COMPANY)


                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





1. ORGANIZATION AND BASIS OF PRESENTATION, continued:

Company.  In January 1995, JPS  repurchased shares of its common stock 
representing  2% of the issued  and outstanding common stock  of JPS.
In  May  1995,  JPS was dissolved, and  all  of its assets and  liabilities
were transferred  to a newly  created wholly-owned  subsidiary of the Company,
GEMS.   In November  1995,  the  Company repurchased  shares  of the common 
stock of JPS representing the  remaining 1% of the issued and outstanding common
stock of its dissolved subsidiary in  exchange for 9,450 shares of common stock 
of the Company.  GEMS is a Delaware corporation in  the  development stage whose
primary activity is the development of satellite and radio  systems for use in 
automating the control  and distribution of gas and electric power by utility 
companies.

The Company's investments in  E-SAT Corporation and Seimac Limited, in which
the Company has ownership interests  of 20% each, are  accounted  for using the
equity method.  The Company's investment in     Echostar    Communication  Inc.
(Echostar) and interest in Continental Satellite Corporation  were  disposed of
during 1997 (see Notes 3 and 5).


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Hereafter, unless otherwise specified, all references to the "Company" include,
DBS  Industries, Inc.  and  its  wholly- owned subsidiary.

USE OF ESTIMATES:

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

CASH EQUIVALENTS:

The  Company  considers   all  money market instruments and other  highly
liquid   investments  with  original maturities  of  three months or less
to be cash equivalents.

DEPRECIATION AND AMORTIZATION:

Furniture    and    equipment    are   depreciated   over   the   estimated
useful  lives of the assets  ranging  from five  to  seven years using the
straight-line       method        of   depreciation.    When   assets   are
disposed  of,  the  related cost and  accumulated depreciation are removed
from  the  books  and the  resulting   gain  or loss is recognized  in  the
year of disposal.


<PAGEF-10>


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,   continued:

GOODWILL:

Goodwill   is  amortized  using  the straight-line   method   over   five
years.  Amortization expense charged  to  operations  for  the years ended 
December  31,  1997  and   1996  was  $20,715 and $9,606, respectively.

INCOME TAXES:

Income  taxes  are accounted for  in accordance   with    Statement    of
Financial  Accounting  Standards No. 109,  ACCOUNTING  FOR  INCOME  TAXES
(SFAS No. 109).  Under SFAS No. 109, deferred income tax liabilities  and
assets  are  determined based on the difference  between   the  financial
reporting amounts and tax  bases  of assets  and  liabilities  that  will
result   in  taxable  or  deductible amounts in  the  future such amounts
are based on enacted  tax  laws  and rates  in  effect  for  the years in
which  the differences are  expected to  affect   taxable   income,   net
operating   loss   and   tax  credit carryforwards.  Valuation allowances
are  established  when necessary  to reduce deferred tax  assets  to  the
amounts  expected  to  be  realized. Income   tax   expense  is  the  tax
payable  for  the   period  and  the change during the period in deferred
tax assets and liabilities.

NET EARNINGS (LOSS) PER SHARE:

In  February  1997,  the   Financial Accounting  Standards  Board  issued
Statement  of  Financial  Accounting Standards  (SFAS)  No. 128, EARNINGS
PER    SHARE,    which   establishes standards    for    computing    and
presenting   earnings   (loss)   per  share.   Under  the  new  standards,
basic earnings per share is computed based on the weighted average number
of  common  shares  outstanding  and excludes  any  potential   dilution;
diluted  earnings per share reflects  potential dilution from the exercise
or  conversion  of  securities  into  common   stock.   SFAS  No.  128  is
effective  for  financial statements  issued  for  periods   ending  after
December   15,   1997   and  earlier  adoption  is  not  permitted.    The
financial  statements presented have  been prepared  in accordance in SFAS
No. 128 and earnings  per share data  for all prior periods presented have
been   restated   to  conform   with current year presentation.   Options
to   purchase  1,144,036  shares  of  common  stock  with  exercise prices
ranging  from  $1.60 to  $6.00  were  outstanding as of  December 31, 1996
and were excluded from  the loss per  share calculation for the year ended
December 31, 1996 as they  have  the  effect of decreasing loss per share.

RECENTLY      ISSUED      ACCOUNTING     PRONOUNCEMENTS:

In    March   1997,   Statement   of  Financial  Accounting  Standards No.
129, DISCLOSURE OF INFORMATION ABOUT  CAPITAL  STRUCTURE,  was issued  and
has been implemented by  the Company  for  the  year  ended  December  31,
1997.   In  June 1997, Statement  of  Financial Accounting  Standards  No.
130,  REPORTING COMPREHENSIVE INCOME  and    Statement     of    Financial
Accounting   Standards   No.    131,  DISCLOSURES  ABOUT  SEGMENTS  OF  AN
ENTERPRISE  AND  RELATED INFORMATION  were  issued and are  effective  for
the year ending December 31, 1998.


<PAGEF-11>


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,  continued:

RECENTLY      ISSUED      ACCOUNTING   PRONOUNCEMENTS, continued:

The  Company has not determined  the  impact   of  the  implementation  of
these pronouncements.

RECLASSIFICATIONS:

Certain prior  period  balances have  been reclassified to conform  to the
current  year's  presentation.  Such  reclassifications  had  no impact on
net loss or stockholders'  (deficit)  equity as previously reported.

3. INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES:

Following is a summary of the  Company's significant investment activities:

DIRECT     BROADCASTING    SATELLITE   CORPORATION (DBSC):

DBSC is one  of  nine  permittees of  the      Federal      Communications
Commission    (FCC)    for    Direct  Broadcast  Satellite (DBS) services.
As of December 31, 1996, the Company  owned  approximately   25%   of  the
common  stock  of DBSC.  The Company  accounted for its  investment  using
the  equity  method.   The Company's  net equity investment in  DBSC as of
December 31, 1996 was $539,080.

On  December  21,  1995,  DBSC   and  Echostar agreed to a merger, subject
to  government  approval.  Under the  terms of the merger  agreement,  (1)
both  parties  agreed  to merge DBSC  into  a  wholly owned subsidiary  of
Echostar,  and (2) DBSC shareholders  would  be  entitled  to  receive  at
their  option,   $7.99  in  cash  or  .67417  shares  of  Echostar  common
stock for each of the  973,148  DBSC  shares    not   already   owned   by
Echostar.  At December 31, 1996, the  Company owned  401,107 shares of the
common stock of DBSC.  The requisite  government approvals  were  obtained
and   the   merger   consummated  on  January  8,  1997.   On January  23,
1997,   the   Company   elected   to  exchange  all  of  its 401,107  DBSC
shares   for   270,414   shares   of  Echostar  common  stock  which   was
valued  at  $25.00  per  share as of  January 8, 1997, the effective  date
of  the  merger.  In connection with  this   transaction,    the   Company
recorded  a  gain  of  approximately  $6,200,000 in its first  quarter  of
1997.

On August 29, 1997,  the  Company  transferred the 270,414 shares back to
Echostar   in   exchange    for    the  retirement of certain debentures (Note
5)  and  recognized  a  loss  on  such transfer    of    approximately   $2.3
million.


<PAGEF-12>



                              DBS INDUSTRIES, INC. AND SUBSIDIARY

                                 (A DEVELOPMENT STAGE COMPANY)


                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




3. INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES, continued:

DIRECT    BROADCASTING     SATELLITE  CORPORATION (DBSC), continued:

Following  is  a  summary  of DBSC's  financial  position  as  of December
31, 1996:

                                                             DECEMBER 31,
                                                                 1996
                                                             (UNAUDITED)

                  Current assets                             $      20,046
                  Other assets                                  52,373,192
                                                             -------------
                     Total assets                            $  52,393,238
                                                             =============
 
                 Current liabilities                         $     186,748
                 Long-term debt                                 50,887,763
                 Stockholders' equity                            1,318,727
                                                             -------------
                    Total liabilities and stockholders'         
                      equity                                 $  52,393,238
                                                             =============

DBSC's losses for the year ended  December  31,  1996 (unaudited)   amounted  to
$310,172.

The  Company's  equity  in losses of DBSC was $76,922 for    the    year   ended
December 31, 1996  and was recorded in December  1996 when financial information
became available.

E-SAT CORPORATION (E-SAT):

In   October   1994,   the Company    and    Echostar  formed   E-SAT   for the
purpose of filing with the FCC   for   a  license  to operate a low  earth orbit
satellite  system.   E-SAT filed  with  the   FCC  on  November 16, 1994.  The
Company  holds   a    20% interest  in  E-SAT.   The Company's total investments
in  and advances   to  E-SAT  were  $127,265       as       of  December   31,  
1997   and  1996.   The investment  is accounted  for  using the equity  method.
The Company's equity in losses of  E-SAT  for  the  years ended  December  31,  
1997 and 1996  were $66,469 and $385,  respectively.   The equity in  losses 
for the years  ended December  31, 1997 and 1996 were  recorded  in December
1997 and  1996  when  financial information became available.  As of December
31, 1997, the Company  had a  receivable  of $632,865 from     Echostar    which
represents  the  excess of advances to date to  E-SAT in     excess    of    its
proportionate 20% share of its  investee's  financing requirements.

SEIMAC LIMITED:

On November  30, 1995, the Company  acquired  232,829 shares representing 20% of
the   voting   shares   of common   stock  of  Seimac Limited,    a     Canadian
company,  pursuant  to   a stock     purchase     and exchange    agreement   in
exchange    for    165,519 shares of common  stock of the  Company,  valued   at
$662,010.    The Company's investment of $662,010 was $464,255 in excess of  the
Company's    proportionate share  of  the  net   book value of Seimac


<PAGEF-13>



                              DBS INDUSTRIES, INC. AND SUBSIDIARY

                                 (A DEVELOPMENT STAGE COMPANY)


                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




3. INVESTMENTS IN AND ADVANCES TO  AFFILIATED COMPANIES, continued:

SEIMAC LIMITED, continued:

as  of  November 30, 1995. This   excess   is   being amortized over a period of
five      years.       The amortization    of    this excess book value amounted
to  $92,851  for the years ended  December  31,  1997 and 1996.  This investment
is accounted for using the equity method.

For   the    years   ended December   31,  1997   and 1996,   the  Company   has
recorded its proportionate share of  Seimac Limited's net   (loss)   income   of
$(14,506)   and   $45,387, respectively.          The Company's   investment  in
Seimac   Limited   as   of December 31, 1997 and 1996 was $510,689 and $618,046,
respectively.

Following   is  a  summary  of Seimac's  unaudited  financial position as  of  
December  31, 1997    and   1996   and   its  unaudited      results      of
operations for the years ended December 31, 1997 and 1996:



                                           DECEMBER 31,             DECEMBER 31,
                                              1997                     1996   
                                                          (UNAUDITED)

       Current assets                    $    1,037,165           $    1,201,477
       Other assets                             974,888                1,352,364
                                         --------------           --------------
           Total assets                  $    2,012,053           $    2,553,841
                                         ==============           ==============

       Current liabilities               $      329,887           $      469,421
       Long-term debt                           733,973                  597,407
       Shareholders' equity                     948,194                1,487,013
                                         --------------           --------------

                                         $    2,012,053           $    2,553,841
                                         ==============           ==============
       Net sales                         $    1,569,043           $    1,607,128
                                         ==============           ==============
       Net income (loss)                 $      (72,527)          $      226,935
                                         ==============           ==============

CONTINENTAL    SATELLITE  CORPORATION  (CONTINENTAL):

On January 12, 1996, the Company  entered  into a stock purchase agreement
with a third party  (the Seller)    to    acquire 72,030  shares of common
stock of  Continental in exchange  for approximately $2,300,000
in   cash.    A  $50,000 advance was paid  to the seller in December 1995.
Continental has received one   of  the  nine  DBS licenses  awarded by the
FCC.

In connection  with this agreement,  the  Company issued   a   three-year,
Series   B   convertible debenture  (Note  6)  to Echostar on  January 12,
1996  for  proceeds   of $3,000,000.


<PAGEF-14>


                              DBS INDUSTRIES, INC. AND SUBSIDIARY

                                 (A DEVELOPMENT STAGE COMPANY)


                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




3. INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES, continued:

CONTINENTAL SATELLITE  CORPORATION (CONTINENTAL),   continued:

On January 22, 1996, Loral Aerospace Holdings,  Inc.,   a  Continental   common
shareholder     (the plaintiff), filed  a complaint   in   the Superior   Court 
of the     State     of California   against Continental and  its shareholders
alleging   that  the common  shares purchased   by   the Company were
improperly    issued and, therefore, should   be  voided.  On May 16, 1996, the
Court ruled that the Continental   shares were invalidly issued.     However,
the Court also ruled that the Company was not without equitable remedy and
allowed  the Company to    commence    an action       against  Loral.

On  April  21, 1997, the  Superior  Court of    Santa  Clara County  awarded the
Company  damages  of approximately   $4.1 million,   plus   50  percent  annual
interest.  On August 17, 1997,    the Company  and   Loral formally   completed
an agreement wherein the Company received a  cash  payment  of approximately   
$3.5 million  from  Loral in exchange   for dismissals of appeals    by   both
parties.

The agreement provides  that   the Company  return  the Continental    stock
the Company acquired,  that  the Company  acknowledge that all Continental
stock  held  by  the Company   owned   is invalid,   and  that the Company  has
no objection   to   the cancellation of that stock by Continental.     The
parties to  the agreement   released one another from all present   or  future
claims connected with the allegations related to the action   which  give
rise to the agreement.

The excess of the settlement   payment over  the  Company's carrying  value  for
its  interest    in Continental  of $1.2 million was recorded as a gain on sale
of investment  for  the year ended December 31, 1997.

4. LINE OF CREDIT:

The Company  maintained  a $300,000  line  of  credit with a bank.  The line was
collateralized     by    a $300,000  certificate   of deposit.  As      of
December  31,  1996,   the Company   had  outstanding borrowings   of   $295,000
under this line of credit.  As of December 31, 1997, $295,000  had  been repaid
and  the  credit  facility was discontinued.


5. CONVERTIBLE DEBENTURES:

On July 1,  1995,  the Company issued Convertible Debenture 1995 Series A to
the  majority  shareholder of  E-SAT,  Echostar,  and received   $1,000,000   in
proceeds  pursuant to this issuance in  August  1995.  Interest   on   the  debt
accrued,  and was payable, quarterly at prime plus 2% for  a  period   of  three
years.  As collateral  for the loan, Echostar held  a security    interest    in
125,000   shares  of  DBSC common  stock   and  2,000 shares   of  E-SAT  common
stock held by the Company.



<PAGEF-15>



5. CONVERTIBLE DEBENTURES,  continued:

On January  12,  1996, the Company  issued  a  three-year  Series B Convertible
Debenture  to Echostar for proceeds  of   $3,000,000. Interest     terms    were
similar  to those  of  the Series    A    Convertible Debenture discussed above.
As   collateral  for   the loan,   Echostar   has   a security    interest    in
72,030  shares  of  common stock  of Continental  and 200,000  shares  of common
stock of DBSC held  by the Company.

On  December 5, 1996,  the Company  issued  a  three-year  Series C Convertible
Debenture  to Echostar for proceeds   of    $640,000.  Interest     terms were
similar  to those  of  the Series    A    Convertible  Debentures  discussed
above.  As collateral  for the loan, Echostar held  a security  interest  in the
remaining 76,107 shares of common stock of DBSC  held by the Company.

As  of  December 31, 1996, the Company classified all borrowings under the above
convertible  debentures as current liabilities due to the Company's  default  in
connection     with    the  required quarterly payment  of accrued interest.

The  interest  payable  to Echostar     under     the aforementioned  debentures
amounted to $405,794 as of December 31, 1996.

On  August  29, 1997,  the Company    completed    an agreement with Echostar to
retire  three  convertible debentures,    Series   A, Series  B,  and Series  C,
issued to  Echostar  with accrued    interest     of  $722,811 and certain legal
fees  and  other  expenses related to  the    transaction.   In exchange
for  Echostar's retirement of the  debt,  the Company transferred    back     to
Echostar 270,414 shares of Echostar  Class  A  common stock   and  made  a  cash
payment  of  approximately $936,000 from the proceeds of  its  settlement   with
Loral (Note 3).  The value of the Echostar shares was determined  based on a per
share   price  of   $16.57 which   represented    the closing   bid   price   on
August  27, 1997, the date the   parties    initially agreed to the terms of the
transaction.


6. COMMITMENTS:

OPERATING LEASES:

The Company and  its wholly-owned subsidiary, GEMS, lease their facilities under
noncancelable operating leases which run concurrently and expire in March
2000.   Minimum future   rental payments  under  the leases,    are    as
follows:

                     YEAR ENDING
                    DECEMBER 31,
                        1998                                $      68,130
                        1999                                       68,130
                        2000                                       11,355
                                                            -------------
                                                            $     147,615
                                                            =============


<PAGEF-16>


6. COMMITMENTS, continued:

Total rent expense was   $66,592  and $74,808   for  the years  ended
December  31, 1997 and 1996, respectively.

7. STOCKHOLDERS' EQUITY:

COMMON STOCK:

The Company's Certificate of Incorporation,  as amended   in   May 1997,   
authorizes the issuance of 20,000,000  shares of   common  stock with a  par  
value of $.0004 per share.   Each record  holder  of common   stock  is
entitled  to   one vote    for   each share held  on all matters   properly
submitted  to  the stockholders   for their vote.  Cumulative  voting
for  the  election of  directors   is not  permitted  by the Certificate of
Incorporation.

PREFERRED STOCK:

The Company's Certificate ofIncorporation,  as amended in May 1997,   authorizes
the  issuance   of 5,000,000   shares of preferred stock with par value  of
$.0004  per share.  The    Board    of Directors  of  the Company is
authorized to issue preferred stock from time to time in series and is further
authorized to establish such series, to fix and determine the variations  in the
relative    rights and preferences as between the series, and to allow for the
conversion of preferred stock into common stock. No preferred stock has been 
issued by the Company as  of December 31, 1997.

NONEMPLOYEE  STOCK WARRANTS:

On January 13, 1996,  the Company issued warrants for  the  purchase of 75,000  
shares of  the  Company's common stock at an exercise price  of $7.30.  On
December 31, 1997, the Company replaced these with new warrants at   an exercise
price   of  $1.44. These warrants were  issued   for services  rendered and are
exercisable through January 2006.  As of December  31, 1997 none    of   these
warrants have been exercised.

On  July 9,  1997, the Company issued warrants  for  the purchase of 200,000  
shares of the Company's common stock at an exercise price  of $0.50  per  share.
These warrants were issued in connection  with a $100,000 short-term loan made  
by a stockholder of the  Company.   As of   December  31, 1997, the loan had
been repaid.

None of the non-employee stock warrants were exercised as of December 31, 1997.


<PAGEF-17>



                              DBS INDUSTRIES, INC. AND SUBSIDIARY

                                 (A DEVELOPMENT STAGE COMPANY)


                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




7. STOCKHOLDERS' EQUITY,   continued:

EMPLOYEE     STOCK   OPTIONS        AND    WARRANTS:

On   February  15, 1996,  the Company adopted  the  1996 Stock  Option Plan
(the 1996 Plan) to consolidate    its three     existing plans.  Provisions
of  the 1996  Plan are  substantially similar  to  those of   the   earlier
plans.    The overall purpose of the  1996  plan is to   advance   the
long-term interest of  the Company by motivating its employees, directors and
consultants with the opportunity to obtain  an  equity interest   in  the
Company and to attract and retain such persons  upon whose    judgments
the success of the Company largely depends.

Eligible employees, directors, and consultants can receive options to purchase 
shares of the Company's common stock  at a price generally not less than 100%
and  85%  of   the fair  market value of   the    common stock on the  date
of  the  grant  of incentive    stock options and nonstatutory stock options,
respectively.  The 1996  Plan  allows for  the  issuance of  a  maximum  of
1,650,000   shares of  the  Company's common stock. This   number   of shares  
of  common stock   has   been reserved for issuance under the 1996   Plan.   
The options    granted under   the   1996 Plan are exercisable over a maximum   
term  of ten years from the date of grant  and generally vest over  (i) one year
in  the   case  of directors and consultants, and (ii) up to a five-year period 
in the case of employees. Shares  sold under the 1996  Plan are subject to 
various restrictions as to resale.

Information   with respect to activity under these plans as consolidated in
the  1996  Plan is set forth below:

<TABLE>
<CAPTION>
                                                                         Outstanding Options and Warrants
<S>             <C>                              <C>              <C>                 <C>                 <C>
                                                                                                          Weighted
                                                                                                          Average
                                                 Number of        Price Per           Aggregate           Exercise
                                                   SHARES           SHARE               PRICE             PRICE

              Balance, January 1, 1996               16,281       $0.40-$6.00         $   52,476          $3.40
                Options granted                   1,017,535       $4.75-$5.60          5,241,115           5.15
                Options exercised                      -               -                    -               -
                Options terminated                     -               -                    -               -
                                                  ---------                           ----------         

              Balance, December 31, 1996          1,180,116       $0.40-$6.00          5,793,591           4.91
                         
                Options granted                   1,373,843       $0.53-$1.44            980,835           0.71
                Options exercised                      -               -                   -                -
                Options terminated               (1,135,726)      $0.40-$6.00         (5,502,778)          4.83
                                                 ----------                           -----------      
 
              Balance, December 31, 1997          1,418,233       $0.40-$5.60       $  1,271,648           0.90
                                                 ==========                         ============
</TABLE>



<PAGEF-18>



                              DBS INDUSTRIES, INC. AND SUBSIDIARY

                                 (A DEVELOPMENT STAGE COMPANY)


                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




7. STOCKHOLDERS' EQUITY, continued:

EMPLOYEE   STOCK OPTIONS      AND WARRANTS, continued:

The    following table summarizes information with respect to stock options and
warrants outstanding   at December     31, 1997:

<TABLE>
<CAPTION>
                                                                              Options and Warrants
                               Options and Warrants Outstanding                    Exercisable
<S>     <C>         <C>            <C>             <C>            <C>           <C>    

                                   Weighted                        Weighted
                     Number        Average          Weighted       Number        Weighted
        Range of     Outstanding   Remaining        Average        Exercisable   Average
        EXERCISE     AT            Contractual      Exercise       AT            Exercise
        PRICE        12/31/97      Life (YEARS)     PRICE          12/31/97      PRICE
                                        
        $0.53-       1,342,949          8.19        $0.73          879,887       $0.79
        $1.44

        $1.60-          36,875          6.55        $2.39           36,875        2.39
        $2.80

        $3.00-          38,409          8.06        $5.23           38,409        5.23
        $5.60
                     ---------                                     -------
                     1,418,233                                     955,171
                     =========                                     =======

</TABLE>


The following information concerning the Company's stock option plans is
provided in accordance with Statement of Financial Accounting Standards
No.   123, ACCOUNTING FOR STOCK-BASED COMPENSATION (SFAS  No. 123).  The
Company accounts for   such plans   in accordance with   APB No. 25 and
related interpretations.

The weighted average fair value of the options and warrants granted or
modified  for the years ended December 31,   1997 and  1996, was  $0.90
and $4.62, respectively. The   fair value   of each stock  option  is
estimated on the date of grant using  the Black-Scholes option-pricing
model with the following weighted average assumptions:

                                    1997                1996

Risk free interest rate             5.70%               6.11%
Expected life                       8.2 years           5.5 years
Volatility                          80%                 104%
Dividend yield                       -                    -



<PAGEF-19>


                              DBS INDUSTRIES, INC. AND SUBSIDIARY

                                 (A DEVELOPMENT STAGE COMPANY)


                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




7. STOCKHOLDERS' EQUITY, continued:

EMPLOYEE STOCK OPTIONS AND WARRANTS, continued:

The  following pro forma  net income  (loss) information has been prepared
following  the provision   of SFAS No. 123:


                                              DECEMBER 31,          DECEMBER 31,
                                                   1997                 1996
Net income (loss)     As Reported             $3,068,917            $(3,752,583)

                      Pro forma               $3,036,571            $(5,916,026)

Net income (loss)     As Reported                $0.5234               $(0.6484)

  per share           Pro forma                  $0.5211               $(1.0223)


In February 1997, the Company completed a stock option repricing program in
which 1,119,646 stock options, originally issued with exercise prices ranging
from $1.60 to $6.00 per share, were reissued with an exercise price of $1.44
per share, which approximated fair market value.

In December 1997, the Company completed a second voluntary stock option
repricing program in which approximately 1,135,726 stock options, originally
issued with an exercise price of $1.44 per share were reissued with exercise
prices ranging from $0.53 to $0.58 per share.  These repriced options are
generally exercisable over four years and the Company has maintained  the
vesting schedule from the original grants.

8. RELATED  PARTY  TRANSACTIONS:

In August 1995, the Company entered into consulting agreements with  two
directors of the Company.  The Company incurred approximately $29,000
in consulting expenses in connection with these agreements during the  year
ended December 31, 1996.  In January 1997, the Company began  to defer payment
of a portion of all future compensation of the Company's president.  The
deferred compensation balances were $216,000 and $108,000 as of December 31,  
1997 and 1996, respectively.

On  April 28, 1997, the Company's president provided a  bridge loan   to
the Company for $47,750 representing collateral funds pledged to Pacific
Bank  for the Company's bank overdraft. As  of December 31, 1997, both  the
bank overdraft and   the bridge loan have been repaid.


<PAGEF-20>


                              DBS INDUSTRIES, INC. AND SUBSIDIARY

                                 (A DEVELOPMENT STAGE COMPANY)


                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



8. RELATED PARTY TRANSACTIONS, continued:

During 1997, the Company borrowed $100,000 under   a loan agreement with    a
stockholder.  Borrowings under the agreement were unsecured and  bore interest
at 8% per annum. All borrowings and accrued interest were repaid as of December
31, 1997.

Refer  to Notes   3 and     6 (DBSC and E-SAT) for disclosures regarding related
party transactions   with EchoStar.


9. INCOME TAXES:

The provision for income taxes for all periods presented relates to current
minimum taxes.

The estimated tax effect of significant temporary differences and carryforwards
that gave rise   to deferred income tax assets as of December 31,  1997 and  
1996 is as  follows:

<TABLE>
<CAPTION>
                                                   DECEMBER 31, 1997            DECEMBER 31, 1996
<S>     <C>                              <C>   <C>        <C>  <C>      <C>  <C>       <C>  <C>
                                      FEDERAL    STATE     FEDERAL    STATE
Deferred tax liability                    -         -           -              -
Deferred tax assets:
  Net operating loss carryforwards     706,000   108,000   1,700,000   165,000
  Research and development credit       95,000      -         79,000    35,000
    carryforwards
  Excess of tax over book basis of
    investments, and other deferred     12,000     2,000     300,000    55,000
    compensation
                                       -------   -------  ----------   -------
      Net deferred tax assets          813,000   110,000   2,079,000   255,000
                                                                         
Valuation allowance                   (813,000) (110,000) (2,079,000) (255,000)
                                      --------  --------  ----------  --------  
      Net deferred tax                    -         -           -         -
                                      ========  ========  ==========  ========


Due to the uncertainty of realization, a valuation allowance has been provided
to offset the net deferred tax assets. The (decrease) increase in the valuation
allowance was approximately $(1,411,000) and $1,402,000 during the years ended
December 31, 1997 and 1996, respectively. The provision for income taxes differs
from the amount which would arise by applying the combined statutory income tax
rate of approximately 40% due to changes in the deferred tax valuation
allowance.

As  of December 31, 1997, the Company has net operating loss carryforwards of
approximately $2,078,000 and $1,758,000 for federal income tax purposes and 
California state franchise tax purposes, respectively. The Company has also
research and development credit carryforwards of $95,000 and $0 for federal
income tax purposes and California state franchise tax purposes, respectively.
Such carryforwards expire in varying amounts between 1998 and 2012.


<PAGEF-21>



9. INCOME TAXES,  continued:

As a result of changes enacted by the 1986 Tax Reform Act, utilization of net
operating loss and tax credit carryforwards may be limited due to equity
transactions occurring on  or after May 6, 1986.


10. CONCENTRATION OF CREDIT RISK:

The Company periodically maintains cash balances at banks in excess of the
Federal Deposit Insurance Corporation insurance limit of $100,000.

Sales to one customer represented all Company sales in the year ended
December 31, 1996.

11. SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:

During the year ended December 31, 1996, the following noncash activities
occurred:

The Company issued 41,187 of its shares of common stock to certain
individuals in consideration for services rendered. These  shares  were
valued at $156,380.

The Company issued warrants to certain individuals in consideration  for
services rendered.  These  warrants  were  valued  at  $112,500.

The  Company  issued  19,821  shares  of  common  stock  to  certain
individuals  for  services  rendered  in   connection   with the
placement  of  the  January  and  February  1996  sales  of  the
Company's  common  stock.  These  services  were  valued   at  $83,899
and  were  offset  against  the  proceeds.

The Company issued 55,419 of its shares of common stock to certain individuals
in consideration for services rendered. These shares were valued at $76,293.

On January 23, 1997, the Company elected to exchange all of its 401,107 DBSC 
shares for 270,414 shares of Echostar common stock which were valued at
approximately $539,000 and $6,760,000, respectively.

On August 29, 1997, the Company settled all principal and accrued interest
balances outstanding under its convertible debentures (Note 6), in exchange
for 270,414 shares of Echostar common stock and  a cash payment of approximately
$936,000.

12.  SUBSEQUENT   EVENTS:

In January 1998, the Company created Newstar Limited, a wholly owned subsidiary
organized under the Laws of the Republic of Bermuda.

In April 1998, the Federal Communications Commission approved E-SAT's
application for  a Low Earth Orbit Satellite license.




</TABLE>