Net income before taxes for the three months ended November 30, 2000 increased to $36,353 as compared to $(126,939) in pretax income for the previous year's three month period. This increase in net income can be directly attributed to overhead cost reductions initiated by management during this quarter.

Nine Months Ended November 30, 2000 versus Nine Months Ended November 30, 1999

Revenues for the nine months ended November 30, 2000 were $4,655,243 or $584,359 down from the same period of last year. The decrease in current year revenues can be attributed to managements requirement of secure pay terms as a part of AES order acceptance.

Cost of sales for the nine months period ended November 30, 2000 was down $275,227 as would be expected with lower prior year revenues. Further, gross profit dollars were down 23% compared to the same period of last year.

Operating expenses were down $113,342 in the nine months ended November 30, 2000 compared to the nine months ended November 30, 1999. This decrease can be attributed to a very aggressive effort by management to reduce operating cost.

Interest and other expenses for the nine months of the current fiscal year decreased $396,285 compared to the same period of last year. This is primarily due to renegotiations with debtors.

Liquidity and Capital Resources

The primary sources of the Company's liquidity for the nine months ended November 30, 2000 included cash available at the beginning of the year and more significantly capital contributed by the investing public. These funds were primarily used for the reduction of accounts payable, as well as prepayments with several of AES vendors.

During the nine months ended November 30, 2000, the working capital deficit improved to $1,618,393 when compared to the deficit at February 29, 2000 of $2,079,128. In the past, short-term cash flows have been inadequate in the past to overcome the working capital deficit. However, AES management's continuing efforts to raise capital have benefited the Company's working capital position, as well as its ability to move forward with an aggressive five year strategic plan. Management is continually striving to improve its working capital position as well as grow the Company through a variety of alternatives. These alternatives may include, but are not limited to, debt restructuring, debt and equity offerings, cash flow reengineering, joint ventures, mergers and acquisitions. Because of the aggressive pursuit of such alternatives, the Company anticipates imminent improvement in its financial position. However, there is no guarantee that such improvements will occur, nor that such capital will be available when it is required or on terms that are acceptable to the Company.

A deferred tax asset of $775,260 was recognized by the company. It is management's position that the company will be able to realize this asset in the future.

There were no capital expenditures during the three months ended November 30, 2000. Only upon a continued and significant improvement in the Company's financial position, will capital expenditures be considered, and then only after diligent consideration and within stringent guidelines.

The decrease in retained earnings is due primarily to negative revenue adjustments, which were a result of modifications to certain contracts previously awarded to AES.

Year 2000

The year 2000 (“Y2K”) issue is the inability of computer systems to recognize the change in year from 1999 to 2000. The issue affects both information technology (“IT”) and non-IT systems. Because non-IT systems are typically embedded technology, these are more difficult to assess than IT systems and often require replacement rather than repair.

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