APPLIED RESEARCH CORP, S-8, 1995-09-21

APPLIED RESEARCH CORP
S-8, 1995-09-21
BLANK CHECKS

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<PAGE>

As filed with the Securities and Exchange Commission on September 21, 1995
S.E.C. File No. _______

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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APPLIED RESEARCH CORPORATION
(EXACT NAME OF ISSUER AS SPECIFIED IN ITS CHARTER)

COLORADO 86-0585693
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

8201 CORPORATE DRIVE, SUITE 1120
LANDOVER, MARYLAND 20785
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)

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WILLIAM C. HAYDE 1995 CONSULTATION AGREEMENT
AND
MARKET VISIBILITY, INC. 1995 CONSULTATION AGREEMENT
(FULL TITLE OF THE PLANS)

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Dr. S.P.S. Anand
8201 Corporate Drive, Suite 1120
Landover, Maryland 20785
(NAME AND ADDRESS OF AGENT FOR SERVICE)

(301) 459-8442
(TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)

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Copy To:
Nathan L. Stone, Esq.
Neuman & Cobb
Temple-Bowron House
1507 Pine Street
Boulder, Colorado 80302
(303) 449-2100

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CALCULATION OF REGISTRATION FEE

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Title of Proposed Maximum Proposed Maximum
Securities to be Amount to be Offering Price Aggregate Amount of
Registered Registered Per Share (1) Offering Price(1) Registration Fee
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<S> <C> <C> <C> <C>
Common Stock
$.0005 par value 800,000 shares $.25 $200,000 $ 100.00
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<FN>
(1) Estimated solely for the purpose of calculating the Registration Fee
pursuant to Rule 457 under the Securities Act of 1933.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
APPLIED RESEARCH CORPORATION
CROSS REFERENCE SHEET REQUIRED BY ITEM 501(b) OF REGULATION S-K

Form S-8 Item Number
and Caption Caption in Prospectus
----------- ---------------------

<S> <C>
1. Forepart of Registration Statement Facing Page of Registration Statement
and Outside Front Cover Page of and Cover Page of Prospectus
Prospectus

2. Inside Front and Outside Back Cover Inside Cover Page of Prospectus and
Pages of Prospectus Outside Cover Page of Prospectus

3. Summary Information, Risk Factors and Risk Factors
Ratio of Earnings to Fixed Charges

4. Use of Proceeds Use of Proceeds

5. Determination of Offering Price Not Applicable

6. Dilution Not Applicable

7. Plan of Distribution Plan of Distribution

8. Selling Securityholders Selling Securityholders

9. Description of Securities to be Registered Description of Securities;
William C. Hayde 1995 Consultation
Agreement; Market Visibility,
Inc. 1995 Consultation Agreement;
Selling Securityholders

10. Interests of Named Experts and Counsel Interests of Named Experts and Counsel

11. Material Changes Not Applicable

12. Incorporation of Certain Information Incorporation of Certain Documents
by Reference by Reference

13. Disclosure of Commission Position Indemnification
on Indemnification for Securities
Act Liabilities
</TABLE>

-iii-

<PAGE>

PROSPECTUS APPLIED RESEARCH CORPORATION
800,000 SHARES OF COMMON STOCK
($.0005 PAR VALUE)

This Prospectus is part of a Registration Statement which registers an
aggregate of 400,000 shares of Common Stock, $.0005 par value ("Common Stock")
of Applied Research Corporation (the "Company") which may be sold, as set forth
herein, by William C. Hayde ("Hayde"), a consultant to the Company (the "Hayde
Shares"). The Hayde Shares were issued under the William C. Hayde 1995
Consultation Agreement (the "Hayde Agreement"). This Prospectus also registers
an aggregate of an additional 400,000 shares of Common Stock of the Company
which may be sold, as set forth herein, by Market Visibility Inc. ("MVI"), a
consultant to the Company (the "MVI Shares"). The MVI Shares were issued under
the Market Visibility, Inc. 1995 Consultation Agreement (the "MVI Agreement");
the Hayde Agreement and MVI Agreement may sometimes hereinafter be referred to
as the "Agreements"; (Hayde and MVI may sometimes hereinafter be referred to
collectively as the "Consultants" or "Selling Securityholders"). The Company
has been advised by the Consultants that they may sell all or a portion of their
shares of Common Stock from time to time in the over-the-counter market at
prices obtainable at the time of sale, or in privately negotiated transactions
at prices determined by negotiation. The Consultants may effect such
transactions by selling the shares to or through securities broker/dealers, and
such broker/dealers may receive compensation in the form of discounts,
concessions or commissions from the Consultants and/or the purchasers of the
shares for whom such broker/dealers may act as agent or to whom they sell as
principals, or both (which compensation as to a particular broker/dealer may be
in excess of customary commissions). The Consultants, and the brokers and
dealers through whom sales of the shares are made, may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), and any profits realized by them on the sale of the shares
may be considered to be underwriting compensation.

The Company will not receive any of the proceeds from the sale of shares by
the Consultants. Additionally, pursuant to an agreement between the Company and
the Consultants, the cost of registering the shares offered hereby, estimated to
be $5,000, is being paid by the Company. The Consultants will, however, pay the
other costs related to the sale of their shares, including discounts,
commissions and transfer fees. (See "SELLING SECURITYHOLDERS.")

The Company's Common Stock is traded in the over-the-counter market and
quoted on the Electronic Bulletin Board System. Prior to this Offering,
however, the public market for the Company's Common Stock has been highly
illiquid, and there can be no assurance that a more viable public market will
develop in the future. On September 6, 1995, the bid and ask prices of the
Company's Common Stock, as quoted on the Electronic Bulletin Board System, were
$.375 and $.5625, respectively.

There can be no assurance that a market for the Common Stock will continue
in the future. The Company has no arrangements with broker-dealers concerning
the maintenance of the trading market for the Common Stock.

No person has been authorized by the Company to give any information or to
make any representation other than as contained in this Prospectus, and if given
or made, such information or representation must not be relied upon as having
been authorized by the Company. Neither the delivery of this Prospectus nor any
distribution of the shares of Common Stock shall, under any circumstances,
create any implication that there has been no change in the affairs of the
Company since the date hereof.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED ON THE
<PAGE>
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE

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This Prospectus does not constitute an offer to sell or the solicitation of
any offer to buy any security other than the securities covered by this
Prospectus, nor does it constitute an offer or solicitation by anyone in any
jurisdiction in which such offer or solicitation is not authorized, or in which
the person making such offer or solicitation is not qualified to do so, or to
any person to whom it is unlawful to make such offer or solicitation.

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The date of this Prospectus is ___________ ___, 1995.

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<PAGE>
AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed with the Commission can be inspected and
copied at the public reference facilities of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies of this material can also be obtained at
prescribed rates from the Public Reference Section of the Commission at its
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549.

The Company has filed with the Commission a Registration Statement on Form
S-8 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Act"), with respect to an aggregate of 800,000 shares of the Company's
Common Stock, to be re-sold by certain consultants to the Company, which shares
were issued by the Company pursuant to written consulting agreements. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain portions of which have been omitted as permitted by the rules
and regulations of the Commission. For further information with respect to the
Company and the shares of the Common Stock offered by this Prospectus, reference
is made to the Registration Statement, including the exhibits thereto.
Statements in this Prospectus as to any document are not necessarily complete,
and where any such document is an exhibit to the Registration Statement or is
incorporated by reference herein, each such statement is qualified in all
respects by the provisions of such exhibit or other document, to which reference
is hereby made, for a full statement of the provisions thereof. A copy of the
Registration Statement, with exhibits, may be obtained from the Commission's
office in Washington, D.C. (at the above address) upon payment of the fees
prescribed by the rules and regulations of the Commission, or examined there
without charge.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the Securities and
Exchange Commission pursuant to the Exchange Act are incorporated herein by
reference and made a part hereof:

(a) The Registrant's Annual Report on Form 10-K for the fiscal year ended
May 31, 1995;

(b) All other reports filed pursuant to Section 13 or 15(d) of the
Exchange Act since the end of the fiscal year covered by the
Registrant's document referred to in (a) above; and

(c) The Registrant's Registration Statement on Form S-18, as amended, SEC
File No. 33-11943-LA, as filed with the Securities and Exchange
Commission on June 21, 1989.

All reports and documents filed by the Company pursuant to Section 13, 14
or 15(d) of the Exchange Act, after the date of this Prospectus and prior to the
filing of a post-effective amendment which indicates that all securities offered
hereby have been sold or which de-registers all securities then remaining
unsold, shall be deemed to be incorporated by reference herein and to be a part
hereof from the respective date of filing of such documents. Any statement
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document, which also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute part of this Prospectus.

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<PAGE>
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of the Prospectus has been
delivered, on the written request of any such person, a copy of any or all of
the documents referred to above which have been or may be incorporated by
reference in this Prospectus, other than exhibits to such documents. Written
requests for such copies should be directed to Dr. S.P.S. Anand, President,
Applied Research Corporation, 8201 Corporate Drive, Suite 1120, Landover,
Maryland, 20785 (301) 459-8442.

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<PAGE>
RISK FACTORS

These securities involve a high degree of risk, and no one should invest in
these securities who cannot afford a complete loss of his or her investment.
Several risk factors regarding these securities are set forth below. However,
the investor is cautioned that this list is not necessarily complete and that
the investor should consult with his or her professional advisers prior to
investing in these securities.

RISK FACTORS RELATED TO THE BUSINESS OF THE COMPANY

1. INCREASED OPERATING COSTS AND EXPENSES. Although the Company, for the
year ended May 31, 1995, generated revenues of $9,590,113, an increase of
$30,080 over revenues generated during the same twelve (12) month period in
1994, the Company's operating costs and expenses during this period also
increased significantly, growing from $9,501,257 at May 31, 1994, to $9,916,588
at May 31, 1995, an increase of $415,331. As a result, the Company's operating
income decreased from $58,776 for the twelve (12) months ended May 31, 1994, to
a loss of $(326,475) at May 31, 1995, and its net loss grew from $(220,534) to
$(869,979), during this same period, an increase of $649,445 or nearly 295%.
There can be no assurance that operating costs and expenses will not continue to
out-pace revenues, or that the Company will not continue to experience operating
losses.

2. LACK OF LIQUIDITY AND CAPITAL RESOURCES. As of May 31, 1995, the
Company's fiscal year-end, the Company had a working capital deficit of
$(1,781,905), on total current assets of $1,872,409 and total current
liabilities of $3,654,314. This figure represents an eighty-three percent (83%)
increase over the Company's working capital deficit of $(974,265) at May 31,
1994. Although the Company is taking steps to reduce its working capital
deficit, there can be no assurance that the Company will be successful or that
the Company's working capital deficit will not continue to increase. The
Company's continued lack of working capital presents a significant impediment to
the Company's ability to implement its strategic plan or further develop and
exploit any opportunities which may present themselves to the Company or its
subsidiaries. The Company's net capital deficiency and working capital
deficiency, as well as certain delinquent obligations more fully detailed below,
also raise substantial doubt about the Company's ability to continue as a going
concern.

3. FAILURE TO PAY WITHHOLDING TAXES. As of May 31, 1995, the Company had
not timely filed and remitted Federal Payroll Tax Withholdings totalling
approximately $420,300, relating to the fourth calendar quarter of 1994 and the
second calendar quarter of 1995. As a result, the Company has incurred
penalties and interest on those delinquent amounts totaling approximately
$176,500 through May 31, 1995. Through June 30, 1995, the Company's unremitted
payroll tax withholding obligation increased to $607,800.

The Company is currently attempting to negotiate a settlement with the
IRS that would allow the Company a reasonable period of time to remit the
delinquent Federal payroll tax withholding payments, and possibly result in a
waiver or reduction in the penalties and/or interest that has and continues to
accrue on the unpaid balance. However, as of the date of this Prospectus, no
agreement has been reached and there can be no assurance that the Company and
the IRS will be able to agree on settlement terms. In the event the Company and
IRS fail to reach an agreement and the Company is unable to bring its
Withholding Tax obligation current, the IRS would be in a position to force a
cessation of operations if it so elected, and all or a portion of the Company's
assets would be subject to seizure and possible sale by the IRS.

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<PAGE>
4. FAILURE TO MAKE 401(K) CONTRIBUTIONS. As of May 31, 1995, the Company
had failed to remit $511,875 in contributions to the Company's 401(k) retirement
plan (the "Plan"), including employee withheld contributions of approximately
$358,317 and employer contributions of nearly $153,558, accumulated during the
period from 1992 through December 31, 1994. The Company has agreed to pay
employees interest at the rate of fifteen percent (15%) per annum on their
unpaid contributions and at the prevailing statutory rates (approximately 5%)
on unpaid employer contributions. Through May 31, 1995, $51,700 of interest
has been accrued towards the employee contributions and $2,300 has been accrued
towards the employer contributions.

During 1995 the Company reached an agreement with the Lender
to remit the 1995 employee contributions directly to the Plan as they
become due. Under this agreement, the Lender deducts the current amounts due to
the Plan from the Company's borrowings against its billed receivables. As a
result, since February 1, 1995, the Company, through its Lender, has remitted
all required 1995 employee contributions as they have become due.

Additionally, during July, 1995, the Company executed contract
modifications on its two largest contracts with NASA. The contract
modifications require the Company to remit an increasing portion of its fees
earned on these two contracts directly to the Plan in order to reduce the past
due amounts owed. The portion of the fees applied to the Plan was 25% for the
fees earned from January 1, 1995, and increases to 75% during calendar year
1995. Starting January 1, 1996, the percentage increases to 100%. The contract
modifications will remain in effect until all past due amounts owed the Plan
have been repaid. Although the fees generated by these contracts will
ultimately liquidate the past due amounts owed to the Plan, these modifications
will reduce the cash flow available to meet the Company's remaining obligations.
Based on current levels of work being performed on these two contracts, which
together generate approximately $150,000 in fees per year, and absent additional
payments from other sources, it will take nearly 3.5 years to cure all
delinquencies owed to the Plan.

Given the Company's current operating losses and lack of working
capital, there can be no assurance that the Company will be able to remit the
delinquent contributions within a reasonable period of time, or that the Company
will be able to make interest payments to its employees as agreed. If the
Company is unable to remit delinquent contributions or make interest payments to
its employees as agreed, there can be no assurance that the Company will be able
to attract and/or retain the high quality employees necessary to carry out the
Company's operations. Additionally, failure to remit delinquent contributions
may subject the Company to legal proceedings seeking to collect the unpaid
contributions, together with interest thereon, liquidated damages and attorneys'
fees. Any legal action would have a material adverse impact on the Company's
ability to continue as a going concern.

5. DEPENDENCE UPON GOVERNMENT CONTRACTS AND CONTRACTORS. The Company
depends upon its ability to establish and maintain contracts with entities that
require the types of specialized services and expertise provided by the Company.
To date, the Company's customers have predominantly been agencies of the United
States Government or contractors that perform services for the United States
Government. Specifically, during fiscal 1995, NASA accounted for approximately
thirty-two percent (32%) of the Company's total revenues. NASA had twenty-one
(21) contracts with the Company of which one contract provided eighteen percent
(18%) and a second provided fourteen percent (14%) of total revenue.
Additionally, contracts with Hughes Information Technology Corp. accounted for
thirty-eight percent (38%) of the Company's revenue, and contracts with the
Naval Research Laboratory (NRL) accounted for seven percent (7%) of the
Company's revenue. The Company also maintains one (1) contract with General
Sciences Corporation which contributed approximately six percent (6%) of the
Company's revenue during fiscal 1995. Because a significant portion of the
Company's revenues are

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<PAGE>
dependent upon these Government contracts and relationships with Government
contractors, the loss of any of these contracts will have a material adverse
effect upon the Company's financial condition. The Company's Government
contracts contain standard clauses permitting termination of contracts and
subcontracts at the election of the Government. Accordingly, there can be no
assurance that any of the Company's present customers will continue to utilize
the Company's products, services or expertise. Additionally, the Government
often assesses the ability of a contractor to perform the contract as a basis
for awards or additional funding. As a result, certain of the Government
contractors currently doing business with the Company have expressed concern
about the Company's financial condition and the Company's failure to timely pay
its Federal withholding and 401(k) obligations. Absent an improvement in the
Company's financial condition, the Company may lose one or more existing and
future Government contracts to the substantial detriment of the Company.

6. REIMBURSEMENT OF COSTS CONTINGENT UPON OUTCOME OF GOVERNMENT AUDITS.
The majority of the Company's revenues are generated from contracts with
departments or agencies of the U.S. Government and are subject to audit by
government auditors. A significant portion of the Company's contract costs,
including direct and indirect costs, are subject to audit by the Defense
Contract Audit Agency (DCAA), and ultimate reimbursement of costs is contingent
upon the outcome of such audits. Audit adjustments could negatively impact the
Company's financial condition. The DCAA has completed audits for the years 1990
through 1993, and any adjustments resulting from those audits are reflected in
the consolidated financial statements of the Company. During the fiscal year
ended May 31, 1995, the Company reported a $60,000 reduction to previously
recorded revenues resulting from an audit by the Government of its incurred
costs for the Fiscal Years 1990 through 1993 incurred costs. There can be no
assurance that future audits will not result in additional reductions to
previously recorded revenues.

7. SOFTWARE SUBSIDIARY. ARSoftware, Inc. ("ARS") was organized on
April 1, 1992, to engage in the business of marketing and distributing
proprietary software. The Company markets and/or distributes software developed
by other manufacturers; however, the Company ultimately intends to market and
distribute software which is developed solely by the Company. ARS has generated
net operating losses since inception which have negatively impacted the parent
corporation and impaired its working capital. Specifically, for the twelve (12)
months ended May 31, 1995 and May 31, 1994, ARS reported operating losses from
continuing operations, before other expenses, income taxes and extraordinary
items, of $(404,720) and $(422,566), respectively. While the Company is taking
steps to increase revenues and/or reduce operating costs and expenses, there can
be no assurance that the operations of ARS can be rendered profitable or, if
rendered profitable, how long it will take to reach this milestone. In
addition, there can be no assurance that ARS will be successful in developing
its own proprietary computer software or, if so developed, that the software
will be commercially successful.

8. ARINTERNET SUBSIDIARY. ARInternet, Inc. ("ARI") was organized in
November, 1994, to capitalize on the market for those Internet users interested
in accessing information of a scientific nature. Although the Company has begun
to provide services to on-line subscribers, ARI is still principally in the
development stage and, as a result, generated a net operating loss of $(207,957)
during the nine (9) months ended May 31, 1995, which has and will continue to
negatively impact the Company and impair its working capital. While the Company
believes, given the rapid growth of the Internet, both domestically and
internationally, that ARI's long-range potential for profitability is very
promising, it is probable that ARI will continue to generate net operating
losses into fiscal 1996, and perhaps longer. Given the Company's lack of
working capital, there can be no assurance that the Company will be able to
sustain continued losses for a sufficient period of time to allow ARI to attain
profitability. There can be no assurance that ARI will ever be successful or
that its operations will ever be rendered profitable.

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<PAGE>
9. COMPETITION. The Company, with and through its subsidiaries, faces
competition from numerous organizations nation-wide which possess similar
expertise and provide comparable products and services as those furnished by the
Company. Although the Company does not consider any one firm or company to hold
a dominant position in the industry, some of these firms are larger and better
capitalized than the Company. Accordingly, the Company may suffer a competitive
disadvantage due to its limited resources.

10. BACKLOG. The Company's total backlog as of May 31, 1995, was
approximately $33.1 million, $3.3 million of which was funded, with the balance
of $29.8 million remaining unfunded. While the Company anticipates that each of
the contracts will receive the necessary funding, given the Government's stated
desire to reduce spending and lower the "budget deficit", future funding cannot
be assured.

11. DEPENDENCE ON MANAGEMENT AND KEY EMPLOYEES. The Company's success is
dependent upon the services of two (2) of its key officers and directors,
namely, Dr. Anand and Dr. Endal. The loss of either or both of these
individuals, and particularly Dr. Anand, would have a material adverse effect on
the Company's business. The Company does maintain key-man life insurance on the
lives of all these individuals, and each individual has executed an employment
agreement with the Company. There can, however, be no assurance that either or
both of the foregoing will remain with the Company, or, in the event of the
untimely departure of one or both of said individuals, that a suitable
replacement, with comparable expertise and experience, can be located.

On March 10, 1995, Dr. Richard Harms, a senior Vice President with the
Company, announced his resignation, effective April 8, 1995. Following his
resignation, Dr. Harms took one of ARM's contracts with him (the "FOS
Contract"), which contract names Dr. Harms as the principal investigator
(scientist). The FOS Contract accounted for approximately $480,000 in revenues
and approximately $35,000 in operating profit during the fiscal year ended
May 31, 1995. Since this is the only instrumentation contract that the Company
has, Management has decided not to replace Dr. Harms at this time. The Company
is currently pursuing opportunities which could replace this contract and
increase the business base for the Company. However, there can be no assurance
that the Company will be able to procure a contract or contracts to replace the
revenue and income related to the FOS Contract.

12. SIGNIFICANT COMPENSATION OBLIGATIONS. During the fiscal year ended
May 31, 1995, the Company paid its three (3) most highly compensated executives
a total of $444,795 in cash compensation, which amount included the taxable
portion of keyman life insurance premiums paid by the Company. The Company also
accrued an additional $6,863 on behalf of those individuals to a Company
sponsored retirement plan. Given the Company's continued operating losses and
its current lack of working capital, there can be no assurance that the Company
will be able to continue to pay its executives salaries in the range referred to
above, or, that if the Company is unable to pay such salaries, that the
individual executives will be willing to remain in the Company's employ.

13. ADDITIONAL CAPITAL REQUIREMENTS. Given the Company's working capital
deficit, its significant operating expenses and its Federal withholding and
retirement plan contribution deficiencies, the Company will require additional
capital in the future to finance its business activities and to pay its
delinquent liabilities. Such additional needed capital may be obtained through
borrowings or by additional equity financing. Future equity financing may occur
through the sale of either unregistered Common Stock in exempt offerings, or
through the public offering of registered stock. In any case, such additional
equity financing may result in dilution to investors in this offering.

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<PAGE>
The Company has entered into an agreement with Stanhope Capital, Inc.
("Stanhope") pursuant to which Stanhope has agreed to assist the Company, on a
best efforts basis, in raising between $1 million and $5 million (the
"Agreement"). Pursuant to the terms of the Agreement, the Company is required
to pay Stanhope a success fee in the form of warrants or options to purchase
Common Stock in the Company equal to between 5% and 10% of the amount raised,
which warrants and/or options will be exercisable at approximately the same
price that shares would be sold in any offering of such securities.
Notwithstanding the foregoing, there can be no assurance that additional capital
or funding can be arranged or, if obtained, that it will not be upon terms
unfavorable to investors in this Offering. Additionally, depending on the
amount of capital raised, the costs and fees paid to Stanhope may substantially
exceed those customarily charged by other underwriters and/or investment banking
firms.

14. FINANCING ARRANGEMENTS. The Company's primary source of financing is
a $1.5 million line of credit with a local factoring organization ("Lender"),
allowing the Company to borrow against billed receivables on certain assigned
contracts. The cost of financing the Company's receivables is prime plus five
percent (5%) per annum on borrowings on all billed receivables and eighteen and
a quarter percent (18.25%) per annum on borrowings on unbilled receivables. In
addition, the Company is charged an annual administration fee of $25,000 and a
service fee of one-half of one percent (.5%) on the highest outstanding loan
balance during the proceeding month. Based on the foregoing, the Company pays
an effective interest rate of approximately twenty-three percent (23%).
Financing of the Company's billed and unbilled receivables at these high rates
of interest has resulted in the Company reporting a net loss.

The Company is currently in default of its loan agreement with the
Lender pursuant to a provision requiring the Company to remit all Federal
payroll withholding taxes as they become due. As a result, on May 10, 1995, the
Company signed a modification to its original loan agreement whereby the Company
agreed to allow the Company's payroll processing company (which is related to
the Lender) to withhold from borrowings on its billed receivables and to remit
on the Company's behalf, all payroll taxes and other related payroll deductions.
As of the date of this Prospectus, the Company's payroll processing company has
not yet begun to withhold from borrowings the Company's payroll taxes and/or
other related payroll deductions; however, the Company is in the process of
taking the necessary actions in order to comply with the loan agreement as
modified. Notwithstanding the foregoing, there can be no assurance that the
Company will be able to retire its delinquent withholding obligations within a
reasonable period of time or that such efforts will stay enforcement actions by
the IRS.

15. GOVERNMENT REGULATIONS. In the conduct of its business, the Company
must comply with various state, local and federal laws and regulations,
including various labor, employment and/or environmental laws and regulations,
as well as the laws and regulations applicable to proprietary materials and
products, including the laws of copyright and trademark. The Company believes
that it is in compliance with all applicable laws, and does not anticipate that
any existing laws will have a material adverse impact upon the proposed business
and operations of the Company. However, governmental intervention or
introduction of additional regulations aimed at the products and/or services
provided by the Company would necessarily increase costs to the Company and,
therefore, would likely impact negatively on the Company's operations.

16. GOVERNMENT SPENDING. Many of the risks to which the Company is
subject are tied to Government spending and the economic and political factors
influencing Government allocations, and particularly those affecting the United
States Space Program and NASA. This is because, as indicated above, the
Company's customers are primarily agencies of the United States Government or
contractors that perform services for the United States Government, and, as
such, look to the United States

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<PAGE>
Government for funding. Given the current emphasis placed on the budget
deficit, and the Government's expressed commitment to reduce spending, as well
as the current climate of uncertainty regarding future funding of NASA and the
United States Space Program, it is possible that a decline in funding for the
types of products and/or services offered by the Company may be forthcoming.
Such a decline would have a material adverse impact on the Company's financial
position and results of operations.

17. COPYRIGHT AND TRADEMARK PROTECTION. The Company, through its
subsidiaries, owns or is developing proprietary software and printed materials
that are protectable under U.S. copyright laws, provided the Company utilizes
appropriate copyright notices and otherwise exercises reasonable care to avail
itself of this copyright protection. In addition, the Company may be entitled
to trademark protection of its proprietary trademarks and service marks used in
connection with its business operations. There can, however, be no assurance
that trademark protection can be successfully defended against prior users.
Although the Company has and will take meticulous precautions to prevent the
unauthorized duplication of its intellectual property, there can be no assurance
that it will maintain effective protection against unauthorized duplication. In
addition, even if unauthorized duplication were to occur, there can be no
assurance that the Company would have sufficient resources with which to enforce
its proprietary interests.

18. GOING CONCERN ISSUE. The report of Friedman & Fuller, P.C., the
Company's Accountants, covering the Company's 1995 consolidated financial
statements, contains an explanatory paragraph that states that the Company's net
capital deficiency and working capital deficiency, as well as certain delinquent
obligations, raise substantial doubt about the Company's ability to continue as
a going concern. While the Company is taking steps to improve its liquidity,
there can be no assurance that such steps will be successful or that the Company
will continue as a going concern.

RISK FACTORS RELATED TO THIS OFFERING

1. LIMITED PUBLIC TRADING MARKET FOR THE COMPANY'S COMMON STOCK. The
Company's Common Stock was, until recently, traded on the Philadelphia Stock
Exchange, under the symbol "ARL.X". However, effective February 7, 1995, the
Company's Common Stock was delisted from the Philadelphia Stock Exchange for
failure to meet the Exchange's maintenance requirements. As a result, the
Company's Common Stock is now traded on the OTC Electronic Bulletin Board under
the symbol "APLS". Consequently, the public market for the Common Stock being
offered hereby is highly illiquid, and there can be no assurance that such a
market will continue or that a more viable public market will develop in the
future. There can be no assurance that purchasers will be able to resell their
securities, or that a purchaser will be able to liquidate his investment without
considerable delay, if at all. If a market does continue, the price may be
highly volatile. Moreover, due to the low price of the Company's securities,
many brokerage firms may not effect transactions in the Company's Common Stock.
Rules enacted by the Securities and Exchange Commission increase the likelihood
that many brokerage firms will not participate in the market for the Company's
Common Stock.

2. THE SECURITIES ENFORCEMENT AND PENNY STOCK REFORM ACT OF 1990. The
Securities Enforcement and Penny Stock Reform Act of 1990 requires additional
disclosure, relating to the market for penny stocks, in connection with trades
in any stock defined as a penny stock. The Commission recently adopted
regulations that generally define a penny stock to be any equity security that
has a market price of less than $5.00 per share, subject to certain exceptions.
Such exceptions include any equity security listed on NASDAQ and any equity
security issued by an issuer that has (i) net tangible assets of at least
$2,000,000, if such issuer has been in continuous operation for three years,
(ii) net

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<PAGE>

tangible assets of at least $5,000,000, if such issuer has been in continuous
operation for less than three years, or (iii) average annual revenue of at least
$6,000,000, if such issuer has been in continuous operation for less than three
years. Unless an exception is available, the regulations require the delivery,
prior to any transaction involving a penny stock, of a disclosure schedule
explaining the penny stock market and the risks associated therewith.

If the Company fails to meet one of the exceptions set forth above,
trading in the Company's securities would be covered by Rules 15-g-1 through 15-
g-6 promulgated under the Exchange Act for non-NASDAQ and non-exchange listed
securities. Under such rules, broker-dealers who recommend such securities to
persons other than established customers and accredited investors must make a
special written suitability determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser's written agreement to
this transaction. Securities are exempt from these rules if the market price of
the Common Stock is at least $5.00 per share.

In the event the Company's Common Stock is characterized as a penny
stock, the market liquidity for the Company's securities could be severely
affected. In such an event, the regulations on penny stocks could limit the
ability of broker-dealers to sell the Company's securities and thus the ability
of purchasers of the Company's securities to sell their securities in the
secondary market.

3. DIVIDEND. No dividend has been paid on the Company's Common Stock
since inception, nor, by reason of its present financial status and its
contemplated financial requirements, does the Company contemplate or anticipate
paying any dividends upon its Common Stock in the foreseeable future. (See
"DESCRIPTION OF SECURITIES").

4. SHARES ELIGIBLE FOR FUTURE SALE. As of September 6, 1995, 6,744,416
shares of the Company's $.0005 par value Common Stock, were issued and
outstanding, 5,451,051 of which are "restricted securities" and under certain
circumstances may, in the future, be sold in compliance with Rule 144 adopted
under the Securities Act of 1933, as amended. Actual sales or the prospect of
future sales of shares of Common Stock under Rule 144 may have a depressive
effect upon the price of the Common Stock and the market therefor.

5. MARKET OVERHANG FROM WARRANTS, OPTIONS AND/OR CONVERTIBLE PROMISSORY
NOTE. The Company currently has outstanding Common Stock Purchase Warrants
exercisable to purchase 184,000 shares of Common Stock at an exercise price of
$.75 per share and options exercisable to purchase an additional 60,000 shares
of Common Stock reserved for issuance under the Company's Stock Incentive Plan.
Additionally, during January, 1994, the Company, in exchange for $25,000 in
cash, executed its convertible note in the principal amount of $25,000 ("Note"),
together with a Convertible Note Purchase Agreement. Pursuant to the terms of
the Note and the Convertible Note Purchase Agreement, the Note may, at the
option of the Holder, be converted into fully-paid and non-assessable shares of
the Company's $.0005 par value Common Stock, at a conversion price of $.375 per
share. Exercise of the Options and Warrants and/or Conversion of the Note can
be expected to have an adverse effect on the trading price and market for the
Common Stock. The holders of the Options, Warrants and/or Note are likely to
exercise their options and warrants and convert the Note at a time when the
market price of the shares of Common Stock exceeds the exercise price of the
Options and Warrants and the conversion ratio of the Note. Accordingly, the
issuance of shares of Common Stock upon exercise of the Options and/or Warrants
and conversion of the Note may result in a dilution of the equity represented by
the then outstanding shares of Common Stock held by other shareholders.
Further, holders of the options, warrants and/or Note can be expected to
exercise them at a time when the Company would, in all likelihood, be able to
obtain any needed capital on terms which are more favorable to the Company

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<PAGE>
then the exercise terms provided by such options and warrants and/or the
conversion value of the Note. (See "DESCRIPTION OF SECURITIES").

6. FUTURE SALES OF ADDITIONAL SHARES. The Company's Board of Directors
has the authority to issue additional shares of Common and Preferred Stock and
to issue options and warrants to purchase shares of the Company's Common and
Preferred Stock without shareholder approval. Future issuance of Common and/or
Preferred Stock could be at values substantially below the Offering Price in
this Offering and therefore could represent substantial dilution to investors in
this Offering. Additionally, the Board of Directors has been granted the
authority to fix and determine the relative rights and preferences of preferred
shares. As a result, the Board of Directors could authorize the issuance of a
series of preferred stock which would grant to holders preferred rights to the
assets of the Company upon liquidation, the right to receive dividend coupons
before dividends would be declared to common stockholders, and the right to the
redemption of such shares, together with a premium, prior to the redemption of
common stock. Common stockholders have no redemption rights. In addition, the
Board could issue large blocks of voting stock to fend off unwanted tender
offers or hostile takeovers without further shareholder approval. (See
"DESCRIPTION OF SECURITIES").

7. RETENTION OF CONTROL. The Company's Articles of Incorporation do not
provide for cumulative voting in the election of Directors. Additionally, of
the Company's present shareholders, two (2), the Company's President and his
wife, own approximately SIXTY-NINE percent (69%) of the outstanding common stock
of the Company. Thus, these two (2) shareholders are in a position to totally
influence the election of the Board of Directors of the Company who, in turn,
appoint all of the Company's officers.

8. NEED FOR CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATIONS. Holders
of shares of Common Stock will have the right to sell those shares only if there
is a current and effective Registration Statement and Prospectus covering the
shares of Common Stock, and only if the shares are qualified for sale under the
securities laws of the applicable state or states in which they are offered for
sale. While the Company has undertaken to do so and plans to do so, there can
be no assurance that a current Registration Statement and Prospectus will be in
effect when a sale of shares of Common Stock is contemplated or attempted.
Although the Company will seek to qualify for sale the shares of Common Stock in
those states in which the securities are to be offered, no assurance can be
given that such qualification will occur. The Common Stock may be deprived of a
significant portion of its value if a Prospectus covering the shares is not kept
effective and current, or if such shares are not, or cannot be, registered in
the applicable states. (See "DESCRIPTION OF SECURITIES.")

-12-

<PAGE>

THE COMPANY

The Company is comprised of two wholly-owned subsidiaries, Applied Research
of Maryland, Inc. ("ARM") and ARSoftware Corporation ("ARS"), and a majority-
owned subsidiary, ARInternet Corporation ("ARI").

ARM is a high technology company specializing in technical support services
and design and fabrication of space-born instrumentation. ARM consists of three
(3) unincorporated divisions: Technical Services Division, Instruments Division,
and ARInstruments Division. ARM, through its divisions, provides scientific
software design and development, mathematical analysis, laboratory experiment
design and implementation, and scientific data analysis to support research
programs in the earth and space sciences, optics, electronics, and chemistry.
The majority of these services are performed pursuant to government contracts,
and are performed on-site at government installations. ARM also designs and
fabricates specialized hardware used to complete space-born scientific
observations. The emphasis in this area is on development and manufacture of
ultra-violet to near-infrared imaging and spectrographic instruments.

ARS was formed in April 1992 to diversify the Company's business by
developing niche markets in the computer software industry. The objective of
ARS is to develop and distribute scientific and technical software to academic,
commercial and governmental entities. ARS is currently reselling existing
products under licensing arrangements, while developing state-of-the-art
proprietary software products.

ARI, a Maryland corporation, was formed and organized in November, 1994,
and has positioned itself to become the place to go on the Internet for
information useful to those in search of scientific knowledge. Specifically,
ARI provides a reliable, high-speed, full-service link to the Internet,
utilizing state-of-the-art networking hardware and software with built-in
capacity for expansion and improvement. ARI currently hosts, maintains, and
provides gateways to numerous free and commercial scientific databases, refers
subscribers to on-line research and document delivery services, and offers a
variety of server capabilities to facilitate information exchange. ARI offers
all the "standard" connection options, such as e-mail, telnet, ftp, WWW, gopher,
finger, and so forth, which most people have come to expect as the basic
services of a dial-up account. However, in contrast to a cheaper, "no-frills"
basic account, ARI also offers good customer support in the form of a user-
friendly, menu-driven, interface, excellent on-line and phone-in help, access to
public ftp, gopher, and WWW servers, electronic conferencing and publishing
services, Internet training, and a myriad of research services.

Unless otherwise indicated, the Company and its subsidiaries will,
hereinafter, collectively be referred to as the "Company". The principal
offices of the Company are located at 8201 Corporate Drive, Suite 1120,
Landover, Maryland 20785. The Company's telephone number at that location is
(301) 459-8442.

-13-

<PAGE>

WILLIAM C. HAYDE 1995 CONSULTATION AGREEMENT AND
MARKET VISIBILITY, INC. 1995 CONSULTATION AGREEMENT

CONSULTATION AGREEMENTS

On August 2, 1995, the Company and William C. Hayde executed and entered
into the William C. Hayde 1995 Consultation Agreement (the "Hayde Agreement").
Effective August 8, 1995, the Company also executed and entered into the Market
Visibility, Inc. 1995 Consultation Agreement (the "MVI Agreement"). Under the
terms of the Hayde and MVI Agreements, the Consultants have agreed to consult
with and advise the Company on business-related matters and in connection
therewith have agreed to: (i) attend meetings of the Company's Board of
Directors or Executive Committee(s) when requested by the Company; (ii) attend
meetings and, at the request of the Company, review, analyze and report on
proposed business opportunities; (iii) consult with the Company concerning on-
going strategic corporate planning and long-term investment policies, including
any revision of the Company's business plan; and (iv) consult with and advise
the Company with regard to potential mergers and acquisitions whether the
Company be the acquiring company or the target of the acquisition.
Additionally, MVI has agreed, for and on behalf of the Company, to develop, run
and maintain an Internet home page. Such advice, assistance and consultation is
to be provided by the Consultants to the Company in such form, manner and place
as the Company reasonably requests and is agreed to by the Consultants. The
initial terms of the Hayde and MVI Agreements terminate, unless extended or
renewed at the sole option of the Company, on March 31, 1996. The foregoing
notwithstanding, the Company has the sole and exclusive option to terminate both
the Hayde and MVI Agreements, or either of them, effective the last day of any
month, for any reason, or no reason at all, upon written notice to the
Consultant, delivered on or before the close of business on the effective date
of termination.

In consideration for providing such services and consulting functions
pursuant to the Hayde and MVI Agreements, the Company has agreed to issue to
Hayde and MVI, as consulting fees, an aggregate of 400,000 shares each, or a
total of 800,000 shares of the Company's Common Stock (the "Company Stock"),
which shares shall be held in escrow, subject to vesting in the Consultants as
more fully described below. (See "VESTING PROVISIONS").

VESTING PROVISIONS

The Company Stock will vest in the Consultants in accordance with the
following schedule provided the Company has not, prior to vesting, terminated
one or both of the Agreements. In the event the Company elects to terminate
either or both of the Agreements, those shares of Common Stock which, on the
effective date of termination have NOT vested in the Consultant operating under
the terminated Agreement, shall be returned to the Company.

Date Shares Vest No. of Shares Vesting
in each Consultant in each Consultant
------------------ ---------------------

August 1, 1995 50,000
September 1, 1995 50,000
October 1, 1995 50,000
November 1, 1995 50,000
December 1, 1995 50,000
January 1, 1996 50,000
February 1, 1996 50,000
March 1, 1996 50,000

-14-
<PAGE>

FEDERAL INCOME TAX EFFECTS

The Consultants are required to pay all applicable taxes which are assessed
against them as a result of their receipt of compensation under the Consultation
Agreements, and the Company is not withholding any such taxes from the
compensation paid to either Consultant. The Consultants have agreed to
indemnify and hold harmless the Company, together with its officers and
directors, with respect to any such taxes or other assessments which may be due
and payable as a result of the payment or receipt of compensation under the
Consultation Agreements.

RESTRICTIONS UNDER SECURITIES LAWS

The sale of any shares of Common Stock must be made in compliance with
federal and state securities laws. Officers, directors and ten percent (10%) or
greater stockholders of the Company, as well as certain other persons or parties
who may be deemed to be "affiliates" of the Company under the Federal Securities
Laws, should be aware that resales by affiliates can only be made pursuant to an
effective Registration Statement, Rule 144 or any other applicable exemption.
Officers, directors and ten percent (10%) and greater stockholders are also
subject to the "short swing" profit rule of Section 16(b) of the Exchange Act of
1934. Section 16(b) of the Exchange Act generally provides that any profit
realized by an officer, director or beneficial owner of ten percent (10%) or
more of the Company's equity securities from any purchase and sale, or any sale
and purchase of any equity security of the Company within any period less than
six (6) months shall inure to and be recoverable by the Company.

PLAN OF DISTRIBUTION

Effective August 2, 1995, the Company executed and entered into the William
C. Hayde 1995 Consultation Agreement pursuant to which the Company issued to
Hayde, as a consulting fee, an aggregate of 400,000 shares of the Company's
$.0005 par value Common Stock, which shares are currently being held in escrow,
subject to vesting in Hayde (See "WILLIAM C. HAYDE 1995 CONSULTATION AGREEMENT
and MARKET VISIBILITY, INC. 1995 CONSULTATION AGREEMENT"). Inasmuch as the
Hayde was knowledgeable, sophisticated and/or had access to comprehensive
information relevant to the Registrant, the foregoing transaction was undertaken
in reliance on the exemption from registration provided by Section 4(2) of the
Securities Act of 1933. As a condition precedent to such grant, Hayde was
required to express an investment intent and consent to the imprinting of a
restrictive legend on each Stock Certificate received from the Registrant.

Effective August 8, 1995, the Company executed and entered into the Market
Visibility, Inc. 1995 Consultation Agreement pursuant to which the Company
issued to MVI, as a consulting fee, an aggregate of 400,000 shares of the
Company's $.0005 par value Common Stock, which shares are currently being held
in escrow, subject to vesting in MVI (See "WILLIAM C. HAYDE 1995 CONSULTATION
AGREEMENT and MARKET VISIBILITY, INC. 1995 CONSULTATION AGREEMENT"). Inasmuch
as MVI was knowledgeable, sophisticated and/or had access to comprehensive
information relevant to the Registrant, the foregoing transaction was undertaken
in reliance on the exemption from registration provided by Section 4(2) of the
Securities Act of 1933. As a condition precedent to such grant, MVI was
required to express an investment intent and consent to the imprinting of a
restrictive legend on each Stock Certificate received from the Registrant.

This Prospectus covers the re-offer by the Consultants of the shares of
Common Stock issued pursuant to the terms of the Hayde Agreement and the MVI
Agreement. The Company has been advised by the Consultants that they may hold
some of the shares of Common Stock which they own for

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<PAGE>
investment purposes. However, the Consultants have not determined how many
shares they will hold for investment and how many shares they will sell. The
Consultants may distribute or resell the shares offered hereby to the public on
the OTC Market at prices and on terms prevailing on the date of sale or in
negotiated transactions or otherwise. The Consultants have advised the Company
that sales to certain dealers may be made at a discount, not in excess of ten
percent of the offering price of the shares. The Consultants also may pay
customary brokerage commissions on sales. The Consultants and any brokers or
dealers through whom sales of the Common Stock are made may be deemed
"underwriters" within the meaning of the Securities Act, and any profits
realized on the sale may be deemed underwriting compensation. The Consultants
have undertaken to the Company to comply with Rule 10b-6 under the Securities
Exchange Act of 1934, as amended, in connection with any distribution of the
Company's securities.

The shares of Common Stock are offered on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act.

The Company has agreed to indemnify the Consultants against certain
liabilities that may be incurred in connection with this offering, including
certain liabilities under the Securities Act.

The Company has agreed to pay all expenses incurred in connection with the
registration of the shares offered hereby. The Consultants shall be exclusively
liable to pay any and all commissions, discounts and other payments to broker-
dealers incurred in connection with their sale of the Shares.

USE OF PROCEEDS

-16-
<PAGE>

SELLING SECURITYHOLDERS

The following table sets forth certain information regarding the Common
Stock held by each of the Selling Securityholders as of September 6, 1995. To
the knowledge of the Company, none of the Selling Securityholders has had a
material relationship with the Company within the past three years, other than
as a result of the ownership of the shares, except as is expressly noted. The
following information has been furnished to the Company by the person named:

<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Prior to Offering Shares After Offering
Name Shares % To Be Sold Shares %
---- -------------------- ---------- --------------------

<S> <C> <C> <C> <C> <C>
William C. Hayde(1) 400,000(2) 5.9% 400,000 -0- -0-
14 Fourth Street
Farmingville, New York 11738

Market Visibility, Inc.(3) 400,000(4) 5.9% 400,000 -0- -0-
605 Third Avenue
New York, New York 10158
-------------------------

<FN>
(1) Effective August 2, 1995, the Company executed and entered into the William
C. Hayde 1995 Consultation Agreement pursuant to which Mr. Hayde agreed to
perform consulting services for and on behalf of the Company for an initial
term expiring on March 31, 1996, unless extended or renewed at the sole
option of the Company (See "WILLIAM C. HAYDE 1995 CONSULTATION AGREEMENT
and MARKET VISIBILITY, INC. 1995 CONSULTATION AGREEMENT").

(2) Represents shares of the Company's $.0005 par value Common Stock issued to
Hayde pursuant to the terms of the Hayde Agreement, which shares are
currently being held in escrow, subject to vesting in Hayde (See "WILLIAM
C. HAYDE 1995 CONSULTATION AGREEMENT and MARKET VISIBILITY, INC. 1995
CONSULTATION AGREEMENT").

(3) Effective August 8, 1995, the Company executed and entered into the Market
Visibility, Inc. 1995 Consultation Agreement pursuant to which MVI agreed
to perform consulting services for and on behalf of the Company for an
initial term expiring on March 31, 1996, unless extended or renewed at the
sole option of the Company (See "WILLIAM C. HAYDE 1995 CONSULTATION
AGREEMENT and MARKET VISIBILITY, INC. 1995 CONSULTATION AGREEMENT").

(4) Represents shares of the Company's $.0005 par value Common Stock issued to
MVI pursuant to the terms of the MVI Agreement, which shares are currently
being held in escrow, subject to vesting in MVI (See "WILLIAM C. HAYDE 1995
CONSULTATION AGREEMENT and MARKET VISIBILITY, INC. 1995 CONSULTATION
AGREEMENT").
</TABLE>

The Selling Securityholders have advised the Company that they may sell
such shares from time to time at prices related to the then current market
prices prevailing. In selling the shares offered hereby, a Selling
Securityholder may be deemed an "Underwriter" under the Securities Act of 1933,
as amended. Sales may be made by the Selling Securityholders to or through
brokers or dealers who may

-17-
<PAGE>

also be deemed to be Underwriters. Any commissions or profits realized on
resales by such brokers or dealers also may be deemed to be underwriting
compensation under the 1933 Act.

The costs of registering the shares being offered by the Selling
Securityholders are being paid by the Company.
-18-
<PAGE>
DESCRIPTION OF SECURITIES

The authorized capital stock of the Company consists of sixty million
(60,000,000) shares of $.0005 par value Common Stock, and forty million
(40,000,000) of $.10 par value Preferred Stock. As of September 6, 1995,
6,744,416 shares of Common Stock were issued and outstanding, and no shares of
Preferred Stock were issued and outstanding.

COMMON STOCK

The authorized Common Stock of the Company consists of sixty million
(60,000,000) shares of $.0005 par value Common Stock. All shares have equal
voting rights and are not assessable. The Articles of Incorporation of the
Company prohibit cumulative voting. Upon liquidation, dissolution or winding up
of the Company, the assets of the Company, after satisfaction of all liabilities
and all liquidation preferences, if any, granted to holders of the Preferred
Shares of the Company, will be distributed pro rata to the holders of Common
Stock. The holders of the Common Stock do not have preemptive rights to
subscribe for any securities of the Company and have no right to require the
Company to redeem or purchase their shares. The issued and outstanding shares
of Common Stock are validly issued, fully paid and non-assessable.

Holders of Common Stock are entitled to dividends when, as and if declared
by the Board of Directors of the Company, out of funds legally available
therefor. The Company has not paid any cash dividends on its Common Stock, and
it is unlikely that any such dividends will be declared in the foreseeable
future.

PREFERRED STOCK

The Articles of Incorporation of the Company authorize the issuance of a
maximum of forty million (40,000,000) shares of Preferred Stock. The Articles
of Incorporation vest the Board of Directors of the Company with authority to
divide the class of Preferred Shares into series and to fix and determine the
relative rights and preferences of the shares of any such series so established
to the full extent permitted by the laws of the State of Colorado and the
Articles of Incorporation in respect of, among other things, (a) the number of
Preferred Shares to constitute such series and the distinctive designations
thereof, (b) the rate and preference of dividends, if any, the time of payment
of dividends, whether dividends are cumulative and the date from which any
dividends shall accrue, (c) whether Preferred Shares may be redeemed and, if so,
the redemption price and the terms and conditions of redemption, (d) the
liquidation preferences payable on Preferred Shares in the event of involuntary
or voluntary liquidation, (e) sinking fund or other provisions, if any, for
redemption or purchase of Preferred Shares, (f) the terms and conditions by
which Preferred Shares may be converted, if the Preferred Shares of any series
are issued with the privilege of conversion, and (g) voting rights, if any.

WARRANTS

ANAND WARRANTS

The Company has granted and issued to its President Common Stock Purchase
Warrants exercisable to purchase 184,000 shares of Common Stock at an exercise
price of $.75 per share (the "Anand Warrants"). A portion of the Anand Warrants
have been assigned to third parties. The Company has authorized and reserved
for issuance the Common shares issuable upon exercise of the Anand Warrants.
Each Anand Warrant is exercisable until November 12, 1996.

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<PAGE>
In the event the outstanding Anand Warrants are not exercised by their
expiration date, all unexercised Anand Warrants will, thereafter, become void
and be of no further force or effect.

Owners of the Anand Warrants may, in their sole discretion, trade the
Warrants if a market for such Warrants develops and if an exemption from federal
and state registration requirements can be established, of which there can be no
assurance. There is no assurance market conditions will exist at any time
during the exercise periods such that trading the Warrants will be practicable.
On expiration of the Warrants following the exercise period referred to above,
it is anticipated that any market which might have existed for the Anand
Warrants will terminate.

If the Company has not qualified its Common Stock underlying such Warrants
for sale in particular states, holders of the Anand Warrants in those states
will have no choice but to either sell such Warrants or let them expire.

The Anand Warrants do not contain the usual anti-dilution provisions so as
to avoid dilution of the equity interest represented by the underlying Common
Stock upon the occurrence of certain events such as share dividends or splits.
Moreover, no anti-dilution provisions will apply in the event a merger or
acquisition is undertaken by the Company. In the event that the Company adopts
a resolution to merge, consolidate or sell percentages in all of its assets,
prior to the expiration of the Anand Warrants, each Warrantholder upon the
exercise of his/her Warrants would be entitled to receive the same treatment as
a holder of any share of Common Stock. In the event the Company adopts the
resolution for the liquidation, dissolution or winding up of the Company's
business, the Company will give written notice of the adoption of such
resolution to the registered holders of the Anand Warrants. Thereupon, all
liquidation and dissolution rights under the Anand Warrants will terminate at
the end of thirty (30) days from the date of the notice to the extent not
exercised within those thirty (30) days. Holders of the Warrants will have no
voting, preemptive, liquidation or other rights of a shareholder, and no
dividends will be declared on the Warrants.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock of the Company is
American Securities Transfer, Inc., Denver, Colorado.

CONVERTIBLE NOTE

During January, 1994, the Company, in consideration of $25,000 in cash,
issued its convertible note in the principal amount of $25,000 (the "Note"),
together with a Convertible Note Purchase Agreement. Pursuant to the terms of
the Note and the Convertible Note Purchase Agreement, the Note may, at the
option of the Holder, be converted into fully-paid and non-assessable shares of
the Company's $.0005 par value Common Stock at any time after ninety (90) days
from the date of the Note. The price per share at which the Note may be
converted into Common Stock is $.375 per share (the "Conversion Value").

If the Common Stock issuable upon conversion of the Note is changed into
the same or different number of shares of any class or classes of stock, whether
by capital reorganization, reclassification or otherwise, or in the event of a
transfer of all, or substantially all of the Company's properties and assets to
any other person, then and in such event, the Holder of the Note shall have the
right thereafter to convert such Note into the kind of stock or other securities
and property receivable upon such

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<PAGE>
reorganization, reclassification or other change for the applicable conversion
value applied to such stock, other securities or property received.

Upon the reorganization, consolidation or merger of the Company, the Note
shall continue in full force and effect until conversion by the Holder thereof,
and the terms of the Convertible Note Purchase Agreement are applicable to the
shares of stock and other securities and property receivable on the conversion
of any Note after the consummation of such reorganization, consolidation, merger
or any similar event, and shall be binding upon the issuer of any such stock or
other securities, including, in the case of any such transfer, the person
acquiring all or substantially all of the properties or assets of the Company,
whether or not such person shall have expressly assumed the terms of the Note.

Pursuant to the terms of the Convertible Note Purchase Agreement, the
Company is prohibited from amending its Certificate of Incorporation; or through
any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, from avoiding or
seeking to avoid the observance or performance of any of the terms of the Note.
The holder of the Note will have no voting, pre-emptive, liquidation or other
rights of a shareholder, and no dividends will be declared on the Note.

REPORTS TO STOCKHOLDERS

The Company intends to furnish annual reports to shareholders which will
include certified financial statements reported on by its certified public
accountants. In addition, the Company may issue unaudited quarterly or other
interim reports to shareholders as it deems appropriate. The Company will
comply with the periodic reporting requirements imposed by the Securities
Exchange Act of 1934.

LEGAL MATTERS

Legal matters in connection with the securities being offered hereby will
be passed upon for the Company by Neuman & Cobb, Temple-Bowron House, 1507 Pine
Street, Boulder, Colorado 80302.

EXPERTS

The consolidated financial statements and schedules of Applied Research
Corporation as of May 31, 1995, and for each of the years in the two-year period
ended May 31, 1995, incorporated by reference herein and elsewhere in the
registration statement, have been incorporated by reference herein and in the
registration statement in reliance on the report of Friedman & Fuller, P.C.,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.

The report of Friedman & Fuller, P.C. covering the 1995 consolidated
financial statements and schedules contains an explanatory paragraph that states
that the Company's net capital deficiency and working capital deficiency, as
well as certain delinquent obligations, raise substantial doubt about the
Company's ability to continue as a going concern. The consolidated financial
statements and financial statement schedules do not include any adjustments that
might result from the outcome of that uncertainty.

-21-

<PAGE>

PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE

The documents listed in (a) through (c) below are incorporated by reference
in the Registration Statement. All documents subsequently filed by the
Registrant pursuant to Section 13(a), 13(c), 14 and 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), prior to the filing of a
post-effective amendment which indicates that all securities offered have been
sold or which de-registers all securities then remaining unsold, shall be deemed
to be incorporated by reference in the Registration Statement and to be part
thereof from the date of filing of such documents.

(a) The Registrant's Annual Report on Form 10-K for the fiscal year ended
May 31, 1995;

(b) All other reports filed pursuant to Section 13 or 15(d) of the
Exchange Act since the end of the fiscal year covered by the
Registrant's document referred to in (a) above; and

(c) The Registrant's Registration Statement on Form S-18, as amended, SEC
File No. 33-11943-LA, as filed with the Securities and Exchange
Commission on June 21, 1989.

ITEM 4. DESCRIPTION OF SECURITIES.

The class of securities to be offered hereby is registered under Section 12
of the Securities Exchange Act of 1934, as amended. A description of the
Registrant's securities is set forth in the Prospectus incorporated as a part of
this Registration Statement.

ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.

None

ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The only statute, charter provision, bylaw, contract, or other arrangement
under which any controlling person, director or officers of the Registrant is
insured or indemnified in any manner against any liability which he may incur in
his capacity as such, is as follows:

Sections 7-109-101 through 7-109-110 of the Colorado Corporation Code
provide as follows:

7-109-101. DEFINITIONS. As used in this article:

(1) "Corporation" includes any domestic or foreign entity that is a
predecessor of a corporation by reason of a merger or other
transaction in which the predecessor's existence ceased upon
consummation of the transaction.

(2) "Director" means an individual who is or was a director of a
corporation or an individual who, while a director of a corporation,
is or was serving at the corporation's request as a director, officer,
partner, trustee, employee, fiduciary, or agent of another domestic or
foreign corporation or other person or of an employee benefit plan. A
director is considered to be serving an employee benefit plan at the
corporation's request if his or her duties to the corporation also
impose

II-1
<PAGE>
duties on, or otherwise involve services by, the director to the plan or to
participants in or beneficiaries of the plan. "Director" includes, unless
the context requires otherwise, the estate or personal representative of a
director.

(3) "Expenses" includes counsel fees.

(4) "Liability" means the obligation incurred with respect to a
proceeding to pay a judgment, settlement, penalty, fine, including an
excise tax assessed with respect to an employee benefit plan, or
reasonable expenses.

(5) "Official capacity" means, when used with respect to a director,
the office of director in a corporation and, when used with respect to
a person other than a director as contemplated in section 7-109-107,
the office in a corporation held by the officer or the employment,
fiduciary, or agency relationship undertaken by the employee,
fiduciary, or agent on behalf of the corporation. "Official capacity"
does not include service for any other domestic or foreign corporation
or other person or employee benefit plan.

(6) "Party" includes a person who was, is, or is threatened to be
made a named defendant or respondent in a proceeding.

(7) "Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal.

7-109-102. AUTHORITY TO INDEMNIFY DIRECTORS.

(1) Except as provided in subsection (4) of this section, a
corporation may indemnify a person made a party to a proceeding
because the person is or was a director against liability incurred in
the proceeding if:

(a) The person conducted himself or herself in good faith; and

(b) The person reasonable believed:

(I) In the case of conduct in an official capacity with the
corporation, that his or her conduct was in the corporation's best
interests; and

(II) In all other cases, that his or her conduct was at least not
opposed to the corporation's best interests; and

(c) In the case of any criminal proceeding, the person had no
reasonable cause to believe his or her conduct was unlawful.

(2) A director's conduct with respect to an employee benefit plan for
a purpose the director reasonably believed to be in the interests of
the participants in or beneficiaries of the plan is conduct that
satisfies the requirement of subparagraph (II) of paragraph (b) of
subsection (1) of this section. A director's conduct with respect to
an employee benefit plan for a purpose that the director did not
reasonably believe to be in the interests of the participants in or
beneficiaries of the

II-2
<PAGE>
plan shall be deemed not to satisfy the requirements of paragraph (a) of
subsection (1) of this section.

(3) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is
not, of itself, determinative that the director did not meet the
standard of conduct described in this section.

(4) A corporation may not indemnify a director under this section:

(a) In connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the
corporation; or

(b) In connection with any other proceeding charging that the
director derived an improper personal benefit, whether or not
involving action in an official capacity, in which proceeding the
director was adjudged liable on the basis that he or she derived an
improper personal benefit.

(5) Indemnification permitted under this section in connection with a
proceeding by or in the right of the corporation is limited to
reasonable expenses incurred in connection with the proceeding.

7-109-103. MANDATORY INDEMNIFICATION OF DIRECTORS. Unless limited by
its articles of incorporation, a corporation shall indemnify a person
who was wholly successful, on the merits or otherwise, in the defense
of any proceeding to which the person was a party because the person
is or was a director, against reasonable expenses incurred by him or
her in connection with the proceeding.

7-109-104. ADVANCE OF EXPENSES TO DIRECTORS.

(1) A corporation may pay for or reimburse the reasonable expenses
incurred by a director who is a party to a proceeding in advance of
final disposition of the proceeding if:

(a) The director furnishes to the corporation a written affirmation
of the director's good faith belief that he or she has met the
standard of conduct described in section 7-109-102;

(b) The director furnishes to the corporation a written
undertaking, executed personally or on the director's behalf, to repay
the advance if it is ultimately determined that he or she did not meet
the standard of conduct; and

(c) A determination is made that the facts then known to those
making the determination would not preclude indemnification under this
article.

(2) The undertaking required by paragraph (b) of subsection (1) of
this section shall be an unlimited general obligation of the director
but need not be secured and may be accepted without reference to
financial ability to make repayment.

(3) Determinations and authorizations of payments under this section
shall be made in the manner specified in section 7-109-106.

II-3
<PAGE>
7-109-105. COURT-ORDERED INDEMNIFICATION OF DIRECTORS.

(1) Unless otherwise provided in the articles of incorporation, a
director who is or was a party to a proceeding may apply for
indemnification to the court conducting the proceeding or to another
court of competent jurisdiction. On receipt of an application, the
court, after giving any notice the court considers necessary, may
order indemnification in the following manner:

(a) If it determines that the director is entitled to mandatory
indemnification under section 7-109-103, the court shall order
indemnification, in which case the court shall also order the
corporation to pay the director's reasonable expenses incurred to
obtain court-ordered indemnification.

(b) If it determines that the director is fairly and reasonable
entitled to indemnification in view of all the relevant circumstances,
whether or not the director met the standard of conduct set forth in
section 7-109-102 (1) or was adjudged liable in the circumstances
described in section 7-109-102 (4), the court may order such
indemnification as the court deems proper; except that the
indemnification with respect to any proceeding in which liability
shall have been adjudged in the circumstances described in section 7-
109-102 (4) is limited to reasonable expenses incurred in connection
with the proceeding and reasonable expenses incurred to obtain court-
ordered indemnification.

7-109-106. DETERMINATION AND AUTHORIZATION OF INDEMNIFICATION OF
DIRECTORS.

(1) A corporation may not indemnify a director under section 7-109-
102 unless authorized in the specific case after a determination has
been made that indemnification of the director is permissible in the
circumstances because the director has met the standard of conduct set
forth in section 7-109-102. A corporation shall not advance expenses
to a director under section 7-109-104 unless authorized in the
specific case after the written affirmation and undertaking required
by section 7-109-104 (1) (a) and (1) (b) are received and the
determination required by section 7-109-104 (1) (c) has been made.

(2) The determinations required by subsection (1) of this section
shall be made:

(a) By the board of directors by a majority vote of those present
at a meeting at which a quorum is present, and only those directors
not parties to the proceeding shall be counted in satisfying the
quorum; or

(b) If a quorum cannot be obtained, by a majority vote of a
committee of the board of directors designated by the board of
directors, which committee shall consist of two or more directors not
parties to the proceeding; except that directors who are parties to
the proceeding may participate in the designation of directors for the
committee.

(3) If a quorum cannot be obtained as contemplated in paragraph (a)
of subsection (2) of this section, and a committee cannot be
established under paragraph (b) of subsection (2) of this section, or,
even if a quorum is obtained or a committee is designated, if a
majority of the directors constituting such quorum or such

II-4
<PAGE>

committee so directs, the determination required to be made by subsection
(1) of this section shall be made:

(a) By independent legal counsel selected by a vote of the board of
directors or the committee in the manner specified in paragraph (a) or
(b) of subsection (2) of this section or, if a quorum of the full
board cannot be obtained and a committee cannot be established, by
independent legal counsel selected by a majority vote of the full
board of directors; or

(b) By the shareholders.

(4) Authorization of indemnification and advance of expenses shall be
made in the same manner as the determination that indemnification or
advance of expenses is permissible; except that, if the determination
that indemnification or advance of expenses is permissible is made by
independent legal counsel, authorization of indemnification and
advance of expenses shall be made by the body that selected such
counsel.

7-109-107. INDEMNIFICATION OF OFFICERS, EMPLOYEES, FIDUCIARIES, AND
AGENTS.

(1) Unless otherwise provided in the articles of incorporation:

(a) An officer is entitled to mandatory indemnification under
section 7-109-103, and is entitled to apply for court-ordered
indemnification under section 7-109-105, in each case to the same
extent as a director;

(b) A corporation may indemnify and advance expenses to an officer,
employee, fiduciary, or agent of the corporation to the same extent as
to a director; and

(c) A corporation may also indemnify and advance expenses to an
officer, employee, fiduciary, or agent who is not a director to a
greater extent, if not inconsistent with public policy, and if
provided for by its bylaws, general or specific action of its board of
directors or shareholders, or contract.

7-109-108. INSURANCE. A corporation may purchase and maintain
insurance on behalf of a person who is or was a director, officer,
employee, fiduciary, or agent of the corporation, or who, while a
director, officer, employee, fiduciary, or agent of the corporation,
is or was serving at the request of the corporation as a director,
officer, partner, trustee, employee, fiduciary, or agent of another
domestic or foreign corporation or other person or of an employee
benefit plan, against liability asserted against or incurred by the
person in that capacity or arising from his or her status as a
director, officer, employee, fiduciary, or agent, whether or not the
corporation would have power to indemnify the person against the same
liability under section 7-109-102, 7-109-103, or 7-109-107. Any such
insurance may be procured from any insurance company designated by the
board of directors, whether such insurance company is formed under the
laws of this state or any other jurisdiction of the United States or
elsewhere, including any insurance company in which the corporation
has an equity or any other interest through stock ownership or
otherwise.

II-5
<PAGE>
7-109-109. LIMITATION OF INDEMNIFICATION OF DIRECTORS.

(1) A provision treating a corporation's indemnification of, or
advance of expenses to, directors that is contained in its articles of
incorporation or bylaws, in a resolution of its shareholders or board
of directors, or in a contract, except an insurance policy, or
otherwise, is valid only to the extent the provision is not
inconsistent with sections 7-109-101 to 7-109-108. If the article of
incorporation limit indemnification or advance of expenses,
indemnification and advance of expenses are valid only to the extent
not inconsistent with the articles of incorporation.

(2) Sections 7-109-101 to 7-109-108 do not limit a corporation's
power to pay or reimburse expenses incurred by a director in
connection with an appearance as a witness in a proceeding at a time
when he or she has not been made a named defendant or respondent in
the proceeding.

7-109-110. NOTICE TO SHAREHOLDER OF INDEMNIFICATION OF DIRECTOR. If
a corporation indemnifies or advances expenses to a director under
this article in connection with a proceeding by or in the right of the
corporation, the corporation shall give written notice of the
indemnification or advance to the shareholders with or before the
notice of the next shareholders' meeting. If the next shareholder
action is taken without a meeting at the instigation of the board of
directors, such notice shall be given to the shareholders at or before
the time the first shareholder signs a writing consenting to such
action.

* * *

Article XI of the Amended and Restated Articles of Incorporation of the
Company provides, in pertinent part:

(1) A Director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a Director, except to the extent that such
an exemption from liability or limitation thereof is not
permitted under the General Corporation Laws of the State of
Colorado as the same exists or may hereafter be amended.

Article VIII of the Amended and Restated Articles of Incorporation of the
Company provides:

The Corporation may and shall indemnify each Director,
Officer and any employee or agent of the Corporation, his
heir, executors and administrators, against any and all
expenses and liability reasonably incurred by him in
connection with any action, suit or proceeding to which he
may be a party by reason of his being or having been a
Director, Officer, employee or agent of the Corporation to
the full extent required or permitted by the Colorado
Corporation Code, as amended.

Article XII of Registrant's Articles of Incorporation provides, in part:

II-6
<PAGE>
To the maximum extent permitted by law or by public policy, directors
of this Corporation are to have no personal liability for monetary
damages for breach of fiduciary duty as a director."

The Registration Rights between the Company and the Selling
Securityholder provides that the Selling Securityholder will indemnify
and hold harmless the Company, the directors of the Company, each
person, if any, who controls the Company within the meaning of Section
15 of the Securities Act of 1933, as amended (the "1933 Act"), against
any and all losses, claims, demands, liabilities and expenses
(including reasonable legal or other expenses) to which it may become
subject, arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement, or in any Blue Sky Application, or the omission or alleged
omission to state therein a material fact required to be stated
therein, or necessary to make the statements therein not misleading,
resulting from the use of written information furnished to the Company
by the Selling Securityholder for use in the preparation of the
Registration Statement, or in any Blue Sky Application.

ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.

At the present time, 400,000 shares of the Registrant's Common Stock have
been granted pursuant to the terms of the Hayde Agreement and 400,000 shares of
the Registrant's Common Stock have been granted pursuant to the terms of the MVI
Agreement. Inasmuch as the Consultants who received the Common Stock were
knowledgeable, sophisticated and/or had access to comprehensive information
relevant to the Registrant, such transactions were undertaken in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act of
1933. As a condition precedent to such grant, the Consultants were required to
express an investment intent and consent to the imprinting of a restrictive
legend on each Stock Certificate received from the Registrant.

ITEM 8. EXHIBITS.

Exhibit Description
------- -----------

4.1 William C. Hayde 1995 Consultation Agreement;

4.2 Marketing Visibility, Inc. 1995 Consultation Agreement;

5.0 Opinion of Neuman & Cobb regarding the legality of the securities
being registered;

24.1 Consent of Neuman & Cobb included in the opinion filed as Exhibit 5
hereto;

24.2 Consent of Friedman & Fuller, Certified Public Accountants.

ITEM 9. UNDERTAKINGS.

1. The undersigned Registrant hereby undertakes:

(a) To file, during any period in which offerings or sales are being made,
a post-effective amendment to this Registration Statement to include any
material information with respect to the plan of

II-7

<PAGE>

distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;

(b) That, for the purposes of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof; and

(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

2. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

3. The undersigned Registrant hereby undertakes to deliver, or cause to be
delivered with the Prospectus, to each person to whom the Prospectus is sent or
given, the latest annual report to Securityholders that is incorporated by
reference in the Prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the Prospectus, to deliver, or
cause to be delivered to each person to whom the Prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the Prospectus to provide such interim financial information.

4. Insofar as indemnification for liabilities arising under the Act may be
permitted to Directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a Director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

II-8

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of Landover, State of Maryland on the 20th of
September, 1995.

APPLIED RESEARCH CORPORATION

By: /s/ Dr. S.P.S. Anand
-------------------------------
Dr. S.P.S. Anand, President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with Applied Research Corporation and on the dates indicated.

SIGNATURE POSITION DATE
--------- -------- ----

/s/ Dr. S.P.S. Anand Chairman of the Board, September 20, 1995
----------------------------- President and Chief
Dr. S.P.S. Anand Executive Officer

/s/ Manjit K. Anand Treasurer, Director September 20, 1995
-----------------------------
Manjit K. Anand

/s/ Dennis H. O'Brien Director, Secretary September 20, 1995
----------------------------- Vice-President &
Dennis H. O'Brien Chief Financial Officer

/s/ Dr. Andrew S. Endal Senior Vice-President September 20, 1995
-----------------------------
Dr. Andrew S. Endal

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<PAGE>

EXHIBITS

Exhibit Description
------- -----------

4.1 William C. Hayde 1995 Consultation Agreement;

4.2 Marketing Visibility, Inc. 1995 Consultation Agreement;

5.0 Opinion of Neuman & Cobb regarding the legality of the securities
being registered;

24.1 Consent of Neuman & Cobb included in the opinion filed as Exhibit 5
hereto;

24.2 Consent of Friedman & Fuller, Certified Public Accountants.

<PAGE>

----------------------------------------------------------------------
----------------------------------------------------------------------

EXHIBIT 4.1

----------------------------------------------------------------------
----------------------------------------------------------------------

<PAGE>

WILLIAM C. HAYDE 1995 CONSULTATION AGREEMENT

THIS AGREEMENT is executed and made effective this 2nd day of August, 1995,
by and between APPLIED RESEARCH CORPORATION, a Colorado corporation (the
"Company") with principal offices at 8201 Corporate Drive, Landover, Maryland
20785, and WILLIAM C. HAYDE with offices at 14 Fourth Street, Farmingville, New
York 11738 ("Consultant").

WITNESSETH

WHEREAS, the Company desires to retain the services of Consultant as more
fully described below:

NOW THEREFORE, in consideration of the mutual covenants, agreements and
provisions contained in this Agreement, the parties agree as follows:

1. CONSULTATION.

The Company hereby retains the services of Consultant, as an
independent contractor, which retention is accepted and agreed to be performed
by Consultant, subject to and upon the terms and conditions hereinbelow set
forth.

2. TERM.

2.1. The term of this Agreement shall begin on the day and year first
above written, and, unless earlier terminated by the Company in accordance with
the provisions of Section 2.2 hereof shall terminate on March 31, 1996 (the
"Initial Term"), unless extended or renewed at the sole option of the Company.
Upon the termination of this Agreement, the retention and agency, and
Consultant's independent contractor status, shall end, unless a new, separate
written agreement shall have been executed by all parties. In any event,
Sections 6, 10 through 12 and 14 through 21 shall survive any termination of
this Agreement.

2.2. The Company shall have the sole and exclusive option to terminate
this Agreement, effective the last day of any month, for any reason, or no
reason at all, upon written notice to the Consultant, delivered on or before the
close of business on the effective date of termination.

3. CONSULTANT'S STATUS.

It is understood and agreed that Consultant shall be at all times and
for all purposes hereunder an independent contractor to the Company and under no
circumstances shall be deemed an employee, partner or joint venturer of or with
the Company. Consultant agrees that he shall not directly or indirectly imply
or represent to others, or permit another to imply or represent to others that
Consultant has any authority to act for, represent or bind the Company in any
matter by virtue of this Agreement. Consultant expressly agrees to indemnify
and hold harmless the Company for any damages which may be sustained by the
Company as a result of or arising out of any breach of the covenants set forth
in this Section 3.

<PAGE>

4. SERVICES OF CONSULTANT.

4.1. Upon the request of the Company, Consultant shall render advice
and assistance to the Company on business-related matters and in connection
therewith shall:

4.1.1 Attend meetings of the Company's Board of Directors or
Executive Committee(s) when requested by the Company;

4.1.2 Attend meetings and at the request of the Company
review, analyze and report on proposed business opportunity;

4.1.3 Consult with the Company concerning on-going strategic
corporate planning and long-term investment policies, including any revision of
the Company's business plan;

4.1.4 Consult with and advise the Company with regard to
potential mergers and acquisitions whether the Company be the acquiring company
or the target of the acquisition.

4.2. In performing hereunder, Consultant may, but need not, use the
facilities or resources of the Company. Consultant shall be solely and
exclusively responsible for determining when, where, how and by whom the
services are to be performed hereunder, subject only to such matters as may be
specifically addressed in written communications from the Company.

4.3. In connection with the services to be rendered by Consultant,
Consultant shall report to and be responsible to the Board of Directors,
President and others of the Company and shall consult with those individuals on
behalf of the Company in connection with the development of a marketing plan for
product development, management, advertising and all other related areas.
Consultant agrees to make himself available to evaluate all proposals related to
any financing undertaken by the Company.

4.4. Consultant agrees to exercise his best efforts, skill and
diligence in the performance of his services hereunder and shall perform all
services in a good and workmanlike fashion.

4.5. Consultant shall keep accurate records showing the quantity and
date of time devoted to the services provided for herein and a description
thereof, and shall present such records to the Company on request.

4.6. Anything to the contrary herein notwithstanding, it is agreed
that Consultant's services will not include any service that constitute the
rendering of legal opinions, performance of work that is in the ordinary purview
of a certified public accountant or any work that is the ordinary purview of a
registered broker/dealer.

5. COMPENSATION.

5.1. The Consultant shall be promptly reimbursed for all reasonable and

<PAGE>

necessary business expenses incurred by the Consultant in connection with its
rendering of services hereunder to the Company; provided, however, that such
expenses require the prior approval of the President of the Company and provided
further that the Consultant shall only be reimbursed for such expenses as to
which it presents the Company with receipts or other reasonable substantiation
thereof.

5.2. For all services to be rendered by Consultant during the Initial
Term, the Company agrees to issue to Consultant 400,000 shares of the $.005 par
value Common Stock ("Common Stock") of the Company to be held in escrow, subject
to vesting and consulting in accordance with the provisions of Section 5.2.1.

5.2.1 The Company Stock shall vest in Consultant in
accordance with the following schedule provided the Company does not, in
accordance with the provisions of Section 2.2 above, terminate this Agreement.
In the event the Company terminates this Agreement, those shares of Common Stock
which on the effective date of termination have NOT vested in Consultant shall
be returned to the Company.

Date Shares No. of Shares
Vest in Consultant Vesting in Consultant
------------------ ---------------------

August 1, 1995 50,000
September 1, 1995 50,000
October 1, 1995 50,000
November 1, 1995 50,000
December 1, 1995 50,000
January 1, 1996 50,000
February 1, 1996 50,000
March 1, 1996 50,000

5.3. The Consultant shall pay all applicable taxes which are assessed
against it as a result of its receipt of compensation under this Agreement, and
the Company shall not withhold any such taxes from the compensation paid to the
Consultant. Consultant agrees to indemnify and hold harmless the Company,
together with its officers and directors, with respect to any such taxes or
other assessments which may be due and payable as a result of the payment or
receipt of compensation hereunder.

6. COVENANTS OF CONSULTANT.

6.1. In connection with its performance hereunder, Consultant shall
not make any untrue statement of a material fact regarding the Company or omit
to state a material fact necessary in order to make any statement regarding the
Company made by the Consultant not misleading.

<PAGE>

result of any misrepresentation, and inaccuracy in, or any breach of, any
warranty or representation or any nonperformance of any covenant or other
obligation on the part of the Consultant contained in this Agreement.

7. REGISTRATION RIGHTS.

7.1. Within thirty (30) days of the date of this Agreement, the
Company shall cause to be prepared and filed with the SEC a Registration
Statement on Form S-8 registering for sale the shares of Common Stock issuable
in accordance with the provisions of Section 5.2 (the "Registration Statement").

7.2. In connection with the preparation and filing of the Registration
Statement, the Company agrees to (i) use its best efforts to cause such
Registration Statement to become and remain effective; (ii) prepare and file
with the SEC such amendments and supplements to such Registration Statement as
may be necessary to keep such Registration Statement effective for a period of
not less than one hundred eighty (180) days; (iii) furnish to the Consultant
such number of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act of 1933, as amended (the
"Act"), and such other documents as Consultant may reasonably request in order
to facilitate the disposition of the shares of Common Stock; and (iv) use its
best efforts to register and qualify the shares of Common Stock covered by such
Registration Statement under the Blue Sky laws of the State of New York for the
distribution of the securities covered by the Registration Statement. The
Consultant agrees to cooperate in all reasonable respects with the preparation
and filing of the Registration Statement.

7.3. All fees and other expenses incurred in connection with the
registration, offering and distribution of the shares of Common Stock shall be
borne by the Company, including, without limitation, fees of the Company's legal
counsel, Securities and Exchange Commission filing fees. Blue Sky filing fees,
printing costs, accounting fees costs, transfer agent fees, and any other
miscellaneous costs and disbursements. Consultant shall be liable for any and
all underwriting discounts, brokerage commissions or other fees or expenses
incurred in connection with the sale or other disposition by Consultant of the
shares of Common Stock covered by the Registration Statement.

7.4. To the extent permitted by law, Consultant will indemnify and
hold harmless the Company, and its directors, officers, employees, agents and
representatives, as well as its controlling persons (within the meaning of the
Act) against any losses, claims, damages, liabilities, or expenses, including
without limitation, attorney's fees and disbursements, which arise out of or are
based upon any violation by Consultant of the Act or under the Securities
Exchange Act of 1934, or any rule or regulation promulgated thereunder
applicable to Consultant, or arise out of or are based upon any untrue statement
or omission of Consultant in the Subscription Agreement between the Company and
Consultant, or arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, but only to the extent that such untrue
statement or alleged untrue statement or omission, or alleged omission was made
in such Registration Statement in reliance upon and in conformity with
information furnished by Consultant in writing, expressly for use in connection
with such Registration Statement.

<PAGE>

7.5. To the extent permitted by law, the Company will indemnify and
hold harmless Consultant, including his employees, agents, and representatives,
against any losses, claims, damages, liabilities, or expenses, including without
limitation attorney's fees and disbursements, to which Consultant may become
subject under the Act to the extent that such losses, claims, damages or
liabilities arise out of or are based upon any violation by the Company of the
Act or under the Securities Exchange Act of 1934, or any rule or regulation
promulgated thereunder applicable to the Company, or arise out of or are based
upon any untrue or alleged untrue statement of any material fact contained in
the Registration Statement, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or arise out of any
violation by the Company of any rule or regulation promulgated under the Act
applicable to the Company and relating to action or inaction required of the
Company in connection with such Registration Statement; provided, however, that
the indemnity agreement contained in this paragraph shall not apply to any loss,
damage or liability to the extent that same arises out of or is based upon an
untrue statement or omission made in connection with such Registration Statement
in reliance upon and in conformity with information furnished in writing
expressly for use in connection with such Registration Statement by Consultant.

7.6. Consultant undertakes to comply with all applicable laws
governing the distribution of securities in connection with Consultant's sale of
common stock of the Company acquired pursuant to the terms of this Agreement,
including, without limitation, Rule 10(b)-6 under the Securities Exchange Act of
1934, and to notify the Company of any changes in Consultant's plan of
distribution, including the determination of the public offering price and any
dealer concession or discount so that the Company can sticker or amend the
Registration Statement as the Company deems appropriate in its sole discretion.

8. PERFORMANCE AND OTHER ENGAGEMENTS.

Throughout the term of this Agreement, it is understood that
Consultant will only provide services to the Company on a part-time basis and,
subject to the provisions concerning competition hereinbelow set forth, may
perform the same or similar services for other persons or entities not
inconsistent with his undertakings hereunder.

9. REPRESENTATIONS AND WARRANTIES OF THE CONSULTANT.

9.1. The Consultant hereby represents and warrants to the Company that
there are no agreements or binding obligations enforceable against the
Consultant which would be violated by his entering into this Agreement or
providing the services to be provided hereunder.

9.2. NO OTHER INFORMATION RELIED UPON

Consultant represents, warrants and agrees that he has been
afforded the opportunity to make, and has made, all such investigation of the
Company and its financial condition, business affairs and prospects as it deems
appropriate. Consultant acknowledges receipt of such information as he deems
necessary or appropriate as a prudent and knowledgeable investor in evaluating
the Company and the shares of Company Common Stock issuable hereunder.
Consultant acknowledges that the Company has made available to him the
opportunity to obtain additional information to evaluate the merits and risks of
this Agreement. Consultant

<PAGE>

acknowledges that he has had the opportunity to ask questions of the Company
and, to the extent he availed himself of such opportunity. Consultant received
satisfactory answers from the Company, its affiliates, associates, officers and
directors.

9.3. NATURE OF THE RISK.

Consultant represents, warrants and agrees that he understands
that the Company's business is, by its nature, speculative; that Consultant is
aware that the financial resources of the Company are extremely limited and that
it is very likely that the Company will require additional capital, and there is
no assurance that such capital will be available if necessary; that Consultant
is familiar with the high degree of risk that is involved in the Company's
business, and that Consultant is financially able and willing to accept the
substantial risk involved in such investment, including the risk of loss of the
entire amount of his compensation.

9.4. UNREGISTERED STOCK.

Consultant represents that he understands that the Company's
stock issuable hereunder has not been registered for sale under federal or state
securities laws and that such securities are being issued to Consultant pursuant
to a claimed exemption from the registration requirements of such laws which is
based upon the fact that said securities are not being offered to the public.
Consultant understands that in order to satisfy such requirement he must be
acquiring the stock with no view to making a public distribution of said
securities, and the representations and warranties contained in this Section 9
are given with the intention that the Company may rely thereon for purposes of
claiming such exemption; and that he understands that he must bear the economic
risk of his investment in the stock issuable hereunder, for a substantial period
of time, because neither has been registered under the federal or state
securities laws, and cannot be sold unless subsequently registered under such
laws, or unless an exemption from such registration is available.

9.5. STOCK ACQUIRED FOR INVESTMENT: LIMITATIONS ON DISPOSITION.

Consultant represents that he is acquiring the Common Stock for
his own account and for investment and not with a view to, or for sale in
connection with, any distribution thereof in violation of the Securities Act of
1933, as amended. Consultant agrees that the Common Stock will not be offered
for sale, sold or otherwise transferred for value, and that no transfer thereof
will be made by the Consultant unless (i) a registration statement with respect
thereto has become effective under the Securities Act of 1933, as amended, or
(ii) there is presented to the Company an opinion of counsel for Consultant
reasonably satisfactory to the Company that such registration is not required,
or (iii) there is presented to the Company a letter from the Securities and
Exchange Commission (said Commission having been informed of all relevant
circumstances) to the effect that in the event either the Common Stock is
transferred by Consultant without such registration, the Commission or its staff
will not recommend any action. Consultant further agrees that the Common Stock
will not be offered for sale, sold or otherwise transferred unless, in the
opinion of legal counsel for the Company, such sale or disposition does not and
will not violate any provisions of any federal or state securities law or
regulation. Consultant consents that any transfer agent of the Company may be
instructed not to transfer any of the Common Stock unless it receives
satisfactory evidence of compliance with the foregoing

<PAGE>

provisions and that there may be endorsed upon any certificate (or instruments
issued in substitution thereof) the Company's regular legend regarding the sale
of restricted securities.

9.6. The Consultant shall pay all applicable taxes which are assessed
against him as a result of the receipt of compensation under this Agreement, and
the Company shall not withhold any taxes from the compensation paid thereunder
to the Consultant.

10. CONFIDENTIALITY.

Consultant for himself and his employees covenants with the Company
that all information concerning its methods, processes, plans of acquisition,
research, markets, plans, strategies, distributors, dealers, customers, clients
and vendors collectively are and constitute the trade secrets and confidential
proprietary information of the Company. Consultant covenants and agrees for
himself and his employees that he will not (except as required in the course of
his services for the Company), during the term of this Agreement or thereafter,
communicate or divulge to, or use for the benefit of himself or any other
person, firm, association, or corporation, without the consent of the Company,
any trade secrets or confidential and proprietary information of the Company or
other confidential matters possessed, owned, or used by the Company that may be
communicated to, acquired by, or learned of by him or his employees in the
course of or as a result of his services for the Company. All records, disks,
tapes, stored information on any medium, files, memoranda, reports, price lists,
customer lists, drawings, plans, sketches, documents, equipment, and the like,
relating to the business of the Company, which Consultant or his employees shall
use or prepare or come into contact with, shall remain the sole property of the
Company, and upon termination of this Agreement, shall, together with all copies
in the possession of Consultant, be delivered to the Company.

Notwithstanding the foregoing, the restrictions on disclosure and use of
information and materials as set forth in this Section 10 shall not apply to the
following, and the following is not confidential or proprietary information: (1)
any information or materials which were generally available to the public at the
time made available to Consultant by the Company, (2) any information or
materials which become, without breach of this Section 10 and through no fault
of Consultant, generally available to the public, (3) any informatin or
materials which Consultant has received from other sources prior to the date of
this Agreement, subject to no restrictions on disclosure applicable to
Consultant; and (4) any information or materials which Consultant at any time
lawfully obtains from a third party and who is not under any obligation of
secrecy or confidentiality to the Company, under circumstances permitting
disclosure by Consultant to others without restriction.

11. NON-INTERFERENCE WITH EMPLOYEES.

11.1. Consultant convenants with the Company that employees of or
consultants to the Company and employees of and consultants to firms,
corporations or entities affiliated with the Company have, of necessity, been
exposed to and have acquired certain knowledge, understandings, and know-how
concerning the Company's business operations which is confidential information
and proprietary to the Company.

11.2. In order to protect the Company's confidential information
and to promote and insure the continuity of the Company's contractual relations
with its employees and

<PAGE>

consultants, Consultant covenants and agrees that for the term of this
Agreement, and for a period of sixty (60) days from the date this Agreement
terminates, he will not directly or indirectly, or permit or encourage others to
directly or indirectly (i) interfere in any manner whatsoever with the Company's
contractual or other relations with any or all of its employees or consultants,
or (ii) induce or attempt to induce any employee or consultant to the Company to
cease performing services for or on behalf of the Company.

11.3. In the event any court of competent jurisdiction determines
or holds that all or any portion of the covenants contained in this Section 11
are unlawful, invalid, or unenforceable for any reasons, then the parties hereto
agree to modify the provisions of this Section 11 if and only to the extent
necessary to render the covenants herein contained enforceable and otherwise in
conformance with all legal requirements.

12. CLIENTS AND CUSTOMERS.

12.1. Consultant covenants with the Company that the clients and
customers of the Company, both actual and contemplated, constitute actual and
prospective business relationships which are proprietary to the Company and
comprise, in part, the Company's confidential information and trade secrets.

12.2. In order to protect the Company's proprietary rights and to
promote and ensure the continuity of the Company's contractual relations with
its customers and clients, Consultant covenants and agrees that for the term of
this Agreement, and for a period of sixty (60) days from the date this Agreement
terminates, he will not directly, or indirectly, or permit or encourage other to
directly or indirectly (i) interfere in any manner whatsoever with the Company's
contractual or prospective relations with any clients or customers, or (ii)
induce or attempt to induce any client or customer of the Company to cease doing
business with the Company, or (iii) solicit, offer to retain, or retain, or in
any other manner engage or enter into any business or other arrangement with any
of the Company's customers or clients to provide any services or products to any
of such customers or clients as they may from time to time exist or be
constituted, except and unless such arrangements for the provision of products
or services is not in any way competitive with the products or services actually
provided by the Company to its clients or customers or proposed to be provided
by the Company to its clients or customers.

12.3. In the event any court of competent jurisdiction determines
or holds that all or any portions of the covenants contained in this Section 12
are unlawful, invalid or unenforceable for any reason, then the parties hereto
agree to modify the provisions of this Section 12 if and only to the extent
necessary to render the covenants herein contained enforceable and otherwise in
conformance with all legal requirements.

13. AFFILIATES OF CONSULTANT.

Consultant agrees that the Covenants set forth in Sections 9, 10, 11
and 12 of this Agreement are applicable to and binding upon any and all of
Consultant's agents and employees (hereafter "Affiliates"). Consultant agrees
that he will not permit any Affiliate to perform services hereunder nor permit
the disclosure of any Company trade secret, proprietary or confidential
information to any Affiliate until and unless such Affiliate agrees in writing
to be bound by the terms and conditions of Sections 9, 10, 11 and 12 of this
Agreement.

<PAGE>

14. ATTORNEY'S FEES.

In the event there is any litigation or arbitration between the
parties concerning this Agreement, the successful party shall be awarded
reasonable attorney's fees and litigation or arbitration costs, including the
attorney's fees and costs incurred in the collection of any judgment.

15. NOTICES.

All notices required or permitted hereunder shall be sufficient if
delivered personally or mailed to the parties at the address set forth below or
at such other address as either party may designate in writing from time to
time. Any notice by mailing shall be effective 48 hours after it has been
deposited in the United States certified mail, return receipt requested, duly
addressed and with postage prepaid.

16. PARTIAL INVALIDITY.

If any provisions of this Agreement are in violation of any statute or
rule of law of any state or district in which it may be sought to be enforced,
then such provisions shall be deemed null and void only to the extent that they
may be in violation thereof, but without invalidating the remaining provisions.

17. BINDING EFFECT.

This Agreement shall be binding upon and inure to the benefit of the
respective parties hererto, their heirs, personal representatives, successors
and assigns.

18. WAIVER.

No waiver of any breach of any one of the agreements, terms,
conditions or covenants of this Agreement by the Company shall be deemed to
imply or constitute a waiver of any other agreement, term, condition or
covenants of this Agreement. The failure of either party to insist on strict
performance of any agreement, term, condition or covenant, herein set forth,
shall not constitute or become construed as a waiver of the rights of either or
the other thereafter to enforce any other default of such agreement, term,
condition or covenant; neither shall such failure to insist upon strict
performance be deemed sufficient grounds, to enable either party hererto to
forego or subvert or otherwise disregard any other agreement, term, condition or
covenants of this Agreement.

19. GOVERNING LAW.

This Agreement and the rights and duties of the parties shall be
construed enforced in accordance with the laws of the State of New York.

20. FAX/COUNTERPARTS.

This Agreement may be executed by telex, telecopy or other facsimile
transmission, and such facsimile transmission shall be valid and binding to the
same extent as if

<PAGE>

it were an original. Further, this Agreement may be signed in one or more
counterparts, all of which when taken together shall constitute the same
document.

21. ENTIRE AGREEMENT.

This Agreement constitutes the entire agreement of the parties hereto
with respect to the subject matter hereof. There are no representations,
warranties, conditions or obligations except as herein specifically provided.
Any amendment or modification hereof must be in writing.

IN WITNESS WHEREROF, the parties to this Agreement have duly executed
effective on the day and year first above written.

APPLIED RESEARCH CORPORATION

Attest:

/s/ Dennis H. O'Brien By: /s/ Dr. S.P.S. Anand
--------------------- -------------------------
Secretary Dr. S.P.S. Anand, President

CONSULTANT:

/s/ William C. Hayde
-----------------------------
William C. Hayde

<PAGE>

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----------------------------------------------------------------------

EXHIBIT 4.2

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----------------------------------------------------------------------

<PAGE>

MARKET VISIBILITY, INC. 1995 CONSULTATION AGREEMENT

THIS AGREEMENT is executed and made effective this 8th day of August, 1995,
by and between APPLIED RESEARCH CORPORATION, a Colorado corporation (the
"Company") with principal offices at 8201 Corporate Drive, Landover, Maryland
20785, and MARKET VISIBILITY, INC. with offices at 605 Third Avenue, New York,
New York 10158 ("Consultant").

WITNESSETH

WHEREAS, the Company desires to retain the services of Consultant as more
fully described below:

NOW THEREFORE, in consideration of the mutual covenants, agreements and
provisions contained in this Agreement, the parties agree as follows:

1. CONSULTATION.

2. TERM.

3. CONSULTANT'S STATUS.

<PAGE>

that he shall not directly or indirectly imply or represent to others, or permit
another to imply or represent to others that Consultant has any authority to act
for, represent or bind the Company in any matter by virtue of this Agreement.
Consultant expressly agrees to indemnify and hold harmless the Company for any
damages which may be sustained by the Company as a result of or arising out of
any breach of the covenants set forth in this Section 3.

4. SERVICES OF CONSULTANT.

4.1. Upon the request of the Company, Consultant shall render advice
and assistance to the Company on business-related matters and in connection
therewith shall:

4.1.1 Attend meetings of the Company's Board of Directors or
Executive Committee(s) when requested by the Company;

4.1.2 Attend meetings and at the request of the Company
review, analyze and report on proposed business opportunity;

4.1.3 Consult with the Company concerning on-going strategic
corporate planning and long-term investment policies, including any revision of
the Company's business plan;

4.1.4 Consult with and advise the Company with regard to
potential mergers and acquisitions whether the Company be the acquiring company
or the target of the acquisition.

4.1.5 Develop, run and maintain an Internet home page.

4.4. Consultant agrees to exercise his best efforts, skill and
diligence in the performance of his services hereunder and shall perform all
services in a good and workmanlike fashion.

<PAGE>

4.7. The services to be provided by the Consultant to the Company
hereunder are not in connection with or related to the offer or sale of
securities of the Company in a capital raising transaction.

5. COMPENSATION.

5.1. The Consultant shall be promptly reimbursed for all reasonable
and necessary business expenses incurred by the Consultant in connection with
its rendering of services hereunder to the Company; provided, however, that such
expenses require the prior approval of the President of the Company and provided
further that the Consultant shall only be reimbursed for such expenses as to
which it presents the Company with receipts or other reasonable substantiation
thereof.

Date Shares No. of Shares
Vest in Consultant Vesting in Consultant
------------------ ---------------------

August 1, 1995 50,000
September 1, 1995 50,000
October 1, 1995 50,000
November 1, 1995 50,000
December 1, 1995 50,000
January 1, 1996 50,000
February 1, 1996 50,000
March 1, 1996 50,000

<PAGE>

6. COVENANTS OF CONSULTANT.

6.2. The Consultant agrees to indemnify, defend and hold harmless the
Company, and it officers, directors, shareholders, agents, employees (hereafter
"Affiliates"), attorneys, successors and assigns, from and against, and pay or
reimburse each of them for, any and all claims, losses, damages, judgments,
amounts paid in settlement, costs and legal, accounting or other expenses
(collectively "Losses") that any of them may sustain or incur as a result of any
misrepresentation, and inaccuracy in, or any breach of, any warranty or
representation or any nonperformance of any covenant or other obligation on the
part of the Consultant contained in this Agreement.

6.3. In furnishing the Company with Internet service and strategic
marketing services as hererin provided, the Consultant shall not be liable to
the Company or its creditors for errors of judgment or for anything except
malfeasance, reckless disregard or gross negligence in the performance of its
duties under the terms of this Agreement.

It is further understood and agreed that the Consultant may rely upon
information furnished to it reasonably believed to be accurate and reliable and
that, except as herein provided, the Consultant shall not be accountable for any
loss suffered by the Company by reason of the Company's action or non-action on
the basis of any advice, recommendation or approval of the Consultant.

The parties further acknowledge that the Consultant undertakes no
responsibility for the accuracy of any statements to be made by management
contained in press releases or other communications, including but not limited
to, filings with the Securities Dealers, Inc.

6.4 The Company hereby agrees to protect defend, indemnify, and hold
the Consultant, its officers, directors, employees, and representatives harmless
from, against, and in respect of all claims, demands, liabilities, suits,
including reasonable attorneys' fees, judgments, damages, costs and expenses
directly or indirectly incurred and arising out of or resulting from any
misrepresentations or omissions of financial or other data supplied to the
Consultant by the Company for use by the Consultant in performing its services
for the Company.

7. REGISTRATION RIGHTS.

<PAGE>

Registration Statement as may be necessary to keep such Registration Statement
effective for a period of not less than one hundred eighty (180) days; (iii)
furnish to the Consultant such number of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act of 1933, as amended (the "Act"), and such other documents as Consultant may
reasonably request in order to facilitate the disposition of the shares of
Common Stock; and (iv) use its best efforts to register and qualify the shares
of Common Stock covered by such Registration Statement under the Blue Sky laws
of the State of New York for the distribution of the securities covered by the
Registration Statement. The Consultant agrees to cooperate in all reasonable
respects with the preparation and filing of the Registration Statement.

<PAGE>

paragraph shall not apply to any loss, damage or liability to the extent that
same arises out of or is based upon an untrue statement or omission made in
connection with such Registration Statement in reliance upon and in conformity
with information furnished in writing expressly for use in connection with such
Registration Statement by Consultant.

8. PERFORMANCE AND OTHER ENGAGEMENTS.

9. REPRESENTATIONS AND WARRANTIES OF THE CONSULTANT.

9.2. NO OTHER INFORMATION RELIED UPON

9.3. NATURE OF THE RISK.

<PAGE>

compensation.

9.4. UNREGISTERED STOCK.

9.5. STOCK ACQUIRED FOR INVESTMENT: LIMITATIONS ON DISPOSITION.

10. CONFIDENTIALITY.

<PAGE>

agrees for himself and his employees that he will not (except as required in the
course of his services for the Company), during the term of this Agreement or
thereafter, communicate or divulge to, or use for the benefit of himself or any
other person, firm, association, or corporation, without the consent of the
Company, any trade secrets or confidential and proprietary information of the
Company or other confidential matters possessed, owned, or used by the Company
that may be communicated to, acquired by, or learned of by him or his employees
in the course of or as a result of his services for the Company. All records,
disks, tapes, stored information on any medium, files, memoranda, reports, price
lists, customer lists, drawings, plans, sketches, documents, equipment, and the
like, relating to the business of the Company, which Consultant or his employees
shall use or prepare or come into contact with, shall remain the sole property
of the Company, and upon termination of this Agreement, shall, together with all
copies in the possession of Consultant, be delivered to the Company.

11. NON-INTERFERENCE WITH EMPLOYEES.

11.2. In order to protect the Company's confidential information
and to promote and insure the continuity of the Company's contractual relations
with its employees and consultants, Consultant covenants and agrees that for the
term of this Agreement, and for a period of sixty (60) days from the date this
Agreement terminates, he will not directly or indirectly, or permit or encourage
others to directly or indirectly (i) interfere in any manner whatsoever with the
Company's contractual or other relations with any or all of its employees or
consultants, or (ii) induce or attempt to induce any employee or consultant to
the Company to cease performing services for or on behalf of the Company.

<PAGE>

12. CLIENTS AND CUSTOMERS.

13. AFFILIATES OF CONSULTANT.

14. ATTORNEY'S FEES.

15. NOTICES.

<PAGE>

hours after it has been deposited in the United States certified mail, return
receipt requested, duly addressed and with postage prepaid.

16. PARTIAL INVALIDITY.

17. BINDING EFFECT.

This Agreement shall be binding upon and inure to the benefit of the
respective parties hererto, their heirs, personal representatives, successors
and assigns.

18. WAIVER.

19. GOVERNING LAW.

This Agreement and the rights and duties of the parties shall be
construed enforced in accordance with the laws of the State of New York.

20. FAX/COUNTERPARTS.

This Agreement may be executed by telex, telecopy or other facsimile
transmission, and such facsimile transmission shall be valid and binding to the
same extent as if it were an original. Further, this Agreement may be signed in
one or more counterparts, all of which when taken together shall constitute the
same document.

21. ENTIRE AGREEMENT.

IN WITNESS WHEREROF, the parties to this Agreement have duly executed
effective on the day and year first above written.

<PAGE>

APPLIED RESEARCH CORPORATION

Attest:

/s/ DENNIS H. O'BRIEN By: /s/ DR. S.P.S. ANAND
--------------------- ---------------------------
Secretary Dr. S.P.S. Anand, President

CONSULTANT:

/s/ WILLIAM J. MCDERMOTT
-------------------------------
Market Visibility, Inc.
William J. McDermott, President

<PAGE>
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--------------------------------------------------------------------------------

EXHIBIT 5.0

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<PAGE>

September 13, 1995

Applied Research Corporation
8201 Corporate Drive, Suite 1120
Landover, Maryland 20785

Re: S.E.C. Registration Statement on Form S-8

Ladies and Gentlemen:

We have acted as counsel to Applied Research Corporation (the "Company") in
connection with a Registration Statement to be filed with the United Stated
Securities and Exchange Commission, Washington, D.C., pursuant to the Securities
Act of 1933, as amended, covering the registration of an aggregate of 800,000
shares of the Company's $.0005 par value common stock (the "Common Stock") which
may be sold by William C. Hayde, a consultant to the Company ("Hayde"), issued
under the William C. Hayde 1995 Consultation Agreement (the "Hayde Agreement")
and by Market Visibility, Inc., a consultant to the Company ("MVI"), issued
under the Market Visibility, Inc. 1995 Consultation Agreement (the "MVI
Agreement"). In connection with such representation of the Company, we have
examined such corporate records, and have made such inquiry of government
officials and Company officials and have made such examination of the law as we
deemed appropriate in connection with delivering this opinion.

Based upon the foregoing, we are of the opinion as follows:

1. The Company has been duly incorporated and organized under the laws of
the State of Colorado and is validly existing as a corporation in good standing
under the laws of that state.

2. The Company's authorized capital consists of Sixty Million
(60,000,000) shares of Common Stock having a par value of $.0005 each, and forty
million (40,000,000) shares of $.10 par value Preferred Stock.

3. The 800,000 shares of the Company's common stock issued pursuant to
the Hayde Agreement and the MVI Agreement (the "Agreements") and which Hayde and
MVI propose to sell, were duly and validly authorized, legally issued, fully
paid and nonassessable.

Sincerely,

Nathan L. Stone

NLS:at

<PAGE>

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--------------------------------------------------------------------------------

EXHIBIT 24.1

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

September 13, 1995

Applied Research Corporation
8201 Corporate Drive, Suite 1120
Landover, Maryland 20785

Re: S.E.C. Registration Statement on Form S-8

Ladies and Gentlemen:

We hereby consent to the inclusion of our opinion regarding the legality of
the securities being registered by the Registration Statement to be filed with
the United Stated Securities and Exchange Commission, Washington, D.C., pursuant
to the Securities Act of 1933, as amended, by Applied Research Corporation, a
Colorado corporation, in connection with the offering of up to 800,000 shares of
its common stock pursuant to the William C. Hayde 1995 Consultation Agreement
and the Market Visibility, Inc. 1995 Consultation Agreement, as proposed and
more fully described in such Registration Statement.

We further consent to the reference in such Registration Statement to our
having given such opinions.

Sincerely,

/s/ Nathan L. Stone
Nathan L. Stone

NLS:at

<PAGE>

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EXHIBIT 24.2

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CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation by
reference in this Form S-8 Registration Statement of our reports dated
July 28, 1995, on the consolidated financial statements and the financial
statement schedules included or incorporated by reference in the Applied
Research Corporation Annual Report on Form 10-K for the year ended May 31,
1995, and to all references to our Firm included in this Registration
Statement.

/s/ Friedman & Fuller, P.C.

FRIEDMAN & FULLER, P.C.

Rockville, Maryland
September 15, 1995