CONFORMED COPY

                       FORM 10-KSB

           SECURITIES AND EXCHANGE COMMISSION

                  WASHINGTON DC. 20549

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

For the twelve month period ending December 31, 1996

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, 1997 the  aggregate market value for the 4,794,999 shares
of the common stock, par value $.0004 per share,  held  by  non-affiliates  was
approximately $7,791,873.

      The  number  of  shares  outstanding of registrant's only class of common
stock, as of March 31, 1997 was 5,821,003 shares of its common stock, par value
$.0004 per share.

      DOCUMENTS INCORPORATED BY REFERENCE: NONE

      Exhibit Index is located at Page 15.





<PAGE>2
                                    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 and home security systems.  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. ("E-SAT").   Further
reference to the Company will also include its subsidiary,  GEMS, unless stated
otherwise.

      Of  slightly  less significance is the Company's interest  in  commercial
broadcasting by use of  direct broadcast satellite ("DBS") technology.  This is
primarily  accomplished  through  the  Company's  investment  in  DBS  licensee
EchoStar Communications Corporation  ("EchoStar")  and  potential  DBS licensee
Continental Satellite Corporation ("Continental").

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

A1.   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.  Currently,  the  FCC  has  approved  3  LEO  satellite
license  applications  for  data  transmission  and  has  received 4 additional
applications, including E-SAT's.  The applications currently  with  the FCC all
request  approval  for  essentially the same frequency band, but propose  using
different communication schemes.   The  commercial  use of LEO satellites is in
its  infancy  worldwide.  Competition will be driven by  the  ability  of  each
license holder  to  build  and  launch  their  LEO  satellites  and by the data
services they propose to provide.

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 utilizing LEO satellite technology.
In 1996, GEMS entered into  an  agreement  with  the City of Alameda, Bureau of
Electricity, ("Bureau") in California to provide a  5  month trial reading of 4
electric meters.

      GEMS also received, in 1996, a purchase order for 10,000 LEO transmitters
from  ABB  Power  T&D Company, Inc. ("ABB") for inclusion in  electric  meters.
(See ITEM 6. "Management  Discussion  and  Analysis  of Financial Condition and
Results of Operation".)  Additionally, the Company has  an agreement with North
American  CLS,  Inc.  ("NACLS"), providing a limited amount  of  LEO  satellite
capacity for AMR applications utilizing the Argos System-the satellite location
and data collection system  under  the  control of the Centre National d'Etudes
Spatiales  (France), and the National Oceanic  and  Atmospheric  Administration
("NOAA").  The  Argos  System has 4 receivers on board 3 LEO weather satellites
owned by NOAA and operated  by  the  National Aeronautical Space Administration
("NASA").  Unlike the proposed E-SAT technology,  which  would  provide two way
communication to small earth based terminals, the ARGOS system can only receive
one  way  communications  from small earth based transmitters.  This  agreement
expires December 31, 1997.   Although the Company intends to eventually operate
its  AMR  system  utilizing  other  LEO  satellites,  currently  there  are  no
agreements in place to secure such satellites.  Prior to the anticipated end of
the NACLS agreement, the Company  will  need to obtain the use of a replacement
satellite.  No assurances can be given that  a  replacement  will  be available
when  required  or,  if available, that it will be on terms acceptable  to  the
Company.

<PAGE>3

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  smaller  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.

      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.  The Company has granted ABB exclusive  rights  to
market  GEMS'  equipment  in  conjunction  with  electric  meters in the United
States.  In turn, GEMS will be responsible for providing remote  reading of all
ABB  placed  electrical  meters  with  Argos  satellite  transmitters  and  for
providing the meter information to subscribing utility companies.

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.

      Approximately  30  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, unlicensed  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.

      Once  electric meters with embedded LEO satellite transmitters are  fully
developed, the  Company  expects to market the meters using ABB's marketing and
sales  staff.   ABB currently  has  exclusive  marketing  rights  to  the  GEMS
technology in electric  meters in the United States and non exclusive marketing
rights worldwide.  GEMS also  anticipates  that its own marketing staff will be
making initial customer contacts and working  to  obtain  orders for electrical
AMR services.

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  an  Argos satellite.  (See Note 4 to the
Company's 1996 Consolidated Financial Statements.)

D.    OWNERSHIP IN E-SAT, INC.

      E-SAT, a Colorado corporation established  in  1994,  is owned 20% by the
Company and 80% by EchoStar.  In November 1994, E-SAT filed an application with
the  FCC  for a license to develop a commercial LEO satellite system  for  data
transmission.   Three companies, in a first round of FCC applications submitted
in 1992, were granted  data transmission LEO permits in 1993 and 1994.  E-SAT's
application was one of four second round applications taken under consideration
by the FCC.  All four second  round  applicants  seek  the same frequency bands
comprising the total remaining frequencies available in  the  United States, in
accordance with international agreements, for data transmission  by  LEOs.  The
total  capital requirements for the proposed network, including the anticipated
six satellites  and  start  up  costs,  is estimated to exceed $60 million.  In
1996, the Company funded E-SAT expenses of  $238,786, which is greater than 20%
of the total expenses to date.  The Company's  percentage of ownership in E-SAT
is 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  requirements to maintain a leased interest in E-SAT capacity.  (See Note 4
to the Company's 1996 Consolidated Financial Statements.)

<PAGE>4

E.    OWNERSHIP   IN   ECHOSTAR   COMMUNICATIONS  CORPORATION  AND  CONTINENTAL
SATELLITE CORPORATION, INC.

      The Company now owns 270,414 shares of EchoStar Class A Common Stock as a
result of the merger between Direct Broadcasting Satellite Corporation ("DBSC")
and EchoStar.  On December 31, 1996,  the  Securities  and  Exchange Commission
approved  the  EchoStar  registration  statement for the issuance  of  EchoStar
shares to DBSC shareholders and the merger was formally completed on January 8,
1997.   Prior  to  the  merger, the Company  owned  approximately  25%  of  the
outstanding shares of DBSC.   EchoStar  has  been  a  DBS broadcaster since the
unveiling  of  its service, the "DISH Network," in March  1996.   In  addition,
EchoStar,  through   DBSC,  is  now  the  holder  of  a  conditional  satellite
construction permit and has a contract with Lockheed Martin Corporation for the
construction of two additional  satellites,  with  an anticipated launch of the
first satellite in the Fall of 1997.

      In January 1996 the Company purchased 72,030 shares  of  Continental from
Intraspace Corporation for approximately $2.3 million dollars.  Continental has
received an FCC permit for 11 frequencies for DBS service at 61.5  degrees W.L.
and 11 frequencies at 166 degrees W.L. and has entered into a contract  for the
construction of 2 satellites.

      The  Company's  ownership  interest  in  Continental  and  the control of
Continental's  FCC permit are being disputed by Loral Aerospace Holdings,  Inc.
("Loral"), a subsidiary  of  Loral  Corporation.   Loral filed suit in Superior
Court of the State of California in and for the County  of  Santa Clara, in San
Jose, California, to resolve the matter.  Continental shares issued on or after
September 15, 1995, including the Company's shares, were deemed  invalid by the
judge in the action, however, it was also indicated that the Company  may  have
an  equitable  interest in Continental.  Intraspace has agreed to indemnify the
Company against  the  potential loss of its ownership position and its incurred
legal fees. (See "Legal Proceedings".)

E1.   DBS INDUSTRY BACKGROUND

      DBS service provides high-powered signals sent directly to the home.  DBS
delivers high quality video  and  audio signals which can be received by an 18"
inch dish with little signal interference  and,  depending  on  the satellite's
orbital  location,  can  be broadcast throughout the Continental United  States
from a single satellite.   Eight  satellite orbital slots have been reserved by
the FCC to provide DBS service in the United States.

      The FCC has granted conditional  satellite  construction  permits to nine
applicants, including Continental and EchoStar (through DBSC), to implement new
or  additional  DBS  service.   Under  these  grants, each permittee was  given
exclusive rights to certain frequency band widths  to  transmit digital signals
from DBS satellites located at assigned orbital slots.   A  permittee  who  has
completed and successfully launched a DBS satellite will be issued a license by
the FCC for a renewable term of 10 years.  Prior to licensing, the FCC requires
all  permittees to maintain a valid satellite construction contract and to meet
specific  schedules  for  completion and launch of their satellite.  Permittees
who fail in their efforts to  meet  these  requirements  may have their permits
revoked and the frequencies sold at public auction.  In January  1996,  the FCC
accepted  aggregate  bids  of  $734.8 million for 52 formerly held frequencies.
MCI  bid  $682.5  million for 28 frequencies  at  110  degrees  West  Longitude
("W.L.") or approximately  $25  million  per  frequency, and EchoStar bid $52.3
million for 24 frequencies at 148 degrees W.L.  or approximately $2 million per
frequency.  MCI paid a premium on the orbital slot  because the signal from one
satellite at that location can reach the entire Continental United States.

E2.   DBS MARKET AND COMPETITION

      Competition comes from numerous companies engaged  in  communications and
entertainment,  including cable operators, other satellite providers,  wireless
cable operators,  television networks and home video product companies, as well
as companies developing  new  technologies.  The FCC auction results have shown
that telecommunications companies  are willing to spend a substantial amount of
money to enter into the home entertainment market.

E3.   THE COMPANY'S STRATEGIC PLAN FOR DBS

      The Company is not a DBS permittee  and  the  Company's  interest  in DBS
permits  is  solely through its interest in EchoStar and its potential interest
in Continental.


<PAGE>5

F. EMPLOYEES

      The Company and its subsidiary currently employ 8 people full-time.

ITEM 2. PROPERTIES

      On March  1,  1997,  the  Company  and GEMS leased 2,271 square feet at a
monthly rate of $5,677.50 for their principal  offices  at  100 Shoreline Hwy.,
Suite  190-A, Mill Valley, California on a 3-year lease which  will  expire  in
March 2000.

ITEM 3. LEGAL PROCEEDINGS

      On  January  12, 1996, the Company acquired 72,030 shares of common stock
of Continental which  the  Company  believed  represented  an  approximate  34%
interest in Continental Satellite Corporation ("Continental").  Continental has
a conditional construction permit to construct and launch DBS satellites in two
orbital  locations  which will thereafter entitle it to receive one of the nine
DBS licenses awarded  or  to  be  awarded by the FCC.  The Company acquired the
72,030 shares of common stock of Continental  from  Intraspace  Corporation for
approximately $2.3 million pursuant to a stock purchase agreement.

      The  Company  financed  the  purchase of the 72,030 shares of Continental
common  stock  pursuant  to  a three-year,  $3  million  Series  B  convertible
debenture   (the   "Convertible  Debenture")   with   EchoStar   Communications
Corporation ("EchoStar").  The Convertible Debenture bears interest at the rate
of prime, plus 2% on  the  outstanding balance.  Interest only payments are due
on a quarterly basis and the  Convertible Debenture is due on January 12, 1999.
With consent of the holder, the  Company  may extend the due date in additional
one year increments.  At the election of the  holder,  the  holder  may receive
interest  payments  in  the  form  of common stock of the Company based on  the
average closing bid price during the  quarter.  In addition, the holder has the
right to convert the Convertible Debenture,  plus  any  accrued  interest, into
common  stock  of the Company at $7.20 per share subject to adjustment  due  to
standard anti-dilutive  provisions.   The  Convertible  Debenture is subject to
subordination in the event the Company seeks certain types  of  financing.  The
Company  may  redeem  the  Convertible  Debenture  at any time, the Convertible
Debenture is secured by the Company's shares of EchoStar.

      On  January 22, 1996, Loral Aerospace Holding,  Inc.  ("Loral")  filed  a
complaint in  the  Superior  Court  of  the  State of California In and For the
County of Santa Clara (No. CV755366) against Continental  and its shareholders.
The   complaint  seeks  declaratory  relief  to  declare  that  rescission   by
Continental  of  a share certificate issued to Loral is invalid, that a meeting
of Continental's shareholders  was  not  properly  noticed  and  therefore  the
meeting  and  the actions taken at such meeting were invalid, that Loral should
be deemed a 51%  shareholder of Continental in accordance with a prior judgment
involving Loral and  Continental,  that  certain  shares issued by Continental,
including  the  72,030  shares  of  common  stock  issued   to  Intraspace  and
subsequently  purchased by the Company, were improperly issued  and  should  be
voided, and that  a  constructive  trust should be imposed on 51% of the common
stock  issued  to  defendant  shareholders.   Loral  also  sought  a  temporary
restraining  order  preventing  Continental  from  taking  certain  actions  in
connection  with  its  common  stock   including   recording  any  transfer  of
Continental common stock on its books and records.   The  Company was not named
as a defendant in the complaint.

      On  January  22,  1996,  the judge granted a temporary restraining  order
preventing Continental from issuing,  transferring or otherwise recognizing any
transfer on its books and records of its  common  stock without court approval.
The temporary restraining order remained in effect until January 26, 1996.

      On January 26, 1996, the judge issued a new temporary  restraining  order
preventing  Continental  from  issuing  any  new  Continental shares that would
dilute Loral's stock interest without first providing  written  notice  of  its
intent  to  Loral.  Within 72 hours from written notice, Loral has the right to
acquire, under  the  same terms and conditions, the Continental shares proposed
to be issued.  Loral must  exercise  its  right to acquire additional shares of
Continental within the 72 hour period following  the  notice or such right will
be waived.  The first right of refusal to acquire any proposed  new issuance of
Continental shares shall apply only to the extent that Loral's interest remains
below  51%  of  the issued and outstanding shares of Continental.  Further  any
shares of Continental acquired by Loral pursuant to this first right of refusal
is subject to rescission by the Court.

      At the January  26, 1996 hearing, the judge also scheduled a February 13,
1996 hearing date for consideration of the request for a preliminary injunction
sought by Loral to prevent Continental from taking certain action in connection
with its common stock including  recording  any  transfer of Continental common
stock on its books and records.

<PAGE>6

      On  May  16, 1996, the judge ruled in favor of  Loral's  claim  that  all
shares of Continental  issued  on  or  after  September 15, 1995, including the
72,030 shares of common stock issued to Intraspace  Corporation and sold to the
Company,  are  invalid.   The  judge  based  his decision upon  the  fact  that
Continental did not obtain proper shareholder approval to amend its Articles of
Incorporation to increase the number of shares  of  common  stock  that  may be
issued.   However,  the judge further stated that although the Company's shares
in Continental were invalidly  issued,  Intraspace  Corporation and the Company
are not necessarily without an equitable remedy for their contributions.

      The Company believes it has a contingent right  in Continental.  However,
the Company's contingent right in Continental, if any,  will  not be determined
until  the  litigation  has  been  completed.   Pursuant to the stock  purchase
agreement  entered  into  between  Intraspace  Corporation   and  the  Company,
Intraspace Corporation agreed to defend and indemnify the Company  in the event
that there was a breach or inaccuracy of any representation made by  Intraspace
Corporation  in  the  agreement.   In  the  event  the  Company's  interest  in
Continental  is not recognized, the Company may seek indemnity and damages from
Intraspace  Corporation   pursuant  to  the  stock  purchase  agreement,  since
Intraspace Corporation indicated  therein that it had good and marketable title
to the 72,030 shares of Continental.

      Although  the  Company  is confident  of  its  position  in  these  legal
proceedings, as with all litigation,  there  are  no  assurances  of success or
guarantees as to the final outcome.

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.

                                                Common
            QUARTER ENDED                 HIGH BID    LOW BID

            April 30, 1995                  2.00      .40
            July 31, 1995                   1.60      .40
            October 31, 1995                2.30      .40
            December 31, 1995               6.00      .40
            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

      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, 1997, the Company had approximately 528 shareholders of
record.  This number  does  not  include  shareholders  who  hold the Company's
securities in street name.


<PAGE>7

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

GENERAL

      On  January  8,  1997,  the merger between Direct Broadcasting  Satellite
Corporation ("DBSC") and EchoStar  Communications  Corporation ("EchoStar") was
formally completed.  The Company owned approximately  25%  of  the  outstanding
shares  of  DBSC  at  December 31, 1996 and as a result of the merger now  owns
270,414 shares of EchoStar  Class  A  Common  Stock  ("EchoStar  Shares").  The
EchoStar  Shares are currently pledged as security for certain of the Company's
debentures  and  are,  therefore,  held  in an escrow account. EchoStar (NASDAQ
symbol: DISH) stock was trading at approximately $25.00 per share on January 8,
1997.  The merger resulted in a net gain to  the  Company of approximately $6.2
million, increasing its assets by the same amount.   The  effect  of the merger
will be reflected in the Company's first quarter 1997 financial statements.

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, prior to the DBSC
and EchoStar merger, 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
$293,000   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, and (vii) gross
proceeds  of  $4,640,000  from  the  sale  of a three convertible  debentures..
Additionally, the Company has an established  line  of credit for $300,000 from
Pacific  Bank,  Burlingame, California, collateralized  by  a  restricted  cash
deposit in the amount of $300,000.  As of December 31, 1996, $295,000 was drawn
from this credit facility.

      Stockholders'  deficit  at  December  31, 1996 was $2,273.169 compared to
stockholders' equity of $210,532 at December  31,  1995.   Although the Company
sold  $1  million  of common stock in the first quarter of 1996,  stockholder's
equity decreased due  to  the  1996  net  loss  of  approximately $3.8 million.
Subsequent  to  year  end,  the net gain resulting from the  DBSC  merger  with
EchoStar, is expected to increase  stockholder's  equity  by approximately $6.2
million, based upon the trading price of EchoStar shares on  January  8,  1997.
However,  the Company continues to incur approximately $300,000 to $400,000  of
monthly operating  costs  which  will  continually  act to reduce stockholder's
equity in the absence of the sale of additional equity.

      The consolidated balance sheet as of December 31,  1996 reflects cash and
cash equivalents of $402,588 compared to $3,743 as of December  31, 1995.  Cash
will  continue to be used by the Company for the ongoing development  of  GEMS'
automatic   meter   reading   ("AMR")  business  and  the  Company's  operating
activities.  The Company anticipates monthly expenses of approximately $300,000
to $400,000 to continue for the  balance  of 1997.  This includes approximately
$50,000 per month for operating expenses, $150,000  per  month  for  legal  and
consulting  expenses,  and $150,000 per month for GEMS' research & development.
Accordingly,  cash  resources  presently  available  to  the  Company  are  not
sufficient to continue  operations  at  their  projected  level, and additional
capital will be necessary to expand operations or continue  current operations.
In  addition  to  the ongoing legal costs necessary to defend its  interest  in
Continental and legal  and  consulting  costs  deemed advisable to maintain its
interest  in  FCC  licenses and pursue pending FCC  applications,  the  Company
expects the development  of  a  low earth orbit satellite transmitter scheduled
for  completion  in  mid  1997  to  cost   approximately   $650,000,  of  which
approximately  $550,000  has  already  been expended as of December  31,  1996.
Although the Company earned revenue of approximately  $11,420  from the sale of
satellite radio units during the quarter ended September 30, 1996,  it does not
expect  its  automated  meter  reading  operations  to  produce any significant
revenue  in  1997  or  become  profitable  until 1999 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  is eligible to receive up to $500,000 towards development  costs  upon
meeting the  milestone  requirements of the contract.  As of December 31, 1996,
the Company has met the first  four milestones of the contract and has received
$400,000 in cash. These funds are currently classified as unearned revenue, and
all such milestone payments are  subject to refund if the Company fails to meet
certain development and delivery milestones.   Unless  and until the Company is
able  to raise additional funds 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


<PAGE>8

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.   The  Company now
owns 270,414 shares of EchoStar Class A common stock as a result of the  merger
of  DBSC  and EchoStar, as described above (see Item 6. General). As of January
8, 1997, shares  of  EchoStar common stock traded on the Nasdaq National Market
System under the trading  symbol "DISH", at a price of approximately $25.00 per
share.  All of the shares of  EchoStar common stock received as a result of the
merger have been pledged to secure certain of the Company's debentures and are,
therefore, held in an escrow account.

      Total assets at December  31, 1996 were $4,629,177 compared to $1,839,060
at  December  31,  1995.  The largest  components  of  total  assets  represent
investments in and advances  to  affiliated companies of $1,496,524 compared to
$1,349,312 at December 31, 1995, and  other  assets  of $2,292,409 at September
30, 1996 compared to $62,996 at December 31, 1995.  Other  assets  increased by
approximately   $2.2  million  which  represents  the  purchase  price  of  the
Continental  common   shares.   (See  note  4  to  the  consolidated  financial
statements.)   Total current assets  increased  from  $355,898  at December 31,
1995 to $771,532 at December 31, 1996.

      Net  cash  used  in  operating  activities  of  $1.6 million during  1996
resulted from the Company's net loss of $3.8 million offset  somewhat  by  non-
cash  charges of $393,000, increases in liabilities of $1,239,000, and deferred
revenues of $400,000.

      Net  cash  used  in  investing  activities  of  $2.6  million during 1996
resulted  primarily  from the Company's purchase of shares of common  stock  of
Continental Satellite  Corporation,  Inc.  (see Item 1 "Business" and Note 4 to
the  Company's 1996 Consolidated Financial Statements)  for  $2.3  million  and
investments in and advances to affiliates of $284,000.

      Cash  provided  by  financing  activities  of  $4.6  million  during 1996
resulted from the issuance of debentures to EchoStar for $3.6 million  and  the
sale  of  shares  of  the  Company's  common stock in a private placement of $1
million.

RESULTS OF OPERATIONS

      The Company remains in the development  stage  and  did  not generate any
revenues other than $11,420 earned by GEMS, nor any net interest  earnings  for
the  year  ended  December  31,  1996.   There were no revenues or net interest
earnings for the year ended December 31, 1995.

      The  Company's  net  loss  for  the year  ended  December  31,  1996  was
$3,752,583 compared to a net loss for the  five month period ended December 31,
1995 of $662,877 and $1,284,588 for the twelve  month  period  ended  July  31,
1995.  General  and  administrative  costs  were  $2,245,588 for the year ended
December 31, 1996 compared to $334,694 for the five month period ended December
31,1995 and $693,851 for the twelve months ended July  31,  1995.  Research and
development  costs  associated  with  GEMS were $1,078,747 for the  year  ended
December 31, 1996 compared to $219,143 for the five month period ended December
31, 1995 and $461,061 for the twelve month  period  ended  July 31, 1995.  Loss
from operations was $3,323,765 for the year ended December 31, 1996 compared to
$553,837 for the five month period ended December 31, 1995 and  $1,164,912  for
the twelve month period ended July 31, 1995.

      The Company's accumulated deficit at December 31, 1996 rose to $6,908,046
from  $3,155,463  at  December  31,  1995  and  it is believed 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.  As a result of the
DBSC merger with EchoStar, the Company received 270,414  shares of common stock
of EchoStar which resulted in a net gain to the Company of  approximately  $6.2
million,  which will be reflected in the Company's 1997 first quarter financial
statements.  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


<PAGE>9
                        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, Chief           54   December 1992 - present
                       Executive Officer and
                       Chief Financial Officer         November 1993 -present

Michael T. Schieber    Director                   57   December 1992 - present
                       Secretary

Bruce Christopher      Director                   42   August 1994 - present

E.A. James Peretti     Director, President and    54   February 1996 - present
                       Chief Executive Officer, 
                       GEMS

H. Tate Holt           Director                   45   February 1996 - present

The Company  adopted  staggered  terms  for  its Board of Directors at the 1996
Annual Stockholders Meeting.  Mr. Christopher  will serve until the next annual
meeting of stockholders or until his successor is  elected.   Messrs.  Schieber
and  Holt  will  serve  until  the 1998 annual meeting of stockholders or until
their successors have been elected, and Messrs. Thompson and Peretti will serve
until the 1999 annual meeting of  stockholders  or  until their successors have
been elected.

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 Engineer                 42   January 1996 - present
                  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.  Mr. Thompson also serves as a member of the Board of Directors of
Continental Satellite Corporation and is vice-president  of E-Sat, Inc.  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


<PAGE>10

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.  He has served as the Managing  General  Partner of ZAMSTL
Partners, a real estate development firm in Washington State since  June  1991,
and has also served since 1986 as a Director on the Executive Board of Sterling
Communications,  the  winner  of  a  rural  cellular  telephone license for Sun
Valley,  Idaho.   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.

      BRUCE  CHRISTOPHER,  DIRECTOR, has been working as a marketing consultant
over the past seven years.   Mr.  Christopher  has been instrumental in raising
capital,  attracting  technology  partners and generating  business  plans  for
several technology based start-up companies.   He  started  his  career in 1977
working  in  various  Sales  and  Marketing  roles  beginning  with  IBM, Texas
Instruments,  and  Hewlett-Packard  Company.   Mr.  Christopher has been a  key
contributor to the successful launching, managing and selling of companies such
as  Mountain  Computer,  Inc.,  Micro  Integration  Corp.,   and   Mass  Memory
Technology.  His management efforts have been utilized as the Vice President of
North  American  Sales  at  Anamartic Ltd. and North American Sales Manager  at
Ferranti Electronics Ltd.  For  the  past  nine years, Mr. Christopher has been
working as a sales and marketing consultant  to  various  start-up companies in
Silicon Valley and is currently setting up a new company to provide engineering
services  and  chip design consulting services in Los Gatos,  California.   Mr.
Christopher graduated  with  a BS degree in Psychology from California Lutheran
University.

      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.

      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 research and
development of providing worldwide turnkey services to  utilities,  gas and oil
well  operators,  and  bulk  energy distributors and users for the measurement,
transmissions and processing of  wellhead  data.   During 14 years at PG&E, his
experience included being the Project Manager for the  energy  gas and electric
automation throughout PG&E, automatic meter reading and time use control, real-
time  pricing,  tamper  detection,  and  distribution generation dispatch.   He
formulated strategic and financial justification, planned the implementation of

<PAGE>11

systems,  and  presented  technological  advancements   regarding  distribution
automation at PG&E and throughout the utility industry.   Prior to that, he was
a  Gas and Electric Engineering Supervisor, controlling an $18  million  annual
budget,  and  was  the project manager of the Cell Net project, a joint venture
with  Digital Automation  Company  which  was  the  forerunner  of  the  Energy
Communication  Network  Project.  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, 1996, 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
Chief Executive Officer 1996    $180,000(3)              $    4,245       312,500
                        1995(4) $  30,000                $    2,577         4,500
                        1995    $  72,000                $    6,521             0
                        1994    $  72,000                $    7,086         8,125

E.A. James Peretti
CEO GEMS                1996    $155,000                 $      971       375,000

Randall Smith
Executive VP. GEMS      1996    $125,000                 $    2,216       125,000
</TABLE>

(1)  Consists entirely of payment of insurance premiums.
(2)  Common stock of DBS Industries, Inc.
(3)  $72,000  paid  in  cash,  $108,000  deferred  pursuant  to his employment
     agreement
(4)  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 $72,000 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.

<PAGE>12

(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,
during the  lifetime  of  the  optionee,  only  so long as the optionee remains
employed by the Company.  No option is transferable  by the optionee other than
by will or the laws of descent and distribution.

      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 of its 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  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.

                  OPTIONS 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  Grant Date
NAME               1996        YEAR        ($/SH)*   DATE        PRESENT VALUE

Fred W. Thompson   312,500     31.1%       $2.00     Jan 2006    $450,000
President, CEO

E.A. James Peretti 375,000     37.32%      $2.00     Jan 2006    $540,000
CEO GEMS

Randall Smith      125,000     12.44%      $2.00     Jan 2006    $180,000
Exec. VP GEMS

*Reflects exercise price on December  31, 1996.  The exercise price was amended
to $1.4375 in February 1997.

<PAGE>13

                        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, 1996  Options at December 31, 1996

Fred W. Thompson        87,315 / 244,685                 $0 / $0
President, CEO

E.A. James Peretti     150,000 / 225,000                 $0 / $0
CEO GEMS

Randall Smith           72,016 /  91,734            $27,520* / $32,480*
Exec. VP GEMS

*Reflects exercise price of $2.00 per share on December 31, 1996.  The exercise
price was amended to $1.4375 per share in February 1997.


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.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

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

      As  of  March  31,  1997, 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, 1997, and
all options and warrants exercisable through May 30, 1997.


                  Name and Address of     Beneficially and  Percent
TITLE OF CLASS    BENEFICIAL OWNER        RECORD OWNED      OF CLASS

Common Stock      Fred W. Thompson        766,313  (1)      11.9%
                  109 William Avenue
                  Larkspur, CA  94939

Common Stock      Michael T. Schieber     371,559  (2)      5.8%
                  5520 Beverly Drive NE
                  Olympia, WA  98506

<PAGE>14

Common Stock      E.A. James Peretti      225,000  (3)      3.5%
                  8613 Paradise Lagoon Drive
                  Lucerne, CA  95458

Common Stock      Bruce Christopher       195,409  (4)      3.0%
                  4892 Ironwood Drive
                  Soquel, CA 95073

Common Stock      H. Tate Holt             87,629  (5)      1.4%
                  240 Wilson Way
                  Larkspur, CA  94939

Common Stock      Officers, Directors 
                  and Nominees as a
                  Group (5 persons)     1,645,910          25.6%

(1)   Includes  (i)   599,558  held  in Thompson 1996 Revocable Trust and  (ii)
      options to purchase 156,250 shares  at  $1.44 expiring on January 1 2006,
      and 3,551, 3,044, and 2,535, and 1,375 common shares exercisable at $1.58
      per share and expiring February 8, 1999,  February  8,  1999 February 15,
      2000, and December 31, 2000 respectively.

(2)   Includes  (i)  285,625 shares held jointly with spouse, Arlene  Schieber,
      (ii) 8,575 held  solely  by  Mr. Schieber, (iii) 1,075 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 $1.44 per share which expire on November
      22, 2003, February  15,  2005,  December 31, 2005, February 15, 2006, and
      April 30, 2006, respectively.

(3)   Options to purchase 225,000 common shares exercisable at $1.44 per share,
      which expire January 1, 2006.

(4)   Includes (i) 136,000 Held jointly with spouse, Christy Hertzberg and (ii)
      options to purchase 9,375, 12,534,  and  37,500 common shares exercisable
      at $1.44 per share which expire December 31,  2005, February 15, 2006 and
      April 30, 2006, respectively.

(5)   Includes (i) 4,821 held solely by Mr. Holt, and  (ii) options to purchase
      7,808,  37,500,  and 37,500 common shares all exercisable  at  $1.44  per
      share which expire  on  December  15, 2006, April 30, 2006, and April 30,
      2006, respectively.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      During  1995  and  1996,  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.


<PAGE>15
                                    PART IV

ITEM 13. EXHIBITS, 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-3

            Consolidated Statements of Operations           F-4

            Consolidated Statements of Stockholders' Equity F-5 to F-7

            Consolidated Statements of Cash Flows           F-8

            Notes to Consolidated Financial Statements      F-9 to F-24


       (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.

*     (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.

<PAGE>16

*     (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.

*     (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.

<PAGE>17

*     (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 or Form
8-K where indicated.



      REPORTS ON FORM 8-K

      Date of Report: January 10, 1997, reporting the merger of Direct
Broadcasting Satellite Corporation and EchoStar Communications.

      Date of Report: January 12, 1996, reporting the acquisition of an
interest in Continental and change in the Company's fiscal year.

      Subsequent to the acquisition of the interest in Continental, the Company
requested financial information from Continental but to date has not received
any such financial information.  It is the Company's belief that Continental's
failure to present its financial information is due to its involvement in the
litigation between DBS and Loral.


<PAGE>18
                              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, 1997                     DBS INDUSTRIES, INC.


                                              FRED W. THOMPSON
                                         By:  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 14,1997
                                Principal Executive Officer

E.A. JAMES PERETTI
E.A. James Peretti              Director                     April 14,1997


MICHAEL T. SCHIEBER
Michael T. Schieber             Director, Secretary          April 14, 1997


BRUCE CHRISTOPHER               Director                     April 14, 1997
Bruce Christopher


H. TATE HOLT                    Director                     April 14, 1997
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





<PAGE>


                       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, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity
(deficit) and cash flows for the year ended December 31, 1996,
the five-month transition period ended December 31, 1995, and
the year ended July 31, 1995.  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 did
not audit the 1995 and 1994 financial statements of Direct
Broadcasting Satellite Corporation (DBSC), the investment in
which is reflected in the accompanying financial statements
using the equity method of accounting (see Note 4 to the
consolidated financial statements).  The Company's investment in
DBSC as of December  31, 1995 was $616,002, or approximately 33%
of consolidated assets.  The Company's equity in DBSC's net
losses for the five-month period ended December 31, 1995 and the
year ended July 31, 1995 were $56,332 and $81,887, respectively.
DBSC's 1995 and 1994 financial statements were audited by other
auditors whose report, which includes an explanatory paragraph
regarding DBSC's ability to continue as a going concern, has
been furnished to us, and our opinion, in so far as it relates
to the amounts included for DBSC as of December 31, 1995 and for
the five-month period ended December 31, 1995 and the year ended
July 31, 1995, is based solely on the report of the other
auditors.

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 and the report of the other auditors
provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of
the other auditors, 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, 1996 and 1995 and the consolidated results of their
operations and their cash flows for the year ended December 31,
1996, the five-month transition period ended December 31, 1995,
and the year ended July 31, 1995 in conformity with generally
accepted accounting principles.


<PAGE>


To the Board of Directors and Stockholders of
DBS Industries, Inc.: - 2

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 this note.  The
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

San Francisco, California
March 7, 1997



<PAGE>F-3


                      DBS INDUSTRIES, INC. AND SUBSIDIARY
                         (A Development Stage Company)

                          CONSOLIDATED BALANCE SHEETS



                                          December 31,
           ASSETS                       1996         1995



Current assets:
 Cash and cash equivalents              $ 402,588    $   3,743
 Restricted cash                          300,000      300,000
 Prepaid and other current assets          68,944       52,155

       Total current assets               771,532      355,898

Furniture and equipment                    73,277       52,778

Less accumulated depreciation              34,406       21,371

                                           38,871       31,407

Other assets:
 Investments in and advances to 
     affiliated companies               1,496,524    1,349,312

 Goodwill, net of accumulated 
   amortization of $61,149 and 
   $51,543 at December 31, 1996 
   and 1995, respectively                  29,841       39,447
Other assets                            2,292,409       62,996

                                        3,818,774    1,451,755

         Total assets                   4,629,177    1,839,060

LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

Current liabilities:
 Convertible debentures                 4,640,000    1,000,000
 Line of credit                           295,000      300,000
 Accounts payable                         960,277      273,713
 Accrued liabilities                      607,070       54,815
 Deferred revenues                        400,000          -

        Total current liabilities       6,902,347    1,628,528

Commitments (Notes 4 and 8).

Stockholders' (deficit) equity:
 Preferred stock, $.0004 par value; 
  5,000,000 shares authorized; none 
  issued and outstanding                     -            -
 Common stock, $.0004 par value; 
  100,000,000 shares authorized; 
  5,827,509 and 5,528,039 shares issued
  and outstanding at December 31, 1996 
  and 1995, respectively                    2,351        2,232
 Capital in excess of par value         4,605,026    3,448,763
 Warrants                                 112,500          -
 Deficit accumulated during the 
  development stage                    (6,908,046)  (3,155,463)
 Less cost of common stock held in 
  treasury (51,562 shares as of 
  December 31, 1996 and 1995)             (85,000)     (85,000)

          Total stockholders'
            (deficit) equity           (2,273,169)     210,532

            Total liabilities and 
             stockholders' (deficit)
             equity                   $ 4,629,177   $1,839,060


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

<PAGE>F-4

                          DBS INDUSTRIES, INC. AND SUBSIDIARY
                             (A Development Stage Company)

                         CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                               For the         For the         For the       April 25,
                               Twelve-Month    Five-Month      Twelve-Month  1990
                               Period Ended    Period Ended    Period Ended  (Inception) to
                               December 31,    December 31,    July 31,      December 31,
                               1996            1995            1995          1996
<S>                            <C>             <C>             <C>           <C>

Revenue                        $ 11,420           -            $   13,000    $  161,420
                               --------        --------        ----------    ----------
Costs and operating expenses:

 Cost of revenue                 10,850           -                23,000       127,580

 Selling, general and 
   administrative             2,245,588         334,694           693,851     4,990,826

 Research and development     1,078,747         219,143           461,061     1,959,456
                              ---------         -------         ---------     ---------
                              3,335,185         553,837         1,177,912     7,077,862
                              ---------         -------         ---------     ---------
     Loss from operations    (3,323,765)       (553,837)       (1,164,912)   (6,916,442)
                              ---------         -------         ---------     ---------
Other income (expenses):

 Interest, net                 (395,298)        (35,028)           23,869    (  433,786)

 Equity in loss of investees,
  net                           (31,920)        (72,312)         (112,595)   (  331,802)

 Gain on sale of investment         -               -                 -         836,478

 Other, net                         -               -             (27,720)   (   56,634)
                              ---------         --------         --------     ---------
                               (427,218)       (107,340)         (116,446)       14,256
                              ---------         --------         --------     ---------
     Loss before provision 
      for income taxes and 
      minority interests     (3,750,983)       (661,177)       (1,281,358)   (6,902,186)

Provision for income taxes        1,600           1,700             3,200        14,435
                              ---------         -------          --------     ---------
     Loss before minority 
      interests              (3,752,583)       (662,877)       (1,284,558)   (6,916,821)

Minority interests in losses 
 of consolidated subsidiaries      -                -                -            8,575
                            ___________       _________        __________   ___________

Net loss                    $(3,752,583)      $(662,877)      $(1,284,558)  $(6,908,046)
                            ===========       =========       ===========   ===========

Net loss per share          $   (0.6484)      $ (0.1233)      $   (0.2411)
                            ===========       =========       ===========

Weighted average number of 
 shares of common stock       5,787,185        5,376,991        5,328,334
                            ===========        =========       ==========
</TABLE>

<PAGE>F-5


                      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, 1996



<TABLE>
<CAPTION>
                                                                                         Deficit      Total   
                                    Common Stock                                         Accumulated  Stock-
                                                     Capital in                          During the   holders'
                                             Par     Excess of                 Treasury  Development  Equity
                                   Shares    Value   Par Value     Warrants    Stock     State        (Deficit)
<S>                                <C>       <C>     <C>           <C>         <C>       <C>          <C> 

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)
                                 ---------   -----   -------      -----      -------        --------      -------
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

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  2,244,629          -        -         (1,181,119)      1,065,611

Issuance of common stock for
cash at $4.00 per share
(August 1993 through April 
1995)                              102,257      41    411,943          -        -               -            411,984

Stock issued in exchange for
46% of JPS stock on
November 19, 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, 1995         5,318,039   $2,148  2,700,559     (85,000) (1,208,028)       1,409,679

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 December 31, 1995                -           -         -         -        -             (662,877)          (662,877)
                                  --------     -----    --------    ------   --------      -----------

Balance at December 31, 1995     5,528,039     2,232   3,448,763       -      (85,000)      (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 $3.75 per share                 22,743         9       85,277        -      -                  -                85,286

 August 15, 1996, at $4.80
 per share                           6,018         2       28,884        -      -                  -                28,886

 September 21, 1996, at $5.60
 per share                           4,821         2       26,996        -      -                  -                26,998

 July 1 - December 31, 1996,
 at $2.00 per share                  7,605         3       15,207        -      -                  -                15,210

 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)
                                 =========    ======   ==========   ======== ========         ===========
</TABLE>

<PAGE>F-8


                      DBS INDUSTRIES, INC. AND SUBSIDIARY
                         (A Development Stage Company)

                     CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                     For the                         For the
                                     Twelve-        For the          Twelve-         April 26,
                                     Month          Five-Month       Month           1990
                                     Period Ended   Period Ended     Period Ended    (Inception) to
                                     December 31,   December 31,     July 31,        December 31,
                                     1996           1995             1995            1996
<S>                                  <C>            <C>              <C>             <C>
   
Reconciliation of net loss
to net cash used in operating
activities:

 Net loss                            $(3,752,583)   $(662,877)        $(1,284,558)    $(6,908,046)

 Adjustments to reconcile net loss
  to net cash used in
  operating activities:

  Depreciation and amortization          124,086       11,230              28,323         231,141 
  Minority interest's share of net loss        -            -                   -      (    8,575)
  Noncash charges                        268,878       27,768              58,444         434,253
  Equity in loss of investees, net        31,920       72,312             112,595         348,954
  Gain on sale of investment                   -            -                   -       ( 836,478)
  Common stock issued as payment for 
   interest                                    -            -                   -           7,000
  Decrease (increase) in accounts
   receivable and other assets            49,416      (43,295)             36,966       (  64,979)
  Increase (decrease) in accounts
   payable and accrued liabilities     1,238,819     (102,014)            354,611       1,582,591
  Increase in deferred revenues          400,000            -                   -         400,000
                                       ---------     --------            --------       ---------
      Net cash used in operating 
       activities                     (1,621,464)    (698,876)           (693,619)     (4,814,139)
                                       ---------      -------            --------       ---------
Cash flows from investing activities:

  Proceeds from sale of investment             -            -                   -         900,000
  Purchase of fixed assets               (20,499)     (15,198)             (4,896)     (  105,524)
  Organization costs                           -            -             (12,576)     (   28,526)
  Advances to officer                          -            -                   -      (   31,187)
  Purchase of interest in Continental (2,292,409)           -                   -      (2,292,409)
  Advances to affiliates                 (56,757)     (32,942)            (85,812)     (  214,511)
  Investments in affiliates             (227,029)    (215,000)                  -      (  896,811)
  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         152,500
  Cash of divested subsidiary                  -            -                   -      (      277)
                                       ---------      -------             -------       ---------
       Net cash provided by (used in)
        investing activities          (2,596,694)    (263,140)             49,216      (2,525,848)
                                       ---------      -------             -------       ---------
Cash flows from financing activities:

 Proceeds from (payment on) line of 
  credit                                  (5,000)        5,000            295,000         295,000
 Restricted cash on line of credit             -             -           (300,000)     (  300,000)
 Issuance of debentures                3,640,000     1,000,000                  -       4,710,000
 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             -             -                  -         293,000
 Payment of debentures                         -       (55,000)                 -      (  125,000)
 Payment of stockholders' loans                -             -                  -      (  202,217)
 Purchase of shares                            -             -                  -      (    5,000)
                                       ---------       -------            -------       ---------
        Net cash provided by (used in)
        financing activities           4,635,002       950,000           (  5,000)      7,742,574
                                       ---------       -------            -------       ---------
        Net increase (decrease) in 
         cash                            398,844       (10,016)          (649,403)        402,588

Cash and cash equivalents,
 beginning of period                       3,743        13,759            663,162               -
                                        --------       -------            -------        --------
Cash and cash equivalents,
 end of period                          $402,588        $3,743            $13,759         $402,588
                                        ========       =======            =======        =========
  Supplemental Disclosure of Cash
    Flow Information

Cash paid during the period for:
  Interest                               $40,695        $2,551             $2,949          $ 46,195
                                         =======        ======             ======          ========
Income taxes                             $ 3,200        $    -             $3,200          $ 14,335
                                         =======        ======             ======          ========
Supplemental Disclosures of
Noncash Investing and
Financing Activities (Note 13)

</TABLE>

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


<PAGE>F-9


                  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.  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 the
development 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 1997 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 factors 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 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.

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
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


<PAGE>F-10


1.    Organization and Basis of Presentation, continued:

was dissolved, and all of its assets and liabilities
were transferred to a newly created wholly-owned subsidiary of
the Company, Global Energy Metering Service, Inc. (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 results of operations of JPS are included in the
accompanying consolidated financial statements since the date of
the fiscal 1993 transaction until the date of dissolution.  The
total purchase price of the fiscal 1994 and 1993 transactions
was $10,138 and $49,158, respectively.  At the date of the
fiscal 1994 and 1993 transactions, JPS had a stockholders'
deficit of $64,188 and $4,250, respectively.  The excess of the
purchase price over the Company's proportionate share of JPS's
net asset deficiency at the dates of the fiscal 1994 and 1993
transactions, $39,664 and $51,326, respectively, has been
recorded as goodwill and is being amortized using the
straight-line method over five years.

In March 1993, the Company acquired 51% of the voting
shares in Axion Logistics, Inc. (Axion) pursuant to a stock
purchase and exchange agreement in exchange for 50,000 shares of
the Company's common stock.  In May 1994, the Company
repurchased its 50,000 shares in exchange for its entire equity
interest in Axion.  The original purchase transaction was
accounted for as a purchase and, accordingly, the results of
operations of Axion are included in the consolidated financial
statements from the date of acquisition through the May 1994
repurchase.  The 50,000 shares of the Company's common stock
were valued at approximately $80,000 at March 1993, the original
purchase date, and at May 1994, when the repurchase occurred.
The Company recognized no gain or loss in connection with the
divestiture.  In connection with the Company's divestiture of
Axion, the Company assigned a patent back to Axion and, in
return, the Company retained a royalty interest in that patent.

The  Company's investments in Direct  Broadcast  Satellite  Corporation,  E-SAT
Corporation and Seimac Limited, in which the Company has ownership interests of
25%, 20% and 20%, respectively, are accounted for using the equity method.  The
Company's interest in Continental Satellite Corporation is carried at cost (see
Note 4).

As discussed in Note 4, the merger between Echostar
Communications Corporation and Direct Broadcast Satellite
Corporation became effective on January 8, 1997.  In connection
with this transaction, the Company will record a gain of
approximately $6,200,000 in its first quarter of 1997.  Had this
transaction occurred as of December 31, 1996, the Company's
total assets and stockholders' equity would have been
approximately $10,800,000 and $3,900,000, respectively.


<PAGE>F-11


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.

Restricted Cash:

Restricted cash relates to a minimum $300,000 bank
balance that is required as security for the Company's line of
credit.

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.

Goodwill:

Goodwill is amortized using the straight-line method
over five years.  Amortization expense charged to operations for
the year ended December 31, 1996, the five-month period ended
December 31, 1995, and the year ended July 31, 1995 was $9,606,
$7,583, and $18,996, respectively.


<PAGE>F-12


2.    Summary of Significant Accounting Policies, continued:

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 based on enacted tax laws and
rates in effect for the years in which the differences are
expected to affect taxable income and 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 Loss Per Share:

Net loss per share (LPS) is computed based on the
weighted average number of shares outstanding during each period
presented.  Common stock equivalents representing options and
warrants are excluded from the LPS calculation as they have the
effect of decreasing LPS.

Statement of Cash Flows:

In the year ended July 31, 1995, the Company changed
its cash flows reporting from the direct method to the indirect
method.  The change has been retroactively applied to all
periods presented

Recently Issued Accounting Pronouncements:

In February 1997, Statement of Financial Accounting
Standards No. 128, Earnings Per Share (FAS 128), was issued and
is effective for the Company's year ending December 31, 1997.
The Company has not determined the impact of FAS 128 on its
earnings per share.

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.


<PAGE>F-13


3.    Change in Fiscal Year:

The Company changed its fiscal year end from July
31 to December 31, effective January 1, 1996.  The five-month
period ended December 31, 1995 (Transition Period), is presented
within the body of the Company's financial statements.
Comparative condensed income statement data is as follows:

                                Five Months Ended 
                                December 31, 1994
                                (Unaudited)

Revenue                         $       13,000

Loss from operations                  (491,000)

Other expense                          (48,500)

Net loss                              (541,000)
                                 -------------
Net loss per share               $     (0.1017)
                                 =============
Weighted average number of
shares of common stock               5,320,065
                                 =============

4.    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 and 1995, the Company
owned approximately 25% of the common stock of DBSC.  The
Company accounts for its investment using the equity method.
The Company's total investment in DBSC as of December 31, 1996
and December 31, 1995 was $539,080 and $616,002, respectively.

The Company's investment in DBSC consists of both cash
and noncash transactions.  During July 1992, the Company
purchased 60,000 shares of DBSC's common stock for $120,000 in
cash which represented approximately 6.9% of DBSC's issued and
outstanding shares of common stock as of July 31, 1992.  During
fiscal year 1993, the Company purchased 187,800 shares of DBSC's
common stock for $364,725 in cash and 6,375 shares of the
Company's common stock valued at $12,750.  Additionally, in
fiscal year 1993, the Company entered into an exchange
agreement, whereby the Company exchanged 133,307 shares of its
common stock for 133,307 shares of DBSC's common stock valued at
$213,291.



<PAGE>F-14


4.    Investments in and Advances to Affiliated Companies, continued:

Direct Broadcasting Satellite Corporation (DBSC), continued:

In October 1995, the Company acquired 20,000 additional
shares of DBSC common stock for $165,000 in cash.  This
investment increased the Company's ownership position to
approximately 25%.

On November 15, 1994, DBSC entered into a Stock
Purchase Agreement with EchoStar Communications Corporation
(Echostar) which provides for DBSC to issue 583,250 shares of
authorized and unissued common stock for total consideration of
$4,109,905 consisting of $2,960,000 in cash and the cancellation
of certain notes payable totaling $625,000, and the related
accrued interest totaling $524,905, as of March 31, 1994.
Additionally, the agreement has granted Echostar certain further
rights, subject to certain future events that have not yet
occurred and may or may not occur.

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
will 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
will record a gain of approximately $6,200,000 in its first
quarter of 1997.

Following is a summary of DBSC's financial position as
of December 31, 1996 and 1995:

                                December 31,      December 31,
                                1996              1995
                                (Unaudited)

Current assets                $    20,046         $    366,009

Other assets                   52,373,192           18,820,254
                               ----------           ----------

       Total assets           $52,393,238         $ 19,186,263
                              ===========         ============
Current liabilities           $   186,748         $  1,547,282

Long-term debt                 50,887,763           16,010,082

Stockholders' equity            1,318,727            1,628,899
                              -----------         ------------
      Total liabilities and
      stockholders' equity    $52,393,238         $ 19,186,263
                              ===========         ============



<PAGE>F-15


4.    Investments in and Advances to Affiliated Companies, continued:

Direct Broadcasting Satellite Corporation (DBSC), continued:

DBSC's losses for the year ended December 31, 1996
(unaudited) and the nine-month period ended December 31, 1995
amounted to $310,172 and $227,479, respectively.

The Company's equity in losses of DBSC was $76,922,
$56,332 and $81,887 for the year ended December 31, 1996, the
five-month period ended December 31, 1995, and the year ended
July 31, 1995, respectively.  The equity in losses for the year
ended July 31, 1995 was based on DBSC's fiscal year ended March
31, 1995.  Effective April 1, 1995, DBSC changed its fiscal year
to December 31 from March 31.  The equity in losses for the
years ended December 31, 1996 and July 31, 1995 were recorded in
the respective fourth quarters and the equity in losses for the
five-month period ended December 31, 1995 was recorded in
December 1995 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 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 and
$70,893 as of December 31, 1996 and 1995, respectively.  The
investment is accounted for using the equity method.  The
Company's equity in losses of E-SAT for the year ended December
31, 1996, the five-month period ended December 31, 1995, and the
year ended July 31, 1995 were $385, $17,152 and $30,708,
respectively.  The equity in losses for the years ended December
31, 1996 and July 31, 1995 was recorded in the respective fourth
quarters and the equity in losses for the five-month period
ended December 31, 1995 was recorded in December 1995 when
financial information became available.  As of December 31,
1996, the Company had a receivable of $227,029 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 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 year ended December 31, 1996.  This
investment is accounted for using the equity method.


<PAGE>F-16


4.    Investments in and Advances to Affiliated Companies, continued:

Seimac Limited, continued:

For the year ended December 31, 1996 and the five-month
period ended December 31, 1995, the Company has recorded its
proportionate share of Seimac Limited's net income of $45,387
and $1,172, respectively.  The Company's investment in Seimac
Limited as of December 31, 1996 was $618,046.

Following is a summary of Seimac's unaudited financial
position as of December 31, 1996 and 1995 and its unaudited
results of operation for the year ended December 31, 1996 and
the one month ended December 31, 1995:

                            December 31, 1996         December 31, 1995
                            (Unaudited)

Current assets              $  1,201,477              $ 1,008,133

Other assets                   1,352,364                1,480,196
                            ------------              -----------
      Total assets          $  2,553,841              $ 2,488,329
                            ============              ===========
Current liabilities         $    469,421              $   254,969

Long-term debt                   597,407                  730,987

Shareholders' equity           1,487,013                1,502,373
                            ------------              -----------
                            $  2,553,841              $ 2,488,329
                            ============              ===========
Net sales                   $  1,607,128              $   146,500
                            ============              ===========
Net income                  $    226,935              $       858
                            ============              ===========


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 and is accounted for as a
non-current other asset as of December 31, 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 7) to Echostar
on January 12, 1996 for proceeds of $3,000,000.


<PAGE>F-17


4.    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.  The Court is in the process of determining the
Company's equitable interest in the Continental's DBS License,
if any.

5.    Notes Payable:

During 1994, the Company entered into bridge loan note
agreements with three individuals who are stockholders and in
some cases directors or officers of the Company pursuant to
which they loaned the Company $116,550.  These notes were
unsecured and bore interest at 8% per annum and were payable
within six months.  In August 1995, the Company repaid the
remaining balance of $55,000.

6.    Line of Credit:

The Company has a $300,000 line of credit with a bank.
The line is collateralized by a $300,000 certificate of deposit
and expires on September 5, 1997.  As of December 31, 1996,
$295,000 was outstanding on the line, at an interest rate of
6.45% (certificate of deposit rate plus 1.25%).  The Company
believes that the carrying value of this debt approximates
market value given the short maturity and required collateral.

7.    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 accrues, and is
payable, quarterly at prime plus 2% for a period of three years.
 As collateral for the loan, Echostar has a security interest in
125,000 shares of DBSC common stock and 2,000 shares of E-SAT
common stock held by the Company.


<PAGE>F-18


7.    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 are 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 are similar to those of the Series A
Convertible Debentures discussed above.  As collateral for the
loan, Echostar has a security interest in the remaining 76,107
shares of common stock of DBSC held by the Company.

At the end of the respective three-year periods, the
principal and unpaid accrued interest on the above debentures is
due and payable.

The Holder of these Debentures has the right at any
time prior to the respective due dates, to convert the
outstanding principal amount of the Debentures into shares of
common stock of the Company at a conversion rate of $4.00 per
share, subject to adjustment for certain dilutive transactions.

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 and $27,020 as of
December 31, 1996 and 1995, respectively.


8.    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,
               1997             $     68,347
               1998                   68,130
               1999                   68,130
               2000                   11,355

                               $     215,962



<PAGE>F-19


8.    Commitments, continued:

Operating Leases, continued:

Total rent expense was $74,808, $31,900 and $49,475 for
the year ended December 31, 1996, the five-month period ended
December 31, 1995 and for the year ended July 31, 1995,
respectively.

Satellite Transmission Contract:

In October 1995, the Company entered into a long term
contract with a satellite transmission provider under which, the
Company was to utilize Satellite transmission capabilities
during the period from March 1996 through February 2001.  In May
1996, the Company terminated this contract.  Payments made by
the Company during fiscal 1996 and the five month period ended
December 31, 1995 were approximately $51,000 and $30,000,
respectively.

9.    Stockholders' Equity:

Common Stock:

The Company's Certificate of Incorporation, as amended
in February 1996, authorizes the issuance of 100,000,000 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 of Incorporation, as amended
in February 1996, 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, 1996.

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.  These warrants were issued for
services rendered and are exercisable through January 2006.  As
of December 31, 1996, none of these warrants have been exercised.



<PAGE>F-20


9.    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:

                  Outstanding Options and Warrants 
                                                                       Weighted
                                                                       Average
                                  Number of   Price Per    Aggregate   Exercise
                                  Shares      Share         Price      Price

Balance, July 31, 1994            28,580      $0.40-$4.00  $ 87,320    $3.06

  Options and warrants granted    91,080      $2.00         125,000     2.00
  Options exercised                    -                -         -        -
  Options terminated                   -                -         -        -
                                  ------      -----------   -------    -----
Balance, July 31, 1995            91,080      $0.40-$4.00   212,320     2.33

Options and warrants granted      71,501       1.60-6.00    340,156     4.76

Options exercised                      -               -          -        -

Options terminated                     -               -          -        -
                               ---------      ----------  ---------    -----
Balance, December 31, 1995       162,581       0.40-6.00    552,476     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
                              ==========     =========== ==========    =====


<PAGE>F-21


9.    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, 1996:

       Options and Warrants Outstanding Options and Warrants Exercisable

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

                                 Weighted Average     Weighted                   Weighted
                  Number of      Remaining            Average      Number        Average
Range of          Outstanding    Contractual Life     Exercise     Exercisable   Exercise
Exercise Price    at 12/31/96    (years)              Price        at 12/31/96   Price
<S>               <C>             <C>                 <C>          <C>           <C>

$ 0.40                2,500       9.00                $0.40          2,500       $0.40

$ 1.60 - $3.00      106,080       7.00                $2.04         86,419       $2.06

$ 4.75 - $6.00    1,071,536       9.25                $5.17        500,590       $4.48

$ 1.60 - $6.00    1,180,116       9.10                $4.91        587,009       $4.25

</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 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 year ended December 31,
1996, the five-month period ended  December 31, 1995, and the
year ended July, 31, 1995 was $4.62, $4.27, and  $1.78,
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:

 Risk free interest rate           6.11%

 Expected life                     5.5 years

 Volatility                        104%

 Dividend yield                    -


<PAGE>F-22


9.    Stockholders' Equity, continued:

Employee Stock Options and Warrants, continued:

The following pro forma net loss information has been
prepared following the provision of SFAS 123:

                                    For the       For the       For the
                                    Twelve-Month  Five-Month    Twelve-Month
                                    Period Ended  Period Ended  Period Ended
                                    December 31,  December 31,  July 31,
                                    1996          1995          1995 

Net Loss             As Reported    $(3,752,583)  $(662,877)    $(1,284,558)

                     Pro forma      $(5,916,026)  $(700,790)    $(1,344,755)

Net loss per share   As Reported    $(0.6484)     $(0.1233)     $(0.2411)

                     Pro forma      $(1.0223)     $(0.1303)     $(0.2524)

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.

10.   Related Party Transactions:

On September 11, 1992, as discussed in Note 1, the
Company acquired from its president and other individuals 51% of
the voting shares in JPS.

On November 19, 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 valued at $10,137.

Refer to notes 4 (DBSC and E-SAT) and 7 for disclosures
regarding transactions with EchoStar.

In August 1995, the Company entered into consulting
agreements with two directors of the Company.  The Company
incurred approximately $29,000 and $31,000 in consulting
expenses in connection with these agreements during the year
ended December 31, 1996 and the five-month period ended December
31, 1995, respectively.


<PAGE>F-23


11.   Income Taxes:

The components of the provision for income taxes for
all periods presented relate to current state taxes.

The estimated tax effect of significant temporary
differences and carryforwards that gave rise to deferred income
tax assets as of December 31, 1996 and 1995 is as follows:

                           December 31, 1996        December 31, 1995
                           Federal      State       Federal     State

Deferred tax liability        -           -            -          -

Deferred tax assets:

Net operating loss
 carryforwards            $1,700,000    $165,000    $731,000     $79,000

Research and development
 credit carryforwards         79,000      35,000      47,000      22,000

Excess of tax over book 
 basis of investments, 
 and other deferred 
 compensation                300,000      55,000      45,000       8,000
                           ---------     -------     -------     -------
Net deferred tax assets    2,079,000     255,000     823,000     109,000

Valuation allowance       (2,079,000)   (255,000)   (823,000)   (109,000)
                           ---------     -------     -------     -------
Net deferred tax                -           -            -           -
                           =========     =======     =======     =======

Due to the uncertainty of realization, a valuation
allowance has been provided to eliminate the net deferred tax
assets.  The increase in the valuation allowance was
approximately $1,402,000, $219,000 and $507,000 during the year
ended December 31, 1996, the five-month period ended December
31, 1995, and the year ended July 31, 1996, respectively.

As of December 31, 1996, the Company has net operating
loss carryforwards of approximately $5,000,000 and $2,700,000
for federal income tax purposes and California state franchise
tax purposes, respectively.  The Company has also research and
development credit carryforwards of $79,000 and $35,000 for
federal income tax purposes and California state franchise tax
purposes, respectively.  Such carryforwards expire in varying
amounts between 1997 and 2011.

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.


<PAGE>F-24


12.   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 years ended December 31, 1996 and July 31, 1995.

13.   Supplemental Disclosures of Noncash Investing and Financing Activities:

During the year ended July 31, 1995, the Company issued
32,097 of its shares of common stock to certain individuals in
consideration for services rendered.  These shares were valued
at $58,444.

During the five-month period ended December 31, 1995,
the following noncash activities occurred:

The Company issued 9,450 of its shares of common stock in
exchange for the acquisition of the final 1% of JPS  it did not
already own.  These shares were valued at $11,340.

The Company issued 165,519 of its shares of common stock
in exchange for a 20% interest in the common stock of Seimac
Limited, a Canadian company.  These shares were valued at
$662,076.

The Company issued 2,934 of its shares of common stock to
a certain individual in consideration for services rendered.
These shares were valued at $16,428.

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.