AMERI-CAN RAILWAY SYSTEMS INC, 10SB12G/A, 1999-08-18

AMERI-CAN RAILWAY SYSTEMS INC
10SB12G/A, 1999-08-18
RAILROAD EQUIPMENT

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-SB

GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934

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

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

100 WALNUT STREET - CHAMPLAIN, NEW YORK 12919
(Address of principal executive offices) (Zip Code)

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

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

COMMON STOCK $000.1
____________________________
(Title of class)

____________________________
(Title of class)

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ITEM 1: DESCRIPTION OF BUSINESS

Business Development

Ameri-can Railway Systems Inc.(ARS)is a developmental-stage company
incorporated in New Hampshire on May 4, 1998. In return for 50,000
shares of the Company, the Company acquired from Ameri-Can Equipment
Sales and Leasing, Inc. (AEL), a Canadian corporation, certain assets
comprised of the rights to the contractual relationship AEL has with
Geismar/Modern Track Machinery Inc. (Geismar/MTM) industry
relationships, goodwill, know how and application experience on May
11, 1998. Although AEL and the Company at the time of the sale had one
hundred percent common ownership the Company is, in management's
opinion, not a successor company to AEL. AEL is engaged in a completely
different business separate and apart from the Company's Railway
communications and signaling business described below.

Business of Issuer

The prime focus of Ameri-Can Railway Systems Inc. is wireless
private network management for railway traffic control and public
safety. ARS designs, develops and commercializes new lines of
railroad equipment products based on modern signaling, control and
communications technologies. The Advance Warning System for railway
level crossings is the first commercial product to be offered by ARS,
and its technology is the foundation for an extensive family of
wayside warning and wayside to train signaling products.

Railway signaling and control systems are used to provide advance
warning of oncoming trains, and maintain adequate separation between
trains on the same track and in switching areas where tracks cross or
merge. They also facilitate train movements under centralized
dispatcher control, classify freight cars, and provide warning systems
for rail and highway grade crossings. Signaling system technology
ranges from the use of microprocessors to 150-ton freight car
retarders. The technology has evolved from relatively simple train
separation schemes to the highly sophisticated systems that facilitate
complete automation of both railway and rapid transit operations.

The ARS system makes innovative use of reliable, remote sensing
equipment and radio communications technology, allowing the system to
be priced competitively. The ARS system is a complete line of
intelligent microprocessor-based equipment for train detection, wireless
communications, advanced warning systems, that provide general-purpose
data acquisition and control capabilities for a wide variety of vital
fail-safe railway applications.

The ARS Signaling System is composed of five modules:

Web Sensors that perform the wheel sensing functions;

Rail Sensor Processors - to control and process the signals from the
sensors, and interface to the communications system;

Digital Communications Sub-System - that may be a data radio,
dedicated wire lines or multi-drop system;

Application (Crossing) Processor - to collect and interpret sensor
data from Remote Sensor Processors and perform the specific
application functions; and,

Optional PC-based Diagnostics and Monitoring System - to maintain
monitor and analyze the application system.

Two important advances have been secured in the ARS system by
eliminating the insulated joints (insulated joints work much the same
way as a light switch, turning the crossing on when the train arrives in
the crossing zone and off when the train leaves) used in conventional
systems. (1) In conventional systems a signal is triggered when the axle
of a carriage creates a shunt across the insulated sections of rail.
Because the ARS system does not use insulated joints it is not prone
to false triggering caused by broken insulation, foreign objects
shorting the circuit, or adverse climate conditions. (2) Traditional
competing railway crossing systems use insulated joints installed in the
tracks, which contribute to shifting rails caused by loose joint bars
that bolt the sections of track together, and battered joints that
damage rail car wheels when they hit defective joints.

Because the ARS system eliminates insulated joints it reduces wheel
damage, premature wheel wear, damaged tracks and, ultimately,
potential derailments. It is estimated that each insulated joint costs
$1,000 per year to maintain. With each crossing requiring at least one
set of joints per track savings on maintenance add up very quickly.

The ARS Advanced Warning System is a wireless radio based multi channel
computer communication system that makes it possible for ARS to add
other optional features not available on competing systems.

Our first product application is the ARS level grade crossing. Unlike
traditional systems we can add other applications to the system such as
hot bearing detectors and flat wheel detectors and transmit the
information gathered form these applications over the wireless
communications part of our crossing system as the train passes by. Hot
box detectors are non-contact temperature measurement systems, which we
will add-on to our sensors on the track at the crossing, allowing
the bearing temperatures to be monitored as the train rolls by
at high speed.

Flat wheel detectors use (vibration) impact sensors to detect wheels
with flat spots. The detection of flat spots will allow the offending
cars to be decommissioned and repaired before additional damage to the
rail occurs. Both of these problems are leading causes of train
derailments. The ARS signaling communication system can identify
potentially dangerous situations so that early maintenance pre-empts
accidents and derailments.

The ARS system is a boon to railway operating efficiency because it
can give virtually instant feedback on the location of cars and
freight, which includes capturing information and time-stamping it
as trains pass through a crossing. Plus, this innovative system will
allow communication between trains and crossing signals to provide
motorists with more complete information on train movements. Improved
information creates safer conditions and benefits for the railways and
their customers, as well as motorists and pedestrians.

ARS plans to distribute the Advance Warning System through an
exclusive distributorship with Geismar/Modern Track Machinery Inc.
(Geismar/MTM). Geismar/MTM has a worldwide sales network in over 100
countries. They are a premier manufacturer and distributor of light
machinery and railway systems for the railroad industry. They command
a major share of the North American markets.

ARS has completed the design, technical development, and laboratory
testing of the Advanced Warning System and is now in pre-production
testing. Canadian Pacific Railway (CPR), among North America's largest
and most technologically advanced railways, is participating in a trial
of ARS's pre-productions system. In management's opinion once we have
successfully completed our system testing and CPR has completed its
audit of the system, ARS's system will be approved for installation
along other CPR subsidiaries in Canada and the US as well as on CN Rail
and its US subsidiaries. CPR and CN Rail share signal system test
results with each other under a Joint CPR/CN Safety Assurance Process
Audit Plan agreed to March 26, 1998 (CPRCNJSP98-A1). However, there is
no assurance that even when the required certification is completed that
CPR,CN Rail or any of their subsidiaries will purchase and install the
ARS advanced level crossing warning system.

US Freight Transportation Forecast...to 2003", a study conducted by
DRI/McGraw-Hill and quoted in the U.S. Department of Transportation
Quarterly Freight Report in 1996, predicts that rail inter-modal and air
freight will experience the largest percentage revenue gains of all
transportation industries in the coming years. Air freight revenues will
increase by 90% while rail inter-modal is forecast to grow 61%. Trucking
revenue, while still 76% of total transportation revenue, is expected to
decline by 2%, with the loss mainly to rail and air freight.

Despite growing public pressure, potential civil penalties, and the
threat of government imposed penalties, there are still over 260,000
inadequately protected passive and private crossings in North America.
Passive crossings are those which typically do not have warning lights
or active mechanical arms or other devices to warn of pending rail
traffic. Private crossings are those on private property, often with
extremely low vehicular traffic, and have at most signs warning oncoming
traffic that a rail crossing exists. These crossings remain unprotected
as a result of the extremely high cost of installing and maintaining
available crossing systems. While the railways would like to provide
warning systems at every crossing the expense ($39 billion) of doing so
is clearly beyond their means in a competitive transportation industry.
Substantial government subsidies are available, but they do not come
close to covering the cost of installing so many crossing systems.
However, Congress has appropriated an additional 5.8 billion dollars in
constant 1997 dollars to be spent over the next 23 years for states to
improve safety at rail-highway crossings. (Source: Operation Lifesaver,
Federal Railroad Administration, Rail-Highway Crossing Safety Action
Plan)

On the tracks operated by these railways there are 220,000 passive
and/or private crossings in the USA and 40,000 in Canada. Based on an
average cost per crossing of US $30,000 per installation, the 260,000
passive crossings indicate a market worth US $7,800,000,000 for the ARS
basic system. (Source: Operation Lifesaver)

This estimate does not include the approximately 80,000 public
crossings in the USA and 15,000 in Canada which have some form of
active warning system in place, nor does it include the crossings for
the approximately 60 transit or passenger railways across North
America. (Source: Operation Lifesaver)

The Company visualizes that there is a strong market for a crossing,
advance control system which is substantially cheaper (less than 50
percent) than the presently available systems from the four major
suppliers. This price advantage, combined with the technical
advantages described earlier, in management's opinion provides
a substantial market opportunity. The company does not believe that
traditional customers will readily abandon existing systems due to the high
costs associated with removing already installed systems and replacing them
with new ARS systems. Therefor, the company intends to focus its marketing
efforts on educating the public and traditional customers, emphasizing the
benefits of ARS's technology and addressing the potential of providing level
crossing protection at the 220,000 passive, private and public railway
crossing that do not have automated protection systems at this time.

There are four major suppliers of railway crossing systems, all of whom
are well connected with the railway industry and government, and control
collectively 80 to 90% of the market today. However, the crossings
systems offered by these competitors remain deeply rooted in traditional
technology developed as far back as 1890. Most train control and
crossing systems currently in use are based on principals developed in
the last century, such as insulated joints. The railways have continued
to use traditional approaches because there has never been a reliable
and cost effective alternative. ARS is confident that its approach will
be successful because railways, their employees and the population in
general are more educated and comfortable with the use of today's modern
computer technology. ARS uses modern day secure wireless communications
and computer technology as the bases for its level crossing system and
the growth of its system approach to support the railways' need to
develop a safer, more efficient railway safety and communications
system. The competitors are:

Safetran Systems Corporation, Minneapolis, MN.
General Railway Signal Corporation, Rochester, NY.
United Switch & Signal Inc., Columbia, SC.
Harmon Industries Inc., Blue Springs, MO.

The company has applied for U.S. patent protection for its products.
ARS has applied for patent protection filed on January 23, 1998 for an
Automated Railway Crossing control system in the USA and will pursue
protection overseas through international patent treaties and local
patent applications in appropriate markets. It is anticipated that ARS
will receive confirmation that its patent is approved within the next 10-
12 month, however, until the application is approved there can be no
guarantee that ARS's patent will be approved. ARS intends to file for
additional patent protection by the end of May 1999 on other elements of
its planned product line, related to track condition monitoring,
intermodal refrigerated car monitoring, flat train car wheels and wheel
bearing deterioration.

Government Approval:

The federal government regulated private crossings in the past and
there were no specifications for passive crossings. In 1994 The Federal
Railroad Administration held an informal safety inquiry to review
the concept of defining minimum safety standards for private crossings,
or for certain categories of private crossings, up to and including
standards for closure and consolidation under certain conditions. The
inquiry addressed the allocation of responsibilities and costs
associated with private crossings and the need for dispute resolution
mechanisms regarding that allocation. The FRA has authority in all
matters concerning railroad safety, and can set standards for private
crossings. States and local highway agencies frequently have no
involvement in, or responsibility for, private crossings. In January
1995, the FRA issued regulations requiring periodic maintenance,
testing, and inspection of automatic warning devices at all highway
crossings over tracks of railroads which are part of the Nation's
general railroad system, including private crossings.

Every year accidents at railway crossings claim the lives of more than
600 people in North America. Railways are facing significant
potential liabilities as a result of these court rulings. In addition
mounting pressure from the public as well as municipalities, states,
provinces and the federal government in the US and Canada is beginning
to demand that the all passive/private crossings have adequate advance
warning systems.

The Founders of the Company have contributed their knowledge and
expertise to the Company in exchange for 5,250,739 number of common
shares. (SEE DESCRIPTION OF LOCK-UP AGREEMENT)

ARS has completed the design and technical development of the Advance
Warning System, which offers significantly more features and
functionality than envisioned in the original specification. The
laboratory test system has been rigorously tested to insure that the
communications and the wheel counting systems operate accurately at
speeds of up to 175 miles per hour. Canadian Pacific Railway has agreed
to a (no purchase obligation) mainline (high traffic area) test
installation of the ARS pre-production crossing system. Our system will
be installed in parallel with an existing CPR mainline crossing. Testing
of the system by ARS will include recording information gathered by our
system and comparing the information with CPR's existing crossing
system. When ARS completes its testing of the crossing system the
Company will turn the crossing system over to CPR to begin their Safety
Assurance Process Audit. CPR is not bound to certify ARS's level
crossing system if it does not meet the railways 6 phase rigorous
requirements of the audit process. Both CPR and CN Rail agreed to work
together and share information between each other under an agreement
signed March 26,1998 (Joint CPR/CN Rail Safety Assurance Process Audit
Plan,CPRCNJSAP98-A1). In Management's opinion a successful audit will
lead to certification of ARS's level crossing system. However,
certification of the level crossing system does not mean that other
products under development by ARS will automatically receive
certification by Canadian Pacific Railway and CN Rail. All other new
products developed by ARS will be required to follow the same approval
process. ARS began testing the ARS Level Crossing on Canadian Pacific
Railway's main line at the end of February 1999, testing should take
approximately 90 to 180 days. Upon successful completion of the
certification process, ARS management believes the ARS Level Crossing
System will also be approved for sale to the U.S. subsidiaries of both
CPR and CN Rail. However, there is no assurance that even when the
required certification is completed that CPR,CN Rail or any of their
subsidiaries will purchase and install the ARS advanced level crossing
warning system.

LOCK-UP AGREEMENT

On June 20, 1998, the Directors, Officers Advisors and certain initial
investors to the Company entered into an Lock-up Agreement (the "Lock-
up") with the Company, hereby agreeing that for a period of two (2)
years from the date of the first of sales of the Company's stock to
the public, under what is commonly referred to as a Regulation D-Rule
504 offering. The Directors, Officers Advisors agreed not to,
directly or indirectly, offer, sell, grant any options to purchase or
otherwise dispose of any of the 6,811,489 shares of Company Common
Stock without prior written consent of the company, except that they
may transfer any number of such shares to their children, by gift or
otherwise, provided that any such shares will continue to be subject
to the restriction set forth.

Total employees and contractors number 7, full time employees are
zero.

Reports to Security Holders:

The Company is not presently a reporting Company and does not file
annual reports or other information with the securities exchange
commission, On the effective date of this filing under the Securities
Act, however, the Company will become a reporting Company. The Company
intends to furnish it's shareholders with annual reports containing
audited financial statements and quarterly reports containing un-
audited summary financial information for each of the first three
quarters of each fiscal year.

The public may read and copy all materials filed with the SEC at the
SEC's Public Reference Room at 450 Fifth St., N.W., Washington, D.C.,
20549 or may obtain a information on the operation of the public
Reference Room by calling the SEC at 1-800-SEC-0330.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

2(a) Plan of Operation

The Company is in the developmental stage and therefore has
no revenue from operations in the current period. Because of this,
the Company faces significant hurtles in regards to financing and
customer acceptance of the Company's products. The Company's
continuation as a going concern is dependent upon its ability to
raise capital from outside sources. The Company has been successful
in raising approximately $100,000 through January 31, 1999 and
anticipates raising an additional $100,000 for a total of approximately
$200,000 from the sale of its Common Stock pursuant to Rule 504 Regulation D
exemption. These funds have been and will continue to be utilized
to fund the start-up and development of the Company.

After successful completion of the Company's voluntary 10-SB-12G filing,
the Company intends to file Form SB-2 and register 2,000,000 additional
shares of Common Stock for sale on the OTCBB. The Company is in negations
with a Securities Brokerage firm and expects to conclude negotiations with
the broker upon the successful competition of the Form 10-SB filing. The
Company will use the proceeds raised from the sale of its stock to fund and
expand operations. Management believes sufficient funds are or will be
available to sustain operations for at least the twelve months following the
latest balance sheet date. The Company intends to purchase small companies
that have products and services that add value and are strategic to the
success of the Company's growth. It is intended that these acquisitions
of small companies will complement the Company's product and generate
ongoing revenue to strengthen the Company's ability to stabilize its stock
for its stockholders. The Company is presently in preliminary discussions
with its first potential acquisition target, and believes that if successful
in raising additional funding, it will be able to successfully acquire the
company. However, there is no assurance that the company will be successful
in filing form SB-2 and registering 2,000,000 shares of common stock for
sale on the OTCBB. Further, if the company is successful, there no
assurance that the company will be able to sell any of it's shares.

Management believes sufficient funds are or will be available to sustain
Operations for at least the twelve months following the latest balance sheet.

In the current fiscal year of operation the company anticipates to
have raised a total of $102,246 from the sale of its Common Stock
pursuant to Rule 504 Regular D exemption. These funds in part were
utilized to fund the start-up and development of the Company. The
Officers and Directors have not been compensated to date. SEE
Management Compensation included elsewhere herein.

The prime focus of Ameri-Can Railway Systems Inc. (ARS) is private
wireless network management for railway traffic control and public
safety. ARS designs, develops and commercializes new lines of
railroad equipment products based on modern data acquisition,
signaling, control and communications technologies. The ARS
objective is to build and design "State of the Art," signal systems
that meet customer demands, that are cost competitive, and that are
capable of standing up to the tough conditions of continuous use in
the railway industry.

The Advance Warning System for railway level crossings is the first
commercial product to be offered by ARS, and its technology is the
foundation for an extensive family of wayside warning and wayside to
train signaling products. The following products are in the design
stages and add considerable value for the railway yet are relatively
inexpensive to add onto the system because they use the same multi
channel computer based wireless communications technology that the level
crossing system uses.

Hot box detector: This is a non-contact temperature measurement
system, which will add-on to our sensors on the track which will allow
the bearing journal temperatures to be monitored as the train rolls by
at high speed. This is a major safety issue for the railway since the
detection of a hot bearing can prevent a derailment.

Flat wheel detector: The use of a (vibration) impact sensor can be used
to detect wheel with flat spots. The detection of flat spots will allow
the offending cars to be decommissioned and repaired before additional
damage to the rail occurs.

Wide area networking: Current radio technology can be upgraded to
provide a higher speed communications capability and include
locomotive mobile radios and work equipment monitoring.

Hazardous Materials Monitoring: Constant monitoring of tank cars or
other vessels transporting hazardous materials, e.g. measures of
temperature, pressure, evaporation, volatility, decomposition, and so
forth.

Inter-modal Reefer Monitoring Systems: This is a wireless monitoring
system for refrigerated railway cars (Reefers) which communicate with
each ARS crossing system via wireless radio. This allows the reefers to
report such things as cooling temperature, fuel levels and the
condition of the engine generators that run the refrigerator cars, etc.,
allowing the railway to determine where the cars are located, define the
problem with the refrigerated unit and take the appropriate action to
correct any problems before the goods being transported are damaged.

Railway crossing systems are one of the most important safety systems
used by railroads. Canadian Pacific Railroad has agreed to test the
ARS Advance Crossing System on its main line in Mississauga Ontario
Canada. The audit and certification process is expected to take 90 to
180 days. CN Rail shares signaling information and test results with
CPR under an agreement signed by both railways March 26, 1998
(CPRCNJSAP98-A1). In management's opinion both Canadian railways and
their U.S. subsidiaries railroads will agree to put the system through
their own internal audit procedures, which will take 3 to 6 months. ARS
will offer to sell/lease/rent crossing systems to each of its customers
on a money back guarantee basis to gain approval to install test systems
at all targeted railways as soon as possible. Certification of the ARS
Advance Warning System by selected Class I railways should open the
door for system installations at Class II and Class III railways. Many
Class II and III railways traditionally forego testing if Class I
railway's have certified a technology. However, certification does not
guarantee market acceptance of ARS's technology.

ARS plans to distribute the Advance Warning System through an
exclusive distributorship with Geismar/Modern Track Machinery Inc.
(Geismar/MTM). Ameri-can Equipment Sales and Leasing, Inc., transferred
its contract with Geismar/MTM to sell the level crossing systems to
ARS. The contract is valid until October 1, 2000 and is automatically
renewable for an additional five years unless notice is given by either
party. Geismar/MTM has a worldwide sales network in over 100 countries.
They are a premier manufacturer and distributor of light machinery and
railway systems for the railroad industry. They command 60% of the US
market and over 70% of the Canadian market. The alliance with Geismar/
MTM will enhance the company's ability to penetrate the market. This
relationship facilitates exposure to the key decision-makers at most
U.S. railways and the 60 rapid transit authorities across North America,
and opens to ARS an entrance into the world market. The ARS management
team will support the efforts of Geismar's sales representatives. The
ARS Vice President of Sales and Service will be mandated to build a
field support group to service the railways directly, which will provide

further brand recognition to ARS in the market place. It is anticipated
that the railways will demand a strong technical service group to support
systems sold by Geismar/Modern Track. The Company feels growth in this
area will be ongoing and dependent on future sales.

Market Development and Future Key Customers

ARS will use a multi-step approach to develop business opportunities in
national and international markets:

Identify and rank the decision-makers within each customer organization.

Develop relationships among the decision-makers of ARS clients, who will
act as positive references of ARS.

Demonstrate the signal equipment at target accounts to insure a
comprehensive, unified understanding of ARS' advantages, and identify
problems for which ARS could contribute to cost effective solutions.

Publicity and Advertising:

The company will aggressively pursue the leading industry publications
for editorial coverage, publicity and trade advertising.

Railway Age
Progressive Railroading
Modern Railway

The objective will be to create awareness of the company's products.
Geismar/MTM will co-op with ARS on advertising.

Brochures and Technical Briefs:

ARS will produce a web site and product brochure in the first half of
calendar 1999 using services of management and funding from investors to
illustrate the Advance Warning System's features and benefits to railway
executive, government transportation authorities and rail safety lobby
groups. The company plans to have Geismar/MTM representatives
distribute these brochures to customers. In addition they will be used
in direct marketing campaigns.

ARS will publish Technical Briefs that provides technical and
operational details. The briefs will be distributed over the web and
in hard copy to the railway's signal engineers to evaluate the system.

Direct Mail:

The company will use direct mail to build awareness of the Advanced
Warning System. The company will target senior officials at each
railway as well as appropriate officials at municipal, state,
provincial and Canadian US federal transportation authorities. By
targeting these government officials, the company hopes to be able to
"pull" product through the distribution channel.

Manufacturing Plan

Manufacturing and assembly will be by contractors for the foreseeable
future, with care taken to ensure that ISO 9000 standards are
maintained. ISO is a series of international standards for Quality
Management Systems. The ISO 9000 family of standards recognizes four
generic product categories, hardware, software, processed materials, and
services. More than 95,000 companies received certification of
compliance in 86 countries.

The salient points are discussed below:

Year 2000

Historically, certain computer programs were written using two digits
rather that four to define the applicable year. Accordingly, the
Company's software may recognize a date using "00" as 1900 rather than
the year 2000, which could result in computer systems failures or
miscalculations, commonly referred to as the Year 2000 ("Y2K") issue.
The Y2K issue can arise at any point in the Company's supply, product
development tools, and financial applications. Incomplete or untimely
resolution of the Y2K issue by the company, key suppliers, customers
and other parties could have a material adverse effect on the
company's results of operations, financial condition and cash flows.
The Company has developed a plan to modify its information technology
to recognize the Year 2000 and has, to the extent necessary, begun
analyzing and converting, where necessary, its critical data
processing systems. Since many of the Company's systems and software
are relatively new, management does not expect Year 2000 issues
related to its own internal systems to be significant and does not
anticipate that it will incur significant operating expenses or be
required to invest heavily in computer systems improvements to be Year
2000 compliant. The Company is planning to initiate formal
communications at the end of the second quarter of 1999 with
certain of its significant equipment suppliers and
service providers to determine the extent to which the Company's
systems may be vulnerable to embedded technology such as micro-
controllers. The Company currently expects the project to be
completed in the third quarter of 1999. There can be no guarantee that
the systems of suppliers or other companies on which the Company
relies will be converted in a timely manner and will not have a
material adverse effect on the Company's systems. To date the Company
has not developed a formal contingency plan. The Company believes it
is taking the steps necessary regarding Year 2000 compliance with
respect to matters within its control. However, no assurance can be
given that the Company's systems will be made Year 2000 compliant in
a timely manner or that the Year 2000 problem will not have a material
adverse effect on the Company's business, prospects, financial condition
and results of operations.

Procurement

All hardware will be specified and procured by ARS engineering staff.
This critical function will be controlled to guarantee that only
optimal hardware from the most reliable vendors is used. A database of
hardware component failures, which occur during manufacturing and test,
will be maintained in order to keep vital statistics on component failure
rate for each part and for each vendor. This Quality Assurance program
will meet ISO9000 standards.

Component Assembly

To avoid the high cost of establishing an assembly plant, this
operation will be contracted out to a qualified assembly house. Future
assembly may require in-house facilities to control production and
reduce product cost.

Functional Testing

ARS's system will be tested by our design engineers who have developed
the product in co-operation with third party contractors that provide
such test and certification services. The tests will be conducted in an
environmentally controlled test chamber at temperature ranges from -40 to
+85 Degree C. In addition, vibration tables will be used to test the
boards and sensors at variable vibration levels to detect assembly and
component mechanical problems. Thermal Cycling is a well-documented
process proven to expose failures in electronic components.

Circuit boards will be monitored during extended temperature cycling
by a computer system, which will record the calibration, drift,
induced noise and functionality over several thermal cycles. Each
board is serialized and this data is saved permanently.

Final Quality Assurance

Contract manufacturers will assembly the ARS system. Company personnel
will approve all product tests, in order to control the final
acceptance and quality assurance operations before shipping.

The manufacturing area will be operated under the principles of "Improved
Product Reliability through Continuous Process Improvement" in accordance
with ISO9000 standards.

Product Research and Development

During the coming fiscal year the company plans to complete the
initial pre-production testing and complete the first rail carrier
system audit and gain certification for the base Advance Crossing
configuration using a single track system. Multiple track systems
will be deployed later on in the fiscal year with the ability to
permanently record (log) and timestamp rail data information and
transfer this to other computers for analysis. Later releases in this
fiscal year will alert vehicular traffic of train direction and speed,
and provide support for Wide Area Network capability and (Internet
communications) protocol.

In future product releases planed over the next two years the entry
level crossing processor will be expanded to include other devices and
functions that can build on the installed user-base. For example, the
following products are in the design stages and add considerable value
for the railway yet are relatively inexpensive to manufacture and add-on
to the system.

Hot box detector: This is a non-contact temperature measurement
system, which will add-on to our sensors on the track to allow
the temperatures of railcar axles bearing to be monitored as the train
rolls by at high speed. This is a major safety issue for the railway
since the detection of a hot bearing can prevent a derailment.

Flat wheel detector: The use of a vibration sensor can be used to
detect wheel with flat spots. The detection of flat spots will allow
the offending cars to be decommissioned and repaired before additional
damage to the rail occurs.

Wide area networking: Current radio technology can be upgraded to
provide a higher speed communications capability and include
locomotive mobile radios and work equipment monitoring.

Inter-modal Reefer Monitoring Systems: This is a wireless monitoring
system for refrigerated railway cars (Reefers) which communicate with
each ARS crossing system to report operating conditions and allows the
railway to determine where the cars are located.

Purchase or sale of Plant and Significant Equipment: This is not
Anticipated to occur as all manufacture and most assembly is contracted out.

Significant Changes in Numbers of Employees: Full time employees are
expected to grow to 8 over the next fiscal year.

ARS has applied for patent protection filed on January 23, 1998 for an
Automated Railway Crossing in the USA and will pursue protection
overseas through international patent treaties and local patent
applications in appropriate markets. ARS intends to file for patent
protection in May 1999 on other elements of its planned product line,
related to track condition monitoring, intermodal refrigerated car
monitoring, flat train car wheels and wheel bearing deterioration.

ITEM 3. DESCRIPTION OF PROPERTY

The company has no investments in plants or other property. The
company presently leases office at the following locations.

Ameri-can Railway Systems, Incorporated
100 Walnut Street,
Champlain,
New York 12919
Tel: 518-298- 2042
Fax:518-298-2813

Small warehousing available, offices and meeting rooms when required.

Ameri-can Railway Systems, Incorporated,
3 Robert Speck Parkway,
9th Floor, Mississauga,
Ontario, L4Z 2G5
Tel: 905-276-661
Fax: 905-277-1232

Corporate Business Center, provides both large and small meeting rooms
and other common space. We will to lease 2 offices at 100 square feet
each. Services are available on a charge per usage's bases ie:
answering phones, offices and typing services.

ITEM 4 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(a) security ownership of certain beneficial owners.

(1) (2) (3) (4)
Name and Address Amount and Percent of
Title of of Beneficial Nature of Class
Class Owner Beneficial
Owner

Common Sydney Harland CO-Founder 46.0
2155 Winchester Court 4,520,239
Burlington Ontario, Canada,
L7P 3M7

Common Donald Hathaway CO-Founder 7.6
5964 Ninth Line, Erin 750,500
Ontario, Canada, N0B 1T0

(b) Security ownership of management.

(1) (2) (3) (4)
Title of Name and Address Amount and Percent of
Class of Beneficial Nature of Class
Owner Beneficial
Owner

Common Peter Ross Officer 1.4
276 Chartwell, Oakville, 144,250
Ontario, Canada, L6J 3Z9

Common Mark P. Miziolek CFO & Treasurer 0.6
1450 Bayshire Drive, 63,000
Oakville, Ontario, Canada,
L6H 6E7

Common John Andrews Director 1.0
109 Lamplighter Lane 100,500
Pontevedra, Fl 32082

Common Patrick R. Shea Director 1.0
944 North Russell Road, 100,500
Russell, Ontario. K4R 1C7

Common Robert M. Esecson Director 1.0
5964 Ninth Line, Erin, 100,500
Ontario, Canada, N0B 1T0

Common Peter Hoult Director 1.0
110 East 55th Street 100,500
11th floor
NY, NY 10022

Common Stock controlled by the Chief Executive Officer and the other
Co-Founder , both of whom are directors of the Company, own directly
or beneficially 5,270,739 shares of the Company's Common Stock and
will control more than 50% of the outstanding Common Stock if this
Offering is fully subscribed. Therefore, they are in a position to
elect all of the Company's Directors. The Company's Directors, in
turn, elect all of the Company's executive officers. Accordingly, the
principal shareholder and the other Co-Founder directly or indirectly
will be able to control all of the affairs of the Company. Therefor
there is no situation which would result in a change in control of the
company.

ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

A) Directors and Executive Officers of the Company are:

1) Name Age 2) Position 3)Term, Time Served

Sydney Harland 48 Chairman,CEO, 24 mo. 6 mo.
Peter Ross 55 President & COO 24 mo. 6 mo.
Mark Miziolek 41 CFO & Treasurer 24 mo. 6 mo.
Donald Hathaway 62 Director 24 mo. 6 mo.
Patrick Shea 50 Director 24 mo. 6 mo.
Robert Esecson 47 Dir.& Secretary 24 mo. 6 mo.
Peter Hoult 54 Director 24 mo. 6 mo.
John Andrews 45 Director 24 mo. 6 mo.

4) Business Experience:

Sydney A. Harland, M.C.Inst. M., 48, has been Chairman and Chief
Executive Officer of the Company since April 5, 1998. He is a co-founder
of the company. From 1987 to 1998, Mr. Harland was President, founder
and sole shareholder of Ameri-can Equipment Sales and Leasing Inc., a
product development and sales company. From 1995 to the present he has
been a consultant to Ontario Hydro Technologies. He has over 20 years of
business experience, primarily in sales and marketing, in the railway,
telecommunications, nuclear utility and mining industries. He received a
4-year Electrical Diploma from C.P Tech., Montreal, Quebec, Canada and
studied Business Administration and Marketing at Dawson College
Montreal, Quebec, Canada. He has been elected a member of the Canadian
Institute of Marketing, and the American Railway Engineering and
Maintenance-of-Way Association. Mr. Harland has assured the Board of
Directors that his other business shall not be in conflict with the
interest of the Company.

Peter Ross, MBA, B.Sc., 55, has been the President and Chief Operating
Officer of the Company since May 28, 1998. From 1996 to 1998, Mr. Ross was
President and Chief Operating Officer of Internet Payment Inc., a leader in
the development of an INTERAC compliant electronic payments system over the
Internet. Peter Ross has over 25 years in leadership roles in
manufacturing, information technology, telecommunications and management
consulting. Mr. Ross received his MBA, from McGill University, Montreal,
Quebec, Canada and a B.Sc., from Sir George Williams University, Montreal,
Quebec, Canada. Mr. Ross is a Certified Management Consultant (CMC), and a
member of the Institute of Certified Management Consultants of Ontario.

Mark P. Miziolek, C.G.A., B.Com.,41, has been the Vice President
Finance, Chief Financial Officer and Treasurer of the Company since May
20,1998. From 1994 to 1998, Mr. Miziolek became the Treasurer and Chief
Financial Officer and later the President, Treasurer & CFO of Thornmark
Holdings Inc./Thornmark Corporation, a privately held investment holding
company with interests in industrial and residential real estate
development and Great Lakes and ocean shipping. From 1981 to 1994 Mr.
Miziolek was first the Assistant Controller and then the Controller of
Upper Lakes Group Inc., one of Canada's largest dry bulk shipping
companies with 21 vessels operating on the Great Lakes and in 4 vessels
in ocean trades. Mr. Miziolek received a B. Com., from the University of
Toronto in 1983 and became a Certified General Accountant in 1989.

Donald B. Hathaway, B.Eng., B.Sc., MBA, FCMC, 62 has been a Director of
the Company since June 3, 1998. He is a co - founder of the Company. Don
Hathaway is the Managing Director and co-founder, NetFX Concepts Inc.,
begun in 1996 to pursue the commercialization of new and innovative
technologies. While pursuing a career in electronics design and
manufacturing, academia and management consulting over the last thirty
years, he has also been an active entrepreneur, with interests in
several small companies. He has been a partner in two national
consulting firms and the president of two others, and he is a Past
President and a Fellow of the Institute of Management Consultants of
Ontario, and a Past President of the Institute of Management Consultants
of Canada. He is active on several other Boards, including Qnetix Inc.
(Chair); Wordwrap Associates Inc. (Chair); Organization and Systems
Design Inc. (Chair); The Uxmal Group; Keystone Enterprizes Inc.
(Secretary); Nu-wave Photonics Inc., and NetFX Concepts Inc. He is a
former Governor of York University and he is currently on the University
of Waterloo Advisory Council and The Financial Post's selection
committee for the Leaders in Management Education Award. He has a B.Eng.
(electrical) from Sir George Williams University (now Concordia), a
B.Sc. in mathematics from the same university, and an MBA from York
University. Mr. Hathaway has assured the Board of Directors that his
other business shall not be in conflict with the interest of the
Company.

Patrick R. Shea, 50 has been a Director of the Company since June 3,
1998 Pat Shea is the President and co-founder of Taima Corporation,
providing in-bound call center and related technical support services to
the high growth internet, hardware and software market. In 1985 Pat Shea
co-founded The PSC Communications Group (PSC), a high tech systems,
consulting and OEM training company. While at PSC, he assumed the positions
of President, CEO and Chairman of the Board. He sold the company in 1994,
but retained executive leadership till he joined Taima in 1996. The
company was renamed to Geotrain in 1997, and remains one of Ciscos's
prime global training partners. He is still a shareholder and Director
of Geotrain. He joined Bell Canada in 1969 and designed and managed
numerous communications and systems projects in networks and telematics.
He worked at Royal Trust from 1978 to 1980, leading major initiatives in
Information Systems programs. Pat Shea is actively involved in several
investments in the high tech sector, and serves on the board of various
companies. He has a Diploma in Electronics from the Montreal Institute
of Technology (1969). Mr. Shea has assured the Board of Directors that
his other business shall not be in conflict with the interest of the Company.

Robert M. Esecson, BS, JD, 47 has been a Director of the Company since
June 3, 1998. Bob Esecson is the founder, Senior Managing Director and
CEO of The Esmarox Group, LLC, an Investment banking and business
advisory firm specializing in comprehensive services to public and
private middle-market companies. The Esmarox Group develops and
implements creative marketing programs and strategic growth/expansion
plans to increase the profitability of client firms. Trained as a
lawyer, and an entrepreneur in his own right, Bob Esecson has a
comprehensive background in finance, management, and consulting
businesses. He has held senior executive positions at a merchant and
investment-banking firm and at several financial services firms. He
earned BS in Management and Accounting from Bentley College in Waltham,
Massachusetts and a JD from the New England School of Law in Boston. Mr.
Esecson has assured the Board of Directors that his other business shall
not be in conflict with the interest of the Company.

Peter J. Hoult, BA., 54, has been a Director of the Company since June
3, 1998. In 1993 Peter Hoult formed the international strategic
marketing and consulting practice which he operates from North Carolina
and Toronto, Ontario. In 1965 he joined Unilever in London, England as a
management trainee while attending the London School of Economics in the
doctoral program.. In 1967 he formed his own market research company in
London with an American partner and conducted studies in all parts of
the world. In 1972 he joined RJR Tobacco as the International Research
Director, and moved through successively more senior positions to become
President and CEO, RJR Canada; and Executive Vice President US
Operations. He joined Northwest Airlines in 1990 as Executive Vice
President Marketing, Sales, and Strategic Planning. He teaches marketing
and strategy at the Fuqua Graduate School of Business at Duke University
in North Carolina, while continuing to serve his key clients. Peter
Hoult graduated from the University of Reading with an Upper Second
Honours degree in Psychology in 1965 and he has completed the course
work for a doctorate at the London School of Economics. Mr. Hoult has
assured the Board of Directors that his other business shall not be in
conflict with the interest of the Company.

John Andrews, BA, MBA.,41, has been a Director of the company since June
3, 1998. Mr. Andrews is President and Chief Executive Officer of Sanga
International Inc., a leader in the Java applications development
market. He joined Sanga in 1998 from CSX where he was Chief Information
Officer, CSX as well as President and CEO of CSX Technology and a Senior
Vice President of CSX Transportation. Prior to joining CSX from GTE in
1993, he was the Vice President and General Manager of several GTE
business units, serving the health, government and telecommunications
industries. During his career at GTE, he also held positions in field
operations, engineering, planning, operations, finance and information
technology. He is a member of the Conference Board's Council of North
American Information Management Executives; National Defense
Transportation Association's Transportation Advisory Board; NCR's
Transportation Board of Directors; Computer World's Board of Directors
North Florida Technology Innovation Corporation's Board; Harvard School
of Government; and BMC Software Corporation's Board of Advisors. John
holds a B.A. degree in Business Administration/Finance from Whitworth
College and an MBA from the University of Puget Sound. Mr. Andrews has
assured the Board of Directors that his other business shall not be in
conflict with the interest of the Company.

5) Directorships Held In Reporting Companies:

Donald B. Hathaway Qnetix Inc. (Chairman), Alberta Stock Exchange

B Significant Employees:

1) Name Age 2) Position 3) Term Time Served

Shabir Gova 32 VP, Technology 24 mo., 6 mo.
Gary S. Johnson 38 VP Marketing 24 mo., 6 mo.
Susan MacStravick 49 Dir.,Investor Relations 24 mo., 6 mo.

4) Business Experience:

Shabir Gova B.Sc., P. Eng., 32, has been Vice President, Technology of
the company since April 5, 1998. From 1990 to 1998, Mr. Gova worked
for Shlumberger Systems & Services Canada Limited, and has held the
following positions, Design engineer, Senior Design Engineer, Manager,
Systems Services & Development, Manager, Technology and Development -
Canada, Director, Information Technology - Canada. Mr. Gova, has
progressive experience in Software/ Firmware systems design and
development, Interactive DOS and Windows based software applications
(employing an object-oriented framework) used to remotely program,
read and provide a graphical analysis of data gathered by monitoring
devices. Real time multitasking embedded systems used for high-speed
data acquisition and storage. Graphical User Interfaces used as a
front-end for various existing software applications. C++ Class
Libraries used as the core technology for software under development.
From 1989 to 1990 Mr. Gova was Software Development & Systems Support
Analyst, for IBM Canada Limited. Mr. Gova was responsible for
automation of the SIMM prototype fabrication laboratory. Mr. Gova
received an Honours Bachelor of Applied Science in Systems Design
Engineering, Options in Management Science and Computer Engineering,
from the University of Waterloo, Ontario, Canada. Mr. Gova is a member
of the IEEE.

Gary S. Johnson, MBA, B.Sc., 38, has been Vice President, Marketing of
the company since April 5,1998. From 1996 to 1998, Mr. Johnson was
Marketing Manager, Ontario Hydro Technologies, responsible for developing
technology services marketing opportunities to the electric utility industry
in the U.S., Mexico and Canada. From 1989 to 1996 Mr. Johnson worked for
Schlumberger Limited, Electricity Division a world leader in the metering
industry. He started as Product Manager Core Products and Automatic Meter
Reading Technology and by 1994 he became the Director, Utility Services
Group, responsible for P&L, 142 employees, and contracting services to
electricity, water and gas utilities across Canada. From 1988 to 1989,
Mr. Johnson was the Marketing Manager Semi-conductors Philips
electronics Limited. Mr. Johnson received his MBA, and B.Sc. Electrical
Engineering from Queens University in Kingston, Ontario, Canada.

Susan Boyd MacStravick Hon. B. A., 47 has been the Director of Investor
Relations of the company since April 5, 1998. Ms. Boyd McStravick has been
President of Susan Boyd & Associates for 12 years and has over 20 years of
experience in investor relations and communications, advisor work for the
Toronto Stock Exchange, and pre and post offering phases for new equity
issues aimed at gaining national and international media coverage for
Canadian and American high tech and resource companies. She has organized
and orchestrated international conferences and events.(Ms. Boyd MacStravick
received her Hon. B.A., form University of Toronto 1971, Postgrad
Journalism Diploma, from University of Western Ontario 1972. Ms. Boyd
MacStravick has assured the Board of Directors that her other business
shall not be in conflict with the interest of the Company.

ITEM 6. EXECUTIVE COMPENSATION

The Officers of the company currently are forgoing their compensation
until which time the Company has raised sufficient capital to fund the
anticipated compensation.

<TABLE>

Summary Compensation Table

Annual Compensation Long Term Comp.

A B C D E F G

Other Restricted Options
Name and Annual Stock Granted
Principal Com- Awards Excerised
Position Year Salary $ Bonus $ pensation $000.1

<S> <C> <C> <C> <C> <C> <C>
Sydney Harland 98 75,000 0 0 0 0
Peter Ross 98 45,750 0 0 29,250 115,000
Mark Miziolek 98 33,750 0 0 13,000 50,000

</TABLE>

<TABLE>

Aggregated Options/SAR Exercises and Fiscal Year and FY-End Option/SAR Values

A B C D E
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SAR's at Options/SAR's at
FY-End ($) FY-End ($)

Shares Acquired Exercisable/ Exercisable/
Name On Exercise (#) Value Realized Unexercisable Unexercisable *

<S> <C> <C> <C> <C>
Sydney Harland 0 0 0/0 0/0
Chairman & CEO
Peter Ross 29,250 0 0/85,750 0/ 8575
President/COO
Mark Miziolek 13,000 0 0/37,000 0/ 3700
CFO/Treasurer

* The value per share has been determined to be $0.10 based upon sales to unrelated third parties.

</TABLE>

Incentive Compensation Plan

Equity Incentive Plan:

On June 20,1998 the Company adopted the Equity Incentive Plan (the
"Equity Plan"). The purpose of the Equity Plan is to provide
directors, officers and certain key employees with additional
incentives by increasing their proprietary interest in the Company.
As of June 20,1998, there were 4,500,000shares of Common Stock
reserved for issuance under the Equity Plan pursuant to stock options
and stock awards. Options granted under the Equity Plan may be either
Incentive Stock Options (as defined in the Internal Revenue Code of
1986, as amended) or Options which do not qualify as incentive stock
options ("Non-Qualified Options"). The exercise price of all Incentive
Stock Options granted under the Equity Plan may not be less than the
fair market value of the underlying Common Stock at the date of grant.
In the event that an optionee owns more than 10% of the voting power
or value of all classes of stock of the Company, the minimum exercise
price of the Incentive Stock Option may not be less than 110% of the
market value of the underlying Common Stock at the date of grant. No
Option may be exercised after 10 years from the date of grant (5 years
for optionees who are greater than 10% stockholders). The Equity Plan
will be administered by a committee of two or more non-employee
members of the Company's Board of Directors. Options are transferable
only with the written approval of the Committee. An option to purchase
1,969,998 Shares of the Company's Common Stock has been granted to the
Founders, Directors, Executive Officers and certain consultants of the
Company. The options have a term of five (5) years and vested upon
the date of grant. It was resolved to issue to the founders,
Directors, and Officers a pro-rata increase in their respective
shareholdings of twenty-five in response to progress in meeting
corporate goals related to key milestones in the development and
testing of the technology, securing a test site with a major Class I
Railway, in operations, and in the raising of capital. SEE: options
SAR Grants table elsewhere within.

NOTE: see Options/SAR Grants Table re: 500,000 shares granted to
consultants elsewhere within.

Under the Equity Plan, a director who is not otherwise an employee of
the Company ("Non-Employee Director") is granted in July of each year
that he serves as a director, a Non-Qualified option to Purchase
10,000 shares of Common Stock at an exercise price equal to the fair
market value of the underlying Common Stock at the date of grant. Each
option is for a term of ten years and can be exercised immediately.
Except for the foregoing, non-employee directors are not otherwise
eligible to receive options, awards or other rights under the Equity
Plan.

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

The Equity Plan also provides that stock appreciation and depreciation
rights may be granted in tandem with, or independently of, options
granted under the Equity Incentive Plan (except for non-employee
directors). However, stock appreciation rights granted in tandem with
an Incentive Stock Option may be granted only at the time such option
is granted, and Stock depreciation rights may not be granted in
connection with an Incentive Stock Option.

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

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

Option/SAR Grants Table:

NOTE: CERTAIN COMPANY CONSULTANTS WERE GRANTED 500,000 COMMON
SHARES AT $000.1 SUBJECT TO THE TERMS OF THE COMPANYS CONTRACT WITH
IDAHO CONSULTING SERVICES, INC. THE GRANTS EXPIRE JULY 1, 2003 AND
ARE SUBJECT TO A TWO YEAR LOCK-UP AGREEMENT. (SEE: LOCK-UP AGREEMENT
ELSEWHERE WITHIN.)

<TABLE>

Options/SAR Grants in last fiscal Year:

A B C D E
Name No. of Securities % Total Options/
Underlying SARs Granted to Exercise
Options/SARs Employees in or Base Expiration
Granted (#) Fiscal Year Price ($/Sh) Date

<S> <C> <C> <C> <C>
Peter Ross 115,000 69% $.0001 5/29/00
276 Chartwell, Oakville,
Ontario, Canada, L6J 3Z9
President & COO

Mark P. Miziolek 50,000 31% $.0001 5/20/00
1450 Bayshire Drive, Oakville,
Ontario,Canada,L6H 6E7
CFO & Treasuer

</TABLE>

Compensation of Directors:

1) Standard Arrangements:

1. Term

Directors are appointed for a term of twenty-four(24) months, to
commence upon the date of your acceptance of the Appointment.

2. Compensation

Save and except for the share options set out below and 100,000 common
shares of the Company at a nominal value you shall receive no
compensation for your services or efforts as a Director. Provided that
should you, for any reason resign your Directorship prior to the
expiration of the term of your appointment hereunder, the Company has
the right to repurchase and you must sell to the Company all of these
100,000 common shares at their par value.

3. Expenses

Directors will be forthwith reimbursed by the Company for all expenses
incurred in the course of fulfilling there duties as a Director,
including the full cost of travel, food and hotel accommodation
associated with your attendance at meetings of the Board of Directors.

4. Share Option Plan

Each Director shall be entitled to purchase fifty thousand (50,000)
common shares of the Company at fair market value per share, for each
year of the Term that the Director completes as a Director, however, the
shares which underlay the option referable to any given year do
not vest in the Director until the expiry of that year. Should the
Director resign the position of Director or should his or her
Appointment be terminated prior to the completion of any given year,
then the shares referable to that year shall be forfeited upon
repayment to the Director of the cost of exercising the option for
that year.

5. Attendance at Board Meetings

Directors are required to attend all Board Meeting. Absence from any
two (2) consecutive Board Meetings shall constitute the tendering of
the Directors resignation from the Board.

Employment Contracts and Termination of Employment and in-control
arrangements.

The Company has entered into employment contracts with its Executive
Officers. The terms of the contracts provide for provisions to
terminate the parties at any time as stipulated under the conditions
of their individual contracts. Mr. Harland's contract is for a term of
5 years and he is to be compensated in the amount of $100,000 per year
plus bonus. Mr. Ross is contracted for 2 years and is to be
compensated in the amount of $61,000 per year plus quarterly stock
options. Mr. Miziolek is compensated in the amount of $45,00 per year
plus semi-annual stock options. The compensation packages of the
Officers shall be reviewed from time to time by the Directors of the
Company. The Officers have agreed to forgo Compensation until the
Company is successful in raising initial financing in the amount of
$1,000,000

1) Employment Contracts Executive Officers

Sydney Harland see: Exhibits

Peter Ross see: Exhibits

Mark Miziolek see: Exhibits

ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company, a developmental-stage company, was incorporated in New
Hampshire on May 4, 1998. The Company was formed to manufacture and
sell railway level crossings to the railroad industry. The Company
acquired certain assets comprised of the rights to the contractual
relationship AEL has with Geismar, industry relationships, goodwill,
know how and application experience on May 11,1998 in return for 50,000
shares of the Company from Ameri-Can Equipment Sales and Leasing,
Inc.("AEL"), a Canadian corporation. Although AEL and the Company at the
time of the sale had one hundred percent common ownership, the Company
is, in management's opinion, not a successor company to AEL. AEL is
engaged in a completely different business apart from the Company's
Railway communications and signaling business. Additionally, the
Company, issued to the principal shareholder 4,520,239 shares of its
$0.0001 par value, Common Stock. These shares, were issued, in reliance
on the "private placement" exemption under the Securities Act of 1933,
as amended ("the Act"), in exchange for certain assets, including
the assignment of patents and a non-compete agreement. The transaction
was accounted for under the Purchase Method of Accounting.

On June 1, 1998, subject to the Company's due diligence, the Company
issued 1,983,500 shares of Common Stock $0.0001 par value per share to
its Officers, Directors some of which the Company deems to be
founders, and certain initial investors for $2,054 cash and other
valuable considerations. These shares, were issued, in reliance on
the "private placement" exemption under the Securities Act of 1933, as
amended ("the Act"), and the exemption from registration under
Section 4(2) of the Securities Act. See "Risk Factors--Shares
Eligible for Future Sale" and "Principal Shareholders" herein, as to
4,520,239 shares issued to a person who may be deemed to be
"affiliates" of the Company or defined in Rule 405 under the
Securities Act of 1933, although such person does not hereby admit
that they are affiliates.

In management's opinion all transactions were made on terms that are as
favorable to the Company as those available in arm's length transactions
in the marketplace.

ITEM 8. LEGAL PROCEEDING:

A) None
B) None

ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

A) Market Information:

Principal markets where Stock is traded:

There is no trading market for the Common Stock, and no assurances can
be given that a trading market will develop or continue. If no market
develops, it may be difficult or impossible for holders of shares to
sell them.

(2) (i) 4,700,000 common shares

(ii) 895,000 common shares

B) Holders of each class of common equity: 70

ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES; USE OF PROCEED FORM
REGISTERED SECURITIES

Question 1-5

On May 11, 1998 the Company acquired certain assets comprised of the
rights to the contractual relationship Ameri-can Equipment Sales and
Leasing, Inc. has with Geismar, Industry relationships, goodwill, know
how and application experience in exchange for 50,000 shares of the
Company from Ameri-Can Equipment Sales and Leasing, Inc.("AEL"), a
Canadian corporation. Although AEL and the Company at the time of the
sale had one hundred percent common ownership, the Company is, in
management's opinion, not a successor company to AEL. AEL is engaged in
a completely different business apart from the Company's Railway
communications and signaling business. Additionally, the Company,
issued to the principal shareholder 4,520,239 shares of its $0.0001 par
value, Common Stock, these shares, were issued, in reliance on the
"private placement" exemption under the Securities Act of 1933, as
amended("the Act"), in exchange for certain assets, including the
assignment of patents and a non-compete agreement. The transaction was
accounted for under the Purchase Method of Accounting.

During June, 1998 the Company granted 500,000 options pursuant to Rule
504 Regulation D as to tradeabilty to certain consultants to purchase
Common Shares of the Company at an exercise price of $0.0001 per share.
The option vested upon grant and may be exercised in whole or in part at
any time within 5 years of grant. The Stock underlying the option is
subject to a 24 month lock-up agreement from the time of grant.

June 20,1998 the Company had sold approximately 1,915,000 shares of
Common Stock pursuant to Regulation D, Rule 504, with proceeds of
approximately $192 before expenses.

November 10, 1998 the Company had sold approximately 1,000,000 shares
of Common Stock pursuant to Regulation D, Rule 504, with proceeds of
approximately $100,000 before expenses.

On February 1, 1999 the Board of Directors authorized the Company to
issue 100,000 units. See Description of "Units" included elsewhere
herein.(which is hereby being offered) for the purpose of raising up
to $100,000, before expenses, through a sale of the Common Stock
pursuant to Regulation D, Rule 504.

The Company's directors and officers, who do not receive compensation
for such efforts, make this offering. The Company does not have an
underwriter or selling agent. It reserves the right to engage one or
more licensed brokers or dealers for a sales commission up to 10% plus
a 3% non-accountable due diligence and expense allowance, and to pay
up to a 5% finder's fee, to the extent lawful. Any such payments
would reduce the net proceeds to the Company. The Shares are offered
on a "best efforts" basis subject to no minimum sale proceeds. The
Company sold securities to Accredited and Non-accredited investors.

This Offering was made under an exemption from registration provided
by Rule 504 of Regulation D under the United States Securities Act of
1933.

ITEM 11. DESCRIPTION OF SECURITIES:

Common or Preferred shares

Common Stock

The Company is authorized to issue 50,000,000 shares of Common Stock,
$.0001 par value per share (the "Common Stock"). There are currently
9,726,489 shares of Common Stock outstanding of which 6,811,489 shares
of Common Stock is subject to a "Lock-up Agreement" described
elsewhere herein. Additionally, the outstanding Common Stock excludes
1,969,998 shares reserved for the issuance pursuant to the grant of
Common Stock options to the Founders, Directors, Executive Officers
and certain of the Company's consultants SEE : Options/SAR Grants
Table elsewhere within.

Subject to any superior rights of any outstanding preferred stock of
the Company, the holders of Common Stock (i) have equal rights to
dividends from funds legally available therefor, when as and if
declared by the Board of Directors of the Company; (ii) are entitled
to share ratably in all of the assets of the Company available for
distribution to holders of Common Stock upon liquidation, dissolution
or winding up of the affairs of the Company; (iii) do not have
preemptive, subscription or conversion rights and there are no
redemption or sinking fund provisions applicable thereto; and (iv) are
entitled to one non-cumulative vote per share on all matters on which
stockholders may vote at all meeting of shareholders. All of the
shares of Common Stock now outstanding are fully paid and non-
assessable and all shares of Common Stock which are the subject of
this Offering, when issued, will be fully paid and non-assessable.
Holders of Common Stock of the Company do not have cumulative voting
rights, which means that the holders of a majority of such outstanding
shares, voting for the election of directors, can elect all of the
directors to be elected by the holders of the Common Stock if they so
choose and, in such event, the holders of the remaining shares will
not be able to elect any of the Company's directors.

Preferred Stock

The Preferred Stock may be issued from time to time in one or more
classes or series, each class or series of which shall have the voting
rights, designations, preferences and relative rights as fixed by
resolution of the Company's Board of Directors, without the consent or
approval of the Company's shareholders. The Preferred Stock may rank
senior to the Common stock as to dividend rights, liquidation
preferences, or both, and may have extraordinary or limited voting
rights. There are currently no shares outstanding and no plans to
issue any.

Authorization and Discretionary Issuance of Preferred Stock. The
Company's Board of Directors may issue from time to time up to
25,000,000 shares of Preferred Stock without shareholders approval,
with dividends, liquidation, conversion, voting or other rights and
preferences which could adversely affect the voting power or other
rights of the holders of the Common Stock. The issuance of shares of
Preferred Stock could under certain circumstances make it more
difficult for a third party to gain control of the Company, discourage
bids for the Company's Common Stock at a premium, or otherwise
adversely affect the market price of the Common Stock. There are no
shares of Preferred Stock outstanding, and no present plans to issue
any. See "Description of Securities".

ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company's charter or bylaws provide for the Company to defend,
protect and hold harmless its officers, directors and employees from
any lawsuits, legal action and or other actions which may result from
the officers, directors and employees discharging their legal duties.

ITEM 13. FINANCIAL STATEMENTS

Financial Statements in Additional Exhibits Number 99

ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.

Not Applicable

ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.

10SB

2 Plan of acquisition, reorg.,
arrgmnt, liquid. or succession. None in Place

3.1 Articles of Incorporation

3.2 By-laws

6 No exhibit required

9 Voting trust agreement NONE

10.0 Material contracts
10.1 Contract with Idaho Consulting services, Inc.
10.2 Consulting Agreement, Ameri-can Inc.
10.3 Consultant Agreement, Peter Ross Associates
10.4 Appointment Letter, Mark P. Miziolek
10.5 Service Agreement, Shabir Gova
10.6 Service Agreement, Gary Johnson
10.7 Service Agreement, Susan MacStravick
10.8 Board Appointment, Don Hathaway
10.9 Board Appointment, Patrick Shea
10.10 Board Appointment, Robert Esecson
10.11 Board Appointment, Peter Hoult
10.12 Board Appointment, John Andrews
10.13 Lock-up Agreement, Officers, Directors and
Significant (Consultants) Employees
10.14 Non-compete Agreements, Officers, Directors and
significant (Consultants) Employees
10.15 License Agreement Sydney Harland to Ameri-can
Railway Systems, Incorporated
10.16 Patent Application confirmation
10.17 Ameri-can transfer of assets to Ameri-can
Railway Systems, Incorporated

21 Subsidiaries of the registrant None

23 Auditor's Consent

27 Financial Data Schedule

99 Additional Exhibits

Financial Statements for Ameri-can Railway Systems, Incorporated.

SIGNATURES

In accordance with Section 12 of the Securities Exchange Act of
1934, the registrant caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.

Ameri-can Railway Systems, Incorporated
---------------------------------------
(Registrant)

Date June 25, 1999 By /s/ Sydney A. Harland
---------------------------------------
Sydney A. Harland, Chairman,
Chief Executive Officer
(Signature)

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> JAN-31-1999
<CASH> 10,650
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,650
<PP&E> 1
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,651
<CURRENT-LIABILITIES> 63,025
<BONDS> 0
0
0
<COMMON> 973
<OTHER-SE> (53,347)
<TOTAL-LIABILITY-AND-EQUITY> 10,651
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 442,242
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (442,242)
<INCOME-TAX> 0
<INCOME-CONTINUING> (442,242)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (442,242)
<EPS-BASIC> 0
<EPS-DILUTED> 0

</TABLE>

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of
AMERI-CAN RAILWAY SYSTEMS, INCORPORATED

We have audited the accompanying balance sheet of AMERI-CAN RAILWAY
SYSTEMS, INCORPORATED. (a development stage company) as of January 31, 1999
and the related statements of loss, stockholders deficit, and cash flows
from the inception of incorporation, May 4, 1998 to January 31, 1999. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audit.

We conducted our audit 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 audit
provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of AMERI-CAN RAILWAY
SYSTEMS, INCORPORATED at January 31, 1999 and the results of its operations
and its cash flows from the inception of incorporation, May 4, 1998 to
January 31, 1999 in conformity with generally accepted accounting
principles.

The accompanying financial statements have been prepared assuming that
AMERI-CAN RAILWAY SYSTEMS, INCORPORATED will continue as a going concern.
As discussed in Note 6 to the financial statements, AMERI-CAN RAILWAY
SYSTEMS, INCORPORATED is a development stage company and is dependent upon
the raising of equity capital, which raises substantial doubt about its
ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 6. These financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.

/s/ Feldhammer Fishman
Chartered Accountants

Montreal, Quebec
February 19, 1999

Feldhammer Fishman S.E.N.C.
5050 De Sorel, Suite 110, Montreal, Quebec, Canada H4P 1G5
Tel. (514) 735-5375 Fax: (514) 738-8137 Internet: [email protected]

<PAGE>

<TABLE>

AMERI-CAN RAILWAY SYSTEMS, INCORPORATED
(A Development Stage Company)

BALANCE SHEET

JANUARY 31, 1999
($US)

ASSETS

April 30, 1999
(Unaudited)

<S> <C> <C>
CURRENT
Cash in bank $ 10,650 $ 34,600

OTHER ASSETS
Non-compete agreements (Note 5) 1 1
Patents pending (Note 5) 0 0
------------- ----------

------------- ----------
$ 10,651 $ 34,601
============= ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 13,025 $ 11,000
Note payable (Note 3) 50,000 50,000
------------- ----------
63,025 61,000
------------- ----------
COMMITMENTS AND CONTINGENCIES (NOTES 5 AND 6)

STOCKHOLDERS' DEFICIT
Preferred stock, $.0001 par value -
25,000,000 shares authorized; none
outstanding
Common stock - $.0001 par value - 50,000,000
shares authorized; 9,726,489
outstanding 973 1,001
Additional paid in capital 388,895 474,392
Deficit - accumulated during the
development stage (442,242) (501,792)
------------- ---------
(52,374) (26,399)
------------- ---------
$ 10,651 $ 34,601
============= =========

See accompanying notes

Approved:

_________________________ Director

</TABLE>

<PAGE>

<TABLE>

AMERI-CAN RAILWAY SYSTEMS, INCORPORATED
(A Development Stage Company)

STATEMENT OF LOSS

FROM THE INCEPTION OF INCORPORATION
MAY 4, 1998 TO JANUARY 31, 1999
($US)

<CAPTION>
Three Months Ended
April 30, 1999
(Unaudited)

<S> <C> <C>
SALES SINCE INCEPTION $ 0 $ 0
------------- -----------
EXPENSES
Officers' compensation (Note 5) 154,500 51,500
Professional fees (Note 3) 275,900 2,021
Development expenses 7,856 4,201
Rent and telecommunications 3,116 1,637
General 711 77
Bank charges 159 114
------------- ------------
TOTAL EXPENSES 442,242 59,550
------------- ------------
TOTAL EXPENSES SINCE INCEPTION 442,242 501,792
------------- ------------

NET LOSS $ (442,242) $ (59,550)
============= ============
LOSS PER SHARE (BASIC):
Net loss $ (.05) $ (.01)
============= ============

LOSS PER SHARE (DILUTED):
Net loss $ (.05) $ (.01)
============= ============

WEIGHTED AVERAGE SHARES OUTSTANDING 8,495,239 9,775,198
============ ============

See accompanying notes

</TABLE>

<PAGE>

<TABLE>

AMERI-CAN RAILWAY SYSTEMS, INCORPORATED
(A Development Stage Company)

STATEMENT OF STOCKHOLDERS' DEFICIT (NOTES 5 AND 7)
FROM THE INCEPTION OF INCORPORATION
MAY 4, 1998 TO JANUARY 31, 1999
($US)

<CAPTION>
Additional Total
Common Stock Paid-In Stockholders'
Date Shares Value Capital Deficit Deficit

<S> <C> <C> <C> <C> <C> <C>
Balance - Beginning 0 $ 0 $ 0 $ 0 $ 0

Net loss 0 0 0 (442,242) (442,242)

Common stock for
acquisition of assets of
Ameri-can Equipment
Sales & Leasing Inc. 5/11/98 50,000 5 (5) 0 0

Common stock for
acquisition of patents and
non-compete agreement 5/11/98 4,520,239 451 (451) 0 0

Common stock sold for
$.001 in cash 6/1/98 1,983,500 199 1,855 0 2,054

Common stock for
lock-up agreement 6/1/98 6,500 1 0 0 1

Common stock for
service contracts 6/1/98 251,250 25 12,538 0 12,563

Common stock sold for
$0.0001 in cash 6/20/98 1,915,000 192 95,558 0 95,750

Stock options issued
for 500,000 shares for
consulting services 7/1/98 0 0 25,000 0 25,000

Common stock sold for
$0.10 in cash 11/25/98 1,000,000 100 99,900 0 100,000

Officers' compensation
contributed to capital 0 0 154,500 0 154,500
----------- -------- -------- --------- --------
Balance - ending 9,726,489 $ 973 $388,895 $(442,242) $ (52,374)
=========== ======== ======== ========= =========

Three Months Ended April 30, 1999 (Unaudited)

<S> <C> <C> <C> <C> <C> <C>
Common stock sold for
$1.00 in cash 3/22/99 2,000 $ - $ 2,000 $ - $ 2,000

Common stock sold for
$1.00 in cash 3/30/99 5,000 1 4,999 - 5,000

Exercise of options for
250,000 shares at $.0001 4/15/99 250,000 25 - - 25

Common stock sold for
$1.00 in cash 4/21/99 2,000 - 2,000 - 2,000

Common stock sold for
$1.00 in cash 4/28/99 25,000 2 24,998 - 25,000

Officers' compensation
contributed to capital 0 0 51,500 - 51,500

Net loss 0 0 0 (59,550) (59,550)
---------- --------- --------- ---------- --------

Balance ending 10,010,489 $ 1,001 $474,392 $(501,792) $ (26,399)
========== ========= ========= ========== =========

See accompanying notes
</TABLE>

<PAGE>

<TABLE>

AMERI-CAN RAILWAY SYSTEMS, INCORPORATED
(A Development Stage Company)

STATEMENT OF CASH FLOWS (NOTE 8)

FROM THE INCEPTION OF INCORPORATION
MAY 4, 1998 TO JANUARY 31, 1999
($US)

<CAPTION>
Three Months Ended
April 30, 1999
(Unaudited)

<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (442,242) $ (59,550)
----------- ----------
Adjustments to reconcile net loss to
net cash (used in) operating activities:
Officers' compensation 154,500 51,500
Professional fees 183,121 0
Changes in assets and liabilities:
Increase (decrease) in accounts payable
and accrued liabilities 13,025 (2,025)
---------- ---------
TOTAL ADJUSTMENTS 350,646 49,475
---------- ---------
NET CASH (USED IN) OPERATING ACTIVITIES (91,596) (10,075)
---------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the sale of stock 102,246 34,025
---------- ---------

NET INCREASE IN CASH 10,650 23,950
CASH AT BEGINNING OF PERIOD 0 10,650
---------- ---------
CASH AT THE END OF PERIOD $ 10,650 $ 34,600
========== =========

See accompanying notes

</TABLE>

<PAGE>

AMERI-CAN RAILWAY SYSTEMS, INCORPORATED
(A Development Stage Corporation)

NOTES TO THE STATEMENT OF FINANCIAL CONDITION

FROM THE INCEPTION OF INCORPORATION
MAY 4, 1998 TO JANUARY 31, 1999
($US)

1. ORGANIZATION

The Company, incorporated on May 4, 1998 in New Hampshire, was formed
to manufacture and sell railway level crossings to the railroad
industry. The Company is devoting all its efforts to establishing a
new business. Planned principal operations have not yet started.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER
INFORMATION

a) Earnings Per Share

In February 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share," which replaced the calculation of primary and fully
diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share includes all such dilutive effects and, as such, is very
similar to the previously reported fully diluted earnings per share. All
earnings per share amounts for all periods have been presented, to conform
to SFAS No. 128 requirements.

b) Stock Based Compensation

In October, 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation". SFAS No. 123 encourages entities to adopt the fair value
method in place of the provisions of accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," for all
arrangements under which employees receive shares of stock or other equity
instruments of the employer or the employer incurs liabilities to employees
in amounts based on the price of its stock. The Company has not adopted
the fair value method encouraged by SFAS No. 123 and will continue to
account for such transactions in accordance with APB No. 25.

c) Use of Estimates

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

d) Revenue Recognition

Revenue is to be recognized when product is shipped FOB shipping
point.

<PAGE>

AMERI-CAN RAILWAY SYSTEMS, INCORPORATED
(A Development Stage Corporation)

NOTES TO THE STATEMENT OF FINANCIAL CONDITION

FROM THE INCEPTION OF INCORPORATION
MAY 4, 1998 TO JANUARY 31, 1999
($US)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER
INFORMATION (continued)

e) Income Taxes

The Company will account for income taxes using the asset and
liability method as required by FAS 109. Deferred income taxes will
reflect the net tax effect of temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.

f) Start-up Costs

Pursuant to AICPA Statement of Position 98-5, "Reporting on the Costs of
Start-Up Activities", all costs incurred in the organization and start-up
of the Company have been expensed.

g) Average Common Shares Outstanding

The average common shares outstanding is based upon a weighted average
number of common shares outstanding. Since the Company had a loss for the
periods ended January 31, 1999 and April 30, 1999, all stock options were
considered antidilutive.

h) Basis of Presentation

The financial statements are prepared in accordance with generally
accepted accounting principles in the United States.

i) Unaudited Interim Financial Information

The accompanying unaudited balance sheet as of April 30, 1999 and
the unaudited statements of loss, stockholders' deficit, and cash
flows for the three months then ended include all adjustments,
consisting of normal recurring adjustments, which in the opinion
of management, are necessary for the fair presentation of the
financial position, results of operations and cash flows.
The results for the interim period presented are not necessarily
indicative of the results to be expected for the full year.

3. NOTE PAYABLE

The Company issued a promissory note in the amount of $50,000 as
payment to certain consultants for services rendered. The note bears
interest at 8% per annum and is payable at the earlier of the Company
raising $500,000 of new equity capital or one year from January 1,
1999.

4. INCOME TAXES

The Company has a loss for the periods ended January 31, 1999 and
April 30, 1999, and therefore, the financial statements do not include
a provision for income taxes. No deferred tax asset has been
recognized in the financial statements as it would be fully offset
by a valuation allowance because its ultimate realization is uncertain
due to the Company operating in its development stage.

<PAGE>

AMERI-CAN RAILWAY SYSTEMS, INCORPORATED
(A Development Stage Corporation)

NOTES TO THE STATEMENT OF FINANCIAL CONDITION

FROM THE INCEPTION OF INCORPORATION
MAY 4, 1998 TO JANUARY 31, 1999
($US)

5. RELATED PARTY TRANSACTIONS

On May 11, 1998 the Company acquired certain assets which comprised of
the rights to the contractual relationship Ameri-Can Equipment Sales
and Leasing Inc. has with Geismar, industry relationships, goodwill,
and application experience in exchange for 50,000 shares of
the Company from Ameri-Can Equipment Sales and Leasing Inc. ("AEL"), a
Canadian corporation. Although "AEL" and the Company at the time of
sale had one hundred percent common ownership, the Company is, in
management's opinion, not a successor company to "AEL". "AEL" is
engaged in a completely different business apart from the Company's
railway communications and signaling business. Additionally, the
Company issued to the principal shareholder 4,520,239 shares of its
$0.0001 par value common stock. These shares were issued in reliance
on the "private placement" exemption under the Securities
Act of 1933, as amended ("the Act), in exchange for certain assets
including the assignment of patents and a non-compete agreement.
Since the assets acquired pursuant to this transaction had no
carrying value at the date of transfer, no value has been reflected
in the accompanying financial statements for the transaction.

On June 1, 1998, 1,983,500 shares of the Company's stock was purchased
by officers, directors and management of the Company for $2,054 plus
entering into a non-compete agreement.

On June 20, 1998 the officer, directors and certain members of the
advisory board entered into a "lock-up agreement" with the Company,
agreeing to withhold from sale, for a period of two years, any shares
of the Company's common stock which they own directly or deemed
to own beneficially. For this agreement they each received 500 shares
which are not locked up. The total number of these shares locked-up is
6,811,489.

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

<PAGE>

AMERI-CAN RAILWAY SYSTEMS, INCORPORATED
(A Development Stage Corporation)

NOTES TO THE STATEMENT OF FINANCIAL CONDITION

FROM THE INCEPTION OF INCORPORATION
MAY 4, 1998 TO JANUARY 31, 1999
($US)

5. RELATED PARTY TRANSACTIONS (continued)

Options to purchase 500,000 of the Company's common stock have been
granted to certain consultants of the Company. The options have a term
of five years and are vested upon the date of the grant. In April, 1999,
options for 250,000 shares of the Company's common stock were exercised by
the consultants.

The Company has issued stock options to two of its officers. The options
are valid for two years expiring in April, 2000. The total shares under
option are 122,750 at January 31, 1999.

On February 18, 1999, the Company granted options to purchase 1,469,967
to certain officers and directors of the company. The options have a
term of five years and are vested upon the date of grant.

The Company applies APB Opinion 25, "Accounting for Stock Issued to
Employees," and related Interpretations in accounting for this plan. Under
APB Opinion 25, no compensation cost was recognized because the exercise
price of employee stock options equaled the market price of the underlying
stock on the date of grant.

FASB Statement 123, "Accounting for Stock-Based Compensation," requires
that the Company provide pro forma information regarding net income and
earnings per share as if the compensation cost for the Company's stock
option plan had been determined in accordance with the fair value method
prescribed in such statement. The Company estimates the fair value of each
stock option at the grant date by using the Black-Scholes option-pricing
model with the following weighted average assumptions used for grants for
the periods ended:

April 30, 1999
January 31, 1999 (Unaudited)

Dividend yield 0% 0%
Expected volatility 0% 0%
Risk free interest rates 5.52% 4.94%
Expected lives 1.9 years 2.5 years

Under the accounting provisions of FASB Statement 123, the Company's net
loss would have been increased by an insignificant amount and there was no
effect on loss per share for the period ended January 31, 1999. For the
period ended April 30, 1999, the net loss would have been increased by
approximately $119,000 and loss per share by $.01.

<PAGE>

AMERI-CAN RAILWAY SYSTEMS, INCORPORATED
(A Development Stage Corporation)

NOTES TO THE STATEMENT OF FINANCIAL CONDITION

FROM THE INCEPTION OF INCORPORATION
MAY 4, 1998 TO JANUARY 31, 1999
($US)

5. RELATED PARTY TRANSACTIONS (continued)

A summary of the status of the Company's stock option plan as of January
31, 1999 and changes during the period from inception of incorporation, May
4, 1998 to January 31, 1999, is presented below:

Weighted
Average
Exercise
Shares Price
- ---------------------------------------------------------------------------
Outstanding at beginning of period 0 $ 0
Granted 665,000 .0001
Exercised 42,250 .0001
------- -----
Outstanding at end of year 622,750 .0001
Options exercisable at year-end 500,000 .0001
Weighted average fair value of options
granted during the period .0001
==========================================================================

A summary of the status of the Company's stock option plan as of April 30,
1999 and changes during the three months ended April 30, 1999, is presented
below:

(Unaudited)
- ----------------------------------------------------------------------------
Weighted
Average
Exercise
Shares Price
- ---------------------------------------------------------------------------
Outstanding at beginning of period 622,750 $ .0001
Granted 1,469,967 1.01
Exercised 250,000 .0001
--------- ------
Outstanding at end of year 1,842,717 .80
Options exercisable at year-end 1,719,967 .86
Weighted average fair value of options
granted during the period 1.01
==========================================================================

<TABLE>

The following table summarizes information about stock options outstanding at
January 31, 1999:

<CAPTION>
Options Outstanding Options Exercisable
- ------------------------------------------------------ ----------------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices at 1/31/99 Life Price at 1/31/99 Price
- -----------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$.0001 622,750 46 months $.0001 $500,000 $.0001

The following table summarizes information about stock options outstanding at
April 30, 1999 (unaudited):

Options Outstanding Options Exercisable
- ------------------------------------------------------ ----------------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices at 1/31/99 Life Price at 1/31/99 Price
- -----------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$.0001 372,750 38 months $ .0001 $ 250,000 $ .0001
$1.00 to
$1.01 1,469,967 58 months 1.01 1,469,967 1.01
--------- ------- --------- ------
1,842,717 1,719,967
========= =========

</TABLE>

<PAGE>

AMERI-CAN RAILWAY SYSTEMS, INCORPORATED
(A Development Stage Corporation)

NOTES TO THE STATEMENT OF FINANCIAL CONDITION

FROM THE INCEPTION OF INCORPORATION
MAY 4, 1998 TO JANUARY 31, 1999
($US)

5. RELATED PARTY TRANSACTIONS (continued)
The Company has entered into employment contracts with its executive
officers. The terms of the contracts provide for provisions to
terminate the parties at any time as stipulated under the conditions
of their individual contracts. Mr. Harland's contract is for a term of
five years and he is to be compensated in the amount of $100,000 per
year plus a bonus. Mr. Ross is contracted for two years and is to be
compensated in the amount of $61,000 per year plus quarterly stock
options. Mr. Miziolek is compensated in the amount of $45,000 per
year plus semi-annual stock options. The compensation packages of the
officers shall be reviewed from time to time by the directors of the
Company. The officers have agreed to forgo compensation until the
Company is successful in raising initial financing in the amount
of $1,000,000. The value of these forgone salaries based on the
employment contracts amounted to $154,500 for the period from the
inception of incorporation, May 4, 1998, to January 31, 1999 and
and $51,500 for the three months ended April 30, 1999 and has been
recorded as additional paid-in capital.

The agreement with Mr. Harland requires the Company to pay $1,000,000 to
Mr. Harland if the agreement is terminated.

6. CAPITALIZATION OF COMPANY AND MANAGEMENT'S PLANS

The Company's financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company is in the
developmental stage and therefore has no revenue from operations in the
current period. Because of this, the Company faces significant hurtles in
regards to financing and customer acceptance of the Company's products.
The Company's continuation as a going concern is dependent upon its
ability to raise capital from outside sources. The Company has been
successful in raising approximately $100,000 through January 31, 1999
to date and anticipates raising an additional $100,000 for a total of
approximately $200,000 from the sale of its Common Stock pursuant to
Rule 504 Regulation D exemption. These funds have been and will continue
to be utilized to fund the start-up and development of the Company.

After successful completion of the Company's voluntary 10-SB-12G filing,
the Company intends to file Form SB-2 and register 2,000,000 additional
shares of Common Stock for sale on the OTCBB. The Company is in negations
with a Securities Brokerage firm and expects to conclude negotiations with
the broker upon the successful completion of the Form 10-SB filing. The
Company will use the proceeds raised from the sale of its stock to fund and
expand operations. Management believes sufficient funds are or will be
available to sustain operations for at least the twelve months following
the latest balance sheet date. The Company intends to purchase small
companies that have products and services that add value and are strategic
to the success of the Company's growth. Acquisitions of small companies
that complement the Company's product and generate ongoing revenue will
greatly strengthen the Company's ability to stabilize its stock for its
stockholders. The Company is presently in preliminary discussions with
its first potential acquisition target, and believes that if successful
in raising additional funding, it will be able to successfully acquire
the company.

The Company recognizes that the railways may not readily accept the
Company's products in the marketplace. The Company believes a strong market
exists for a crossing, advance control system which is substantially
cheaper (less than 50 percent) than the presently available systems offered
by the four major suppliers. However, the Company does not believe that
traditional customers will readily abandon existing systems due to the high
costs associated with removing already installed systems and replacing them
with new ARS systems. Therefore, the Company intends to lobby state and
municipal governments and private crossing users. Focusing its marketing
efforts on educating the public and traditional customers, emphasizing the
benefits of ARS's technology and addressing the potential of providing
level crossing protection at the 220,000 passive, private and public
railway crossings that do not have automated protection systems at this
time. Even if successful with the execution of its plans, the Company
cannot guarantee that the public will buy its stock or that its marketing
efforts will be sufficient in overcoming the hurtles of introducing a new
product into the market.

<PAGE>

AMERI-CAN RAILWAY SYSTEMS, INCORPORATED
(A Development Stage Corporation)

NOTES TO THE STATEMENT OF FINANCIAL CONDITION

FROM THE INCEPTION OF INCORPORATION
MAY 4, 1998 TO JANUARY 31, 1999
($US)

6. CAPITALIZATION OF COMPANY AND MANAGEMENT'S PLANS (continued)

The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets
or the amounts and classification of liabilities that may result from the
possible inability of the Company to continue as a going concern. However,
management believes sufficient funds are or will be available to sustain
operations for at least the twelve months following the latest balance
sheet.

7. USE OF PROCEEDS FROM ISSUANCE OF STOCK

On June 20, 1998, the Company issued 1,915,000 shares of common stock for
$192 and as compensation to consultants of the company. The cash was used
to fund the start-up activities of the Company. None of these shares were
issued to related parties.

On November 25, 1998, the Company issued 1,000,000 shares of common stock
for $100,000. The proceeds were used to fund the professional fees
incurred with the start-up and development of the company.

During the three months ended April 30, 1999, excluding 250,000 shares issued
upon the exercise of options, the Company issued 34,000 shares for $34,000.
The 34,000 shares of common stock issued included one option to purchase
one share of common stock at a price of $1.25 and one option for one share
at a price of $1.75. These options are exercisable at any time after May 1,
1999, subject to certain conditions, and expire 60 months from that date.
The proceeds have been and will be used to fund the start-up and development
of the company.

8. SUPPLEMENTAL CASH FLOW INFORMATION

The Company did not make any payments for interest or taxes during the
periods ended January 31, 1999 and April 30, 1999.

Noncash investing and financing activities consist of the following:

Three Months Ended
Period Ended April 30, 1999
January 31, 1999 (Unaudited)

<S> <C> <C>
(a) Officer's compensation recorded as a contribution
to additional paid-in capital $154,500 $51,500
======= ======
(b) 50,000 shares of common stock issued for acquisition
of assets of Ameri-can Equipment Sales & Leasing, Inc. $ 0
=======
(c) 4,520,239 shares of common stock issued for acquisition
of patents pending and non-compete agreement from
controlling shareholder $ 0
=======
(d) 6,500 shares of common stock issued for lock up agreement.
Shares issued to founders are considered to be of nominal $ 1
value and have been valued at $.0001 per share =======

(e) 251,250 shares of common stock issued for service contracts
and recorded as professional fee expense. These service
contracts were related to assisting the Company in raising
capital, and these consultants are no longer utilized by the
Company. The value of $.05 per share has been determined to
be the fair value based upon the underlying value of the
services rendered. $ 12,563
=======

(f) Note payable issued for consulting services $ 50,000
=======
(g) 1,915,000 shares of common stock issued to consultants
and recorded as professional fee expenses. The value of
$.05 per share (less cash received of $192) is based $ 95,558
upon the underlying value of the services rendered. =======

(h) Consulting expense recorded as additional paid in capital
for the issuance of stock options for 500,000 shares. $ 25,000
The value of $.05 per share is based upon the underlying =======
value of the services rendered.

</TABLE>

<PAGE>

AMERI-CAN RAILWAY SYSTEMS, INCORPORATED
(A Development Stage Corporation)

NOTES TO THE STATEMENT OF FINANCIAL CONDITION

FROM THE INCEPTION OF INCORPORATION
MAY 4, 1998 TO JANUARY 31, 1999
($US)

8. SUPPLEMENTAL CASH FLOW INFORMATION (continued)

Reconciliation of common stock and additional paid-in capital
in the statement of stockholders' deficit to proceeds from sale
of stock in the statement of cash flows:

Common stock $ 973
Additional paid-in capital 388,895
--------
389,868
Less:
Noncash transactions (a),(d), (e), (g)and(h)previously (287,622)
described.
--------

Proceeds from sale of stock $ 102,246
========