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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-K/A

Amendment No. 2



|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------



For the Fiscal Year ended September 30, 2003



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



Commission file number 0-13111



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ANALYTICAL SURVEYS, INC.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Colorado                                                       |  | 84-0846389                          
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification Number)



11900 Crownpoint
Drive, San Antonio, Texas 78233

(Address of principal executive offices)



(210) 657-1500

(Registrants telephone number, including area code)



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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE
ACT:



|                                     |  |                                          
|------------------------------------ |  | -----------------------------------------
|Title Of Each Class                  |  | Name Of Each Exchange On Which Registered
|Common Stock, no par value per share |  | Nasdaq                                   



SECURITIES
REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT: COMMON STOCK



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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No ̈.



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



Indicate by check mark if registrant is an accelerated filer
(as defined in Rule 12 B-2 of the Act). Yes ̈No x



The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant is $1,721,612, based on the closing price of the Common Stock on March 31,2003.



The number of shares outstanding of the registrants Common Stock, as of December 1, 2003, was 1,085,423.



Documents incorporated by reference: None



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EXPLANATORY NOTE



This Amendment No. 2 on Form 10-K/A for the year ended September 30, 2003 and 2002 is being filed to restate our financial statements to
properly account for a conversion feature of our convertible senior secured note and related warrants that were issued on April 2, 2002, and to correct the diluted number of shares outstanding for certain periods in fiscal 2002 (see Note 16 to the
consolidated financial statements), as well as for the purposes of enhancing our disclosure after discussions with the Staff of the Securities and Exchange Commission. Except as noted below, this Amendment speaks as of the original filing date of
our Annual Report on Form 10-K and has not been updated to reflect events occurring subsequent to the original filing date. For the convenience of the reader, we have restated our Annual Report on Form 10-K/A in its entirety.



Material Developments



The following material developments have occurred since the filing of our original Annual Report on Form 10-K on December 29, 2003:



On January 28, 2004, we announced that our Chief Executive Officer, J. Norman
Rokosh, voluntarily resigned for personal and family reasons as our President and Chief Executive Officer, effective February 29, 2004, and as a member of our Board of Directors, effective January 28, 2004. Mr. Rokosh has continued to work with us
after February to ensure a smooth transition to new leadership. J. Livingston Kosberg, our current Chairman of the Board, served as our interim Chief Executive Officer until March 22, 2004, when Mr. Wayne Fuquay was appointed as Chief Executive
Officer.



Effective January 28, 2004, Joshua Huffard resigned as a member of
our Board of Directors and as member of our Audit Committee. Mr. Huffards resignation was not related to a disagreement with our operations, policies, or practices.



On April 12, 2004, Mr. Hamid Akhavan replaced Mr. Tom Bannon as Senior Vice President of Operations. Mr. Akhavan was previously employed by
us and held various senior level positions in both operations and sales from 1984 until January 2004. He has provided consulting services to us since January. We believe our choice of Mr. Akhavan as Senior Vice President of Operations provides us
with an experienced senior executive who is strongly versed in the operational management aspects of our organization and who has established strong customer relationships critical to our future success.



On May 28, 2004, an event of default was triggered under our $1.7 million senior secured
promissory note (the Second Note) held by Tonga Partners, L.P. (Tonga) when our Registration Statement on Form S-3 filed with the SEC on December 30, 2003 to register shares of our common stock that were issued or are
issuable upon conversion of the $2.0 million senior secured convertible promissory note issued to Tonga on April 2, 2002 (the Old Note) and upon exercise of a warrant to purchase 500,000 shares of our common stock (the
Warrant) was not declared effective by the SEC. On June 30, 2004, the event of default was cured when we restructured the Second Note. The restructured $1.7 million senior secured promissory note (the Restructured Note) bears
interest at a rate of 5% per annum with such interest accruing beginning on November 4, 2003. The principal amount of the Restructured Note, together with accrued and unpaid interest, is due and payable at Tongas option in cash or shares of
our common stock on January 2, 2006. Tonga may, however, convert the Note for shares of our common stock at any time. In connection with the Restructured Note, Tonga waived accrued interest through November 4, 2003, which totaled $134,000. Tonga
also waived its rights to assess liquidated damages pursuant to the Second Note, relinquished its rights under the Warrant and canceled the Warrant. Pursuant to the terms of the Restructured Note, we are required to register 2,500,000 shares of
common stock, including the 261,548 shares that were issued to Tonga on November 7, 2003 in Tongas partial conversion of the Old Note. Tonga may accelerate the Restructured Note if a Registration Statement registering 2,500,000 shares is not
declared effective by the SEC on or before September 28, 2004, and demand a cash payment equal to 100% of the principal amount of the Restructured Note.



In June 2004, we redeemed 1,341,100 shares of our Series A Redeemable Preferred Stock for approximately $252,000. On March 31, 2004, the carrying value of the redeemed
shares totaled approximately $1,446,000 and accrued dividends on those shares totaled approximately $170,000. The early redemption reduced the mandatory payment due on December 27, 2004, to the holders of the preferred stock from $800,000 to
$129,450. On March 31, 2004, the redemption value of the redeemed shares totaled approximately $1,877,500.



On June 30, 2004, the Company, in cooperation with Intergraph Corporation, was awarded a $2.9 million contract for the final roll-out phase of the Puerto Rico
Electric Power Authority (PREPA) AIRe project. The purpose of the project is to help PREPA, the electrical service provider for the island of Puerto Rico, to create a system to allow it to improve customer service and reduce costs. The Company will
provide additional field collection and data conversion services, including customer to transformer connectivity for the Outage management System, and meter collection field services to capture and deliver a Customer Information System to meter
connectivity.



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TABLE OF CONTENTS



|                              |  |                                                                                       |  |     
|----------------------------- |  | ------------------------------------------------------------------------------------- |  | ----
|                              |  |                                                                                       |  | Page
|PART I.                      
|                              |  |                                                                                      
|Item 1.                       |  | Business                                                                              |  | 1   
|Item 2.                       |  | Property                                                                              |  | 11  
|Item 3.                       |  | Litigation                                                                            |  | 11  
|Item 4.                       |  | Submission of Matters to a Vote of Shareholders                                       |  | 12  
|                             
|PART II.                     
|                              |  |                                                                                      
|Item 5.                       |  | Market for the Registrants Common Stock and Related Shareholder Matters              |  | 13  
|Item 6.                       |  | Selected Financial Data                                                               |  | 15  
|Item 7.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 16  
|Item 7a.                      |  | Quantitative and Qualitative Disclosure about Market Risks                            |  | 26  
|Item 8.                       |  | Financial Statements and Supplementary Data                                           |  | 26  
|Item 9.                       |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  |  | 48  
|Item 9a.                      |  | Statement on Disclosure Control and Procedures                                        |  | 48  
|                             
|PART III.                    
|                              |  |                                                                                      
|Item 10.                      |  | Directors and Executive Officers of the Registrant                                    |  | 49  
|Item 11.                      |  | Executive Compensation                                                                |  | 51  
|Item 12.                      |  | Security Ownership of Other Beneficial Owners and Management                          |  | 57  
|                             
|PART IV.                     
|                              |  |                                                                                      
|Item 13.                      |  | Certain Relationships and Related Party Transactions                                  |  | 59  
|Item 14.                      |  | Principal Accountant Fees and Services                                                |  | 59  
|Item 15.                      |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                      |  | 60  
|Signatures and Certifications |  | 63                                                                                   
|Exhibits                      |  |                                                                                      





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PART I



Item 1. Business



Overview



Analytical Surveys, Inc. (ASI, we, our
or the Company), formed in 1981, provides customized data conversion, spatial data management and technical services for the geographic information systems market. Geographic information systems (GIS) consist of computer
software, hardware, data, and personnel that are designed to help manipulate, analyze, and present information that is tied to a spatial (geographic) location. GIS information benefits users in various ways. Business and industry rely on GIS to
promote enhanced infrastructure management, decision support for planning and analysis, and to provide focused development of operational needs based on efficient modeling techniques. Such systems are used by federal, state and local governments,
utilities, telecommunications companies, emergency services, and other businesses to present multi-dimensional information about the physical location and characteristics of their diverse assets. We help customers by transforming or updating raw,
often confusing information from multiple sources (maps, blueprints, construction drawings, databases, aerial photography, field inventory of asset attributes, satellite imagery, etc.) into a high-resolution, large-scale, richly detailed digital and
visual representation on which organizations can rely to make better decisions with speed and confidence. We have historically targeted our services to utilities and state and local governments, and are implementing strategies to expand the range of
GIS-related spatial data management and technical services offered to these markets.



We believe that the market for GIS systems and GIS-related services has grown due to growing awareness of the benefits of GIS technology coupled with lower hardware prices and increased software capability. Our
customers today use GIS technology to:



| |  | improve network operations business processes to reduce operating expenses;.
| | - | ----------------------------------------------------------------------------



| |  | improve corporate customer information processes that capture, report and monitor information related to usage, billing, payments, order processing, special service requests, and
records documentation. The goal is to enable improved customer service satisfaction ratings and to meet and exceed the expectations and/or requirements of regulatory agencies; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | access and update accurate information regarding the location, condition, and function of physical assets in support of operations and maintenance of facilities. Considerations
include monitoring device and equipment performance, establishing inspection schedules and priorities, developing corrective actions necessary to remedy identified unsatisfactory performance, and ensuring update of enterprise information systems.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We believe that GIS outsourcing is a growing
tendency that enables our customers to focus on their core competencies. We expect this trend provides us with the opportunity to leverage our GIS expertise into longer-term program contracts to maintain existing GIS systems in addition to our
traditional contracts to build new GIS systems. Many utilities invested in GIS technology in the late 1990s resulting in improvements in operations and customer service levels. Our belief is that while many of these same companies desire new levels
of improvement and maintenance of quality information, they are challenged to do so because of the cost of training and retaining highly specialized GIS technicians. We are GIS specialists and we believe that we are well positioned to provide such
specialized services to these companies.



Our ongoing
involvement with the technology leaders such as Intergraph and ESRI, has kept our employees abreast of the latest GIS technology. We think that by entering into long-term outsourcing contracts with us, our clients can spare the expense and risk of
developing an internal resource capability necessary to provide them with higher cost savings through an efficient implementation of the latest GIS technologies.



Global economic conditions has slowed the rate of growth in the GIS market since 2000. It is our belief that there will be
delays in growth consistent with other technology-related companies until our utility customers resume significant spending on information technology products and services, but there is no guarantee that such spending will resume. Newer competition,
primarily from service firms with a large labor content in India, has resulted in lower margins and increased competition in the industry. The technologies utilized by our GIS customer base continue to advance and demand a current and accurate
depiction of their spatially located assets. We believe, therefore, that the long-term outlook for the GIS industry is positive and that we are well positioned to serve evolving customer needs.



We enter into long-term, fixed price contracts. Payments for these contracts
are often spread throughout the term of the contract and may be based on successful interim data deliveries or milestone payments. We attempt to negotiate new contracts to minimize negative cash flow and be self-funding throughout the life of the
contract.



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Strategy



Our objective is to maintain and enhance our competitive position in the data conversion and digital mapping industry. This objective is reflected in the following
summary of our strategy:



Turnaround Efforts. Our
near-term strategy is to return our Company to profitability and positive cash flow. To achieve this goal, we have:



| |  | Reduced corporate borrowing;
| | - | ----------------------------



| |  | Settled a class action lawsuit;
| | - | -------------------------------



| |  | Settled a formal SEC investigation;
| | - | -----------------------------------



| |  | Prevailed in a large arbitration case against the Company;
| | - | ----------------------------------------------------------



| |  | Standardized project management and cost estimation processes;
| | - | --------------------------------------------------------------



| |  | Consolidated accounting systems;
| | - | --------------------------------



| |  | Streamlined operations by reducing from five main production centers in the beginning of fiscal 2001 to two centers at the end of fiscal 2003;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  | Strengthened operational management and reduced corporate and overhead expenses; and
| | - | ------------------------------------------------------------------------------------



| |  | Focused on the government and utility conversion and data management sectors of the market.
| | - | -------------------------------------------------------------------------------------------



Expand Business in Existing Markets. We have expanded our products and services to our existing customer base to
include outsourcing services for our utility and municipal customers. We will continue to promote our services to potential customers to capitalize on the increasing sophistication and number of GIS users in our core utilities markets. In addressing
our market, we have adopted a more technical focus and consultative approach to marketing and business development.



Continue to Maintain and Develop Technological and Operational Leadership. We developed and acquired proprietary software and procedures that
automate portions of otherwise labor-intensive data conversion processes, enabling us to provide cost-effective and high-quality services on a timely basis. We will continue to develop new technology and to improve existing technology and
procedures. These activities will enhance our ability to expand into additional markets and further improve our production capacity and productivity. See Research and Development.



ASI Services



We offer a full range of services to create digital land base maps and databases of related geo-referenced information used in GIS. We use
specialized computers and internally developed proprietary software to create land surveys and legal descriptions. These base maps are created using photogrammetric and cadastral mapping technologies. Once the base map is produced, links to tabular
databases are created, and other geo-referenced data, such as buildings, telephone poles and zoning restrictions, are collected, verified, converted into digital format and added to the base map to create a GIS. We provide an experienced field
inventory staff to collect and verify information and use computerized and manual techniques to verify and digitize data from paper sources and legacy electronic systems. Once a GIS is completed, users can view the base map and any or all of the
layers of data on a computer screen and can retrieve selected data concerning any desired location appearing on the screen or all data matching one or more variables. We maintain these databases for customers on an as-needed basis.



Acquisitions, Dispositions and Facility Consolidations and Relocations



In 1995, we embarked on a growth strategy, which included consolidation of the fragmented
GIS services industry. We completed five strategic acquisitions that expanded our geographical scope, capacity, customer base, product offerings, proprietary technology and operational expertise. We acquired:



| |  | Intelligraphics, Inc. located in Wisconsin in December 1995;
| | - | ------------------------------------------------------------



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| |  | Westinghouse Landmark GIS, Inc. located in North Carolina in July 1996;
| | - | -----------------------------------------------------------------------



| |  | MSE Corporation (MSE) located in Indiana in July 1997;
| | - | --------------------------------------------------------



| |  | Cartotech, Inc. located in Texas in June 1998; and
| | - | --------------------------------------------------



| |  | The assets of Measurement Sciences, Inc. located in Colorado in December 1998.
| | - | ------------------------------------------------------------------------------



In 1999, we sold the Phillips Design Group and Mid-States Engineering subsidiaries (both acquired as parts of MSE Corporation), as these units were not core business
competencies. We also sold the Cartographic Sciences Group located in Mumbai, India, to InfoTech Enterprises, Ltd. in 1999.



In April 2001, we sold substantially all of the assets of the Colorado Springs, Colorado-based digital orthophotography and photogrammetric mapping facility to Sanborn
Map Company for a total consideration of $10.1 million. The sale agreement contains clauses that prohibit ASI from competing directly with the buyer in the orthophotography and photogrammetric markets for three years. Both companies agreed to
cooperate to complete customer contracts where services are provided by more than one ASI production facility. The sale allowed us to reduce debt and to refocus attention on utility and municipal mapping services.



In March 2002, we consolidated the Cary, North Carolina facility and transferred existing
project work to the Texas and Wisconsin facilities. The principal activity of the North Carolina facility has been cadastral and photogrammetric mapping.



In June 2002, we consolidated and relocated the Indianapolis, Indiana office to smaller office space. We consolidated offices in response to reduced demand for technology
services in the government and utility marketplace. Existing project work in Indiana was also transferred to the Texas and Wisconsin facilities.



On January 1, 2003, we moved our corporate headquarters from Indianapolis, Indiana to San Antonio, Texas, to give the executive team closer proximity to production staff.
The Indianapolis, Indiana, office was closed effective January 2, 2003.



Customers



We derive revenues primarily from two core markets:
utilities and state and local governments. We also serve commercial businesses. Four of our current customers accounted for 68% of our consolidated revenues in fiscal 2003 (KeySpan Corporate Services LLC (20%), Logica, Inc. (13%), Michigan
Consolidated Gas Company (17%), and Worldwide Services, Inc. (a division of Intergraph) (18%)). All four of these customers fall within our utility market. One customer, Worldwide Services, Inc., accounted for 58% of total accounts receivable and
revenue in excess of billings at September 30, 2003. The loss of any of these customers would have a material adverse effect on us. See Risk Factors  Our customer contracts may be adversely modified, changed or terminated prior to the
expiration of the contract terms and Our business comes from two core markets and adverse changes in those markets could cause a reduction in the demand for our services, and note 10Concentrations of Credit
Risk.



Sales and Marketing



We market our products and services in domestic and international markets primarily through
an internal sales force. We augment direct sales efforts by:



| |  | Maintaining relationships and forming alliances with regional businesses offering complementary services;
| | - | ---------------------------------------------------------------------------------------------------------



| |  | Obtaining referrals, either directly or indirectly, from consultants in the GIS industry;
| | - | -----------------------------------------------------------------------------------------



| |  | Maintaining memberships in professional and trade associations; and
| | - | -------------------------------------------------------------------



| |  | Actively participating in industry conferences.
| | - | -----------------------------------------------



Our sales cycle is generally lengthy, as customers normally take several months to go through the bidding/planning and award phases of a GIS project. Once awarded, it
generally takes 30 to 60 days until the final contract is signed. Most projects take from 6 to 48 months to complete. See Risk FactorsWe receive some business from referrals and any reduction in those referrals could effect our
business.



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Subcontractors



We use subcontractors when necessary to expand capacity, meet deadlines, reduce production costs and manage workload. We engage domestic subcontractors on a project by
project basis. With respect to our offshore subcontractors, we are in the fifth year of a five-year exclusive supply agreement with InfoTech Enterprises, Ltd., an India-based company, to provide production capacity for data conversion and other
related services. Under the agreement, we had provided certain assurances of production volume to InfoTech. Currently, we are not meeting these production volume commitments due to the weakened demand for services from our customer base. In
consideration for this volume shortfall, we have permitted InfoTech to seek additional work volume in the aerial photogrammetry sector. In addition, InfoTech has sought other work directly from our competitors based in the United States and named in
the exclusive agreement to supplement their work volume. We utilize InfoTech to provide more than 90% of our offshore subcontractor services. If our exclusive agreement with InfoTech is not renewed, we may have to secure an alternate source of labor
in India. This may increase our cost of offshore services in the short term as we train a new supplier, and may cause delays in completing existing contracts. We intend to continue to utilize offshore subcontractors for a large percentage of certain
data entry production work (which work constitutes less than 10% of our total production costs) in fiscal 2004 to reduce production costs and develop new services. We also employ certain select foreign and domestic subcontractors for tasks outside
our expertise, or to augment in-house capacity (such as field data surveying). See Risk Factors The unavailability or unsatisfactory performance of our subcontractors may affect our ability to deliver quality services to our
customers, and The unsatisfactory performance or unavailability of overseas subcontractors may impact our ability to profitably perform services under existing contracts.



Research and Development



We continue to develop new technology and to improve existing technology and procedures to
enhance our ability to expand into additional markets and further improve our production capacity and productivity. Most of these activities occur as we develop software or design a product or process for a particular contract. These efforts are
typically included as an integral part of our services for the particular project and, accordingly, the associated costs are charged to that project. Such custom-designed software can often be applied to projects for other customers. Approximately
three employees are substantially engaged in research and development efforts. The amount that we have spent on research and development over the last three fiscal years is immaterial. See Risk Factors We may be unable to protect our
proprietary rights, and We may need to invest in research and development to remain competitive.



Competition



The GIS services business is highly competitive and highly fragmented. Competitors include small regional firms, independent firms, large companies with GIS services divisions, customer in-house operations and
international low-cost providers of data conversion services. Two of our nationally recognized competitors for conversion services are Avineon and Rolta. We also compete with numerous regional firms for conversion services and field data collection
services. Because our competitors are all privately owned companies, it is difficult to determine the relative ranking in the market between us and our competitors.



We seek to compete on the basis of:



| |  | the quality of our products and the breadth of our services. We have won numerous awards from Geospatial Information & Technology Association, our industry association, for
providing superior customer services and innovative solutions;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the accuracy, responsiveness and efficiency with which we provide services to customers. We routinely complete our projects within our customers challenging accuracy
requirements and typically deliver data within a high level of accuracy tolerance; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | our capacity to perform large complex projects. We have completed data conversion and field projects for the investor owned electric, gas and telephone utilities in the United
States.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We use internally developed proprietary
production software and commercially available software to automate much of the otherwise labor-intensive GIS production process. We believe this automated approach enables us to achieve more consistent quality and greater efficiencies than more
manually intensive methods.



To compete against low-cost providers, we minimize
costs by using offshore subcontractors for a large percentage of certain data entry production work, which work constitutes less than 10% of our total production costs. See Risk Factors The unavailability or unsatisfactory performance of
our subcontractors may affect our ability to deliver quality services to our customers.



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Personnel



At September 30, 2003, we had approximately 135 employees compared to 200 at September 30, 2002. We reduced the workforce and executive ranks as we:



| |  | Transitioned a greater percentage of work to less expensive offshore subcontractors;
| | - | ------------------------------------------------------------------------------------



| |  | Continued efforts to improve operational efficiencies;
| | - | ------------------------------------------------------



| |  | Adjusted expenses to match forecasted revenues; and
| | - | ---------------------------------------------------



| |  | Flattened our organizational structure to shorten the internal communications hierarchy.
| | - | ----------------------------------------------------------------------------------------



We believe that retention of highly qualified managers and executive officers is critical to our ability to compete in the GIS data
conversion industry. Almost all of our employees work on a full-time basis. We do not have a collective bargaining agreement with any of our employees and generally consider relations with our employees to be good. See Risk FactorsThe
market for our services is highly competitive and such competition within our industry can lead to lower profit margins and reduced volume of new work and If we are unable to retain the members of our senior management team our
business operations may be adversely impacted.



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RISK FACTORS



In addition to the other information set forth in this Form 10-K/A, the issues and risks described below should be considered carefully
in evaluating our outlook and future.



Our cash flow may be insufficient
to meet our operating and capital requirements.



We
currently do not have a line of credit with any lender and rely solely on cash flow from operations to fund future operations and expenditures. There is no assurance that the cash flow from operations will be sufficient to meet our capital
requirements. We must convert accounts receivable and amounts earned not billed to cash in excess of our operating expenses in order to meet our debt payments . On or before December 27, 2004, we must redeem in cash approximately $800,000 of our
preferred stock. The terms of our $1.7 million aggregate principal amount senior secured convertible promissory note (the Note) restricts our ability to secure additional debt and also contains immediate call provisions for event that
are outside our control, and which, if triggered and exercised, would accelerate the Note and change the terms from being solely convertible to Common Stock at maturity to being immediately payable in cash. At December 1, 2003, the value of the
unconverted portion of the Note plus accrued interest totaled $1,841,000. If a default provision was triggered and Tonga Partners, L.P. (Tonga), the holder of the Note, did not waive such default but demanded repayment of the Note plus
accrued interest in cash, it would be difficult for us to meet this and other debt payments as well as fund our operations.If we do not have the cash flow necessary to meet our operating and capital requirements, we will be in violation of
the agreement with Tonga and we would be forced to obtain additional financing with Tongas consent and/or restrict capital and operating expenditures to match available resources. If these actions are not sufficient, and we are not able to
meet our commitments when due, then we will be forced to liquidate assets and repay our secured creditors with the proceeds.



Our independent auditors have expressed that there is substantial doubt about our ability to continue as a going concern.



During fiscal years 2000 through 2003, we experienced significant operating
losses with corresponding reductions in working capital and net worth, excluding the impact of debt forgiveness. Our revenues and backlog have also decreased substantially during the same period. Our independent auditors issued a going concern
qualification on our financial statements for each fiscal year since the fiscal 2000 results were reported. The going-concern qualification, which expressed substantial doubt about our ability to continue as a going concern, was based on the
significant operating losses reported in fiscal 2003 and 2002 and a lack of external financing to fund working capital and debt requirements. As of September 30, 2003, the amount of our accumulated deficit is approximately $29 million.



Successful implementation of our turnaround efforts is required to return the Company
to profitability.



The successful implementation of our
turnaround efforts requires the cooperation of customers, subcontractors, vendors, lenders, outside professionals and employees. There can be no assurance that the specific strategies designed to return our operations to profitability and positive
cash flow can be implemented to the extent and in the timeframe planned. We have implemented financial and operational restructuring plans designed to improve operating efficiencies, reduce and eliminate cash losses and position ourselves for
profitable operations. Delays and difficulties in achieving sales targets, realizing cost savings, retaining employees and other turnaround efforts could result in continued operating losses and a decrease or loss in the value of your investment.



The market for our services is highly competitive and such competition
within our industry can lead to lower profit margins and reduced volume of new work.



As the GIS services industry evolves, additional competitors may enter the industry. In addition, other improvements in technology could provide competitors or customers with tools to perform the services we provide
and lower the cost of entry into the GIS services industry. We are facing increased price competition, particularly in the utilities market, from relatively new entrants to the market, which perform their work utilizing mostly offshore labor. A
number of our competitors or potential competitors may have capabilities and resources greater than ours.



Our customer contracts may be adversely modified, changed or terminated prior to the expiration of the contract terms.



Most of our revenue is earned under long-term, fixed-price contracts. Our contractual obligations typically include large projects that will extend
over six months to four years. These long-term contracts entail significant risks, including:



| |  | Our ability to estimate our costs accurately is critical to ensuring the profitability of projects.
| | - | ---------------------------------------------------------------------------------------------------



| |  | Our skill at controlling costs under such fixed-price contracts once in production is required for profitable operations.
| | - | -------------------------------------------------------------------------------------------------------------------------



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| |  | Contracts may be signed with a broad outline of the scope of the work, with detailed specifications prepared after a contract is signed. In preparing the detailed specifications,
customers may negotiate specifications that reduce our planned project profitability.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Customers may increase the scope of contracts and we must negotiate change orders to maintain planned project profit margins and cash flows.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------



| |  | Customers may request us to slow down or scale back the scope of a project to satisfy their budget or cash constraints. Schedule delays and scope reductions may interrupt workflow,
create inefficiencies, and increase cost.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Customers may require a compressed schedule that may place additional strains on cash availability and managements ability to hire and train personnel required to meet
deadlines.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Contracts are generally terminable by the customer on relatively short notice, and it may be difficult for us to recoup our entire investment if a project is terminated prior to
completion.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Large, long-term, fixed-price contracts generally increase our exposure to the effects of inflation and currency exchange rate fluctuation.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------



We experience quarterly variations in our operating results due to external influences
beyond our control, such variations could result in a decreased stock value.



Our quarterly operating results vary significantly from quarter to quarter, depending upon factors such as the following:



| |  | The timing of customers budget processes. Our customers have greatly reduced purchasing of technology solutions over the past four years, This reduction, broadly reflective of
technology spending in general, may create a large demand for additional resources in the future in order to update aging systems
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Slowdowns or acceleration of work by customers. Our contracts are generally scheduled for completion over many months or perhaps years. If delivery schedules are accelerated or
delayed, our revenues may fluctuate accordingly. Costs generally increase when a schedule is lengthened due to the additional management and administrative costs associated with a longer project.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The impact of weather conditions on the ability of our or subcontractors to obtain satisfactory aerial photography or field data. Some of the data is collected in the field at the
customers location. Winter weather conditions and other adverse weather can greatly impact our ability to collect data bundles and thereby generate revenue. Similarly, cloudy conditions or snow cover impacts the collection of accurate aerial
photography.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Fluctuations in the price of our common stock as we record non-cash and non-operating income or expense each quarter as a result of the increase or decrease in the fair value of the
derivative features of the Note.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



For these
reasons, period-to-period comparisons of our results of operations are not and will not be necessarily a reliable indication of future performance. The fluctuations of our operating results could result in a decreased value of our stock. We also
could experience inconsistent quarterly revenues as a result of general weak economic conditions as customers defer projects or cancel planned expenditures.



We may need to invest in research and development to remain competitive and obtain new business.



We have devoted significant resources to developing and acquiring
specialized data collection and conversion hardware and software. In order to remain competitive, we must continue to select, invest in, acquire and develop new and enhanced technology on a timely basis. If competitors introduce new products and
services embodying new technologies, or if we fail to adopt or develop new technologies or to adapt our products and services to emerging industry standards, we may be unable to obtain new business or maintain existing business. There can be no
assurance that we will be successful in these efforts or in anticipating developments in data conversion technology.



We may be unable to protect our proprietary rights, permitting competitors to duplicate our products and services.



We do not have any patent protection for our products or technology. Third
parties could independently develop technology similar to ours, obtain unauthorized access to our proprietary technology or misappropriate technology to which we have granted access.



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Because our means of protecting our intellectual property rights may not be adequate, it may be possible for a third
party to copy, reverse engineer or otherwise obtain and use our technology without authorization. Unauthorized copying, use or reverse engineering of our products could result in the loss of current or future customers.



Our business comes from two core markets and adverse changes in those markets could cause
a reduction in the demand for our services.



We derive our
revenues primarily from two core markets, utilities and state and local governments. The ongoing consolidation and reduced technology budgets of the utilities industry has and may continue to increase competition and reduce profitability for the GIS
services projects of current and potential customers. Also, to the extent that utilities remain regulated, legal, financial and political considerations may constrain the ability of utilities to fund geographic information systems. Many state and
municipal entities are subject to legal constraints on spending, and a multi-year contract with any such entity may be subject to termination in any subsequent year if the entity does not choose to appropriate funds for such contracts in that year.
Moreover, fundamental changes in the business practices or capital spending policies of any of these customers, whether due to budgetary, regulatory, technological or other developments or changes in the general economic conditions in the industries
in which they operate, could cause a material reduction in demand by such customers for the services we offer. Any such reduction in demand could have a significant adverse impact on our net revenue levels.



The unavailability of a skilled labor force may hinder our ability to produce accurate,
cost-effective solutions to meet the terms of our contracts.



Our business is labor-intensive and requires trained employees. We compete for qualified personnel against numerous companies, including more established companies with significantly greater financial resources than ours. Our business,
financial condition and results of operations could be materially adversely affected if we are unable to hire qualified personnel or if we are unable to retain qualified personnel in the future. High turnover among our employees could increase our
recruiting and training costs, could affect our ability to perform services and earn revenues on a timely basis and could decrease operating efficiencies and productivity. In addition, a significant portion of our costs consists of wages to hourly
workers. An increase in hourly wages, costs of employee benefits or employment taxes could increase our other general and administrative costs and thereby reduce our net income.



If we are unable to retain the members of our senior management team our business operations may be adversely impacted.



Our success depends upon the continued service of our key employees: Lori
Jones, Chief Financial Officer, John Federowicz, Vice President  Sales and Data Management Solutions, and Tom Bannon, Senior Vice President  Operations. Our ability to retain our management team is an important factor in our turnaround
program and our ability to pursue our overall business plan. While we have employment agreements with Ms. Jones and Messrs. Bannon and Federowicz, there is no assurance that we will be able to retain the services of such key personnel. We do not
maintain any key personal life insurance policies. Layoffs in recent years may impair our ability to retain and recruit other key personnel. The loss or interruption of the services of Ms. Jones or either of Messrs Bannon or Federowicz could have a
material adverse effect on our business, financial condition and results of operations. Our future financial results will also depend upon our ability to attract and retain highly skilled technical, managerial and marketing personnel.



The unavailability or unsatisfactory performance of our subcontractors may affect our
ability to deliver quality services to our customers.



Certain of our services require us to perform tasks that are outside our expertise such as the acquisition of aerial photography. We are dependent upon the continued availability of third party subcontractors for such production tasks. We
also use subcontractors for work similar to that performed by our own employees such as field data acquisition. The insufficient availability of or unsatisfactory performance by these unaffiliated third-party subcontractors could have a material
adverse effect on our business, financial condition and results of operations due to delays in project schedules, product quality and increased costs of production.



The unsatisfactory performance or unavailability of overseas subcontractors may impact our ability to profitably perform services under
existing contracts.



We utilize subcontractors in India
and may from time to time use subcontractors in other overseas locations to perform certain tasks such as data conversion and photogrammetric interpretation at lower costs than could be achieved in the United States. Our ability to perform services
under some existing contracts on a profitable basis is dependent upon the continued availability of our overseas subcontractors and the quality of their work. For example, India has in the past experienced significant inflation, civil unrest and
regional conflicts. Events or governmental actions that would impede or prohibit the operations of our subcontractors could have a material adverse effect on us. We are in the fifth year of a five-year exclusive agreement with InfoTech Enterprises,
Ltd., an India-based company, to provide production capacity for data conversion and other related services. Under the agreement, we had provided certain assurances of production volume to InfoTech. Currently, we are not meeting these production
volume commitments due to the weakened demand for services from our customer base. In consideration for this volume shortfall, we have permitted InfoTech to seek



8



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additional work volume in the aerial photogrammetry sector. In addition, to supplement its work volume, InfoTech has
sought other work directly from our competitors based in the United States. If our exclusive agreement with InfoTech is not renewed, we may have to secure an alternate source of labor in India. This may increase our cost of offshore services in the
short term as we train a new supplier, and may cause delays in completing existing contracts. We utilize InfoTech to provide more than 90% of our offshore subcontractor services (which services constitute less than 10% of our total production
costs).



We receive some business from referrals and any reduction in those
referrals could affect our business.



A portion of our
sales is the result of referrals derived, either directly or indirectly, from engineers, software developers and consultants in the GIS industry. We believe that our continued success in the GIS services market is dependent, in part, on our ability
to maintain current relationships and to cultivate additional relationships with other industry participants. Such participants could acquire a GIS data collection or data conversion business or businesses or form other relationships with our
competitors. There can be no assurance that relationships with GIS consultants will continue to be a source of business for us. Our inability to maintain such relationships or to form new relationships could reduce our ability to obtain new business
and maintain existing business, thereby reducing our revenue.



We have
outstanding preferred stock and blank check preferred stock that could be issued resulting in the dilution of share ownership.



Our Articles of Incorporation allow the Board of Directors to issue up to 2,500,000 shares of preferred stock and to fix the rights, privileges and
preferences of those shares without any further vote or action by the shareholders. Our outstanding preferred stock holds dividend priority and liquidation preferences over shares of our Common Stock. However, because the outstanding preferred stock
is not convertible to Common Stock, it has no potential dilutive effect on our outstanding shares of Common Stock. Nonetheless, the Common Stock will be subject to dilution if our Board of Directors utilizes its right to issue additional shares of
preferred stock that is convertible into Common Stock. The rights of the holders of Common Stock are and will be subject to, and may be adversely affected by, the rights of the holders of the 1.6 million shares of preferred stock that we have
previously issued and any preferred stock that we may issue in the future. Any such issuance could be used to discourage an unsolicited acquisition proposal by a third party.



We are effectively controlled by a single stockholder which may result in biased decision-making.



Tonga currently owns 261,458 shares, or 24.1%, of our outstanding Common
Stock. Tonga also holds the Note and warrants to purchase 500,000 shares of our Common Stock.



The Note plus accrued interest is convertible at any time into Common Stock at a price that varies in accordance with the changes in the closing bid price of our Common Stock. A lower closing bid price will effect a
lower Conversion Price and a higher percentage of ownership by Tonga upon conversion. The Note includes a provision that Tonga will own a minimum of 38% or 55% of our Common Stock upon full conversion of the Note or upon full conversion and exercise
of the warrants, respectively (unless Tonga exercises the warrants in a cashless exercise where Tonga uses the value of some of the warrants to pay the exercise price for other warrants). Prior to the effectiveness of a registration statement
registering the underlying Common Stock issuable upon exercise of the warrants, Tonga has the right to exercise the warrants through a cashless exercise mechanism. If the $1,700,000 Note had been converted in full on September 30, 2003, the
conversion price would have been $1.19, and we would have issued 1,806,722 shares to redeem the principal and accrued interest. The conversion price would have been equal to 90% of the average closing bid prices of the Common Stock for the 90
trading days preceding September 30, 2003. If the warrants had been exercised on September 30, 2003 pursuant to an effective registration statement, the exercise price would have been $1.37 (115% of $1.19), and the proceeds from the exercise of all
the warrants and issuance of 500,000 shares of Common Stock would have been $685,000. Tonga would have owned 65% of our outstanding shares immediately after the conversion and exercise of warrants.



Pursuant to the Note and the purchase agreement executed in April 2002, Tonga
has the right to appoint a majority of our Board of Directors. Accordingly, Tonga has the power to effectively control the election of our directors and to influence the outcome of various corporate actions requiring shareholder approval. This
control could discourage a third party from seeking to acquire us even if an acquisition would be beneficial to our stockholders. All three outside members of our current Board of Directors are Tonga appointees.



Our stock price is highly volatile and the purchase or sale of relatively few shares can
disproportionately influence the share price.



The trading
price and volume of the Common Stock has been and may continue to be subject to significant fluctuations in response to:



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| |  | actual or anticipated variations in our quarterly operating results;
| | - | --------------------------------------------------------------------



| |  | the introduction of new services or technologies by us or our competitors;
| | - | --------------------------------------------------------------------------



| |  | changes in other conditions in the GIS industry or in the industries of any of our customers;
| | - | ---------------------------------------------------------------------------------------------



| |  | changes in governmental regulation, government spending levels or budgetary procedures; and
| | - | -------------------------------------------------------------------------------------------



| |  | changes in the industry generally; or seasonal, general market or economic conditions.
| | - | --------------------------------------------------------------------------------------



The trading price of the Common Stock may vary without regard to our operating performance. Historically, we have been a
thinly traded stock, therefore relatively few shares traded can disproportionately influence share price.



We have restated our consolidated financial statements for the years ended September 30, 2003 and 2002, and while the adjustments are non-operational in nature and include non-cash interest charges and non-cash
other income and the weighted average number of diluted shares outstanding, the market may look unfavorably on such restatement.



The restatement was made to reflect the proper accounting for the conversion feature of the Note and the related warrants that were issued on April 2, 2002. The
application of these features as derivatives results in two non-operational items: non-cash interest charges and other income or expense resulting from the change in fair value of the derivative features. The carrying value of the Note has been
adjusted to record the discount created by the original $336,000 fair market value of the derivative features and the accretion of interest resulting from the discount. The warrants were reclassified to current liabilities, which resulted in a
$200,000 decrease to common stock. Both the warrants and the conversion feature (derivative instruments) are reported as current liabilities and have been recognized at fair value as of September 30, 2003 and 2002. The decrease in the
fair value of these liabilities from the date of issuance to September 30, 2002, resulted in an increase to other income totaling $90,000, partially offset by $23,000 accretion of the related indebtedness. Additionally, the computations for the
weighted average number of diluted shares outstanding for the year ended September 30, 2002, were not properly calculated in our fiscal 2003 disclosures. Diluted earnings per share have been restated to reflect the correct weighted average shares
outstanding. The net result of these adjustments for the year ended September 30, 2002, increased net income available to common shareholders and reduced the accumulated deficit by $67,000, and basic and diluted earnings per share available to
common shareholders increased by $0.10 and $1.71, respectively.



The derivative
instruments have been recognized at fair value as of September 30, 2003, resulting in a $39,000 increase to other income in fiscal 2003. We recorded $45,000 of additional interest expense resulting from the amortization of the discount to the Note.
The net result of these fiscal 2003 adjustments increased the net loss available to common shareholders and the accumulated deficit by $6,000 and net loss per share available to common shareholders increased by $0.01.



The original carrying value of the Note ($1.664 million) which is the $2 million face value
less the fair value of the derivatives, will be accreted to the face value as we record interest expense during the three year term of the Note at a rate of $28,000 per fiscal quarter. The $336,000 liability will be decreased over the three-year
term of the Note and will be adjusted to reflect the increase or decrease in fair value of the derivatives at the end of each fiscal quarter. The liability will be reduced to $0 upon maturity or other disposition of the Note, and we will recognize
net other income totaling $336,000 during the term of the Note, but not in accordance with the rate at which we record interest expense. The adjustments will result in other income or expense and will fluctuate in accordance with the changes in the
fair value of our common stock.



We will be in default under the terms of
the Note if a Registration Statement on Form S-3 registering the shares issuable upon conversion of the Note and exercise of the warrant has not been declared effective by the SEC on or before May 29, 2004.



Pursuant to the terms of the Note, it is an event of default if we do not have an effective
Registration Statement registering the shares issuable upon conversion of the Note and exercise of the warrant on or prior to 150 days after December 31, 2003, which date is May 29, 2004. If such an event of default were to occur, while it is
continuing, Tonga, may at any time at its option (a) declare the entire unpaid principal balance of the Note, together with interest accrued thereon, due and payable, and the Note will be accelerated without presentment, demand, protest or notice;
(b) demand that we pay all or a portion of the Note at a price equal to the Triggering Event Prepayment Price (as defined) which is the greater of (i) 130% of the aggregate principal amount of the Note and (ii) the product of the Conversion Price
(as defined) at such time and the Per Share Market Value (as defined) of the common stock calculated as of May 29, 2004; (c) demand that the principal amount of the Note then outstanding and all accrued but unpaid interest be converted into shares
of our common stock at a Conversion Price; or (d) exercise or otherwise enforce any one or more of Tongas rights under the Note the other related documents or applicable law.



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Item 2. Property



We operate two offices in the
United States. We lease facilities in San Antonio, Texas, and Waukesha, Wisconsin.



Item 3. Litigation



Two shareholders of ASI, the
Epner Family Limited Partnership and the Braverman Family Limited Partnership, (Claimants), filed suit in Indiana state court (Hamilton County Superior Court, State of Indiana) against four former ASI officers on May 8, 2001. The former
officers are: Sidney Corder, Chief Executive Officer; Scott Benger, Senior Vice President of Finance; Randy Sage, Chief Operations Officer; and John Dillon, Chief Administrative Officer. The plaintiffs claimed that the former officers violated Texas
and Indiana securities laws and other provisions of Texas law in connection with ASIs acquisition of Cartotech, Inc., in June 1998. The four defendants have sent ASI written demands for indemnification. We have no further obligation to
indemnify Mr. Corder as specified in a Settlement Agreement and Mutual General Release entered into between ASI and Mr. Corder in July 2002. We have notified our insurance carrier of these claims and have requested coverage. In response, the
insurance carrier has reserved its rights to deny or limit coverage. This litigation has been stayed pending an outcome in the arbitration between ASI and the plaintiffs described in the following paragraph.



On June 26, 2002, the Claimants initiated arbitration proceedings against ASI. As set forth
in the preceding paragraph, the Claimants are the plaintiffs in related Indiana state court litigation against former officers of ASI. In the Statement of Claim they filed with the American Arbitration Association, Claimants alleged that certain
representations and warranties made by ASI in the Cartotech merger agreement were false because our financial condition allegedly was worse than depicted in our financial statements for 1997 and the unaudited reports for the first two quarters of
fiscal 1998. They alleged that the restatement of our financial statements for fiscal year 1999 should have included the financial statements referenced in the merger agreement. The Claimants alleged that we violated the Texas Securities Act and the
Indiana Securities Act and that we breached warranties in the merger agreement. The Claimants sought recission or damages in the principal amount of approximately $5,546,533, which they alleged to be the net loss in value of
our Common Stock which they received in the merger, and attorneys fees. On October 31, 2003, a three-member panel of the American Arbitration Association concluded a four-day, evidentiary hearing in the matter and issued its decision on
December 17, 2003. The panel concluded that the Claimants failed to prove to the satisfaction of the panel that ASI breached any of its representations and warranties or that ASI made material misrepresentations in connection with the publicly filed
financial statements issued prior to the closing date of the merger. The panel awarded zero damages to the Claimants and ordered each side to bear its own attorneys fees.



We submitted to our insurance carrier legal bills for the defense of the proceedings initiated by the Claimants. The terms of our insurance
policy provide for the carrier to reimburse reasonable and necessary defense costs. Our coverage is subject to a $150,000 deductible which we accrued as legal expense in the quarter ended September 30, 2002. Defense costs through September 30, 2003
totaled approximately $1,600,000. In September 2003, we received $400,000 from our insurance carrier as an initial reimbursement of these defense costs. We have recorded approximately $980,000 as a current liability as of September 30, 2003. We have
also recorded a receivable representing an amount we expect to receive as reimbursement of defense costs from our insurer.



Robert Montgomery, a former officer of ASI, filed suit in Hamilton County Superior Court, State of Indiana, on July 19, 2002, seeking recovery of unpaid commissions
pursuant to the Indiana Wage Payment statute. Mr. Montgomery seeks recovery of $67,611 in unpaid commissions, treble damages, costs interest and attorneys fees. We have responded to the lawsuit and we are vigorously defending this action.



On January 23, 2002, we announced that the Securities and Exchange Commission
had commenced a formal investigation of ASI, certain of our former officers, directors and others in connection with our accounting policies, procedures, disclosures and system of internal controls relating to the period from October 1998 through
March 2000. On March 7, 2000, we restated earnings for the fiscal year ended September 30, 1999. We cooperated fully with the SEC in this investigation. On September 26, 2003, we signed a settlement with the SEC that included our entering into a
Cease-and-Desist Order without admitting or denying the SECs allegations. The Order does not impose a fine, make a finding of fraud against the Company, or seek an injunction. This investigation is now closed.



We are also subject to various other routine litigation incidental to our business.
Management does not believe that any of these routine legal proceedings would have a material adverse effect on our financial condition or results of operations.



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##### Table of Contents

Item 4. Submission Of Matters To A Vote Of Shareholders



On August 21, 2003, at the annual meeting of shareholders, our shareholders approved the 2003 Stock Option Plan, reelected five directors to the Board of Directors, and ratified the appointment of KPMG LLP as independent public accountants
for the fiscal year ending September 30, 2003.



The following table provides
the number of votes cast on each matter:



|                                                          |  |         |  |         |  |          |  | 
|--------------------------------------------------------- |  | ------- |  | ------- |  | -------- |  | 
|                                                          |  | FOR     |  | AGAINST |  | WITHHELD
|Election of Board of Directors                            |  |         |  |         |  |         
|                                                          |  |         | 
|Christopher D. (Kit) Illick                               |  | 565,387 |  |        |  | 30,203  
|Christopher S. Dean                                       |  | 565,706 |  |        |  | 29,884  
|J. Livingston Kosberg                                     |  | 565,442 |  |        |  | 30,148  
|J. Norman Rokosh                                          |  | 564,832 |  |        |  | 30,758  
|Joshua C. Huffard                                         |  | 568,105 |  |        |  | 27,485  
|                                                          |  |         | 
|                                                          |  | FOR     |  | AGAINST |  | ABSTAIN 
|Approval of 2003 Stock Option Plan                        |  | 96,247  |  | 57,157  |  | 3,726   
|                                                          |  |         | 
|Ratification of KPMG LLP as independent public accountant |  | 589,074 |  | 3,446   |  | 3,070   



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##### Table of Contents

PART II.



Item 5. Market For The Registrants Common Stock And Related Shareholder Matters



Since June 6, 2002 our Common Stock has traded on the NASDAQ SmallCap Market under the symbol ANLT. Prior to that date, our Common Stock traded on the NASDAQ
National Market under the same symbol. As of December 1, 2003, we had approximately 5,200 holders of record. The following table sets forth the high and low bid prices for our Common Stock as reported on NASDAQ for the period we were quoted on the
NASDAQ SmallCap Market and the high and low sale prices for the period we were quoted on the NASDAQ National Market System. Prices have been adjusted to reflect the one-for-ten reverse split effective October 2, 2002.



|                              |  |      |       |     |   |     
|----------------------------- |  | ---- | ----- | --- | - | ----
|                              |  | High |       | Low
|Year Ended September 30, 2003 |  |      |       |     |   |     
|First quarter                 |  |      | 1.87  |     |   | 0.76
|Second quarter                |  |      | 2.09  |     |   | 0.67
|Third quarter                 |  |      | 2.52  |     |   | 1.11
|Fourth quarter                |  |      | 2.15  |     |   | 1.15
|Year Ended September 30, 2002 |  |      |       |     |   |     
|First quarter                 |  | $    | 6.70  |     | $ | 2.80
|Second quarter                |  |      | 14.00 |     |   | 3.70
|Third quarter                 |  |      | 4.30  |     |   | 2.00
|Fourth quarter                |  |      | 4.00  |     |   | 1.60



The high and low bid prices reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.



On April 2, 2002, we issued a senior secured convertible promissory note to Tonga Partners, L.P. (Tonga) in the original principal amount of $2,000,000. As
part of the same transaction, we issued to Tonga warrants to purchase 500,000 shares of our Common Stock. One whole warrant entitles the holder to acquire one share of Common Stock at an exercise price equal to 115% of the conversion price on the
date of the exercise of the warrants, which is the amount equal to the least of (i) $4.00, (ii) 90% of the average closing bid prices of our Common Stock for the 90 trading days ending the trading date immediately preceding the closing date, and
(iii) 90% of the average closing bid prices for our Common Stock for the three trading days having the lowest closing bid price during the 20 trading days immediately prior to the date of the exercise of the warrants. The warrants expire on April 2,
2007 and are exercisable in whole or in part at any time during their term. Prior to the effectiveness of a registration statement registering the underlying Common Stock issuable upon exercise of the warrants, Tonga has the right to exercise the
warrants through a cashless exercise mechanism.



The sale and issuance of such
securities were deemed to be exempt from registration under Section 4(2) of the Securities Act of 1933. In connection with the transaction, Tonga established to our satisfaction that it is an accredited investor.



On October 29, 2003, we received from Tonga a notice of conversion of $300,000 principal of
the note. On November 6, 2003, we issued 261,458 shares of our Common Stock pursuant to the partial conversion of the senior secured convertible note at a conversion price of $1.24, which represented 90% of the average closing bid prices for the
three trading days having the lowest closing bid price during the 20 trading days immediately prior to October 29, 2003. We also issued 19,522 shares at the same conversion price for $24,208 accrued interest payable on the converted principal. The
$2 million note was exchanged for the shares and a $1.7 million note bearing the same terms. The newly issued shares increased our total common shares outstanding from 823,965 to 1,085,423. Tonga owned 24% of our outstanding shares immediately after
the partial conversion.



Dividends



Under the terms of our senior secured note, we are prohibited from paying dividends on our
Common Stock without consent from Tonga. Since becoming a public company, we have not declared or paid cash dividends on our Common Stock and do not anticipate paying cash dividends in the foreseeable future. We presently expect that we will retain
all future earnings, if any, for use in our operations and the expansion of our business.



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Equity Compensation Plan Information



The following table gives information about equity awards under our equity compensation plans.



|                                                           |  |                                                                                          |  |                                                                          |       |                                                                                                                                        |        
|---------------------------------------------------------- |  | ---------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------ | ----- | -------------------------------------------------------------------------------------------------------------------------------------- | -------
|                                                           |  | (a)                                                                                      |  | (b)                                                                      |       | (c)                                                                                                                                   
|Plan category                                              |  | Number of securities to beissued upon exercise ofoutstanding options,warrants and rights |  | Weighted-average exerciseprice of outstandingoptions, warrants andrights |       | Number of securitiesremaining available forfuture issuance under equitycompensation plans(excluding securitiesreflected in column
(a))
|Equity compensation plans approved by security holders     |  | 87,499                                                                                   |  | $                                                                        | 15.37 |                                                                                                                                        | 132,245
|Equity compensation plans not approved by security holders |  | 61,571                                                                                   |  | $                                                                        | 11.93 |                                                                                                                                        | 38,430 
|                                                           |  |                                                                                          |  |                                                                          |       |                                                                                                                                        |        
|Total                                                      |  | 149,070                                                                                  |  | $                                                                        | 13.95 |                                                                                                                                        | 170,675
|                                                           |  |                                                                                          |  |                                                                          |       |                                                                                                                                        |        



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##### Table of Contents

Item 6. Selected Financial Data



The following
selected consolidated financial data as of and for the years ended September 30, 2003, 2002, 2001, 2000 and 1999 are derived from our audited consolidated financial statements. Our historical consolidated financial statements as of September 30,
2003 and 2002 and for the years ended September 30, 2003, 2002 and 2001 are contained elsewhere in this Report. The following selected consolidated financial data should be read in conjunction with our consolidated financial statements and the
related notes thereto and with Item 7Managements Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Report. (Amounts in thousands, except for per share data.)



|                                                                                              |  |               |        |   |               |        |   |         |        |   |      |         |   |      |         |  
|--------------------------------------------------------------------------------------------- |  | ------------- | ------ | - | ------------- | ------ | - | ------- | ------ | - | ---- | ------- | - | ---- | ------- | -
|                                                                                              |  | 2003(1)       |        |   | 2002(1)       |        |   | 2001(2) |        |   | 2000 |         |   | 1999 |        
|                                                                                              |  | (As restated) |        |   | (As restated) |        |   |         |        |   |      |         |   |      |        
|Consolidated Statement of Operations Data:                                                    |  |               |        |   |               |        |   |         |        |   |      |         |   |      |         |  
|Revenues                                                                                      |  | $             | 14,973 |   |               | 19,072 |   |         | 40,941 |   |      | 60,085  |   |      | 103,254 |  
|Cost and expenses:                                                                            |  |               |        |   |               |        |   |         |        |   |      |         |   |      |         |  
|Salaries, wages and benefits                                                                  |  |               | 8,903  |   |               | 13,081 |   |         | 25,003 |   |      | 44,027  |   |      | 57,571  |  
|Subcontractor costs                                                                           |  |               | 3,540  |   |               | 3,617  |   |         | 8,293  |   |      | 14,476  |   |      | 15,628  |  
|Other general and administrative                                                              |  |               | 5,120  |   |               | 5,669  |   |         | 12,528 |   |      | 19,031  |   |      | 18,112  |  
|Depreciation and amortization                                                                 |  |               | 482    |   |               | 915    |   |         | 2,849  |   |      | 5,107   |   |      | 5,661   |  
|Impairment of goodwill                                                                        |  |               |       |   |               |       |   |         |       |   |      | 16,513  |   |      |        |  
|Gain on sale of assets                                                                        |  |               |       |   |               |       |   |         | (3,542 | ) |      |        |   |      | (1,084  | )
|                                                                                              |  |               |        |   |               |        |   |         |        |   |      |         |   |      |         |  
|                                                                                              |  |               | 18,045 |   |               | 23,282 |   |         | 45,131 |   |      | 99,154  |   |      | 95,888  |  
|                                                                                              |  |               |        |   |               |        |   |         |        |   |      |         |   |      |         |  
|Earnings (loss) from operations                                                               |  |               | (3,072 | ) |               | (4,210 | ) |         | (4,190 | ) |      | (39,069 | ) |      | 7,366   |  
|Other income (expenses), net                                                                  |  |               | (280   | ) |               | 11,645 |   |         | (2,767 | ) |      | (2,804  | ) |      | (2,523  | )
|                                                                                              |  |               |        |   |               |        |   |         |        |   |      |         |   |      |         |  
|Earnings (loss) before income taxes and cumulative effect of a change in accounting principle |  |               | (3,352 | ) |               | 7,435  |   |         | (6,957 | ) |      | (41,873 | ) |      | 4,843   |  
|Income taxes (benefit)                                                                        |  |               |       |   |               | (1,240 | ) |         | 2,781  |   |      | (3,294  | ) |      | 2,053   |  
|                                                                                              |  |               |        |   |               |        |   |         |        |   |      |         |   |      |         |  
|Earnings (loss) before cumulative effect of a change in accounting principle                  |  |               | (3,352 | ) |               | 8,675  |   |         | (9,738 | ) |      | (38,579 | ) |      | 2,790   |  
|Cumulative effect of a change in accounting principle                                         |  |               |       |   |               | (3,557 | ) |         |       |   |      |        |   |      |        |  
|                                                                                              |  |               |        |   |               |        |   |         |        |   |      |         |   |      |         |  
|Net earnings (loss)                                                                           |  |               | (3,352 | ) |               | 5,118  |   |         | (9,738 | ) |      | (38,579 | ) |      | 2,790   |  
|Accretion of discount and dividends on preferred shares                                       |  |               | (568   | ) |               | (560   | ) |         |       |   |      |        |   |      |        |  
|                                                                                              |  |               |        |   |               |        |   |         |        |   |      |         |   |      |         |  
|Net earnings (loss) available to common shareholders                                          |  | $             | (3,920 | ) |               | 4,558  |   |         | (9,738 | ) |      | (38,579 | ) |      | 2,790   |  
|                                                                                              |  |               |        |   |               |        |   |         |        |   |      |         |   |      |         |  
|Basic earnings (loss) per share(3)                                                            |  | $             | (4.76  | ) |               | 6.24   |   |         | (13.95 | ) |      | (55.43  | ) |      | 4.08    |  
|                                                                                              |  |               |        |   |               |        |   |         |        |   |      |         |   |      |         |  
|Diluted earnings (loss) per share(3)                                                          |  | $             | (4.76  | ) |               | 4.13   |   |         | (13.95 | ) |      | (55.43  | ) |      | 3.89    |  
|                                                                                              |  |               |        |   |               |        |   |         |        |   |      |         |   |      |         |  
|Weighted average common shares outstanding:(3)                                                |  |               |        |   |               |        |   |         |        |   |      |         |   |      |         |  
|Basic                                                                                         |  |               | 824    |   |               | 731    |   |         | 698    |   |      | 696     |   |      | 683     |  
|Diluted                                                                                       |  |               | 824    |   |               | 1,107  |   |         | 698    |   |      | 696     |   |      | 718     |  
|Consolidated Balance Sheet Data:                                                              |  |               |        |   |               |        |   |         |        |   |      |         |   |      |         |  
|Working capital                                                                               |  | $             | 6,557  |   |               | 9,374  |   |         | (2,748 | ) |      | 7,073   |   |      | 40,029  |  
|Total assets                                                                                  |  | $             | 11,780 |   |               | 15,503 |   |         | 23,819 |   |      | 50,262  |   |      | 89,242  |  
|Long-term debt, less current portion                                                          |  | $             | 3,335  |   |               | 2,647  |   |         | 200    |   |      | 5,952   |   |      | 20,339  |  
|Total stockholders equity                                                                    |  | $             | 3,743  |   |               | 7,663  |   |         | 2,204  |   |      | 12,070  |   |      | 50,663  |  

---

|(1) | Certain selected financial data has been restated. See Note 16 to the consolidated financial statements.
|--- | --------------------------------------------------------------------------------------------------------

|(2) | In April 2001, we sold substantially all of the assets of the Colorado Springs, Colorado-based mapping office for an aggregate sales price of $10.1 million, including cash proceeds
of $8.6 million and the assumption by the buyer of $1.5 million of certain liabilities.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Information for all five years reflects the one-for-ten reverse stock split effective October 2, 2002.
|--- | ------------------------------------------------------------------------------------------------------



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Item 7. Managements Discussion And Analysis Of Financial Condition And Results Of Operations



The discussion of our financial condition and results of operations of the Company set forth below should be read in conjunction with the consolidated financial
statements and related notes thereto included elsewhere in this Form 10-K/A. This Form 10-K/A contains forward-looking statements that involve risk and uncertainties. The statements contained in this Form 10-K/A that are not purely historical are
forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. When used in this Form 10-K/A, or in the documents incorporated by reference into this Form 10-K/A, the words
anticipate, believe, estimate, intend and expect and similar expressions are intended to identify such forward-looking statements. Such forward-looking statements include, without
limitation, the statements in  Business  Overview and  Risk Factors and statements relating to competition, management of growth, our strategy, future sales, future expenses and future liquidity and capital resources. All
forward-looking statements in this Form 10-K/A are based upon information available to us on the date of this Form 10-K/A, and we assume no obligation to update any such forward-looking statements. Our actual results could differ materially from
those discussed in this Form 10-K/A. Factors that could cause or contribute to such differences include, but are not limited to, the resolution or outcome of the lawsuits described in Litigation above, the effect of changes in our
management and the ability to retain qualified individuals to serve in key management positions, and those discussed below, in  Business Risk Factors, and elsewhere in this Form 10-K/A.



Overview



Founded in 1981, we are a provider of data conversion and digital mapping services to users of customized geographic information systems.



Our independent auditors, KPMG, LLP, issued a going concern qualification on
our financial statements for each fiscal year since the fiscal 2000 results were reported. The going-concern qualification, which expressed substantial doubt about our ability to continue as a going concern, is based on the significant operating
losses reported in fiscal 2003 and 2002 and a lack of external financing to fund working capital and debt requirements.



We have restated our consolidated financial statements for the years ended September 30, 2003 and 2002. The adjustments are non-operational in nature and include non-cash
interest charges and non-cash other income and the weighted average number of diluted shares outstanding. The restatement is being made to reflect the proper accounting for the conversion feature of the Note and the related warrants that were issued
on April 2, 2002. The warrants have been reclassified to current liabilities, which resulted in a $200,000 decrease to Common Stock. Both the warrants and the conversion option (derivative instruments) have been adjusted to fair value as
of September 30, 2002, and reported as liabilities. The decrease in the fair value of the derivative instruments from the date of issuance to September 30, 2002, resulted in an increase to other income totaling $90,000. The carrying value of the
Note has been adjusted to record the discount afforded by the $136,000 fair value of the conversion option on April 2, 2002 and the related $23,000 interest expense incurred from issuance to September 30, 2002. The computations for the weighted
average number of diluted shares outstanding earnings per share for the year ended September 30, 2002, were not properly calculated in our fiscal 2003 disclosures for the potential shares outstanding pursuant to the Note. Diluted earnings per share
have been restated to reflect the correct weighted average shares outstanding. The net result of these adjustments for the year ended September 30, 2002, increased net income available to common shareholders and reduced the accumulated deficit by
$67,000, and increased basic and diluted earnings per share available to common shareholders increased by $0.10 and $1.71, respectively. See note 16 to the consolidated financial statements.



The derivative instruments have been adjusted to fair value as of September 30, 2003,
resulting in a $39,000 increase to other income. The carrying value of the Note has been adjusted to record the amortization of the discount, which resulted in an additional $45,000 interest expense for the year ended September 30, 2003. The
net result of these adjustments increased the net loss available to common shareholders and the accumulated deficit by $6,000. Net loss per share available to common shareholders increased by $0.01.



The original carrying value of the Note ($1.664 million) which is the $2 million face value
less the fair value of the derivatives, will be accreted to the face value as we record interest expense during the three year term of the Note at a rate of $28,000 per fiscal quarter. The $336,000 liability will be decreased over the three year
term of the Note and will be adjusted to reflect the increase or decrease in fair value of the derivatives at the end of each fiscal quarter. The liability will be reduced to $0 upon maturity or other disposition of the Note, and we will recognize
net other income totaling $336,000 during the term of the Note, but not in accordance with the rate at which we record interest expense. The adjustments will result in other income or expense and will fluctuate in accordance with the changes in the
fair value of our common stock.



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Based on EITF Issue 00-19, the provisions of the Note and warrants allow for net cash settlement by the holder of the
Notes conversion feature and warrants if a registration statement registering the shares issuable upon conversion of the Note is not declared effective within 150 days after filing such registration statement with the SEC, which filing must
occur on or before December 31, 2003.



Pursuant to the terms of the Note, it is
an event of default if we do not have an effective Registration Statement registering the shares issuable upon conversion of the Note and exercise of the warrant on or prior to 150 days of December 31, 2003, which date is May 29, 2004. If such an
event of default were to occur, while it is continuing, Tonga, may at any time at its option (a) declare the entire unpaid principal balance of the Note, together with interest accrued thereon, due and payable, and the Note will be accelerated
without presentment, demand, protest or notice; (b) demand that we pay all or a portion of the Note at a price equal to the Triggering Event Prepayment Price (as defined) which is the greater of (i) 130% of the aggregate principal amount of the Note
and (ii) the product of the Conversion Price (as defined) at such time and the Per Share Market Value (as defined) of the common stock calculated as of May 29, 2004; (c) demand that the principal amount of the Note then outstanding and all accrued
but unpaid interest be converted into shares of our common stock at a Conversion Price; or (d) exercise or otherwise enforce any one or more of Tongas rights under the Note the other related documents or applicable law.



We experience yearly and quarterly fluctuations in production costs, salaries, wages and
related benefits and subcontractor costs. These costs may vary as a percentage of sales from period to period. We utilize InfoTech Enterprises Ltd., an India-based company, to provide more than 90% of our offshore subcontractor services (which
services constitute less than 10% of our total production costs).



Our backlog
has been impacted by changes in macroeconomic and industry market conditions. These conditions, first encountered in fiscal 2000 and which have continued through fiscal 2003, include interest rate and exchange rate stability, public sector spending
levels, and the size of investment spending,. We believe these adverse market conditions were and continue to be primarily caused by the recessionary economic climate, consolidation in the utility industry, and increased competition from companies
with offshore operations. Backlog increases when new contracts are signed and decreases as revenues are recognized. The changes in macroeconomic and industry market conditions have resulted in a reduction of the execution of new contracts and the
renewal of expiring contracts, thus causing a decrease in our backlog. At September 30, 2003, backlog was $7.9 million, $7 million of which we expect to fill in fiscal 2004. Backlog at September 30, 2002 was $19.5 million.



A number of the projects awarded to us are greater than $2 million or longer than two years
in duration, which can increase risk due to inflation, as well as changes in customer expectations and funding availability. Our contracts are generally terminable on short notice, and while we rarely experience such termination, there is no
assurance that we will receive all of the revenue anticipated under signed contracts. See Item 1. Business  Risk Factors and Our customer contracts may be adversely modified, changed or terminated prior to the
expiration of the contract terms.



Critical Accounting Policies



Revenue Recognition.We recognize revenue using the percentage of
completion method of accounting on a cost-to-cost basis. For each contract, an estimate of total production costs is determined and these estimates are reevaluated monthly. The estimation process requires substantial judgments on the costs over the
life of the contract, which are inherently uncertain. The duration of the contracts and the technical challenges included in certain contracts affect the Companys ability to estimate costs precisely. Production costs consist of internal costs,
primarily salaries and wages, and external costs, primarily subcontractor costs. Internal and external production costs may vary considerably among projects and during the course of completion of each project. At each accounting period, the
percentage of completion is based on production costs incurred to date as a percentage of total estimated production costs for each of the contracts. This percentage is then multiplied by the contracts total value to calculate the sales
revenue to be recognized. The percentage of completion is affected by any factors which influence either the estimate of future productivity or the production cost per hour used to determine future costs. We recognize losses on contracts in the
period such loss is determined. Sales and marketing expenses associated with obtaining contracts are expensed as incurred. If we underestimate the total cost to complete a project we would recognize a disproportionately high amount of revenue in the
earlier stages of the contract, which would result in disproportionately high profit margins in the same period. Conversely, if we overestimate the cost to complete a project, a disproportionately low amount of revenue would be recognized in the
early stages of a contract. While our contracts generally contain termination clauses they also provide for reimbursement of costs incurred to date in the event of termination.



Valuation of Accounts Receivable.We maintain allowances for doubtful accounts for estimated losses resulting from the inability of
our customers to make required payments. Management routinely assesses the financial condition of our customers and the markets in which these customers participate. If the financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances might be required.



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Litigation.We are subject to various claims, lawsuits and administrative proceedings that arise from the ordinary
course of business. Liabilities and costs associated with these matters require estimates and judgment based on professional knowledge and experience of management and our legal counsel. When estimates of our exposure for claims or pending or
threatened litigation matters meet the criteria of SFAS 5, amounts are recorded as charges to net earnings. The ultimate resolution of any exposure may change as further facts and circumstances become known.



Income Taxes.The year 2002 was the only year out of the last three in which we have
reported net income (and taxable income), and we reported a net loss in fiscal 2003. The current and prior year losses generated a sizeable federal tax net operating loss, or NOL, carryforward of approximately $22 million as of September 30, 2003.



Generally accepted accounting principles require that we record a valuation
allowance against the deferred tax asset associated with this NOL if it is more likely than not that we will not be able to utilize it to offset future taxes. Due to the size of the NOL carryforward in relation to our recent history of
unprofitable operations and to the continuing uncertainties surrounding our future operations as discussed above, we have not recognized any of this net deferred tax asset. We currently provide for income taxes only to the extent that we expect to
pay cash taxes (primarily state taxes and the federal alternative minimum tax) for current income.



It is possible, however, that we could be profitable in the future at levels which cause management to conclude that it is more likely than not that we will realize all or a portion of the NOL carryforward. Upon
reaching such a conclusion, we would immediately record the estimated net realizable value of the deferred tax asset at that time and would then provide for income taxes at a rate equal to our combined federal and state effective rates, which would
approximate 39% under current tax rates. Subsequent revisions to the estimated net realizable value of the deferred tax asset could cause our provision for income taxes to vary significantly from period to period, although our cash tax payments
would remain unaffected until the benefit of the NOL is utilized.



Results
Of Operations



The following table sets forth, for the fiscal years ended
September 30, 2003, 2002 and 2001, selected consolidated statement of operations data expressed as a percentage of sales:



|                                                                                              |  |               |    |  |               |   |  |       |   
|--------------------------------------------------------------------------------------------- |  | ------------- | -- |  | ------------- | - |  | ----- | --
|                                                                                              |  | 2003          |    |  | 2002          |   |  | 2001  |   
|                                                                                              |  | (As restated) |    |  | (As restated) |   |  |       |   
|Percentage of Sales:                                                                          |  |               |    |  |               |   |  |       |   
|Revenues                                                                                      |  | 100.0         | %  |  | 100.0         | % |  | 100.0 | % 
|Costs and expenses:                                                                           |  |               |    |  |               |   |  |       |   
|Salaries, wages and benefits                                                                  |  | 59.6          |    |  | 68.6          |   |  | 61.1  |   
|Subcontractor costs                                                                           |  | 23.6          |    |  | 19.0          |   |  | 20.2  |   
|Other general and administrative                                                              |  | 31.6          |    |  | 28.9          |   |  | 25.8  |   
|Bad debts (recoveries)                                                                        |  | (0.2          | )  |  | 0.3           |   |  | 4.3   |   
|Depreciation and amortization                                                                 |  | 3.2           |    |  | 4.8           |   |  | 7.0   |   
|Severance and related costs                                                                   |  | 2.7           |    |  | 0.5           |   |  | 0.5   |   
|Gain on sale of assets                                                                        |  |              |    |  |              |   |  | (8.7  | ) 
|                                                                                              |  |               |    |  |               |   |  |       |   
|Earnings (loss) from operations                                                               |  | (20.5         | )  |  | (22.1         | ) |  | (10.2 | ) 
|Other income (expense), net                                                                   |  | 1.9           |    |  | (0.3          | ) |  | (7.5  | ) 
|Gain of extinguishment of debt                                                                |  |              |    |  | 61.4          |   |  | 0.7   |   
|                                                                                              |  |               |    |  |               |   |  |       |   
|Earnings (loss) before income taxes and cumulative effect of a change in accounting principle |  | (22.4         | )  |  | 39.0          |   |  | (17.0 | ) 
|Income taxes (benefit)                                                                        |  |              |    |  | (6.5          | ) |  | 6.8   |   
|                                                                                              |  |               |    |  |               |   |  |       |   
|Net earnings (loss) before cumulative effect of a change in accounting principle              |  | (22.4         | )  |  | 45.5          |   |  | (23.8 | ) 
|Cumulative effect of a change in accounting principle                                         |  |              |    |  | (18.6         | ) |  |      |   
|                                                                                              |  |               |    |  |               |   |  |       |   
|Net earnings (loss)                                                                           |  | (22.4         | )% |  | 26.9          | % |  | (23.8 | )%
|                                                                                              |  |               |    |  |               |   |  |       |   



Fiscal Years Ended September 30,
2003 and 2002



Revenues. We recognize revenues as services are
performed. Revenues recorded in a period are reported net of adjustments to reflect changes in estimated profitability of each project. Revenues decreased 21.5% or $4.1 million to $15.0 million for fiscal 2003 from $19.1 million for fiscal 2002.
This decrease was primarily due to a decline in the number and size of customer contracts.



Salaries, Wages and Benefits. Salaries, wages and benefits include employee compensation for production, marketing, selling, administrative and executive employees. Salaries, wages and benefits decreased 31.9%
to $8.9 million for fiscal 2003 from $13.1



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million for fiscal 2002. This decrease was primarily due to across-the-board staff reductions. As a percentage of
revenues, salaries, wages and benefits decreased to 59.6% for fiscal 2003 from 68.6% for fiscal 2002.



Subcontractor Costs. Subcontractor costs includes production costs incurred through the use of third parties for production tasks such as data conversion services to meet contract requirements, aerial
photography and ground and airborne survey services. Subcontractor costs decreased 2.1% to $3.5 million for fiscal 2003 from $3.6 million for fiscal 2002. This decrease was due to a decreased number of contracts, completing backlog that utilized
subcontractor labor and the sale of the Colorado office. Subcontractor costs increased as a percentage of revenues to 23.6% for fiscal 2003 from 19.0% for fiscal 2002 principally as a result of our use of domestic subcontractors in fiscal 2003 as
compared to offshore subcontractors in fiscal 2002.



Other General and
Administrative Costs. Other general and administrative costs includes rent, maintenance, travel, supplies, utilities, insurance and professional services.Such costs decreased 13.9% to $4.7 million for fiscal 2003 from $5.5 million for
fiscal 2002. The decrease was primarily attributable to decreases in travel, supplies and certain professional services expenses, which varied with the general decrease in personnel in fiscal 2003. As a percentage of revenues, other general and
administrative costs increased slightly to 31.6% for fiscal 2003 from 28.9% for fiscal 2002.



Depreciation and Amortization. Depreciation and amortization for fiscal 2003, depreciation decreased 47.3% to $482,000 from $915,000 for fiscal 2002 due to equipment becoming fully depreciated and the
consolidation from four production centers to two. As a percentage of revenues, depreciation and amortization was 3.2% for fiscal 2003 and 4.8% for fiscal 2002.



Severance and Related Costs. We incurred severance expense of $410,000 in fiscal 2003 and $97,000 in fiscal 2002. These costs represented 2.7% and 0.5% of
revenues in fiscal 2003 and fiscal 2002, respectively.



Other Expense, Net.Other expense, net, is comprised primarily of interest expense and other income resulting from the change in the fair value of the derivative features of the Note. Interest expense increased to $401,000 for fiscal 2003 from $300,000 in fiscal
year 2002. This increase is due to the recognition of accretion and discount on our preferred stock as interest expense during the fourth quarter of 2003 as required by FAS No. 150, offset by a decrease in interest paid on bank debt as a result of
the extinguishment of bank debt in the first six months of fiscal 2002. Most of the interest expense in fiscal 2003 is non-cash in nature as it relates to accretion of discount or payment is deferred. We incurred non-cash interest expense related to
the Note of $112,000 and $56,000 in fiscal 2003 and 2002. We also recorded $174,000 of non-cash interest expense in fiscal 2003 as a result of our adoption of SFAS No. 150 effective July 1, 2003, which required that the accretion, or the increase in
the carrying value, of the preferred stock, to be classified as interest expense. Prior to July 1, 2003, the accretion was recorded as a charge to retained earnings. See Note 5 to the consolidated financial statements. We incurred interest expense
on the Note that is payable only upon its conversion or maturity totaling $100,000 and $50,000 in fiscal 2003 and 2002, respectively. Other interest expense is related to various other debt instruments. Other income (expense) is earned (incurred) as
a result of the decrease or increase in the fair market values of the derivative features, which change proportionately with the change in the market value of our common stock. We recorded other income totaling $39,000 and $90,000 in fiscal 2003 and
2002, respectively, as a result of the decrease in the fair market value of the derivative features of the Note at the end of each period.



Gain on Extinguishment of Debt, Net of Tax. We recognized a gain on the extinguishment of debt of $11.7 million in fiscal 2002. Such gain is a result of the debt
forgiveness related to a $1.95 million cash payment, the issuance of a $175,000 unsecured promissory note and the issuance of non-convertible preferred stock with an original fair value of $300,000 to fully retire debt of $14.1 million. This gain
reflects net tax of $0 due to our estimated effective tax rate for the year.



Income Tax Benefit. We recorded an income tax benefit of $1.2 million in fiscal 2002 as a result of a recent change in federal tax regulations. We recorded zero tax expense for fiscal 2002 and 2003. Also, as a result of the
uncertainty that sufficient future taxable income can be recognized to realize additional deferred tax assets, no additional income tax benefit has been recognized for fiscal 2002 and 2003.



Cumulative Effect Of A Change In Accounting Principle. We elected early adoption of
FASB Statement No. 142, Accounting for Goodwill and Other Intangible Assets, as of October 1, 2001. We determined that goodwill had been impaired under the provisions of FASB 142 and we recognized a loss of $3.6 million as the cumulative effect of
this change in accounting principle during fiscal 2002.



Net Earnings
(Loss).Net loss available to common shareholders of $3.9 million in fiscal 2003 is an $8.5 million decrease from the $4.6 million net earnings in fiscal 2002. As discussed above, non-operational items accounted for the variance.



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Fiscal Years Ended September 30, 2002 and 2001



Revenues. We recognize revenues as services are performed. Revenues recorded in a period are reported net of adjustments to reflect
changes in estimated profitability of each project. Revenues decreased 53.4% or $21.9 million to $19.1 million for fiscal 2002 from $40.9 million for fiscal 2001. This decrease was primarily due to a decline in the number and size of customer
contracts and the sale of the Colorado office and by downward adjustments in the anticipated profitability of existing contracts. As required by percentage-of-completion accounting guidelines, the revenue impact of these changes in accounting
estimates is recorded in the current period.



Salaries, Wages And
Benefits. Salaries, wages and benefits include employee compensation for production, marketing, selling, administrative and executive employees. Salaries, wages and benefits decreased 47.7% to $13.1 million for fiscal 2002 from $25.0 million for
fiscal 2001. This decrease was primarily due to across the board staff reductions, use of lower cost offshore subcontractors labor, and the sale of the Colorado office. As a percentage of revenues, salaries, wages and benefits increased to
68.6% for fiscal 2002 from 61.1% for fiscal 2001.



Subcontractor Costs.
Subcontractor costs includes production costs incurred through the use of third parties for production tasks such as data conversion services to meet contract requirements, aerial photography and ground and airborne survey services. Subcontractor
costs decreased 56.4% to $3.6 million for fiscal 2002 from $8.3 million for fiscal 2001. This decrease was due to a decreased number of contracts, completing backlog that utilized subcontractor labor and the sale of the Colorado office.
Subcontractor costs decreased as a percentage of revenues to 19.0% for fiscal 2002 from 20.2% for fiscal 2001.



Other General And Administrative Costs. Other general and administrative costs includes rent, maintenance, travel, supplies, utilities, insurance and professional services.Such costs decreased 47.9% to
$5.5 million for fiscal 2002 from $10.6 million for fiscal 2001. The decrease was primarily attributable to decreases in travel, supplies and certain professional services expenses, which varied with the general decrease in personnel in fiscal 2002.
As a percentage of revenues, other general and administrative costs increased to 28.9% for fiscal 2002 from 25.8% for fiscal 2001.



Bad Debts. We record losses, or the anticipation of losses, arising from our investment in accounts receivable and revenues in excess of billings in the period in
which the possibility of loss is identified. Bad debts were $68,000 in fiscal 2002 versus $1.7 million in fiscal 2001. Bad debt expense in fiscal 2001 related primarily to the write-down of a receivable on a terminated contract.



Depreciation And Amortization.Depreciation and amortization in fiscal 2001 consists
primarily of amortization of goodwill incurred in connection with our acquisitions, as well as depreciation of certain of our operating assets. For fiscal 2002, goodwill amortization was discontinued due to the change in accounting principle to
apply the provisions of SFAS 142. (See discussion on the cumulative effect of a change in accounting principle below.) For fiscal 2002, depreciation decreased $1.6 million to $915,000 from $2.5 million for fiscal 2001 due to equipment becoming fully
depreciated, the sale of the Colorado office, and the consolidation from four production centers to two. As a percentage of revenues, depreciation and amortization was 4.8% for fiscal 2002 and 7.0% for fiscal 2001.



Severance And Related Costs. We incurred severance expense of $97,000 in fiscal 2002
and $230,000 in fiscal 2001. These costs represented 0.5% of revenues in both fiscal 2002 and fiscal 2001.



Gain On Sale Of Assets.On April 27, 2001, we completed the sale of substantially all of the assets of our Colorado Springs, Colorado-based land mapping office for an aggregate sales price of approximately
$10.1 million, including cash proceeds of $8.6 million and the assumption of $1.5 million of certain liabilities by the buyer. We transferred approximately $2.9 million of net working capital and $2.2 million of net book value of equipment and
leasehold improvements to the buyer and recorded a gain on sale of approximately $3.5 million after transaction and other expenses. We used the proceeds of the transaction to reduce our line-of-credit, lease and term debt by a total of $6.0 million,
pay Colorado-related liabilities of approximately $1.2 million, pay transaction expenses of approximately $700,000 and fund other operating expenses.



Other Expense, Net. Other expense, net is primarily comprised of net interest and other income resulting from the change in the fair value of the derivative
features of the Note. Interest expense decreased to $300,000 for fiscal 2002 from $1.9 million in fiscal year 2001. This decrease was primarily due to reduced average debt outstanding and lower interest rates in fiscal 2002. Most of the interest
expense in fiscal 2002 is non-cash in nature as it relates to accretion of discount or payment is deferred. In fiscal 2002, we recorded non-cash interest expense related to the Note totaling $56,000, as well as interest expense that is payable only
upon conversion or maturity of the Note totaling $50,000. We recorded other income totaling $90,000 in fiscal 2002 as a result of marking the carrying value of the derivative features of the Note to fair market value on September 30, 2002.



Income Tax Expense (Benefit).We recorded income tax benefit of $1.2
million in fiscal 2002 as a result of a recent change in federal tax regulations. New regulations allowed us to claim a refund of taxes paid in prior years by increasing the carryback period of our federal net operating loss generated in fiscal year
2001 from two years to five years. We continued to project zero tax expense for



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fiscal 2002, excluding the benefit from this change in tax law. Also, as a result of the uncertainty that sufficient
future taxable income can be recognized to realize additional deferred tax assets, no additional income tax benefit has been recognized for fiscal 2002. In fiscal 2001, tax expense of $2.8 million was recognized to reflect the uncertainty that
sufficient taxable income could be recognized to realize the deferred tax asset.



Gain On Extinguishment Of Debt, Net Of Tax. We recognized a gain of $11.7 million in fiscal 2002. Such gain is a result of the debt forgiveness related to a $1.95 million cash payment, the issuance of a $175,000 unsecured promissory
note and the issuance of non-convertible preferred stock with an original fair value of $300,000 to fully retire debt of $14.1 million. This gain reflects net tax of $0 due to our estimated effective tax rate for the year. The gain of $300,000 in
fiscal 2001 represents the debt forgiveness related to a $100,000 debt payment under our debt agreement in effect at September 30, 2001.



Cumulative Effect Of A Change In Accounting Principle. We elected early adoption of FASB Statement No. 142, Accounting for Goodwill and Other Intangible Assets, as
of October 1, 2001. We determined that goodwill had been impaired under the provisions of FASB 142 and recognized a loss of $3.6 million as the cumulative effect of this change in accounting principle during fiscal 2002.



Net Earnings (Loss). Net earnings of $5.1 million in fiscal 2002 is a $14.8 million
improvement over the $9.7 million net loss in fiscal 2001. As discussed above, non-operational items accounted for the variance.



Liquidity And Capital Resources



Table Of Contractual Obligations.Below is a schedule (by period due) of the future payments (in thousands) which we are obligated to make based on agreements in
place as of September 30, 2003. The debt obligation in the schedule includes a $2 million Note (as defined below) which is not payable in cash but carries a mandatory redemption clause that provides for its conversion into our Common Stock at the
then-current conversion rate. On November 4, 2003, that obligation was reduced to $1,700,000 when Tonga converted $300,000 in the Note into our Common Stock



|                           |  |                                 |     |      |       |      |   |      |       |      |   |       |   |      
|-------------------------- |  | ------------------------------- | --- | ---- | ----- | ---- | - | ---- | ----- | ---- | - | ----- | - | -----
|                           |  | Fiscal year ending September 30
|                           |  | 2004                            |     | 2005 |       | 2006 |   | 2007 |       | 2008 |   | Total
|Operating Leases           |  | $                               | 334 |      | 103   |      |  |      |      |      |  |       | $ | 437  
|Debt                       |  |                                 | 74  |      | 2,053 |      |  |      |      |      |  |       |   | 2,127
|Preferred Stock redemption |  |                                 |    |      | 800   |      |  |      | 1,851 |      |  |       |   | 2,651
|Total                      |  | $                               | 408 |      | 2,956 |      |  |      | 1,851 |      |  |       | $ | 5,215



Historically, the principal source of
our liquidity has consisted of cash flow from operations supplemented by secured lines-of-credit and other borrowings. At September 30, 2003, our debt obligations included a Note (as defined below), redeemable preferred stock with a redemption value
of $1.9 million, and other miscellaneous borrowings. A mandatory redemption payment of $800,000 plus accrued dividends totaling $96,000 is due on December 28, 2004. We do not have a line of credit and we are generally restricted from additional
borrowings or issuing additional equity securities without the consent of Tonga Partners, L.P. (Tonga), the holder of the Note. Tonga also has a right of first refusal as to certain subsequent financings.



On April 2, 2002, we completed the sale of a $2.0 million senior secured convertible note
(Note) and warrants to purchase our Common Stock to Tonga. The Note, which carries a face value of $2 million, matures on April 2, 2005, and accrues interest on its face value at an annual rate of 5%. Interest is not payable until
maturity or may be converted to Common Stock as described below. We used the proceeds to repay $700,000 to senior lenders, pay transaction expenses of approximately $95,000 and fund operations. Senior lenders accepted the $700,000 cash payment and a
$175,000 unsecured promissory note in full satisfaction of the $3.0 million note payable outstanding at March 31, 2002.



We recorded the Note at $1.664 million reflecting a discount after giving effect to the $200,000 and $136,000 estimated fair value of the warrants and conversion option,
respectively. The effective rate of interest on the Note is 12.5%. Interest expense is recorded using this effective rate of interest. The carrying value of the Note is being accreted through charges to interest from its original fair market value
of $1.664 million to the $2 million face value over its three-year term.



The Note plus accrued interest automatically converts into Common Stock upon its maturity on April 2, 2005 at a conversion price (Conversion Price) equal to the least of (i) $4.00, (ii) 90% of the average closing bid prices of
the Common Stock for the 90 trading days ending the trading date immediately preceding the closing date, and (iii) 90% of the average closing bid prices for the three trading days having the lowest closing bid price during the 20 trading days
immediately prior to the conversion date. Tonga, at it option, may convert the outstanding principal of the Note and accrued interest at any time into Common Stock at the Conversion



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Price. If at the time of conversion of the Note, the price of the Common Stock has dropped below $4.00 per share, the
number of shares of Common Stock issuable upon conversion of the Note and upon exercise of the warrants would increase. Similarly, if we issue shares of Common Stock at a price of less than $4.00 per share, the Conversion Price and the exercise
price decrease to that lower price, and the number of shares issuable under the Note and the warrants would therefore increase. Accordingly the Conversion Price and number of shares issuable upon conversion of the Note vary in accordance with the
changes in the closing bid price of our Common Stock. In any event, the number of shares issuable upon full conversion of the Note must constitute at least 38% of the issued and outstanding shares, on a fully diluted basis, as of the date of full
conversion. Additionally, the number of shares issuable upon conversion of the Note and exercise of the warrants are to be no less than 55% of the outstanding Common Stock (unless Tonga exercises the warrants in a cashless exercise where Tonga uses
the value of some of the warrants to pay the exercise price for other warrants). At the time of conversion, any unpaid interest is to be paid in shares of Common Stock.



If the note had been converted in full on September 30, 2003, the conversion price would have been $1.19, and we would have issued 1,806,722
shares to redeem the principal and accrued interest. The note is subject to mandatory conversion in three years and is secured by all of our assets. All amounts and prices have been adjusted to reflect the one-for-ten reverse split of Common Stock
that became effective October 2, 2002.



Tonga also received warrants to
purchase an additional 500,000 shares of Common Stock (subject to adjustment). One whole warrant entitles Tonga to acquire an additional share of Common Stock at an exercise price equal to 115% of the conversion price in effect on the date of the
exercise of the warrants. Prior to the effectiveness of a registration statement registering the underlying Common Stock issuable upon exercise of the warrants, Tonga has the right to exercise the warrants through a cashless exercise mechanism.
Assuming a conversion price on September 30, 2003, of $1.19 per share and an effective registration statement, the exercise price of the warrants would have been $1.37 per share (115% of $1.19), the aggregate exercise price for the warrants would be
$685,000 for the issuance of 500,000 shares of Common Stock.



On October 29,
2003, we received from Tonga a notice of conversion of $300,000 principal of the Note. On November 6, 2003, we issued 261,458 shares of our Common Stock pursuant to the partial conversion of the senior secured convertible note at a conversion price
equal to $1.24 per share, which represented 90% of the average closing bid prices for the three trading days having the lowest closing bid price during the 20 trading days immediately prior to October 29, 2003. We also issued 19,522 shares at the
same conversion price for $24,208 accrued interest payable on the converted principal. The $2 million note was exchanged for the shares and a $1.7 million note bearing the same terms. The newly issued shares increased our total common shares
outstanding from 823,965 to 1,085,423. Tonga owned 24% of our outstanding shares immediately after the partial conversion.



Under the terms of the Note and related Note and Warrant Purchase Agreement and pursuant to an extension granted by Tonga, we are required to register the shares
underlying the Note and warrants by December 31, 2003. Tonga may accelerate the Note if a Registration Statement is not declared effective by the Securities and Exchange Commission (SEC) by May 29, 2004, and demand a cash payment equal
to 130% of the principal amount of the Note. If Tonga demands such cash payment, we will be forced to liquidate assets and use the proceeds to repay Tonga.



The redemption price of the preferred stock on September 30, 2003, was $1.20 per share. On December 28, 2003, it increases to $1.40, and, accordingly, until December 27,
2004, we are entitled to redeem all of the outstanding shares of preferred stock at $1.40 per share ($2.24 million). The redemption price increases $0.20 per year until December 28, 2006, at which time the outstanding shares must be redeemed at a
price of $2.00 per share. In accordance with its terms, we have accrued, but not declared or paid, dividends on the preferred stock since its issuance. Accrued dividends are included as a current liability on our consolidated balance sheet. The
preferred stock earns a dividend at the annual rate of five percent of the then redemption price on a cumulative, non-participating basis and has a liquidation preference equal to the then redemption value of shares outstanding at the time of such
liquidation.



We must collect at least $800,000 in excess of our operating
expenses by collecting our accounts receivable or by collecting amounts earned not billed in order to meet the requirements of the mandatory redemption payment. If we make the $800,000 mandatory redemption payment on or before December 28, 2004, the
payment will redeem 571,428 of the 1,600,000 outstanding shares of preferred stock. The remaining 1,028,572 shares may be redeemed at $1.60 per share until December 28, 2005, on which date the redemption price increases to $1.80 per share. If we
redeem the remaining outstanding shares on December 27, 2006, we will redeem 1,028,572 at $1.80 per share, totaling $1,851,429, plus accrued dividends.



The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the
normal course of business. Since fiscal 2000, we have experienced significant operating losses with corresponding reductions in working capital. Our revenues and backlog decreased significantly during that time. These factors, among others, have
resulted in our independent auditors issuing an audit opinion on the September 30, 2003, financial statements that expressed substantial doubt about our ability to continue as a going concern.



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To address the going concern issue, management has implemented financial and operational restructuring plans designed to
improve operating efficiencies, reduce and eliminate cash losses and position ASI for profitable operations. In fiscal 2002, we improved our working capital position by reducing our bank debt through the issuance of preferred stock and convertible
debt and with the collection of a $1.2 million federal income tax refund. The consolidation of our production operations in fiscal 2003 to two solution centers has resulted in lower general and administrative costs and improved operating
efficiencies. Additionally, the relocation of our corporate headquarters has resulted in additional savings realized with a smaller corporate staff and efficiencies in occupancy and travel related expenses. Our sales and marketing team is pursuing
market opportunities in both our traditional digital mapping and newly launched data management initiatives. We continue to focus on cost control as we develop the data management initiative.



The financial statements do not include any adjustments relating to the recoverability of
assets and the classifications of liabilities that might be necessary should we be unable to continue as a going concern. However, we believe that our turnaround efforts, if successful, will improve operations and generate sufficient cash to meet
our obligations in a timely manner.



In the absence of a line of credit and
limitations on securing additional debt, we depend on internal cash flow to sustain operations. Internal cash flow is significantly affected by customer contract terms and progress achieved on projects. Fluctuations in internal cash flow are
reflected in three contract-related accounts: accounts receivable; revenues in excess of billings; and billings in excess of revenues. Under the percentage of completion method of accounting:



| |  | Accounts receivable is created when an amount becomes due from a customer, which typically occurs when an event specified in the contract triggers a billing.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Revenues in excess of billings occur when we have performed under a contract even though a billing event has not been triggered.
| | - | ----------------------------------------------------------------------------------------------------------------------------------



| |  | Billings in excess of revenues occur when we receive an advance or deposit against work yet to be performed.
| | - | --------------------------------------------------------------------------------------------------------------



These accounts, which represent a significant investment by us in our business, affect our
cash flow as projects are signed, performed, billed and collected. At September 30, 2003, we had multiple contracts with four customers, each of which accounted for 68% of our consolidated revenues in fiscal 2003. One customer, Worldwide Services,
Inc. (a division of Intergraph) accounted for 58% of total accounts receivable and revenue in excess of billings at September 30, 2003. At September 30, 2002, three customers represented 72% of the total balance of net accounts receivable and
revenue in excess of billings (Worldwide Services, Inc. (43%), SchlumbergerSema (17%) and Michigan Consolidated Gas Company (12%)). Billing terms are negotiated in a competitive environment and, as stated above, are based on reaching project
milestones. We anticipate that sufficient billing milestones will be achieved during fiscal 2004 such that revenue in excess of billings for these customer contracts will begin to decline.



In order to meet our short-term cash requirements we must collect more cash from our
customers than we pay to our employees and suppliers. To meet our long-term cash requirements, we must complete certain projects in fiscal 2004 and 2005 that are related to the balance of revenues in excess of billings at September 30, 2003, in
order to generate sufficient cash flow to fund operations and expenditures and to meet our debt requirements. We anticipate that the successful completion of these projects will reduce the balance of unearned revenue and generate cash sufficient to
meet both our short-term and long-term debt obligations. We expect that we will be able to complete a majority of these contracts by December 31, 2004, but there can be no assurance that market conditions or other factors may prevent us from doing
so or that the cash generated will be equal to the amount that we currently anticipate. If we are unable to complete the contracts and generate cash by earning and collecting our unearned revenues, we will be forced to obtain additional financing
with Tongas consent and/or restrict capital and operating expenditures to match available resources. If these actions are not sufficient, and we are not able to meet our commitments when due, then we will be forced to liquidate assets and
repay our secured creditors with the proceeds.



Our operating activities used
$0.8 million cash in fiscal 2003 and provided positive cash flow of $2.3 million in fiscal 2002 and $0.3 million in fiscal 2001. Contract-related accounts described in the previous paragraph declined $1.5 million, $6.0 million, and $8.7 million in
fiscal 2003, 2002, and 2001, respectively. Accounts payable and accrued expenses increased $0.5 million in fiscal 2003 and decreased $2.0 million in fiscal 2002 and $3.5 million in fiscal 2001. The decrease in fiscal 2001 reflects the Companys
reduced size of operations, in part due to the sale of our Colorado Springs, Colorado office. Prepaid expenses remained constant in fiscal 2003, decreased by $0.5 million in fiscal 2002 and increased by $0.2 million in fiscal 2001.



Cash provided by investing activities principally consisted of proceeds from sales of assets,
offset by the purchases of equipment and leasehold improvements. In fiscal year 2001, we enhanced cash flow by $8.6 million from the sale of assets, primarily from the sale of Colorado assets. We purchased equipment and leasehold improvements
totaling $0.2 million, $0.4 million, and $0.4 million in 2003, 2002, and 2001, respectively.



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Cash used by financing activities for fiscal years 2003, 2002, and 2001 was $0.3 million, $0.6 million, and $10.1
million, respectively. Financing activities consisted primarily of net borrowings and payments under lines of credit for working capital purposes and net borrowings and payments of long-term debt used in operations and the purchase of equipment and
leasehold improvements. We reduced debt by $6.0 million with proceeds from the sale of our Colorado Springs, Colorado office in fiscal 2001.



Restated Quarterly Financial Information



During a review of the terms and provisions of the Note that we issued on April 2, 2002, we identified a default provision of the Note that triggers the warrant and
conversion feature to be accounted for as derivatives. We have restated our financial statements for fiscal 2003 and 2002 to reflect the proper accounting for the conversion feature of the Note and the related warrants that were issued on April 2,
2002. Application of these features as derivatives results in two non-operational items: non-cash interest charges and other income resulting from the change in fair value of the derivatives. Additionally, we have restated the weighted average
number of diluted shares outstanding for the quarter ended June 30, 2002, and the year ended September 30, 2002 pursuant to shares convertible under the Note. Diluted earnings per share have been restated to reflect the corrected weighted average
shares outstanding as well as the non-cash interest charges and other income related to the Note.



Selected quarterly financial data for the years ended September 30, 2003 and 2002 as originally reported for each quarter and as restated are as follows (in thousands, except per share amounts):



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The following table summarizes the quarterly effects of these changes:



|                                                                                              |  |              |       |   |               |   |        |              |  |   |               |   |  |                  |        |   |  |   |        |  
|--------------------------------------------------------------------------------------------- |  | ------------ | ----- | - | ------------- | - | ------ | ------------ |  | - | ------------- | - |  | ---------------- | ------ | - |  | - | ------ | -
|                                                                                              |  | FirstQuarter |       |   | SecondQuarter |   |        | ThirdQuarter |  |   | FourthQuarter |   |  | Fiscal YearTotal |       
|2003 (Originally Reported)                                                                    |  |              |       |   |               |   |        |              |  |   |               |   |  |                  |       
|Revenues                                                                                      |  | $            | 4,285 |   |               | $ | 3,672  |              |  | $ | 3,753         |   |  | $                | 3,263  |   |  | $ | 14,973 |  
|Loss before income taxes                                                                      |  |              | (597  | ) |               |   | (663   | )            |  |   | (462          | ) |  |                  | (1,624 | ) |  |   | (3,346 | )
|Loss available to common shareholders                                                         |  |              | (817  | ) |               |   | (851   | )            |  |   | (623          | ) |  |                  | (1,623 | ) |  |   | (3,914 | )
|Net loss per share                                                                            |  |              |       |   |               |   |        |              |  |   |               |   |  |                  |        |   |  |   |        |  
|Basic                                                                                         |  |              | (0.99 | ) |               |   | (1.03  | )            |  |   | (0.76         | ) |  |                  | (1.97  | ) |  |   | (4.75  | )
|Diluted                                                                                       |  |              | (0.99 | ) |               |   | (1.03  | )            |  |   | (0.76         | ) |  |                  | (1.97  | ) |  |   | (4.75  | )
|                                                                                              |  |              |       |   |              
|2003 Restatements                                                                             |  |              |       |   |               |   |        |              |  |   |               |   |  |                  |       
|Revenues                                                                                      |  | $            |      |   |               | $ |       |              |  | $ |              |   |  | $                |       |   |  | $ |       |  
|Loss before income taxes                                                                      |  |              | 53    |   |               |   | (413   | )            |  |   | 390           |   |  |                  | (36    | ) |  |   | (6     | )
|Loss available to common shareholders                                                         |  |              | 53    |   |               |   | (413   | )            |  |   | 390           |   |  |                  | (36    | ) |  |   | (6     | )
|Net loss per share                                                                            |  |              |       |   |               |   |        |              |  |   |               |   |  |                  |        |   |  |   |        |  
|Basic                                                                                         |  |              | 0.06  |   |               |   | (0.51  | )            |  |   | 0.48          |   |  |                  | (0.04  | ) |  |   | (0.01  | )
|Diluted                                                                                       |  |              | 0.06  |   |               |   | (0.51  | )            |  |   | 0.48          |   |  |                  | (0.04  | ) |  |   | (0.01  | )
|                                                                                              |  |              |       |   |              
|2003 (As restated)                                                                            |  |              |       |   |               |   |        |              |  |   |               |   |  |                  |       
|Revenues                                                                                      |  | $            | 4,285 |   |               | $ | 3,672  |              |  | $ | 3,753         |   |  | $                | 3,263  |   |  | $ | 14,973 |  
|Loss before income taxes                                                                      |  |              | (544  | ) |               |   | (1,076 | )            |  |   | (72           | ) |  |                  | (1,660 | ) |  |   | (3,352 | )
|Loss available to common shareholders                                                         |  |              | (764  | ) |               |   | (1,264 | )            |  |   | (233          | ) |  |                  | (1,659 | ) |  |   | (3,920 | )
|Net loss per share                                                                            |  |              |       |   |               |   |        |              |  |   |               |   |  |                  |        |   |  |   |        |  
|Basic                                                                                         |  |              | (0.93 | ) |               |   | (1.54  | )            |  |   | (.28          | ) |  |                  | (2.01  | ) |  |   | (4.76  | )
|Diluted                                                                                       |  |              | (0.93 | ) |               |   | (1.54  | )            |  |   | (.28          | ) |  |                  | (2.01  | ) |  |   | (4.76  | )
|                                                                                              |  |              |       |   |              
|2002 (Originally Reported)                                                                    |  |              |       |   |               |   |        |              |  |   |               |   |  |                  |       
|Revenues                                                                                      |  | $            | 5,635 |   |               | $ | 4,968  |              |  | $ | 4,304         |   |  | $                | 4,165  |   |  | $ | 19,072 |  
|Earnings (loss) before income taxes and cumulative effect of a change in accounting principle |  |              | 7,604 |   |               |   | 256    |              |  |   | 1,667         |   |  |                  | (919   | ) |  |   | 8,608  |  
|Net earnings (loss) available to common shareholders                                          |  |              | 4,047 |   |               |   | 156    |              |  |   | 1,447         |   |  |                  | (1,159 | ) |  |   | 4,491  |  
|Net earnings (loss) per share                                                                 |  |              |       |   |               |   |        |              |  |   |               |   |  |                  |        |   |  |   |        |  
|Basic                                                                                         |  |              | 5.80  |   |               |   | 0.22   |              |  |   | 1.96          |   |  |                  | (1.52  | ) |  |   | 6.14   |  
|Diluted                                                                                       |  |              | 5.80  |   |               |   | 0.22   |              |  |   | 0.91          |   |  |                  | (1.52  | ) |  |   | 2.42   |  
|                                                                                              |  |              |       |   |              
|2002 Restatements                                                                             |  |              |       |   |               |   |        |              |  |   |               |   |  |                  |       
|Revenues                                                                                      |  |              |       |   |               |   |        |              |  | $ |              |   |  | $                |       |   |  | $ |       |  
|Earnings (loss) before income taxes and cumulative effect of a change in accounting principle |  |              |       |   |               |   |        |              |  |   | 39            |   |  |                  | 28     |   |  |   | 67     |  
|Net earnings (loss) available to common shareholders                                          |  |              |       |   |               |   |        |              |  |   | 39            |   |  |                  | 28     |   |  |   | 67     |  
|Net earnings (loss) per share                                                                 |  |              |       |   |               |   |        |              |  |   |               |   |  |                  |        |   |  |   |        |  
|Basic                                                                                         |  |              |       |   |               |   |        |              |  |   | 0.05          |   |  |                  | 0.05   |   |  |   | 0.10   |  
|Diluted                                                                                       |  |              |       |   |               |   |        |              |  |   | 0.24          |   |  |                  | 0.05   |   |  |   | 1.71   |  
|                                                                                              |  |              |       |   |              
|2002 (As restated)                                                                            |  |              |       |   |               |   |        |              |  |   |               |   |  |                  |       
|Revenues                                                                                      |  |              |       |   |               |   |        |              |  | $ | 4,304         |   |  | $                | 4,165  |   |  | $ | 19,072 |  
|Earnings (loss) before income taxes and cumulative effect of a change in accounting principle |  |              |       |   |               |   |        |              |  |   | 1,706         |   |  |                  | (891   | ) |  |   | 8,675  |  
|Net earnings (loss) available to common shareholders                                          |  |              |       |   |               |   |        |              |  |   | 1,486         |   |  |                  | (1,131 | ) |  |   | 4,558  |  
|Net earnings (loss) per share                                                                 |  |              |       |   |               |   |        |              |  |   |               |   |  |                  |        |   |  |   |        |  
|Basic                                                                                         |  |              |       |   |               |   |        |              |  |   | 2.01          |   |  |                  | (1.47  | ) |  |   | 6.24   |  
|Diluted                                                                                       |  |              |       |   |               |   |        |              |  |   | 1.15          |   |  |                  | (1.47  | ) |  |   | 4.13   |  



Impact Of Recently Issued
Accounting Pronouncements



In April 2002, the FASB issued SFAS No. 145,
Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS No. 145 rescinds the provisions of SFAS No. 4 that requires companies to classify certain gains and losses from debt
extinguishments as extraordinary items, eliminates the provisions of SFAS No. 44 regarding transition to the Motor Carrier Act of 1980 and amends the provisions of SFAS No. 13 to require that certain lease modifications be treated as sale leaseback
transactions. Adoption of SFAS No. 145 did not have a material impact on the Companys financial statements other than the reclassification of debt extinguishments in 2002 and 2001.



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In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities.
This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). The provisions of this Statement are effective for exit or disposal activities initiated after December 31, 2002. The Company does not believe the adoption
of this standard will have a material impact on our financial statements.



In
December 2002, the FASB issued SFAS No. 148, Accounting for Stock Based Compensation  Transition and Disclosure  an Amendment of SFAS 123. SFAS No. 148 provides additional transition guidance for those entities that elect to
voluntarily adopt the provisions of SFAS No. 123, Accounting for Stock Based Compensation. Furthermore, SFAS No. 148 mandates new disclosures in both interim and year-end financial statements of the method of accounting for stock-based
employee compensation and the effect of the method used on reported results. SFAS No. 148 is effective for fiscal years beginning after December 15, 2002. We adopted SFAS No. 148 on April 1, 2003. We do not expect to change to using the fair value
based method of accounting for stock-based employee compensation; and therefore, adoption of SFAS No. 148 is expected to impact only the disclosures, not the financial results of ASI. See Note 8.



In May 2003, the FASB issued SFAS 150, Accounting For Certain Financial Instruments
with Characteristics of Both Liabilities and Equity which establishes standards for how an issuer of financial instruments classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires
that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances) if, at inception, the monetary value of the obligation is based solely or predominantly on a fixed monetary amount known at
inception, variations in something other than the fair value of the issuers equity shares or variations inversely related to changes in the fair value of the issuers equity shares. SFAS No. 150 is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS 150 will require the reclassification of the redeemable preferred stock as debt
and future preferred stock dividends will be classified as interest expense. Effective July 1, 2003 we reclassified mandatorily redeemable shares that were issued prior to May 31, 2003 as liabilities. The total amount of the reclassification was
$1,300,000.



Item 7a. Quantitative And Qualitative Disclosures About Market Risk



We may from time to time employ risk management techniques such as interest rate swaps and foreign currency hedging transactions. None of these techniques is used for speculative or trading purposes and the amounts
involved are not considered material. Short-term interest rate changes would have little impact on interest expense due to our lack of any material variable interest rate debt.



Item 8. Financial Statements And Supplementary Data



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



The Board of Directors and Stockholders

Analytical Surveys, Inc.:



We have audited the accompanying consolidated balance sheets of Analytical Surveys, Inc. and subsidiaries as of September 30, 2003 and 2002, and the related consolidated statements of operations, stockholders
equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended September 30, 2003. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to
express an opinion on these consolidated financial statements based on our audits.



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



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Analytical Surveys, Inc. and
subsidiaries as of September 30, 2003 and 2002, and the results of their operations and their cash flows for each of the years in the three-year period ended September 30, 2003, in conformity with U.S. generally accepted accounting principles.



As discussed in note 1(d) to the consolidated financial statements, the
Company changed its method of accounting for goodwill in 2002.



As discussed in
Note 16 to the accompanying consolidated financial statements, the Company has restated the consolidated balance sheets as of September 30, 2003 and 2002, and the related consolidated statements of operations, stockholders equity, and cash
flows for the years ended September 30, 2003 and 2002.



The accompanying
consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in note 15 to the consolidated financial statements, the Company has suffered significant operating losses in 2003 and 2002
and does not currently have any external financing in place to fund working capital and debt requirements, which raises substantial doubt about the Companys ability to continue as a going concern. Managements plans in regard to this
matter are also described in note 15. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.



KPMG LLP

San Antonio, Texas

December 22, 2003, Except as to Note 16 which is as of May 13, 2004 and except as to paragraphs three and four of Note 17 which are as of June 30, 2004.



27



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##### Table of Contents

ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES



Consolidated Balance Sheets



September 30, 2003 and 2002

(In thousands)



|                                                                                                                                                        |  |               |         |   |               |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ------------- | ------- | -
|                                                                                                                                                        |  | 2003          |         |   | 2002          |        
|                                                                                                                                                        |  | (As restated) |         |   | (As restated) |        
|Assets                                                                                                                                                  |  |               |         |   |               |         |  
|Current assets:                                                                                                                                         |  |               |         |   |               |         |  
|Cash and cash equivalents                                                                                                                               |  | $             | 1,952   |   |               | 3,114   |  
|Accounts receivable, net of allowance for doubtful accounts of $100 and $479                                                                            |  |               | 3,029   |   |               | 2,444   |  
|Revenue earned in excess of billings                                                                                                                    |  |               | 6,112   |   |               | 8,915   |  
|Prepaid expenses and other                                                                                                                              |  |               | 166     |   |               | 184     |  
|                                                                                                                                                        |  |               |         |   |               |         |  
|Total current assets                                                                                                                                    |  |               | 11,259  |   |               | 14,657  |  
|                                                                                                                                                        |  |               |         |   |               |         |  
|Equipment and leasehold improvements:                                                                                                                   |  |               |         |   |               |         |  
|Equipment                                                                                                                                               |  |               | 4,896   |   |               | 6,296   |  
|Furniture and fixtures                                                                                                                                  |  |               | 484     |   |               | 484     |  
|Leasehold improvements                                                                                                                                  |  |               | 267     |   |               | 267     |  
|                                                                                                                                                        |  |               |         |   |               |         |  
|                                                                                                                                                        |  |               | 5,647   |   |               | 7,047   |  
|Less accumulated depreciation and amortization                                                                                                          |  |               | (5,126  | ) |               | (6,201  | )
|                                                                                                                                                        |  |               |         |   |               |         |  
|Net equipment and leasehold improvements                                                                                                                |  |               | 521     |   |               | 846     |  
|                                                                                                                                                        |  |               |         |   |               |         |  
|Total assets                                                                                                                                            |  |               | 11,780  |   |               | 15,503  |  
|                                                                                                                                                        |  |               |         |   |               |         |  
|Liabilities and Stockholders Equity                                                                                                                    |  |               |         |   |               |         |  
|Current liabilities:                                                                                                                                    |  |               |         |   |               |         |  
|Current portion of long-term debt                                                                                                                       |  |               | 74      |   |               | 270     |  
|Billings in excess of revenue earned                                                                                                                    |  |               | 162     |   |               | 887     |  
|Accounts payable                                                                                                                                        |  |               | 2,504   |   |               | 1,879   |  
|Accrued interest  related party                                                                                                                        |  |               | 150     |   |               | 56      |  
|Other accrued liabilities                                                                                                                               |  |               | 647     |   |               | 279     |  
|Accrued payroll and related benefits                                                                                                                    |  |               | 958     |   |               | 1,576   |  
|Fair value of derivative features  related party                                                                                                       |  |               | 207     |   |               | 246     |  
|                                                                                                                                                        |  |               |         |   |               |         |  
|Total current liabilities                                                                                                                               |  |               | 4,702   |   |               | 5,193   |  
|                                                                                                                                                        |  |               |         |   |               |         |  
|Long-term debt:                                                                                                                                         |  |               |         |   |               |         |  
|Notes payable, less current portion                                                                                                                     |  |               | 53      |   |               | 127     |  
|Long-term debt  related party                                                                                                                          |  |               | 1,832   |   |               | 1,720   |  
|Redeemable preferred stock; no par value. Authorized 2,500 shares; 1,600 shares issued and outstanding at September 30, 2003 (liquidation
value $1,600) |  |               | 1,450   |   |               | 800     |  
|                                                                                                                                                        |  |               |         |   |               |         |  
|Total long-term debt                                                                                                                                    |  |               | 3,335   |   |               | 2,647   |  
|                                                                                                                                                        |  |               |         |   |               |         |  
|Total liabilities                                                                                                                                       |  |               | 8,037   |   |               | 7,840   |  
|                                                                                                                                                        |  |               |         |   |               |         |  
|Stockholders equity:                                                                                                                                   |  |               |         |   |               |         |  
|Common stock, no par value. Authorized 10,000 shares; issued and outstanding 824 and 824 shares                                                         |  |               | 32,839  |   |               | 32,839  |  
|Accumulated deficit                                                                                                                                     |  |               | (29,096 | ) |               | (25,176 | )
|                                                                                                                                                        |  |               |         |   |               |         |  
|Total stockholders equity                                                                                                                              |  |               | 3,743   |   |               | 7,663   |  
|                                                                                                                                                        |  |               |         |   |               |         |  
|Commitments and contingencies                                                                                                                           |  |               |         |   |               |         |  
|Total liabilities and stockholders equity                                                                                                              |  | $             | 11,780  |   |               | 15,503  |  
|                                                                                                                                                        |  |               |         |   |               |         |  

See accompanying notes to consolidated financial statements.



28



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ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES



Consolidated Statements of Operations



Years ended September 30, 2003, 2002 and 2001

(In thousands, except per share amounts)



|                                                                             |  |               |        |   |               |        |   |      |        |  
|---------------------------------------------------------------------------- |  | ------------- | ------ | - | ------------- | ------ | - | ---- | ------ | -
|                                                                             |  | 2003          |        |   | 2002          |        |   | 2001 |       
|                                                                             |  | (As restated) |        |   | (As restated) |        |   |      |       
|                                                                             |  |               |       
|Revenues                                                                     |  | $             | 14,973 |   |               | 19,072 |   |      | 40,941 |  
|                                                                             |  |               |        |   |               |        |   |      |        |  
|Costs and expenses:                                                          |  |               |        |   |               |        |   |      |        |  
|Salaries, wages and benefits                                                 |  |               | 8,903  |   |               | 13,081 |   |      | 25,003 |  
|Subcontractor costs                                                          |  |               | 3,540  |   |               | 3,617  |   |      | 8,293  |  
|Other general and administrative                                             |  |               | 4,738  |   |               | 5,504  |   |      | 10,558 |  
|Bad debts (recoveries)                                                       |  |               | (28    | ) |               | 68     |   |      | 1,740  |  
|Depreciation and amortization                                                |  |               | 482    |   |               | 915    |   |      | 2,849  |  
|Severance and related costs                                                  |  |               | 410    |   |               | 97     |   |      | 230    |  
|Gain on sale of assets                                                       |  |               |       |   |               |       |   |      | (3,542 | )
|                                                                             |  |               |        |   |               |        |   |      |        |  
|                                                                             |  |               | 18,045 |   |               | 23,282 |   |      | 45,131 |  
|                                                                             |  |               |        |   |               |        |   |      |        |  
|Loss from operations                                                         |  |               | (3,072 | ) |               | (4,210 | ) |      | (4,190 | )
|                                                                             |  |               |        |   |               |        |   |      |        |  
|Other income (expense):                                                      |  |               |        |   |               |        |   |      |        |  
|Interest expense, net                                                        |  |               | (401   | ) |               | (300   | ) |      | (1,916 | )
|Litigation settlement costs                                                  |  |               |       |   |               |       |   |      | (748   | )
|Other, net                                                                   |  |               | 121    |   |               | 237    |   |      | (403   | )
|Gain on extinguishment of debt, net of tax                                   |  |               |       |   |               | 11,708 |   |      | 300    |  
|                                                                             |  |               |        |   |               |        |   |      |        |  
|                                                                             |  |               | (280   | ) |               | 11,645 |   |      | (2,767 | )
|                                                                             |  |               |        |   |               |        |   |      |        |  
|Earning (loss) before income taxes                                           |  |               | (3,352 | ) |               | 7,435  |   |      | (6,957 | )
|Income tax expense (benefit)                                                 |  |               |       |   |               | (1,240 | ) |      | 2,781  |  
|                                                                             |  |               |        |   |               |        |   |      |        |  
|Earnings (loss) before cumulative effect of a change in accounting principle |  |               | (3,352 | ) |               | 8,675  |   |      | (9,738 | )
|Cumulative effect of a change in accounting principle                        |  |               |       |   |               | (3,557 | ) |      |       |  
|                                                                             |  |               |        |   |               |        |   |      |        |  
|Net earnings (loss)                                                          |  |               | (3,352 | ) |               | 5,118  |   |      | (9,738 | )
|Accretion of discount and dividends on preferred shares                      |  |               | (568   | ) |               | (560   | ) |      |       |  
|                                                                             |  |               |        |   |               |        |   |      |        |  
|Net earnings (loss) available to common shareholders                         |  | $             | (3,920 | ) |               | 4,558  |   |      | (9,738 | )
|                                                                             |  |               |        |   |               |        |   |      |        |  



29



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ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES



Consolidated Statements of Operations (cont.)



Years ended September 30, 2003, 2002, and 2001

(In thousands, except for per share amounts)



|                                                                           |  |               |       |   |               |       |   |      |        |  
|-------------------------------------------------------------------------- |  | ------------- | ----- | - | ------------- | ----- | - | ---- | ------ | -
|                                                                           |  | 2003          |       |   | 2002          |       |   | 2001 |       
|                                                                           |  | (As restated) |       |   | (As restated) |       |   |      |       
|Basic earnings (loss) per common share:                                    |  |               |       |   |               |       |   |      |        |  
|Income (loss) before cumulative effect of a change in accounting principle |  | $             | (4.76 | ) |               | 11.11 |   |      | (13.95 | )
|Cumulative effect of a change in accounting principle                      |  |               |      |   |               | (4.87 | ) |      |       |  
|                                                                           |  |               |       |   |               |       |   |      |        |  
|Net earnings (loss) available to common shareholders                       |  | $             | (4.76 | ) |               | 6.24  |   |      | (13.95 | )
|                                                                           |  |               |       |   |               |       |   |      |        |  
|Diluted earnings (loss) per common share:                                  |  |               |       |   |               |       |   |      |        |  
|Income (loss) before cumulative effect of a change in accounting principle |  | $             | (4.76 | ) |               | 7.35  |   |      | (13.95 | )
|Cumulative effect of a change in accounting principle                      |  |               |      |   |               | (3.22 | ) |      |       |  
|                                                                           |  |               |       |   |               |       |   |      |        |  
|Net earnings (loss) available to common shareholders                       |  | $             | (4.76 | ) |               | 4.13  |   |      | (13.95 | )
|                                                                           |  |               |       |   |               |       |   |      |        |  
|Weighted average common shares:                                            |  |               |       |   |               |       |   |      |        |  
|Basic                                                                      |  |               | 824   |   |               | 731   |   |      | 698    |  
|                                                                           |  |               |       |   |               |       |   |      |        |  
|Diluted                                                                    |  |               | 824   |   |               | 1,107 |   |      | 698    |  
|                                                                           |  |               |       |   |               |       |   |      |        |  



See accompanying notes to consolidated
financial statements.



30



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##### Table of Contents

ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES



Consolidated Statements of Stockholders Equity and Comprehensive Income (Loss)



Years ended September 30, 2003, 2002, and 2001

(In thousands)



|                                                                                                                |  |              |  |                    |        |  |               |   |  |       |   |  |        |  
|--------------------------------------------------------------------------------------------------------------- |  | ------------ |  | ------------------ | ------ |  | ------------- | - |  | ----- | - |  | ------ | -
|                                                                                                                |  | Common Stock |  | AccumulatedDeficit |        |  |               |   |  |       |  
|                                                                                                                |  | Shares       |  | Amount             |        |  | Income (Loss) |   |  | Total |  
|Balances at October 1, 2000                                                                                     |  | 697          |  | $                  | 32,185 |  | (19,996       | ) |  | (119  | ) |  | 12,070 |  
|Net loss                                                                                                        |  |             |  |                    |       |  | (9,738        | ) |  |      |   |  | (9,738 | )
|Unrealized change in investment securities, net of tax                                                          |  |             |  |                    |       |  |              |   |  | (134  | ) |  | (134   | )
|                                                                                                                |  |              |  |                    |        |  |               |   |  |       |   |  |        |  
|Comprehensive loss                                                                                              |  |              |  |                    |        |  |               |   |  |       |   |  | (9,872 | )
|Exercise of stock options                                                                                       |  | 1            |  |                    | 6      |  |              |   |  |      |   |  | 6      |  
|                                                                                                                |  |              |  |                    |        |  |               |   |  |       |   |  |        |  
|Balances at September 30, 2001                                                                                  |  | 698          |  |                    | 32,191 |  | (29,734       | ) |  | (253  | ) |  | 2,204  |  
|Net earnings (as restated)                                                                                      |  |             |  |                    |       |  | 5,118         |   |  |      |   |  | 5,118  |  
|Realized change in investment securities, net of reclassification adjustment of $168, net of income taxes of $0 |  |             |  |                    |       |  |              |   |  | 253   |   |  | 253    |  
|                                                                                                                |  |              |  |                    |        |  |               |   |  |       |   |  |        |  
|Comprehensive earnings (as restated)                                                                            |  |              |  |                    |        |  |               |   |  |       |   |  | 5,371  |  
|Issuance of common shares in litigation settlement                                                              |  | 126          |  |                    | 648    |  |              |   |  |      |   |  | 648    |  
|Accretion of discount and dividends on preferred shares                                                         |  |             |  |                    |       |  | (560          | ) |  |      |   |  | (560   | )
|                                                                                                                |  |              |  |                    |        |  |               |   |  |       |   |  |        |  
|Balances at September 30, 2002 (as restated)                                                                    |  | 824          |  |                    | 32,839 |  | (25,176       | ) |  |      |   |  | 7,663  |  
|Net loss (as restated)                                                                                          |  |             |  |                    |       |  | (3,352        | ) |  |      |   |  | (3,352 | )
|Accretion of discount and dividends on preferred shares                                                         |  |             |  |                    |       |  | (568          | ) |  |      |   |  | (568   | )
|                                                                                                                |  |              |  |                    |        |  |               |   |  |       |   |  |        |  
|Balances at September 30, 2003 (as restated)                                                                    |  | 824          |  | $                  | 32,839 |  | (29,096       | ) |  |      |   |  | 3,743  |  
|                                                                                                                |  |              |  |                    |        |  |               |   |  |       |   |  |        |  



See accompanying notes to consolidated
financial statements.



31



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ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES



Consolidated Statements of Cash Flows



Years ended September 30, 2003, 2002, and 2001

(In thousands)



|                                                                                           |  |               |        |   |               |         |   |      |         |  
|------------------------------------------------------------------------------------------ |  | ------------- | ------ | - | ------------- | ------- | - | ---- | ------- | -
|                                                                                           |  | 2003          |        |   | 2002          |         |   | 2001 |        
|                                                                                           |  | (As restated) |        |   | (As restated) |         |   |      |        
|Cash flows from operating activities:                                                      |  |               |        |   |               |         |   |      |         |  
|Net earnings (loss)                                                                        |  | $             | (3,352 | ) |               | 5,118   |   |      | (9,738  | )
|Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: |  |               |        |   |               |         |   |      |         |  
|Gain on sale of assets                                                                     |  |               |        |   |               |        |   |      | (3,542  | )
|Accretion of interest expense on preferred stock and convertible debt  related party      |  |               | 261    |   |               | 56      |   |      |        |  
|Change in fair value of derivative instruments  related party                             |  |               | (39    | ) |               | (90     | ) |      |        |  
|Depreciation and amortization                                                              |  |               | 482    |   |               | 914     |   |      | 2,849   |  
|Gain on extinguishment of debt                                                             |  |               |       |   |               | (11,708 | ) |      | (300    | )
|Cumulative effect of a change in accounting principle                                      |  |               |       |   |               | 3,557   |   |      |        |  
|(Gain)/loss on sale of equipment                                                           |  |               | (14    | ) |               | 70      |   |      | 415     |  
|Deferred income taxes                                                                      |  |               |       |   |               |        |   |      | 2,487   |  
|Changes in operating assets and liabilities:                                               |  |               |        |   |               |         |   |      |         |  
|Accounts receivable, net                                                                   |  |               | (584   | ) |               | 3,666   |   |      | 5,091   |  
|Revenue earned in excess of billings                                                       |  |               | 2,802  |   |               | 1,652   |   |      | 4,826   |  
|Income taxes refundable or payable                                                         |  |               |       |   |               |        |   |      | 3,125   |  
|Prepaid expenses and other                                                                 |  |               | 17     |   |               | 455     |   |      | (150    | )
|Billings in excess of revenue earned                                                       |  |               | (725   | ) |               | 643     |   |      | (1,181  | )
|Accounts payable and other accrued liabilities                                             |  |               | 1,017  |   |               | (1,643  | ) |      | (2,524  | )
|Accrued payroll and related benefits                                                       |  |               | (618   | ) |               | (384    | ) |      | (1,009  | )
|                                                                                           |  |               |        |   |               |         |   |      |         |  
|Net cash provided (used) by operating activities                                           |  |               | (753   | ) |               | 2,306   |   |      | 349     |  
|                                                                                           |  |               |        |   |               |         |   |      |         |  
|Cash flows from investing activities:                                                      |  |               |        |   |               |         |   |      |         |  
|Purchase of equipment and leasehold improvements                                           |  |               | (156   | ) |               | (434    | ) |      | (376    | )
|Cash proceeds from sale of Colorado assets                                                 |  |               |       |   |               |        |   |      | 8,603   |  
|Cash proceeds from sale of assets                                                          |  |               | 18     |   |               | 452     |   |      | 75      |  
|                                                                                           |  |               |        |   |               |         |   |      |         |  
|Net cash provided (used) by investing activities                                           |  |               | (138   | ) |               | 18      |   |      | 8,302   |  
|                                                                                           |  |               |        |   |               |         |   |      |         |  
|Cash flows from financing activities:                                                      |  |               |        |   |               |         |   |      |         |  
|Payments under lines-of-credit                                                             |  |               |       |   |               |        |   |      | (1,490  | )
|Principal payments on long-term debt                                                       |  |               | (271   | ) |               | (2,561  | ) |      | (8,641  | )
|Proceeds from issuance of senior secured convertible debt                                  |  |               |       |   |               | 2,000   |   |      |        |  
|Proceeds from exercise of stock options                                                    |  |               |       |   |               |        |   |      | 6       |  
|                                                                                           |  |               |        |   |               |         |   |      |         |  
|Net cash (used) by financing activities                                                    |  |               | (271   | ) |               | (561    | ) |      | (10,125 | )
|                                                                                           |  |               |        |   |               |         |   |      |         |  
|Net increase (decrease) in cash                                                            |  |               | (1,162 | ) |               | 1,763   |   |      | (1,474  | )
|Cash and cash equivalents at beginning of year                                             |  |               | 3,114  |   |               | 1,351   |   |      | 2,825   |  
|                                                                                           |  |               |        |   |               |         |   |      |         |  
|Cash and cash equivalents at end of year                                                   |  | $             | 1,952  |   |               | 3,114   |   |      | 1,351   |  
|                                                                                           |  |               |        |   |               |         |   |      |         |  
|Supplemental disclosures of cash flow information:                                         |  |               |        |   |               |         |   |      |         |  
|Cash paid for interest                                                                     |  | $             | 22     |   |               | 249     |   |      | 2,066   |  
|                                                                                           |  |               |        |   |               |         |   |      |         |  
|Refund of income taxes                                                                     |  | $             |       |   |               | 1,255   |   |      | 2,831   |  
|                                                                                           |  |               |        |   |               |         |   |      |         |  
|Issuance of preferred stock to retire debt                                                 |  | $             |       |   |               | 300     |   |      |        |  
|Issuance of common stock in litigation settlement                                          |  | $             |       |   |               | 648     |   |      |        |  
|                                                                                           |  |               |        |   |               |         |   |      |         |  
|Accretion of preferred stock                                                               |  | $             | 650    |   |               | 600     |   |      |        |  
|                                                                                           |  |               |        |   |               |         |   |      |         |  

See accompanying notes to consolidated financial statements.





32



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##### Table of Contents

|(1) | Summary of Significant Accounting Policies
|--- | ------------------------------------------



| | (a) | Business and Basis of Financial Statement Presentation
| | --- | ------------------------------------------------------



Our primary business is the production of precision computerized maps and information files used in Geographic Information Systems (GIS). State and local
governments and utility companies use GIS to manage information relating to utilities, natural resources, streets, land use and property taxation.



Our consolidated financial statements include the accounts of our majority owned subsidiaries. All significant intercompany balances and transactions have
been eliminated in consolidation.



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



| | (b) | Equipment and Leasehold Improvements
| | --- | ------------------------------------



Equipment and leasehold improvements are recorded at cost and are depreciated and amortized using the straight-line method over estimated useful lives of
three to ten years.



| | (c) | Revenue and Cost Recognition
| | --- | ----------------------------



Contract revenues are recognized using the percentage of completion method based on the cost-to-cost method, whereby the percentage complete is based on
costs incurred in relation to total estimated costs to be incurred. Costs associated with obtaining contracts are expensed as incurred. We generally do not combine or segment contracts for purposes of recognizing revenue. Reimbursable out-of-pocket
expenses are recorded as revenue.



Customers are billed based
on the terms included in the contracts, which are generally upon delivery of certain products or information, or achievement of certain milestones defined in the contracts. When billed, such amounts are recorded as accounts receivable. Revenue
earned in excess of billings represents revenue related to services completed but not billed, and billings in excess of revenue earned represent billings in advance of services performed.



Contract costs include all direct material and labor costs and those
indirect costs related to contract performance, such as indirect labor, supplies, tools and depreciation costs. Losses on contracts are recognized in the period such losses are determined. We do not believe warranty obligations on completed
contracts are significant. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions, and final contract settlements may result in revisions to costs and income and are
recognized in the period in which the revisions are determined.



| | (d) | Goodwill Impairment
| | --- | -------------------



We have elected early adoption of FASB Statement No. 142, Goodwill and Other Intangible Assets. As a result of this election, we tested the carrying value
of our goodwill for impairment under the provisions of FASB No. 142 as of October 1, 2001. We determined the goodwill recorded at October 1, 2001 was primarily associated with indefinite lived intangible assets resulting from the acquisitions in our
Utilities Division. We used the quoted market value of our Common Stock on October 1, 2001 at a discounted value to reflect the lack of float in available shares and the going-concern issues at that date to determine the fair value of ASI as a
whole. The fair value of the reporting units (i.e. individual offices) in the Utilities Division was determined by allocating the fair value of our reporting units respective portion of our contract assets (i.e. accounts receivables and
revenue in excess of billings). The fair value of each reporting unit was then compared to the net assets of the respective reporting unit (including allocated corporate net assets) to determine if reporting unit level goodwill was impaired. We
determined that impairment had occurred in each of the respective reporting units and that an impairment loss of $3.6 million should be reflected as a cumulative effect of a change in accounting principle at October 1, 2001. The impact of goodwill
amortization on net earnings available to common shareholders in fiscal 2001 is presented below:



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|                                                       |  |      |        |  
|------------------------------------------------------ |  | ---- | ------ | -
|                                                       |  | 2001 |       
|(In thousands except for per share amounts)            |  |      |       
|Twelve Months Ended September 30:                      |  |      |        |  
|Net earnings available to common shareholders          |  | $    | (9,738 | )
|Add back: Goodwill amortization                        |  |      | 306    |  
|                                                       |  |      |        |  
|Adjusted net earnings available to common shareholders |  | $    | (9,432 | )
|                                                       |  |      |        |  
|Basic and dilutive earnings per common share:          |  |      |        |  
|Net earnings available to common shareholders          |  | $    | (13.95 | )
|Goodwill amortization                                  |  |      | 0.44   |  
|                                                       |  |      |        |  
|Adjusted net earnings available to common shareholders |  | $    | (13.51 | )
|                                                       |  |      |        |  



| | (e) | Investment Securities
| | --- | ---------------------



Investment securities consist of marketable equity securities that are classified as available-for-sale. Available-for-sale securities are recorded at
fair value. Unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and are reported as a separate component of stockholders equity until realized.



| | (f) | Income Taxes
| | --- | ------------



Income taxes are reflected under the liability method, which establishes deferred tax assets and liabilities to be recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment
date.



Generally accepted accounting principles require that
we record a valuation allowance against deferred tax assets if it is more likely than not that we will not be able to utilize it to offset future taxes. Due to the size of the net operating loss carryforward in relation to our recent
history of unprofitable operations and to the continuing uncertainties surrounding our future operations as discussed above, we have not recognized any of this net deferred tax asset. We currently provide for income taxes only to the extent that we
expect to pay cash taxes (primarily state taxes and the federal alternative minimum tax) for current income.



| | (g) | Impairment of Long-Lived Assets Other Than Goodwill
| | --- | ---------------------------------------------------



Long-lived assets other than goodwill held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
value of an asset may not be recoverable. An impairment loss is recognized when estimated undiscounted future cash flows expected to be generated by an asset are less than its carrying value. Measurement of the impairment loss is based on the fair
value of the asset, which is determined using generally accepted valuation techniques such as discounted present value of expected future cash flows.



| | (h) | Stock-Based Compensation
| | --- | ------------------------



Stock-based employee compensation plans are recorded using the intrinsic value method. Pro forma disclosures of net earnings and earnings per share are
provided as if the fair value based method of accounting was used.



| | (i) | Earnings Per Share
| | --- | ------------------



Basic earnings per share is computed by dividing earnings available to common shareholders by the weighted average number of common shares outstanding for
the period. Diluted earnings per share includes the effects of the potential dilution of outstanding options, warrants, and convertible debt on our Common Stock, determined using the treasury stock method.



|                                                              |  |                        |  |       |  |     
|------------------------------------------------------------- |  | ---------------------- |  | ----- |  | ----
|                                                              |  | Year EndedSeptember 30
|                                                              |  | 2003                   |  | 2002  |  | 2001
|Weighted-average common shares outstanding                    |  | 824                    |  | 731   |  | 698 
|Dilutive effect of:                                           |  |                        |  |       |  |     
|Stock options                                                 |  |                       |  |      |  |    
|Convertible debt                                              |  |                       |  | 376   |  |    
|                                                              |  |                        |  |       |  |     
|Weighted-average common shares outstanding, assuming dilution |  | 824                    |  | 1,107 |  | 698 
|                                                              |  |                        |  |       |  |     



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The convertible debt had a dilutive effect in the third quarter of fiscal 2002, the only quarter in which
these securities were outstanding and in which we had income from continuing operations.



All dilutive common stock equivalents are reflected in our earnings per share calculation; the conversion of 1,806,723 shares under the convertible debt agreement is antidilutive for the year ended September 30, 2003.
Additionally, for the years ended September 30, 2003, 2002 and 2001, potential dilutive common shares under the warrant agreement and stock option plans of 649,000, 619,000 and 173,000, respectively, were not included in the calculation of diluted
earnings per share as these shares were antidilutive.



| | (j) | Reverse Stock Split
| | --- | -------------------



All shares and per share amounts have been adjusted to reflect the one-for-ten reverse stock split effected in October 2002.



| | (k) | Financial Instruments
| | --- | ---------------------



The carrying amounts of financial instruments are estimated to approximate estimated fair values. The fair value of a financial instrument is the amount
at which the instrument could be exchanged in a current transaction between willing parties. The carrying amounts of cash, receivables, accounts payable and accrued liabilities approximate fair value due to the short maturity of these instruments.
The carrying amounts of debt approximate fair value due to the variable nature of the interest rates and short-term maturities of these instruments. The carrying amount of the derivative features of our senior secured promissory note is marked to
market at the end of each reporting period. The fair value of these derivative features was $207,000 and $246,000 at September 30, 2003 and 2002, respectively. Other income totaling $39,000 and $90,000 was recognized for the years ended September
30, 2003 and 2002, respectively, as a result of marking derivative features to fair value at the end of each period.



| | (l) | Operating Cycle
| | --- | ---------------



In accordance with industry practice, we include in current assets and liabilities amounts relating to long-term contracts which generally have operating
cycles extending beyond one year. Other assets and liabilities are classified as current and non-current on the basis of expected realization within or beyond one year.



|(2) | Sale of Subsidiaries and Sale of Colorado Assets
|--- | ------------------------------------------------



On April 27, 2001, we completed the sale of substantially all of the assets of our Colorado Springs, Colorado-based land mapping office for an aggregate
sales price of approximately $10.1 million, including cash proceeds of $8.6 million and the assumption by the buyer of $1.5 million of certain liabilities. We transferred approximately $2.9 million of net working capital and $2.2 million of net book
value of equipment and leasehold improvements to the buyer and recorded a gain on the sale of approximately $3.5 million after transaction and other expenses. We used the proceeds of the transaction to reduce our line-of-credit, lease and term debt
by a total of $6.0 million, pay Colorado-related liabilities of approximately $1.2 million, pay transaction expenses of approximately $700,000 and fund other operating expenses.



The following summarized pro forma unaudited information represents our historical operating results assuming the sale of
the Colorado assets had occurred at the beginning of the 2001 fiscal year, adjusted to give effect to events that are directly attributable to the transaction. The pro forma financial information presented is not necessarily indicative of what our
actual operating results would have been had the sale of the Colorado assets occurred before such periods (in thousands, except per share amounts):



|                                     |  |                 |         |  
|------------------------------------ |  | --------------- | ------- | -
|                                     |  | 2001(Pro Forma) |        
|Twelve months ended September 30:    |  |                 |         |  
|Revenues                             |  | $               | 32,567  |  
|Net loss                             |  | $               | (14,162 | )
|Weighted average shares outstanding: |  |                 |         |  
|Basic and diluted                    |  |                 | 698     |  
|Net loss per common share:           |  |                 |         |  
|Basic and diluted                    |  | $               | (20.29  | )



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|(3) | Accounts Receivable, Revenue Earned in Excess of Billings and Billings in Excess of Revenue Earned
|--- | --------------------------------------------------------------------------------------------------



At September 30, 2003, the estimated period to complete contracts in process
ranges from one month to ten months, and we expect to collect substantially all related accounts receivable and revenue earned in excess of billings within twelve months. Reserves on revenues earned in excess of billings total $100,000 and $100,000
for the years ended September 30, 2003 and 2002, respectively, which are netted with revenues earned in excess of billings. In fiscal 2002, $878,000 in reserves was written off against revenue earned in excess of billings and $500,000 in new
reserves were established. During 2001, $549,000 in reserves was written off against revenue earned in excess of billings, $700,000 was transferred to accounts receivable reserves and new reserves of $100,000 were established.



The following summarizes contracts in process at September 30 (in
thousands):



|                                                                     |  |      |         |   |      |         |  
|-------------------------------------------------------------------- |  | ---- | ------- | - | ---- | ------- | -
|                                                                     |  | 2003 |         |   | 2002 |        
|Costs incurred on uncompleted contracts                              |  | $    | 21,290  |   |      | 15,183  |  
|Estimated earnings                                                   |  |      | 10,162  |   |      | 10,495  |  
|                                                                     |  |      |         |   |      |         |  
|                                                                     |  |      | 31,452  |   |      | 25,678  |  
|Less billings to date                                                |  |      | (25,502 | ) |      | (17,650 | )
|                                                                     |  |      |         |   |      |         |  
|                                                                     |  | $    | 5,950   |   |      | 8,028   |  
|                                                                     |  |      |         |   |      |         |  
|Included in the accompanying consolidated balance sheets as follows: |  |      |         |   |      |         |  
|Revenue earned in excess of billings                                 |  | $    | 6,112   |   |      | 8,915   |  
|Billings in excess of revenue earned                                 |  |      | (162    | ) |      | (887    | )
|                                                                     |  |      |         |   |      |         |  
|                                                                     |  | $    | 5,950   |   |      | 8,028   |  
|                                                                     |  |      |         |   |      |         |  



We have established a
reserve (Allowance for Doubtful Accounts) for estimated uncollectible amounts of billed and unbilled accounts receivable. When we identify the collection of a billed or unbilled account receivable related to an active contract is not
probable, we reduce the contract value accordingly. When we identify the collection of a billed or unbilled account receivable related to a completed contract is not probable, we record bad debt expense and increase the allowance for doubtful
accounts reserve for bad debts. When we identify that the collection of a reserved account receivable will not be collected, we write off the account receivable and reduce the allowance for doubtful accounts.



|(4) | Debt
|--- | ----



The components of debt are summarized as follows (in thousands).



|                                              |  |      |       |   |      |       |  
|--------------------------------------------- |  | ---- | ----- | - | ---- | ----- | -
|                                              |  | 2003 |       |   | 2002 |      
|Long-Term Debt                                |  |      |       |   |      |       |  
|Note payable                                  |  | $    |      |   |      | 175   |  
|Senior secured convertible noterelated party |  |      | 1,832 |   |      | 1,720 |  
|Capital lease obligation                      |  |      |      |   |      | 27    |  
|Other                                         |  |      | 127   |   |      | 195   |  
|Redeemable preferred stock                    |  |      | 1,450 |   |      | 800   |  
|                                              |  |      |       |   |      |       |  
|                                              |  |      | 3,409 |   |      | 2,917 |  
|Less current portion                          |  |      | (74   | ) |      | (270  | )
|                                              |  |      |       |   |      |       |  
|                                              |  | $    | 3,335 |   |      | 2,647 |  
|                                              |  |      |       |   |      |       |  



On December 28, 2001,
we completed a Waiver Agreement and Amendment No. 12 to Credit Agreement and Other Loan and Lease Documents (the Agreement) with our senior lenders providing our line-of-credit, note payable and capital lease obligation. Under the
Agreement, these senior lenders accepted a cash payment of $1.25 million and non-convertible redeemable preferred stock with a face value of $3.2 million in payment of the $4.4 million line-of-credit and all but $3.0 million of the note payable. The
Agreement provided for the remaining $3.0 million note payable to be reduced to zero with a cash payment of up to $875,000 by March 31, 2002 (later amended to April 2, 2002).



On April 2, 2002, we completed the sale of a $2.0 million senior secured convertible note (Note) and warrants to
purchase our Common Stock to Tonga Partners, L.P. (Tonga). The Note, which carries a face value of $2 million, matures on April 2, 2005, and accrues interest on its face value at an annual rate of 5%. Interest is converted into Common
Stock as described below, or is converted to Common Stock at maturity. Accrued interest is not payable in cash but is to be converted into Common Stock upon a voluntary conversion date or upon maturity. We recorded the Note at $1.664 million
reflecting a discount after giving effect to the $200,000 and $136,000 estimated fair value of the warrants and conversion option,



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respectively. The effective rate of interest on the Note is 12.5%. Interest expense is recorded using
this effective rate of interest. We used the proceeds to repay $700,000 to senior lenders, pay transaction expenses of approximately $95,000 and fund operations. Senior lenders accepted the $700,000 cash payment and a $175,000 unsecured promissory
note in full satisfaction of the $3.0 million note payable outstanding at March 31, 2002. On March 31, 2003, we paid the $175,000 unsecured promissory note in full together with interest totaling $10,048.



The Note has a face value of $2.0 million and is convertible at any time
into Common Stock at a price (Conversion Price) equal to the least of (i) $4.00, (ii) 90% of the average closing bid prices of the Common Stock for the 90 trading days ending the trading date immediately preceding the closing date, and
(iii) 90% of the average closing bid prices for the three trading days having the lowest closing bid price during the 20 trading days immediately prior to the conversion date. If at the time of conversion of the note, the price of the Common Stock
has dropped below $4.00 per share, the number of shares of Common Stock issuable upon conversion of the Note and upon exercise of the warrants would increase. Similarly, if we issue shares of Common Stock at a price of less than $4.00 per share, the
Conversion Price and the exercise price decrease to that lower price, and the number of shares issuable under the note and the warrants would therefore increase. Accordingly the Conversion Price and number of shares issuable upon conversion of the
Note will vary in accordance with the changes in the closing bid price of our Common Stock. In any event, the number of shares issuable upon full conversion of the note must constitute at least 38% of the issued and outstanding shares, on a fully
diluted basis, as of the date of full conversion. Additionally, the number of shares issuable upon conversion of the Note and exercise of the warrants are to be no less than 55% of the outstanding Common Stock (unless Tonga exercises the warrants in
a cashless exercise where Tonga uses the value of some of the warrants to pay the exercise price for other warrants, and surrenders for cancellation a portion of the warrant representing the number of unissued shares of warrant stock which are equal
to the quotient obtained by dividing (a) the product obtained by multiplying the warrant price by the number of shares of warrant stock being purchased upon such exercise by (b) the closing bid price of our common stock on the date of such exercise,
with a net number of shares issued to Tonga in lieu of any cash payment). At the time of conversion, any unpaid interest is to be paid in shares of Common Stock.



Based on EITF Issue 00-19, the provisions of the Note and warrants allow for net cash settlement by the holder of the
Notes conversion feature and warrants if a registration statement registering the shares issuable upon conversion of the Note is not declared effective within 150 days after filing such registration statement with the SEC, which filing must
occur on or before December 31, 2003. As a result, both the warrants and the Notes conversion feature are classified as current liabilities with the changes in fair value of these liabilities recorded as other income or expense. Our quarterly
results will fluctuate in accordance with the fluctuations in the price of our common stock as we record the non-operating expense or income as a result of the increase or decrease in the fair value of the warrants and conversion feature. See Note
16.



If the Note had been converted in full on September 30,
2003, the conversion price would have been $1.19, and we would have issued 1,806,722 shares to redeem the principal and accrued interest. The note is subject to mandatory conversion in three years and is secured by all of our assets. All amounts and
prices have been adjusted to reflect the one-for-ten reverse split of Common Stock that became effective October 2, 2002.



Tonga also received warrants to purchase an additional 500,000 shares of Common Stock (subject to adjustment). One whole warrant entitles Tonga to acquire
an additional share of Common Stock at an exercise price equal to 115% of the conversion price in effect on the date of the exercise of the warrants. Prior to the effectiveness of a registration statement registering the underlying common stock
issuable upon exercise of the warrants, Tonga has the right to exercise the warrants through a cashless exercise mechanism. Assuming a conversion price on September 30, 2003 of $1.19 per share and an effective registration statement, the exercise
price of the warrants would have been $1.37 per share (115% of $1.19), the aggregate exercise price for the warrants would be $685,000 for the issuance of 500,000 shares of Common Stock.



On October 29, 2003, we received from Tonga a notice of conversion of $300,000 principal of the Note. On November 6, 2003,
we issued 261,458 shares of our Common Stock pursuant to the partial conversion of the senior secured convertible note at a conversion price equal to $1.24 per share, which represented 90% of the average closing bid prices for the three trading days
having the lowest closing bid price during the 20 trading days immediately prior to October 29, 2003. We also issued 19,522 shares at the same conversion price for $24,208 accrued interest payable on the converted principal. The $2 million note was
exchanged for the shares and a $1.7 million note bearing the same terms. The newly issued shares increased our total common shares outstanding from 823,965 to 1,085,423. Tonga owned 24% of our outstanding shares immediately after the partial
conversion. See Note 17, Subsequent Events.



Under the terms
of the note and related purchase agreement and pursuant to an extension granted by Tonga, we are required to register the shares underlying the note and warrants by December 31, 2003. On January 17, 2003, Tonga waived its rights pursuant to the
requirement that we maintain our listing on Nasdaq Small Cap Market, as set forth in the note. We are generally



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restricted from issuing additional equity securities without Tongas consent, and Tonga has a right
of first refusal as to certain subsequent financings.



As part
of the transaction, for a period of three years from the date of the Note (April 2, 2005), Tonga has the right to appoint a majority of our Board of Directors. Currently, all three outside members of the Board are Tonga appointees. The right to
appoint directors to the Board arises solely from the provisions of the Note and not from Tongas ownership of our Common Stock. Upon exercise of the warrants and conversion of the Note, Tonga will own a majority of the Common Stock, thereby
giving Tonga additional control over ASI.



The carrying value
of the senior secured convertible note is $1.83 million at September 30, 2003 and represents the cash received of $2.0 million less the estimated fair value of the warrants and conversion option of $200,000 and $136,000, respectively, which is
recorded as long-term liabilities (Fair value of derivativesrelated party) . The carrying value of the senior secured convertible note is being accreted to the face amount by charges to interest expense through the maturity date.



The agreement with senior lenders resulted in a gain on
extinguishment of debt for the year ended September 30, 2002, which is calculated as follows (in thousands):



|                                                  |  |   |        |  
|------------------------------------------------- |  | - | ------ | -
|Outstanding debt at the time of extinguishment:   |  |   |        |  
|Line-of-credit                                    |  | $ | 4,400  |  
|Note payable                                      |  |   | 9,733  |  
|                                                  |  |   |        |  
|Total                                             |  |   | 14,133 |  
|                                                  |  |   |        |  
|Less:                                             |  |   |        |  
|Cash paid                                         |  |   | (1,950 | )
|Fair value of preferred stock issued (See Note 5) |  |   | (300   | )
|Remaining note payable                            |  |   | (175   | )
|                                                  |  |   |        |  
|Gain on extinguishment of debt                    |  | $ | 11,708 |  
|                                                  |  |   |        |  



The capital lease
obligation is under a leasing facility that bears interest at effective rates ranging from 7.37% to 9.00%, payable in monthly installments through December 2002.



Required principal payments on long-term debt are $74,000 for the year ending September 30, 2004; $2,850,000 in 2005 and
$1,851,000 in 2007. The principal payments include a non-cash payment of a $2 million senior secured note in 2005. The note carries a mandatory redemption clause that provides for its conversion into our Common Stock at the then-current conversion
rate. On November 4, 2003, that obligation was reduced to $1,700,000 when the holder converted $300,000 in the note into our Common Stock.



|(5) | Redeemable Preferred Stock
|--- | --------------------------



On December 28, 2001, we issued 1.6 million shares of no par value Series A Preferred Stock with a face value of $3.2 million, pursuant to the
extinguishment of a bank credit agreement (Agreement). We recorded this preferred stock at a fair market value of $300,000 as described below. The shares are redeemable on or before December 28, 2006. The redemption price of the
preferred stock on September 30, 2003, was $1.20 per share. On December 28, 2003, it increases to $1.40, and, accordingly, until December 27, 2004, we are entitled to redeem all of the outstanding shares of preferred stock at $1.40 per share ($2.24
million). The redemption price increases $0.20 per year until December 28, 2006, at which time the outstanding shares must be redeemed at a price of $2.00 per share. In accordance with its terms, we have accrued, but not declared or paid, dividends
on the preferred stock since its issuance. Accrued dividends are included as a current liability on our consolidated balance sheet. The preferred stock earns a dividend at the annual rate of five percent of the then redemption price on a cumulative,
non-participating basis and has a liquidation preference equal to the then redemption value of shares outstanding at the time of such liquidation.



The Agreement calls for a mandatory redemption payment of $800,000 on or before December 28, 2004, plus any accrued dividends on such shares. If we make
the $800,000 mandatory redemption payment on or before December 27, 2004, the redemption price will be $1.40, and we will redeem 571,428 of the 1,600,000 outstanding shares of the preferred stock. The remaining 1,028,572 shares may be redeemed at
$1.60 per share until December 28, 2005, on which date the redemption price increases to $1.80 per share. If we redeem the remaining outstanding shares on December 27, 2006, we will redeem 1,028,572 at $1.80 per share, totaling $1,851,429, plus
accrued dividends.



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The carrying value for the preferred stock is $1,450,000 at September 30, 2003. The carrying value
represents the estimated fair market value of the stock on the date of issuance plus issuance costs, adjusted for accretion of the difference between fair market value at the date of issuance and the redemption value at the mandatory redemption
dates. The fair market value was based on the present value of required cash flows using a discount rate of 80%. We selected the discount rate based on discussions with third parties that took into account market conditions for similar securities,
the current economic climate and our financial condition and performance as major factors. Accretion is effected by a charge to retained earnings, and the rate of accretion approximates the interest method.



Until June 30, 2003, accretion was affected by a charge to retained
earnings, and the rate of accretion approximates the interest method. We adopted SFAS No. 150 on July 1, 2003, which required the reclassification of the redeemable preferred stock as debt and future preferred stock dividends as interest expense.
Effective July 1, 2003, we reclassified mandatorily redeemable shares that were issued prior to May 31, 2003 as liabilities. The total amount of the reclassification was $1.3 million. Additionally, effective July 1, 2003, the accretion of the
preferred stock is classified as interest expense.



|(6) | Operating Leases
|--- | ----------------



We lease our facilities and certain equipment under operating leases. Amounts due under non-cancelable operating leases with terms of one year or more at
September 30, 2002 are as follows (in thousands):



|                                       |  |   |    
|-------------------------------------- |  | - | ---
|Years ending September 30:             |  |   |    
|2004                                   |  | $ | 334
|2005                                   |  |   | 103
|2006                                   |  |   |   
|2007                                   |  |   |   
|2008                                   |  |   |   
|                                       |  |   |    
|Total minimum operating lease payments |  | $ | 437
|                                       |  |   |    



Facility rent expense
totaled $623,000, $766,000, and $2,131,000 for the years ended September 30, 2003, 2002, and 2001, respectively.



|(7) | Income Taxes
|--- | ------------



Income tax expense (benefit) for the years ended September 30 is as follows (in thousands):



|                |  |      |   |      |        |   |      |      
|--------------- |  | ---- | - | ---- | ------ | - | ---- | -----
|                |  | 2003 |   | 2002 |        |   | 2001
|Current:        |  |      |   |      |        |   |      |      
|Federal         |  | $    |  |      | (1,240 | ) |      | 294  
|State and local |  |      |  |      |       |   |      |     
|                |  |      |   |      |        |   |      |      
|                |  |      |  |      | (1,240 | ) |      | 294  
|                |  |      |   |      |        |   |      |      
|Deferred:       |  |      |   |      |        |   |      |      
|Federal         |  |      |  |      |       |   |      | 2,168
|State and local |  |      |  |      |       |   |      | 319  
|                |  |      |   |      |        |   |      |      
|                |  |      |  |      |       |   |      | 2,487
|                |  |      |   |      |        |   |      |      
|                |  | $    |  |      | (1,240 | ) |      | 2,781
|                |  |      |   |      |        |   |      |      



Actual income tax
expense (benefit) differs from the amount computed using the federal statutory rate of 34% for the years ended September 30 as follows (in thousands):



|                                                  |  |               |        |   |               |        |   |      |        |  
|------------------------------------------------- |  | ------------- | ------ | - | ------------- | ------ | - | ---- | ------ | -
|                                                  |  | 2003          |        |   | 2002          |        |   | 2001 |       
|                                                  |  | (As restated) |        |   | (As restated) |        |   |      |       
|Computed expected income tax expense, (benefit) |  | $             | (1,140 | ) |               | 1,319  |   |      | (2,467 | )
|State income taxes, net of federal tax effect     |  |               | (8     | ) |               |       |   |      | 213    |  
|Amortization of non-deductible goodwill           |  |               |       |   |               |       |   |      | 101    |  
|Impairment of non-deductible goodwill             |  |               |       |   |               | 1,190  |   |      |       |  
|Change in deferred tax valuation allowance        |  |               | 1,904  |   |               | (4,201 | ) |      | 5,415  |  
|Other, net                                        |  |               | (756   | ) |               | 452    |   |      | (481   | )
|                                                  |  |               |        |   |               |        |   |      |        |  
|Actual income tax expense (benefit)               |  | $             |       |   |               | (1,240 | ) |      | 2,781  |  
|                                                  |  |               |        |   |               |        |   |      |        |  



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The tax effects of temporary differences that give rise to significant portions of deferred tax assets
and liabilities at September 30 are as follows (in thousands):



|                                                                                                    |  |               |         |   |               |        |  
|--------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ------------- | ------ | -
|                                                                                                    |  | 2003          |         |   | 2002          |       
|                                                                                                    |  | (As restated) |         |   | (As restated) |       
|Deferred tax assets:                                                                                |  |               |         |   |               |        |  
|Accrued liabilities, primarily due to accrued compensated absences for financial statement purposes |  | $             | 119     |   |               | 186    |  
|Severance accruals                                                                                  |  |               | 40      |   |               | 42     |  
|Bad debt and revenue earned in excess of billing allowances                                         |  |               | 78      |   |               | 78     |  
|NOL carryforward                                                                                    |  |               | 8,604   |   |               | 6,495  |  
|Impairment of deductible goodwill                                                                   |  |               | 2,470   |   |               | 2,807  |  
|Accrued marketing incentives                                                                        |  |               | 67      |   |               |       |  
|Other, net                                                                                          |  |               | 98      |   |               | 30     |  
|Valuation allowance                                                                                 |  |               | (11,168 | ) |               | (9,264 | )
|                                                                                                    |  |               |         |   |               |        |  
|Total deferred tax assets                                                                           |  |               | 308     |   |               | 374    |  
|                                                                                                    |  |               |         |   |               |        |  
|Deferred tax liabilities:                                                                           |  |               |         |   |               |        |  
|Equipment and leasehold improvements, primarily due to differences in depreciation                  |  |               | (308    | ) |               | (374   | )
|                                                                                                    |  |               |         |   |               |        |  
|Net deferred tax asset                                                                              |  | $             |        |   |               |       |  
|                                                                                                    |  |               |         |   |               |        |  



We recorded an income
tax benefit of $1,240,000 in fiscal 2002 as a result of a change in federal tax regulations which allowed us to claim a refund of taxes paid in prior years by increasing the carryback period of our federal net operating loss generated in fiscal year
2001 from two years to five years. At September 30, 2003, we had net operating loss carryforwards of approximately $22 million that will expire through September 30, 2023. We recorded a valuation allowance to reflect the estimated amount of deferred
tax assets that may not be realized due to the uncertainty surrounding our ability to generate sufficient future taxable income to fully realize the deferred tax assets.



|(8) | Stockholders Equity and Stock Options
|--- | --------------------------------------



We may issue up to 2.6 million shares of preferred stock, no par value, with dividend requirements, voting rights, redemption prices, liquidation
preferences and premiums, conversion rights and other terms without a vote of the shareholders. In December 2001, we issued 1.6 million shares of preferred stock to our senior lenders as partial consideration to reduce our outstanding debt. Terms of
the issuance are more fully discussed in note 4.



We currently
have four nonqualified stock option plans with 170,675 shares available for grant as of September 30, 2003. One plan expired on September 30, 2003 and a new plan was approved by shareholders on August 21, 2003. The options outstanding under the
expired plan will remain outstanding until exercised or cancelled, but no new options will be issued under the plan. The exercise price of the options is established by the Board of Directors on the date of grant and are generally equal to the
market price of the stock on that date. Options vest equally over a two year period from the date of grant or at 25% six months from date of grant and 25% on the anniversary dates of the grant thereafter, as determined by the Board of Directors. The
options are exercisable in whole or in part for a period of up to ten years from date of grant. The options may vest earlier under certain circumstances, such as a change in control.



Because we grant options with exercise prices at or above market value at date of grant, no compensation cost is recognized
under the plans. Had compensation cost for our stock-based compensation plans been determined based upon the fair value of options on the grant dates, our pro forma net earnings (loss) and diluted (loss) earnings per share would have been as follows
(in thousands, except per share amounts):



|                                                                |  |                          |        |   |               |       |   |      |         |  
|--------------------------------------------------------------- |  | ------------------------ | ------ | - | ------------- | ----- | - | ---- | ------- | -
|                                                                |  | Year ended September 30, |       
|                                                                |  | 2003                     |        |   | 2002          |       |   | 2001 |        
|                                                                |  | (As restated)            |        |   | (As restated) |       |   |      |        
|Net income (loss), available to common shareholders as reported |  | $                        | (3,920 | ) |               | 4,558 |   |      | (9,738  | )
|Less: Pro forma option expense                                  |  |                          | (203   | ) |               | (750  | ) |      | (1,838  | )
|                                                                |  |                          |        |   |               |       |   |      |         |  
|Pro forma net income (loss)                                     |  | $                        | (4,123 | ) |               | 3,808 |   |      | (11,576 | )
|                                                                |  |                          |        |   |               |       |   |      |         |  
|Basic earnings (loss) per share, as reported                    |  | $                        | (4.76  | ) |               | 6.24  |   |      | (13.95  | )
|Less: Pro forma option expense                                  |  |                          | (0.25  | ) |               | (1.03 | ) |      | (2.63   | )
|                                                                |  |                          |        |   |               |       |   |      |         |  
|Pro forma basic earnings (loss) per share                       |  | $                        | (5.01  | ) |               | 5.21  |   |      | (16.58  | )
|                                                                |  |                          |        |   |               |       |   |      |         |  
|Diluted earnings (loss) per share, as reported                  |  | $                        | (4.76  | ) |               | 4.13  |   |      | (13.95  | )
|Less: Pro forma option expense                                  |  |                          | (0.25  | ) |               | (0.67 | ) |      | (2.63   | )
|                                                                |  |                          |        |   |               |       |   |      |         |  
|Pro forma diluted earnings (loss) per share                     |  | $                        | (5.01  | ) |               | 3.46  |   |      | (16.58  | )
|                                                                |  |                          |        |   |               |       |   |      |         |  



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The weighted average fair value of options granted during fiscal 2003, 2002, and 2001 was $0.85, $4.10,
and $12.90 per share, respectively. The fair value of each option granted was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions: no expected dividends, expected life of the options of three
years, volatility ranging from 120% to 197% and a risk-free interest rate ranging from 4% to 6%.



The above pro forma disclosures are not necessarily representative of the effect on the historical net earnings for future periods because options vest
over several years, and additional awards are made each year. In addition, compensation cost for options granted prior to October 1, 1998, which vest after that date have not been considered.



Stock option activity for the plans for the years ended September 30 are
summarized as follows (shares in thousands):



|                            |  |                 |   |  |                                       |       
|--------------------------- |  | --------------- | - |  | ------------------------------------- | ------
|                            |  | NumberofOptions |   |  | WeightedAverageExerciseprice Pershare
|Balance, October 1, 2000    |  | 171             |   |  | $                                     | 135.30
|Granted                     |  | 60              |   |  |                                       | 14.70 
|Exercised                   |  | (1              | ) |  |                                       | 15.80 
|Canceled                    |  | (57             | ) |  |                                       | 142.40
|                            |  |                 |   |  |                                       |       
|Balance, September 30, 2001 |  | 173             |   |  |                                       | 83.70 
|Granted                     |  | 37              |   |  |                                       | 4.46  
|Exercised                   |  |                |   |  |                                       |      
|Canceled                    |  | (91             | ) |  |                                       | 181.05
|                            |  |                 |   |  |                                       |       
|Balance, September 30, 2002 |  | 119             |   |  |                                       | 31.00 
|                            |  |                 |   |  |                                       |       
|Granted                     |  | 70              |   |  |                                       | 1.14  
|Exercised                   |  |                |   |  |                                       |      
|Canceled                    |  | (40             | ) |  |                                       | 42.08 
|                            |  |                 |   |  |                                       |       
|Balance, September 30, 2003 |  | 149             |   |  | $                                     | 13.95 
|                            |  |                 |   |  |                                       |       



A summary of the
range of exercise prices and the weighted-average contractual life of outstanding stock options at September 30, 2003 is as follows:



|                        |  |                                          |  |                                 |  |                                                     |  |                                         |  |                                
|----------------------- |  | ---------------------------------------- |  | ------------------------------- |  | --------------------------------------------------- |  | --------------------------------------- |  | -------------------------------
|Range of Exercise Price |  | Number Outstanding At September 30, 2003 |  | Weighted average exercise price |  | Weighted average remaining contractual life (years) |  | Number exercisableat September 30, 2003 |  | Weighted average exercise price
|$        0.73  1.00    |  | 20,000                                   |  | 9.4                             |  | $0.73                                               |  | 5,000                                   |  | $0.73                          
|1.01  5.00             |  | 59,750                                   |  | 8.6                             |  | 1.63                                                |  | 15,000                                  |  | 1.88                           
|5.01  10.00            |  | 25,000                                   |  | 8.0                             |  | 8.13                                                |  | 15,250                                  |  | 8.39                           
|10.01  20.00           |  | 22,751                                   |  | 5.2                             |  | 18.14                                               |  | 18,431                                  |  | 18.12                          
|20.01  50.00           |  | 18,225                                   |  | 6.3                             |  | 30.76                                               |  | 18,225                                  |  | 30.76                          
|50.01  200.00          |  | 974                                      |  | 3.2                             |  | 123.91                                              |  | 974                                     |  | 123.91                         
|200.01  283.75         |  | 2,550                                    |  | 3.2                             |  | 264.34                                              |  | 2,550                                   |  | 264.34                         
|                        |  |                                          |  |                                 |  |                                                     |  |                                         |  |                                
|$    0.73  283.75      |  | 149,070                                  |  | 7.7                             |  | $13.95                                              |  | 75,430                                  |  | $24.51                         
|                        |  |                                          |  |                                 |  |                                                     |  |                                         |  |                                



|(9) | Employee Benefit Plan
|--- | ---------------------



We sponsor a qualified tax deferred savings plan in accordance with the provisions of section 401(k) of the Internal Revenue Code. Employees may defer up
to 50% of their compensation, subject to certain limitations. We match 50% of employee contributions up to 4% of their compensation. We contributed $100,000, $96,000, and $314,000 to the plan in fiscal 2003, 2002, and 2001, respectively.



|(10) | Concentrations of Credit Risk
|---- | -----------------------------



At September 30, 2003, we had multiple contracts with one customer that represented 58% of the total balance of net accounts receivable and revenue in
excess of billings. Revenues from this and three other customers for the fiscal year ended September 30, 2003 totaled 68% (18%, 17% and 20% and 13%, respectively) of total revenue. At September 30, 2002, two of these customers represented 30% (13%
and 17%, respectively) of the total balance of net accounts receivable and revenue in excess of billings. Billing terms are negotiated in a competitive environment and are based on reaching project milestones. We anticipate



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that sufficient billing milestones will be achieved during fiscal 2004 such that revenue in excess of
billings for these customer contracts will begin to decline.



|(11) | Litigation and Other Contingencies
|---- | ----------------------------------



Two shareholders of ASI, the Epner Family Limited Partnership and the Braverman Family Limited Partnership, (Claimants), filed suit in Indiana
state court (Hamilton County Superior Court, State of Indiana) against four former ASI officers on May 8, 2001. The former officers are: Sidney Corder, Chief Executive Officer; Scott Benger, Senior Vice President of Finance; Randy Sage, Chief
Operations Officer; and John Dillon, Chief Administrative Officer. The plaintiffs claimed that the former officers violated Texas and Indiana securities laws and other provisions of Texas law in connection with ASIs acquisition of Cartotech,
Inc., in June 1998. The four defendants have sent ASI written demands for indemnification. We have no further obligation to indemnify Mr. Corder as specified in a Settlement Agreement and Mutual General Release entered into between ASI and Mr.
Corder in July 2002. We have notified our insurance carrier of these claims and have requested coverage. In response, the insurance carrier has reserved its rights to deny or limit coverage. This litigation has been stayed pending an outcome in the
arbitration between ASI and the plaintiffs described in the following paragraph.



On June 26, 2002, the Claimants initiated arbitration proceedings against ASI. As set forth in the preceding paragraph, the Claimants are the plaintiffs in related Indiana state court litigation against former
officers of ASI. In the Statement of Claim they filed with the American Arbitration Association, Claimants alleged that certain representations and warranties made by ASI in the Cartotech merger agreement were false because our financial condition
allegedly was worse than depicted in our financial statements for 1997 and the unaudited reports for the first two quarters of fiscal 1998. They alleged that the restatement of our financial statements for fiscal year 1999 should have included the
financial statements referenced in the merger agreement. The Claimants alleged that we violated the Texas Securities Act and the Indiana Securities Act and that we breached warranties in the merger agreement. The Claimants sought recission or
damages in the principal amount of approximately $5,546,533, which they alleged to be the net loss in value of our Common Stock which they received in the merger, and attorneys fees. On October 31, 2003, a three-member panel
of the American Arbitration Association concluded a four-day, evidentiary hearing in the matter and issued its decision on December 17, 2003. The panel concluded that the Claimants failed to prove to the satisfaction of the panel that ASI breached
any of its representations and warranties or that ASI made material misrepresentations in connection with the publicly filed financial statements issued prior to the closing date of the merger. The panel awarded zero damages to the Claimants and
ordered each side to bear its own attorneys fees.



We
submitted to our insurance carrier legal bills for the defense of the proceedings initiated by the Claimants. The terms of our insurance policy provide for the carrier to reimburse reasonable and necessary defense costs. Our coverage is subject to a
$150,000 deductible which we accrued as legal expense in the quarter ended September 30, 2002. Defense costs through September 30, 2003 totaled approximately $1,600,000. In September 2003, we received $400,000 from our insurance carrier as an
initial reimbursement of these defense costs. We have recorded approximately $980,000 as a current liability as of September 30, 2003. We have also recorded a receivable representing an amount we expect to receive as reimbursement of defense costs
from our insurer.



Robert Montgomery, a former officer of ASI,
filed suit in Hamilton County Superior Court, State of Indiana, on July 19, 2002, seeking recovery of unpaid commissions pursuant to the Indiana Wage Payment statute. Mr. Montgomery seeks recovery of $67,611 in unpaid commissions, treble damages,
costs interest and attorneys fees. We have responded to the lawsuit and we are vigorously defending this action.



On January 23, 2002, we announced that the Securities and Exchange Commission had commenced a formal investigation of ASI, certain of our former officers,
directors and others in connection with our accounting policies, procedures, disclosures and system of internal controls relating to the period from October 1998 through March 2000. On March 7, 2000, we restated earnings for the fiscal year ended
September 30, 1999. We cooperated fully with the SEC in this investigation. On September 26, 2003, we signed a settlement with the SEC which included our entering into a Cease-and-Desist Order without admitting or denying the SECs allegations.
The Order does not impose a fine, make a finding of fraud against the Company, or seek an injunction. This investigation is now closed.



We are also subject to various other routine litigation incidental to our business. Management does not believe that any of these routine legal
proceedings would have a material adverse effect on our financial condition or results of operations.



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|(12) | Accrued payroll and related benefits.
|---- | -------------------------------------



Our accrued payroll and related benefits are summarized as follows (in thousands).



|                                     |  |      |     |      |      
|------------------------------------ |  | ---- | --- | ---- | -----
|                                     |  | 2003 |     | 2002
|Accrued payroll                      |  | $    | 447 |      | 788  
|Accrued health benefits              |  |      | 205 |      | 312  
|Accrued vacation                     |  |      | 306 |      | 476  
|                                     |  |      |     |      |      
|Accrued payroll and related benefits |  | $    | 958 |      | 1,576
|                                     |  |      |     |      |      

|
|

|(13) | Segment Information
|---- | -------------------



We evaluate operations and make key strategic and resource decisions based on operating results of our individual production centers. In previous years,
we made these decisions based on our two different operating segments: the utilities division which uses our industry expertise and proprietary geographical information systems (GIS) for data conversion for electric, gas and water
management utility customers; and the land division which creates land base maps using techniques in both general cartography and specialized photogrammetric mapping. We have completed a majority of our contracts in the land division and our primary
focus is now on our utilities division operations. Segment data includes revenue, operating income, including allocated costs charged to each of the operating segments, equipment investment and project investment, which includes net accounts
receivables and revenue earned in excess of billings. We have presented segment data for the years ended September 30, 2003, 2002 and 2001 for comparative purposes.



We have not allocated interest expense and other non-segment specific expenses to individual segments to determine our
performance measure. Non-segment assets to reconcile to total assets consist of corporate assets including cash, prepaid expenses and deferred taxes (in thousands).



|                                    |  |                    |        |   |                    |       |                    |     |   |                |        |   |      |   |             |       |   |       |        |  
|----------------------------------- |  | ------------------ | ------ | - | ------------------ | ----- | ------------------ | --- | - | -------------- | ------ | - | ---- | - | ----------- | ----- | - | ----- | ------ | -
|                                    |  | UtilitiesLocationA |        |   | UtilitiesLocationB |       | UtilitiesLocationC |     |   | TotalUtilities |        |   | Land |   | Non-Segment |       |   | Total |       
|2003                                |  |                    |        |   |                    |       |                    |     |   |                |        |   |      |   |             |       |   |       |        |  
|Operations (as originally reported) |  |                    |        |   |                    |       |                    |     |   |                |        |   |      |   |             |       |   |       |        |  
|Revenues                            |  | $                  | 9,082  |   |                    | 5,673 |                    | 217 |   |                | 14,972 |   |      |  |             |      |   |       | 14,973 |  
|Income (loss) from operations       |  |                    | (3,319 | ) |                    | 275   |                    | (27 | ) |                | (3,071 | ) |      |  |             |      |   |       | (3,072 | )
|Interest expense, net               |  |                    |       |   |                    |      |                    |    |   |                |       |   |      |  |             | (356  | ) |       | (356   | )
|Other                               |  |                    |       |   |                    |      |                    |    |   |                |       |   |      |  |             | 82    |   |       | 82     |  
|                                    |  |                    |        |   |                    |       |                    |     |   |                |        |   |      |   |             |       |   |       |        |  
|Net loss                            |  |                    |        |   |                    |       |                    |     |   |                |        |   |      |   |             |       |   |       | (3,346 | )
|                                    |  |                    |        |   |                    |       |                    |     |   |                |        |   |      |   |             |       |   |       |        |  
|Operations (as restated)            |  |                    |        |   |                    |       |                    |     |   |                |        |   |      |   |             |       |   |       |        |  
|                                    |  |                    |        |   |                    |       |                    |     |   |                |        |   |      |   |             |       |   |       |        |  
|Revenues                            |  | $                  | 9,082  |   |                    | 5,673 |                    | 217 |   |                | 14,972 |   |      |  |             |      |   |       | 14,973 |  
|Income (loss) from operations       |  |                    | (3,319 | ) |                    | 275   |                    | (27 | ) |                | (3,071 | ) |      |  |             |      |   |       | (3,072 | )
|Interest expense, net               |  |                    |       |   |                    |      |                    |    |   |                |       |   |      |  |             | (401  | ) |       | (401   | )
|Other                               |  |                    |       |   |                    |      |                    |    |   |                |       |   |      |  |             | 121   |   |       | 121    |  
|                                    |  |                    |        |   |                    |       |                    |     |   |                |        |   |      |   |             |       |   |       |        |  
|Net loss                            |  |                    |        |   |                    |       |                    |     |   |                |        |   |      |   |             |       |   |       | (3,352 | )
|                                    |  |                    |        |   |                    |       |                    |     |   |                |        |   |      |   |             |       |   |       |        |  
|Assets                              |  |                    |        |   |                    |       |                    |     |   |                |        |   |      |   |             |       |   |       |        |  
|Segment assets                      |  | $                  | 7,743  |   |                    | 1,284 |                    |    |   |                |       |   |      |  |             |      |   |       | 9,027  |  
|Non-segment assets                  |  |                    |       |   |                    |      |                    |    |   |                |       |   |      |  |             | 2,753 |   |       | 2,753  |  
|                                    |  |                    |        |   |                    |       |                    |     |   |                |        |   |      |   |             |       |   |       |        |  
|Consolidated assets                 |  |                    |        |   |                    |       |                    |     |   |                |        |   |      |   |             |       |   |       | 11,780 |  
|                                    |  |                    |        |   |                    |       |                    |     |   |                |        |   |      |   |             |       |   |       |        |  



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|                                                      |  |                    |        |   |                    |        |                    |        |   |                |        |   |      |        |   |             |        |   |       |        |  
|----------------------------------------------------- |  | ------------------ | ------ | - | ------------------ | ------ | ------------------ | ------ | - | -------------- | ------ | - | ---- | ------ | - | ----------- | ------ | - | ----- | ------ | -
|                                                      |  | UtilitiesLocationA |        |   | UtilitiesLocationB |        | UtilitiesLocationC |        |   | TotalUtilities |        |   | Land |        |   | Non-Segment |        |   | Total |       
|2002                                                  |  |                    |        |   |                    |        |                    |        |   |                |        |   |      |        |   |             |        |   |       |        |  
|Operations (as originally reported)                   |  |                    |        |   |                    |        |                    |        |   |                |        |   |      |        |   |             |        |   |       |        |  
|Revenues                                              |  | $                  | 9,346  |   |                    | 7,621  |                    | 1,309  |   |                | 18,276 |   |      | 796    |   |             |       |   |       | 19,072 |  
|Income (loss) from operations                         |  |                    | (2,012 | ) |                    | 301    |                    | (837   | ) |                | (2,548 | ) |      | (1,662 | ) |             |       |   |       | (4,210 | )
|Interest expense, net                                 |  |                    |       |   |                    |       |                    |       |   |                |       |   |      |       |   |             | (277   | ) |       | (277   | )
|Other                                                 |  |                    |       |   |                    |       |                    |       |   |                |       |   |      |       |   |             | 11,855 |   |       | 11,855 |  
|Income tax benefit                                    |  |                    |       |   |                    |       |                    |       |   |                |       |   |      |       |   |             | 1,240  |   |       | 1,240  |  
|Cumulative effect of a change in accounting principle |  |                    |       |   |                    |       |                    |       |   |                |       |   |      |       |   |             | (3,557 | ) |       | (3,557 | )
|                                                      |  |                    |        |   |                    |        |                    |        |   |                |        |   |      |        |   |             |        |   |       |        |  
|Net earnings                                          |  |                    |        |   |                    |        |                    |        |   |                |        |   |      |        |   |             |        |   |       | 5,051  |  
|                                                      |  |                    |        |   |                    |        |                    |        |   |                |        |   |      |        |   |             |        |   |       |        |  
|Operations (as restated)                              |  |                    |        |   |                    |        |                    |        |   |                |        |   |      |        |   |             |        |   |       |        |  
|Revenues                                              |  | $                  | 9,346  |   |                    | 7,621  |                    | 1,309  |   |                | 18,276 |   |      | 796    |   |             |       |   |       | 19,072 |  
|Income (loss) from operations                         |  |                    | (2,012 | ) |                    | 301    |                    | (837   | ) |                | (2,548 | ) |      | (1,662 | ) |             |       |   |       | (4,210 | )
|Interest expense, net                                 |  |                    |       |   |                    |       |                    |       |   |                |       |   |      |       |   |             | (300   | ) |       | (300   | )
|Other                                                 |  |                    |       |   |                    |       |                    |       |   |                |       |   |      |       |   |             | 11,945 |   |       | 11,945 |  
|Income tax benefit                                    |  |                    |       |   |                    |       |                    |       |   |                |       |   |      |       |   |             | 1,240  |   |       | 1,240  |  
|Cumulative effect of a change in accounting principle |  |                    |       |   |                    |       |                    |       |   |                |       |   |      |       |   |             | (3,557 | ) |       | (3,557 | )
|                                                      |  |                    |        |   |                    |        |                    |        |   |                |        |   |      |        |   |             |        |   |       |        |  
|Net earnings                                          |  |                    |        |   |                    |        |                    |        |   |                |        |   |      |        |   |             |        |   |       | 5,118  |  
|                                                      |  |                    |        |   |                    |        |                    |        |   |                |        |   |      |        |   |             |        |   |       |        |  
|Assets                                                |  |                    |        |   |                    |        |                    |        |   |                |        |   |      |        |   |             |        |   |       |        |  
|Segment assets                                        |  | $                  | 9,185  |   |                    | 2,858  |                    | 118    |   |                | 12,161 |   |      |       |   |             |       |   |       | 12,161 |  
|Non-segment assets                                    |  |                    |       |   |                    |       |                    |       |   |                |       |   |      |       |   |             | 3,342  |   |       | 3,342  |  
|                                                      |  |                    |        |   |                    |        |                    |        |   |                |        |   |      |        |   |             |        |   |       |        |  
|Consolidated assets                                   |  |                    |        |   |                    |        |                    |        |   |                |        |   |      |        |   |             |        |   |       | 15,503 |  
|                                                      |  |                    |        |   |                    |        |                    |        |   |                |        |   |      |        |   |             |        |   |       |        |  
|                                                      |  | UtilitiesLocationA |        |   | UtilitiesLocationB |        | UtilitiesLocationC |        |   | TotalUtilities |        |   | Land |        |   | Non-Segment |        |   | Total |       
|2001                                                  |  |                    |        |   |                    |        |                    |        |   |                |        |   |      |        |   |             |        |   |       |        |  
|Operations                                            |  |                    |        |   |                    |        |                    |        |   |                |        |   |      |        |   |             |        |   |       |        |  
|Revenues                                              |  | $                  | 10,611 |   |                    | 13,707 |                    | 5,825  |   |                | 30,143 |   |      | 10,798 |   |             |       |   |       | 40,941 |  
|Income (loss) from operations                         |  |                    | (3,349 | ) |                    | 1,657  |                    | (3,773 | ) |                | (5,465 | ) |      | (2,267 | ) |             | 3,542  |   |       | (4,190 | )
|Interest expense, net                                 |  |                    |       |   |                    |       |                    |       |   |                |       |   |      |       |   |             | (1,916 | ) |       | (1,916 | )
|Litigation settlement costs                           |  |                    |       |   |                    |       |                    |       |   |                |       |   |      |       |   |             | (748   | ) |       | (748   | )
|Other                                                 |  |                    |       |   |                    |       |                    |       |   |                |       |   |      |       |   |             | (103   | ) |       | (103   | )
|Income tax expense                                    |  |                    |       |   |                    |       |                    |       |   |                |       |   |      |       |   |             | (2,781 | ) |       | (2,781 | )
|                                                      |  |                    |        |   |                    |        |                    |        |   |                |        |   |      |        |   |             |        |   |       |        |  
|Net loss                                              |  |                    |        |   |                    |        |                    |        |   |                |        |   |      |        |   |             |        |   |       | (9,738 | )
|                                                      |  |                    |        |   |                    |        |                    |        |   |                |        |   |      |        |   |             |        |   |       |        |  
|Assets                                                |  |                    |        |   |                    |        |                    |        |   |                |        |   |      |        |   |             |        |   |       |        |  
|Segment assets                                        |  | $                  | 12,238 |   |                    | 4,790  |                    | 2,060  |   |                | 19,088 |   |      | 2,065  |   |             |       |   |       | 21,153 |  
|Non-segment assets                                    |  |                    |       |   |                    |       |                    |       |   |                |       |   |      |       |   |             | 2,666  |   |       | 2,666  |  
|                                                      |  |                    |        |   |                    |        |                    |        |   |                |        |   |      |        |   |             |        |   |       |        |  
|Consolidated assets                                   |  |                    |        |   |                    |        |                    |        |   |                |        |   |      |        |   |             |        |   |       | 23,819 |  
|                                                      |  |                    |        |   |                    |        |                    |        |   |                |        |   |      |        |   |             |        |   |       |        |  



|(14) | Impact of Recently Issued Accounting Pronouncements
|---- | ---------------------------------------------------



In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. SFAS No. 145 rescinds the provisions of SFAS No. 4 that requires companies to classify certain gains and losses from debt extinguishments as extraordinary items, eliminates the provisions of SFAS No. 44 regarding transition to the
Motor Carrier Act of 1980 and amends the provisions of SFAS No. 13 to require that certain lease modifications be treated as sale leaseback transactions. Adoption of SFAS No. 145 did not have a material impact on the Companys financial
statements other than the reclassification of debt extinguishments in 2002 and 2001.



In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This Statement addresses financial accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). The
provisions of this Statement are effective for exit or disposal activities initiated after December 31, 2002. The Company does not believe the adoption of this standard will have a material impact on our financial statements.



In December 2002, the FASB issued SFAS No. 148, Accounting for Stock
Based Compensation  Transition and Disclosure  an Amendment of SFAS 123. SFAS No. 148 provides additional transition guidance for those entities that elect to voluntarily adopt the provisions of SFAS No. 123, Accounting for
Stock Based Compensation. Furthermore, SFAS No. 148 mandates new disclosures in both interim and year-end financial statements of the method of accounting for stock-based employee compensation and the effect of the method used on reported
results. SFAS No. 148 is effective for fiscal years beginning after December 15, 2002. We adopted SFAS No. 148 on April 1, 2003. We do not expect to change to using the fair value based method of accounting for stock-based employee compensation; and
therefore, adoption of SFAS No. 148 is expected to impact only the disclosures, not the financial results of ASI. See Note 8.



In May 2003, the FASB issued SFAS 150, Accounting For Certain Financial Instruments with Characteristics of Both Liabilities and Equity which
establishes standards for how an issuer of financial instruments classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument



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that is within its scope as a liability (or an asset in some circumstances) if, at inception, the
monetary value of the obligation is based solely or predominantly on a fixed monetary amount known at inception, variations in something other than the fair value of the issuers equity shares or variations inversely related to changes in the
fair value of the issuers equity shares. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003.
The adoption of SFAS 150 will require the reclassification of the redeemable preferred stock as debt and future preferred stock dividends will be classified as interest expense. Effective July 1, 2003 we reclassified mandatorily redeemable shares
that were issued prior to May 31, 2003 as liabilities. The total amount of the reclassification was $1,300,000.



|(15) | Liquidity
|---- | ---------



The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. During the fiscal years of 2000 through 2003, we experienced significant operating losses with corresponding reductions in working capital and net worth, excluding the impact of debt forgiveness, and do
not currently have any external financing in place to support operating cash flow requirements. Our revenues and backlog have also decreased substantially during the same period. Our senior secured convertible note also has default provisions, which
if triggered and exercised, would accelerate the Note and change the terms from being solely convertible to Common Stock at maturity to being immediately payable in cash. If a default provision was triggered and Tonga, the holder of the Note, did
not waive such default but demanded repayment of the Note plus accrued interest in cash, it may be difficult for us to meet this and other debt payments as well as fund our operations.If we do not have the cash flow necessary to meet our
operating and capital requirements, we will be in violation of the agreement with Tonga and we would be forced to obtain additional financing with Tongas consent and/or restrict capital and operating expenditures to match available resources.
If these actions are not sufficient, and we are not able to meet our commitments when due, then we will be forced to liquidate assets and repay our secured creditors with the proceeds. These factors among others raise substantial doubt about our
ability to continue as a going concern.



To address the going
concern issue, management implemented financial and operational restructuring plans designed to improve operating efficiencies, reduce and eliminate cash losses and position us for profitable operations. Financial steps included restructuring our
bank debt through the issuance of preferred stock and convertible debt, subsequent collection of the federal income tax refund and sale of non-core assets. Operational steps included the consolidation of production services to two solution centers,
reduction of corporate and non-core spending activities, outsourcing certain components of projects and deploying new sales and marketing team.



The financial statements do not include any adjustments relating to the recoverability of assets and the classifications of liabilities that might be
necessary should we be unable to continue as a going concern. However, we believe that our continued turnaround efforts, if successful, will improve operations and generate sufficient cash to meet our obligations in a timely manner.



|(16) | Restatement.
|---- | ------------



We have restated our consolidated balance sheets at September 30, 2003 and 2002 and our consolidated statements of operations, stockholders equity,
and cash flows for the years ended September 30, 2003 and 2002.



The restatement is being made to reflect the proper accounting, in accordance with accounting principles generally accepted in the United States of America, for the conversion feature of the Note and the related
warrants that were issued on April 2, 2002. In our original assessment of the accounting for this transaction, we determined that the Note did not meet the conditions necessary to be classified as equity. In accordance with Accounting Principles
Board (APB) Opinion 14, Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants,we discounted the Note by the fair value of the warrants, which we determined to be approximately $200,000. Additionally, in
accordance with APB Opinion 14, we determined that no portion of the proceeds from the issuance of this convertible debt security was attributed to the conversion feature. The Note was therefore recorded as a liability with an original discounted
value of $1,800,000 and the discount has been amortized to interest expense over the term of the Note using the interest method. The warrants were classified as equity.



In conjunction with the filing of a registration statement with the SEC on December 30, 2003, which will register the shares
issued pursuant to and underlying the Note and warrants, we reevaluated the accounting treatment of the Note, the warrants and the conversion features under EITF 00-19,Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settled in, a Companys Own Stock.After reviewing the terms and provisions of the Note and the warrants, we have concluded that the provisions of the Note and warrants allow for the net cash settlement by the holder of the Notes
conversion feature and warrants



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in certain circumstances. Paragraph 12 of EITF 00-19 specifies that equity derivative contracts that
include a provision that could require net-cash settlement in specific circumstances not within the companys control in which holders of shares underlying the contract would receive cash in exchange for their shares must be classified as an
asset or liability. We determined that the holder of the Note could demand such net-cash settlement if a registration statement registering the shares issuable upon conversion of the Note or exercise of the warrant is not declared effective by the
SEC within 150 days after its filing, which filing, under the terms of the Note, must occur no later than December 31, 2003. Accordingly, EITF 00-19 requires both the warrants and the conversion feature to be classified as a liability at fair value
and the changes in fair value recognized in earnings. Our quarterly results will fluctuate in accordance with the fluctuations in the price of our Common Stock as we record non-cash expense or gains as a result of the increase or decrease in the
fair value of the warrants and conversion feature.



Additionally, we determined that the computations for diluted earnings per share for the year ended September 30, 2002, were not properly calculated in our fiscal 2003 disclosures to provide for the reclassification of the gain on
extinguishment of debt that had previously been classified as an extraordinary item pursuant to our adoption of SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.
Such calculation would apply only to periods in which earnings from operations are reported, and accordingly, we have restated the weighted average number of diluted shares outstanding for the quarter ended June 30, 2002, and the year ended
September 30, 2002. Diluted earnings per share have been restated to reflect the corrected weighted average shares outstanding as well as the non-cash interest charges and other income related to the Note.



We have restated our financial statements to reflect the effect of the
discount resulting from the conversion feature and the related non-cash interest charges on the carrying value of the Note, the fair values of the warrants and the conversion feature, and other income resulting from the change in fair value.



Effects of the Restatement on Fiscal 2002.



The warrants have been reclassified to current liabilities, which
resulted in a $200,000 decrease to Common Stock. Both the warrants and the conversion option have been recognized at fair value as of September 30, 2002, and reported as current liabilities. The decrease in the fair value of these liabilities from
the date of issuance to September 30, 2002, resulted in an increase to other income totaling $90,000. The carrying value of the Note has been adjusted to record the discount afforded by the $136,000 fair value of the conversion option on April 2,
2002 and partially offset by $23,000 accretion of the related debt discount incurred from issuance to September 30, 2002. The net result of these adjustments increased net income available to common shareholders and reduced the accumulated deficit
by $67,000. Basic and diluted earnings per share available to common shareholders increased by $0.10 and $1.71, respectively. Diluted earnings per share were also affected by the correction of the diluted weighted shares outstanding pursuant to the
Note as discussed above.



Effects of the Restatement on
Fiscal 2003.



The derivative instruments have been
recognize at fair value as of September 30, 2003, resulting in a $39,000 increase to other income. The carrying value of the Note has been adjusted to record the amortization of the discount, which resulted in an additional $45,000 interest expense
for the year ended September 30, 2003. The net result of these adjustments increased the net loss available to common shareholders and the accumulated deficit by $6,000. Net loss per share available to common shareholders increased by $0.01.



The restatements have the following impact on the
consolidated balance sheets as of September 30, 2002 and 2003, and the related consolidated statements of operations, shareholders equity and cash flows for the years ended September 30, 2003 and 2002:



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|                                                                                              |  |                                         |         |   |             |   |         |                        |  |   |             |   |  |   |         |  
|--------------------------------------------------------------------------------------------- |  | --------------------------------------- | ------- | - | ----------- | - | ------- | ---------------------- |  | - | ----------- | - |  | - | ------- | -
|                                                                                              |  | 2003                                    |         |   | 2002        |  
|                                                                                              |  | As Previously Reported                  |         |   | As Restated |   |         | As Previously Reported |  |   | As Restated |  
|                                                                                              |  | (In thousands)                          |        
|CONSOLIDATED BALANCE SHEET:                                                                   |  |                                         |         |   |             |   |         |                        |  |   |             |   |  |   |         |  
|Fair value of derivative features-related party                                               |  |                                         |        |   |             |   | 207     |                        |  |   |            |   |  |   | 246     |  
|Total current liabilities                                                                     |  |                                         | 4,495   |   |             |   | 4,702   |                        |  |   | 4,947       |   |  |   | 5,193   |  
|Long-term debtrelated party                                                                  |  | $                                       | 1,900   |   |             | $ | 1,832   |                        |  | $ | 1,833       |   |  | $ | 1,720   |  
|Total long-term debt                                                                          |  |                                         | 3,403   |   |             |   | 3,335   |                        |  |   | 2,760       |   |  |   | 2,647   |  
|Total liabilities                                                                             |  |                                         | 7,898   |   |             |   | 8,037   |                        |  |   | 7,707       |   |  |   | 7,840   |  
|Common stock                                                                                  |  |                                         | 33,039  |   |             |   | 32,839  |                        |  |   | 33,039      |   |  |   | 32,839  |  
|Accumulated deficit                                                                           |  |                                         | (29,157 | ) |             |   | (29,096 | )                      |  |   | (25,243     | ) |  |   | (25,176 | )
|Total shareholders equity                                                                    |  |                                         | 3,882   |   |             |   | 3,743   |                        |  |   | 7,796       |   |  |   | 7,663   |  
|                                                                                              | 
|                                                                                              |  | Year Ended September 30                 |        
|                                                                                              |  | 2003                                    |         |   | 2002        |  
|                                                                                              |  | As Previously Reported                  |         |   | As Restated |   |         | As Previously Reported |  |   | As Restated |  
|                                                                                              |  | (In thousands except per share amounts) |        
|CONSOLIDATED STATEMENTS OF OPERATIONS:                                                        |  |                                         |         |   |             |   |         |                        |  |   |             |   |  |   |         |  
|Interest (expense)                                                                            |  | $                                       | (356    | ) |             | $ | (401    | )                      |  | $ | (277        | ) |  | $ | (300    | )
|Other income (expense)                                                                        |  |                                         | 82      |   |             |   | 121     |                        |  |   | 147         |   |  |   | 237     |  
|Total other income (expense)                                                                  |  |                                         | (274    | ) |             |   | (280    | )                      |  |   | 11,578      |   |  |   | 11,645  |  
|Earnings (loss) before income taxes and cumulative effect of a change in accounting principle |  |                                         | (3,346  | ) |             |   | (3,352  | )                      |  |   | 7,368       |   |  |   | 7,435   |  
|Earnings (loss) before income taxes                                                           |  |                                         | (3,346  | ) |             |   | (3,352  | )                      |  |   | 8,608       |   |  |   | 8,675   |  
|Net earnings (loss)                                                                           |  |                                         | (3,346  | ) |             |   | (3,352  | )                      |  |   | 5,051       |   |  |   | 5,118   |  
|Net earning (loss) available to common shareholders                                           |  |                                         | (3,914  | ) |             |   | (3,920  | )                      |  |   | 4,491       |   |  |   | 4,558   |  
|                                                                                              |  |                                         |         |  
|Basic earnings (loss) per common share:                                                       |  |                                         |         |   |             |   |         |                        |  |   |             |   |  |   |         |  
|Earnings (loss) before change in accounting principle                                         |  |                                         | (4.75   | ) |             |   | (4.76   | )                      |  |   | 11.01       |   |  |   | 11.11   |  
|Net earnings (loss) available to common shareholders                                          |  |                                         | (4.75   | ) |             |   | (4.76   | )                      |  |   | 6.14        |   |  |   | 6.24    |  
|Diluted earnings (loss) per common share:                                                     |  |                                         |         |   |             |   |         |                        |  |   |             |   |  |   |         |  
|Income (loss) before change in accounting principle                                           |  |                                         | (4.75   | ) |             |   | (4.76   | )                      |  |   | 4.33        |   |  |   | 7.35    |  
|Change in accounting principle                                                                |  |                                         |        |   |             |   |        |                        |  |   | (1.91       | ) |  |   | (3.22   | )
|Diluted earnings (loss) per common share                                                      |  |                                         | (4.75   | ) |             |   | (4.76   | )                      |  |   | 2.42        |   |  |   | 4.13    |  
|Diluted shares outstanding                                                                    |  |                                         | 824     |   |             |   | 824     |                        |  |   | 1,859       |   |  |   | 1,107   |  
|                                                                                              | 
|                                                                                              |  | Year Ended September 30                 |        
|                                                                                              |  | 2003                                    |         |   | 2002        |  
|                                                                                              |  | As Previously Reported                  |         |   | As Restated |   |         | As Previously Reported |  |   | As Restated |  
|                                                                                              |  | (In thousands except per share amounts) |        
|CONSOLIDATED STATEMENTS OF CASH FLOWS:                                                        |  |                                         |         |   |             |   |         |                        |  |   |             |   |  |   |         |  
|Net cash provided (used) by operating activities                                              |  | $                                       | (901    | ) |             | $ | (753    | )                      |  | $ | 2,273       |   |  | $ | 2,306   |  
|Net cash provided (used) by financing activities                                              |  |                                         | (123    | ) |             |   | (271    | )                      |  |   | (528        | ) |  |   | (561    | )



Additionally, Notes 1(i), 4, 7, 8 and
13 to the consolidated financial statements have been restated for the effects of restatements referred to above.



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|(17) | Subsequent Events
|---- | -----------------



On October 31, 2003, a three-member panel of the American Arbitration Association concluded a four-day, evidentiary hearing in the matter and issued its
decision on December 17, 2003. The panel concluded that the Claimants failed to prove to the satisfaction of the panel that we breached any of its representations and warranties or that we made material misrepresentations in connection with the
publicly filed financial statements issued prior to the closing date of the merger. The panel awarded zero damages to the Claimants and ordered each side to bear its own attorneys fees.



On November 6, 2003, we issued 261,458 shares of our Common Stock pursuant
to the partial conversion of the $2.0 million in principal amount senior secured convertible promissory note (the Old Note). The shares were issued at a price of $1.24 for an aggregate conversion of $300,000 of principal payable and
$24,208 of interest payable. The Old Note was exchanged for the shares and a $1.7 million senior secured promissory note bearing the same terms (the Second Note). The newly issued shares increased our total common shares outstanding from
823,965 to 1,085,423. Tonga owned 24% of our outstanding shares immediately after the partial conversion.



On May 28,2004, an event of default was triggered under the Second Note when our Registration Statement on Form S-3 filed with the SEC on December 30,
2003 to register shares of our common stock that were issued or are issuable upon conversion of the Old Note and upon exercise of a warrant to purchase 500,000 shares of our common stock (the Warrant) was not declared effective by the
SEC. On June 30, 2004, the event of default was cured when we restructured the Second Note. The $1.7 million in principal amount restructured note (the Restructured Note) bears interest at a rate of 5% per annum with such interest
accruing beginning on November 4, 2003. The principal amount of the Restructured Note, together with accrued and unpaid interest, is due and payable at Tongas option in cash or shares of our common stock on January 2, 2006. Tonga may, however,
convert the Note for shares of our common stock at any time. In connection with the Restructured Note, Tonga waived accrued interest through November 3, 2004, which totaled $134,000. Tonga also waived its rights to assess liquidated damages pursuant
to the Second Note. In addition, Tonga relinquished its rights under the Warrant and canceled the Warrant. Pursuant to the terms of the Restructured Note, we are required to register 2,500,000 shares of common stock, including the 261,548 shares
that were issued to Tonga on November 7, 2003 in Tongas partial conversion of the Old Note. Tonga may accelerate the Restructured Note if a Registration Statement registering 2,500,000 shares is not declared effective by the SEC on or before
September 28, 2004, and demand a cash payment equal to 100% of the principal amount of the Restructured Note.



In June 2004, we redeemed 1,341,100 shares of our Series A Redeemable Preferred Stock for approximately $252,000. On March 31, 2004, the carrying value of
the redeemed shares totaled approximately $1,446,000 and accrued dividends on those shares totaled approximately $170,000. The early redemption reduced the mandatory payment due on December 27, 2004, to the holders of the preferred stock from
$800,000 to $129,450. On March 31, 2004, the redemption value of the redeemed shares totaled approximately $1,877,500.



Item 9. Changes In And Disagreements With Accountants On Accounting And Financial Disclosure.



None.



Item 9a. Statement on Disclosure Control and Procedures



As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of our disclosure controls and procedures (as defined in rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)). Based upon that evaluation, the Chief Executive Officer and
Chief Financial Officer have concluded that the disclosure controls and procedures are effective alerting them on a timely basis to material information relating to the Company (including our consolidated subsidiaries) that is required to be
included in our periodic filings under the Exchange Act.



There
has been no change in our internal control over financial reporting (as defined in Rules 13a-13(f) and 15d-15(f) under the Exchange Act) that occurred during our fourth fiscal quarter of the fiscal year ended September 30, 2003, that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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PART III.



Item 10. Directors and Executive Officers of the Registrant



Directors



The
following lists the directors of Analytical Surveys, Inc. (ASI or the Company), their ages, and a description of their business experience and positions held. The Board consists of five directors. Directors are elected to a
one-year term. The date the present term of office expires for each director is the date of the Annual Meeting of our shareholders or until successors are elected and qualified.



J. Livingston Kosberg, 67, has served as a director and Chairman of the Board of the Company since May 1, 2002. Mr. Kosberg
is a director of Affiliated Computer Services, Inc. and has a wide range of business experience in addition to more than forty years of business management experience. In May 2001, he retired as chairman of U.S. Physical Therapy, a publicly-traded
company he founded in 1990 and served as president and CEO and for which he provides consulting services. Mr. Kosberg has founded and successfully grown three other enterprises during his career. Mr. Kosberg is a designee of Tonga Partners, L.P.



Christopher D. (Kit) Illick, 64, has served as a director of
the Company since May 1, 2002. Mr. Illick has been president of iQ Venture Partners, an investment bank specializing in advising and financing emerging growth businesses since July 2001. He is also a general partner of Illick Brothers, a real estate
management business and serves on the Board of Directors of Shells Seafood Restaurants. Prior to joining iQ Venture Partners, Mr. Illick was a managing director at Brean Murray & Co., an investment banking firm, from 1999 to 2001. From 1996 to
1999, he was a limited partner of Oakes, Fitzwilliams & Co, a London-based investment bank specializing in emerging growth companies. Mr. Illick has more than thirty years of investment banking experience, including as founding president of the
U.S. office of Robert Fleming and Associates, an United Kingdom-based investment bank, in 1968. Mr. Illick is a designee of Tonga Partners, L.P.



Christopher S. Dean, 39, has served as a director of the Company since August 13, 2002. Mr. Dean is the senior vice president of marketing and business
development at FaceTime Communications, Inc. a leading vendor of security, management and control solutions for instant messaging within an enterprise. Since September 2001, Mr. Dean has been a principal in Dean Consulting, a consulting
practice focused on marketing, business development and private equity financing in the technology, consumer products and travel industries. From January to July 2001, Mr. Dean served as senior vice president, business development for Epoch
Partners, a boutique technology focused investment bank in San Francisco. From October 1998 to January 2001, he held executive positions with SmartAge.com (later B2SB Technologies) a small business focused B2B internet portal, most recently as
executive vice president, e-commerce services. From May 1997 to October 1998, Mr. Dean was a principal in Dean Consulting/Helicon Consulting, an internet and software-focused consulting firm. Prior to May 1997, Mr. Dean held multiple executive roles
in technology startups, management consulting firms and venture capital firms. Mr. Dean is a designee of Tonga Partners, L.P.



Joshua C. Huffard, 34, has served as a director of the Company since November 18, 2002. Mr. Huffard is a founder and principal of Consor Capital Partners,
LLC (formerly Prima Capital Partners, LLC), a San Francisco-based private equity investment firm. From 1994 to 2001, Mr. Huffard was one of four principals of Sterling Payot Company, a venture capital and strategic advisory firm that focused on high
technology industries. Mr. Huffard was a member of Donaldson, Lufkin & Jenrettes leveraged buyout group after graduating from Yale University.



J. Norman Rokosh, 44, the Companys president and chief executive officer has served as a director since May 1, 2002. Mr. Rokosh joined the Company
in July 2000 as our president and chief executive officer. From January 1999 until July 2000, Mr. Rokosh was employed by PricewaterhouseCoopers LLP as a vice president, financial advisory services division. From January 1998 to December 1998, Mr.
Rokosh was vice president, business development at Intermap Technologies Limited, a provider of mapping and GIS products and services. From 1996 to 1997, Mr. Rokosh was a vice president at BOVAR Inc., an environmental consulting firm. From 1991 to
1996, Mr. Rokosh was financial director at Intera Information Technologies Limited, a provider of mapping products. Prior to 1991, Mr. Rokosh was employed by international firms in positions of engineering and finance.



Executive Officers



The following is certain information concerning the executive officers of the Company based on information furnished by
them.



Information concerning Mr. Rokosh, our chief executive
officer, appears under the heading Directors above.



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Lori A. Jones, 47, chief financial officer. Ms. Jones joined the Company in January 2003. From March 2001
to January 2003, Ms. Jones was a partner with Tatum CFO Partners LLP, a financial consulting company. From May 2000 to March 2001, Ms. Jones served as the chief financial officer of Worldmerc Incorporated. From January 1999 to May 2000, Ms. Jones
was the chief financial officer of Billserv Inc., an electronic billing presentation and payment service company. From May 1990 to December 1998, Ms. Jones served in various capacities, including most recently as chief financial officer, at Docucon
Incorporated, a document imaging services company.



Thomas W.
Bannon, 39, senior vice presidentoperations. Mr. Bannon joined the Company in October 2001 as senior vice presidentoperations. From May 1997 to October 2001, Mr. Bannon held a number of management positions with SchlumbergerSema,
formerly known as Convergent Group, a provider of end-to-end business transformation solutions, most recently as vice president and executive program director. From 1986 to May 1997, he held account and project managerial positions for Electronic
Data Systems.



Significant Employees



The following is certain information concerning the significant employees of
the Company based on information furnished by them.



John
Federowicz, 48, vice president  sales and data management solutions. Mr. Federowicz joined the Company in July 2003. From July 2000 to July 2003, he was employed by Logica CNG, most recently as Vice President of Business Development and
Consulting, and previously as Vice President of Asset and Resource Management. Prior to that Mr. Federowicz was Principal Consultant for UMS Group, Inc. Mr. Federowicz brings over 25 years experience in utility management, engineering, consulting
and technology to the Company



Section 16(a) Beneficial Ownership Reporting
Compliance



Section 16(a) of the Securities Exchange Act
of 1934 requires our directors and executive officers, and any persons who own more than 10 percent of our Common Stock, to file with the Securities and Exchange Commission (SEC) reports of ownership and changes of ownership of our
Common Stock.



To our knowledge, based solely on review of the
copies of such reports furnished us during fiscal 2003, all such filing requirements were met.



Code of Ethics



In July
2003 we adopted a code of ethics which our senior financial officers, executive officers, and general and project managers are expected to adhere to and promote throughout the organization and which may be found on our website at
www.anlt.com. We intend to disclose on our website any waivers or amendments to our code of ethics within five business days of such action.



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##### Table of Contents

Item 11. Executive Compensation



Executive
Officers



This table sets forth a summary of certain
information regarding the compensation of our Chief Executive Officer, the other executive officers and one former executive officer whose salary and bonus exceeded $100,000 during fiscal 2003 (the named executive officers) for the
fiscal years ended September 30, 2003, 2002, and 2001.



|                                                         |  |              |  |                       |     |  |                             |  |                              |     |  |                  |  |                           |    
|-------------------------------------------------------- |  | ------------ |  | --------------------- | --- |  | --------------------------- |  | ---------------------------- | --- |  | ---------------- |  | ------------------------- | ---
|                                                         |  |              |  | Annual Compensation   |     |  | Long TermCompensationAwards |  |                              |    
|Name and Title                                           |  | Year         |  | Salary                |     |  | Bonus                       |  | Other AnnualCompensation (1) |     |  | StockOptions (2) |  | All OtherCompensation (3) |    
|                                                         |  |              |  | $                     |     |  | $                           |  | $                            |     |  | #                |  | $                         |    
|J. Norman RokoshPresident andChief Executive Officer     |  | 200320022001 |  | 253,969250,000250,000 |     |  | 74,875  200,000            |  |                           |     |  |   2,00020,000   |  | 5,0795,4084,808           | (3)
|                                                         |  |              |  |                       |     | 
|Lori A. JonesChief Financial Officer                     |  | 200320022001 |  | 88,269              | (4) |  | 3,500                     |  |                           |     |  | 25,000         |  | 1,558                   |    
|                                                         |  |              |  |                       |     | 
|Thomas W. BannonSenior Vice PresidentOperations         |  | 200320022001 |  | 200,892188,462       | (5) |  | 35,50012,500               |  |   57,607                   | (6) |  | 5,00020,000     |  | 2,769                   |    
|                                                         |  |              |  |                       |     | 
|Don Fryhover(7)Senior Vice PresidentSales and Marketing |  | 200320022001 |  | 163,453143,494       |     |  | 20,00017,500               |  |                           |     |  | 5,0004,000      |  |                        |    

---

|(1) | Certain perquisites and other personal benefits did not exceed the lesser of $50,000 or 10% of the total amounts reported in the Salary and Bonus columns in any of
the fiscal years reported, except as indicated.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Long term compensation consists only of stock options. There were no grants of restricted stock or payments from other long-term incentive plans, therefore columns
for Restricted Stock Awards and LTIP Payouts are omitted. The number of securities underlying stock options has been adjusted to reflect the Companys one-for-ten reverse stock split effected in October 2002.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Other compensation includes employers matching contributions to the 401(k) Incentive Savings Plan.
|--- | ---------------------------------------------------------------------------------------------------



|(4) | Ms. Jones annual compensation is $ 135,000. Ms. Jones joined the Company in January 24, 2003. Accordingly, compensation information included in the table represents
only compensation from that date through September 30, 2003.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | Mr. Bannon became an executive officer of the Company on October 2, 2001. Accordingly, compensation information included in the table represents only compensation
from that date through September 30, 2003.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | The amount shown above has been paid as reimbursement for expenses incurred in connection with the relocation of Mr. Bannons residence to San Antonio, Texas,
the new location of our principal executive offices.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(7) | Mr. Fryhover became an executive officer of ASI on January 21, 2002. Compensation information included in the table represents his compensation for all of fiscal
2002 and 2003. Mr. Fryhover was no longer deemed an executive officer as of October 1, 2003.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Options/SAR Grants in Last Fiscal Year



This table sets forth certain information with respect to grants we made of stock options to our named executive officers
during fiscal 2003. No stock appreciation rights (SARs) were granted to the named executive officers during fiscal 2003.



|                 |  |                                                |  |                                                 |  |                     |  |                |  |                                                                                       |  |       
|---------------- |  | ---------------------------------------------- |  | ----------------------------------------------- |  | ------------------- |  | -------------- |  | ------------------------------------------------------------------------------------- |  | ------
|                 |  | Number ofSecuritiesUnderlyingOptionsGranted(1) |  | Percent ofTotalOptions toEmployeesIn FiscalYear |  | ExercisePrice($/sh) |  | ExpirationDate |  | PotentialRealizableValue(2) atAssumed AnnualRates of StockAppreciation forOption Term
|Name             |  |                                                |  |                                                 |  | 5% ($)              |  | 10% ($)       
|Lori A. Jones    |  | 20,000                                         |  | 50.00                                           |  | 0.72                |  | 02/19/13       |  | 9,056                                                                                 |  | 22,950
|                 |  | 5,000                                          |  | 12.50                                           |  | 1.73                |  | 07/30/13       |  | 5,440                                                                                 |  | 13,786
|Thomas W. Bannon |  | 5,000                                          |  | 12.50                                           |  | 1.80                |  | 08/06/13       |  | 5,660                                                                                 |  | 14,344
|Don Fryhover     |  | 5,000                                          |  | 13.84                                           |  | 1.73                |  | 09/27/12       |  | 5,440                                                                                 |  | 13,786

---

|(1) | All options vest equally at the end of each of four six-month periods. The number of securities underlying stock options has been adjusted to reflect our one-for-ten
reverse stock split effected in October 2002.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Potential Realizable Value is calculated based on the assumption that the price of the Common Stock will appreciate at the rates shown. The 5% and 10%
assumed rates are mandated by the rules of the Securities Exchange Commission and do not reflect our estimate or projection of future stock prices. Actual gains, if any, realized upon future exercise of these options will depend on the actual
performance of the Common Stock and the continued employment of the named executive officer through the vesting period of the option.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values



This table provides certain information regarding the number and value of unexercised stock options at September 30, 2003.
No options were exercised in 2003. As of that date, no SARs were outstanding.



|                 |  |                                                                         |  |                                                               |  |             |  |              
|---------------- |  | ----------------------------------------------------------------------- |  | ------------------------------------------------------------- |  | ----------- |  | -------------
|                 |  | Number of Securities UnderlyingUnexercised Options atFiscal Year End(1) |  | Value of unexercised In-the- Money Options at Fiscal Year End
|Name             |  | Exercisable                                                             |  | Unexercisable                                                 |  | Exercisable |  | Unexercisable
|J. Norman Rokosh |  | 31,000                                                                  |  | 6,000                                                         |  |            |  |             
|Lori A. Jones    |  | 5,000                                                                   |  | 20,000                                                        |  | 4,150       |  | 12,450       
|Thomas W. Bannon |  | 10,000                                                                  |  | 15,000                                                        |  |            |  |             
|Don Fryhover     |  |                                                                        |  |                                                              |  |            |  |             

---

|(1) | The number of securities underlying stock options has been adjusted to reflect our one-for-ten reverse stock split effected in October 2002.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------



|(2) | The value of the unexercised in-the-money options is calculated using the closing bid price of our Common Stock on September 30, 2003, at $1.55 per share. Amounts
reflected are based on the assumed value minus the exercise price and do not indicate actual sales or proceeds.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Compensation of Directors



Non-employee directors receive a quarterly retainer of $2,500 for participating in Board and Committee meetings. Directors who are also employees do not
receive any additional compensation for their service on the Board of Directors.



Non-employee directors also participate in the Analytical Surveys, Inc. 1993, 1997 and 2003 Non-Qualified Stock Option Plans. In November 2002, each non-employee director received an annual grant of options to
purchase 7,500 shares of Common Stock at an exercise price equal to the fair market value at the date of grant. In prior years, each non-employee director received an annual grant of options to purchase 900 shares of Common Stock (as adjusted for
our one-for-ten reverse stock split effected in October 2002) at an exercise price equal to the fair market value at the date of grant. All options vest at the end of each of four six month periods equally.



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##### Table of Contents

Employment Contracts



Chief Executive Officer



J. Norman Rokosh was hired as our Chief Executive Officer in July 2000. His compensation was established at $250,000 base salary, plus quarterly bonus
potential of $100,000 to $150,000 per quarter. As our size has decreased due to the sale of a division and a reduction in business volume, the Compensation Committee and Mr. Rokosh agreed to reduce the bonus potential appropriately.



Effective July 10, 2001, we entered into a new employment agreement with Mr.
Rokosh, providing for a base salary of $250,000. The agreement entitled Mr. Rokosh to receive a quarterly bonus of up to $65,000, as determined in the discretion of the Board of Directors, and reimbursement of certain expenses incurred in connection
with the relocation of our corporate offices to San Antonio. Effective September 26, 2002, Mr. Rokoshs quarterly bonus potential was reduced to $37,500. During fiscal 2003, Mr. Rokosh was paid a $50,000 bonus for the achievement of fiscal 2002
corporate goals and $24,375 for the achievement of fiscal 2003 corporate goals. The Compensation Committee considered the availability of cash and the overall stage of the Company when it adjudicated the payment of these bonuses. Mr. Rokosh also
participates all other plans that we maintain for the benefit of our executives or employees in general. Mr. Rokoshs employment agreement expired on September 30, 2003.



Under the employment agreement, Mr. Rokosh has agreed that he will not at any time disclose any confidential information or
trade secrets and that all of his rights to inventions relating to our business belong to ASI.



Chief Financial Officer



Effective January 24, 2003, we entered into an employment agreement with Ms. Jones, providing for a base salary of $135,000. The term of the employment agreement extends until March 31, 2005. Pursuant to an amendment dated November 26,
2003, Ms. Jones is entitled to participate in a bonus plan under which she may receive up to $60,000, depending on whether agreed-upon performance objectives for fiscal 2003 are satisfied. Ms. Jones also participates in any and all plans that are
maintained for the benefit of our executives or employees in general.



Upon termination of Ms. Jones employment without cause (as defined in the employment agreement), Ms. Jones will continue to receive salary and benefits for six months.



Under the employment agreement, Ms. Jones has agreed that she will not at any
time disclose any confidential information or trade secrets of ASI, and that all of her rights to inventions relating to our business belong to ASI.



Senior Vice President  Operations



Effective October 8, 2001, we entered into a new employment agreement with Mr. Bannon, providing for a base salary of $200,000. The term of the employment
agreement extends until September 30, 2004. Mr. Bannon is entitled to participate in a bonus plan under which he may receive a bonus of up to $12,500 for each quarter, depending on whether agreed-upon performance objectives are satisfied. Mr. Bannon
also participates in any and all other plans that we maintain for the benefit of our executives or employees in general.



Upon termination of Mr. Bannons employment without cause (as defined in the employment agreement), Mr. Bannon will continue to receive
salary and benefits for six months.



Under the employment
agreement, Mr. Bannon has agreed that he will not at any time disclose any confidential information or trade secrets of ASI, and that all of his rights to inventions relating to our business belong to ASI.



Report of the Compensation Committee



The compensation committee follows established rationale and policies for
compensating our executive officers. The compensation committee evaluates the compensation packages of our chief executive officer and all of our other executive officers on an annual basis or at the end of a contract term. The committee utilizes
salary surveys and statistics to ensure compensation is commensurate for the office held and the size of the business. Base salaries are also negotiated after giving consideration to the risks and responsibilities pertaining to the individual as a
public company officer. Bonus plans are included in the compensation package, but generally include only discretionary payments that are awarded based on company performance, which include achievement of revenue, profits, or achievement of
qualitative rather than quantitative milestones, such as a successful solution to corporate challenges



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such as a successful negotiation or the settlement of litigation. The following report of the compensation committee
describes these policies and rationales with respect to the compensation paid to such executive officers for the fiscal year ended September 30, 2003.



Officer Compensation Policy. The compensation committees fundamental policy is to provide a compensation program for executive officers that
will enable us to attract and retain the services of highly-qualified individuals and offer our executive officers competitive compensation opportunities based upon overall performance and their individual contribution to our financial success. The
compensation committee uses third party compensation surveys and information to assure that executive compensation is set at levels within the current market range for companies in a similar industry and stage as ASI. It is the committees
objective to have a substantial portion of each officers compensation contingent upon our performance, as well as upon such officers own level of performance. Bonus targets are established for each executive officer but are discretionary
and are awarded based on company and personal performance, which include revenue, operating results, new sales, achievement of qualitative milestones, retention incentives, and achievement of personal and company goals. Adjudication of bonus
payments is based on the percentage of achievement of goals and evaluation of performance, with consideration given to the availability of cash and the overall position of the Company.



Employment Agreements. The current executive officers were employed pursuant to written employment agreements during
fiscal 2003. The compensation committee has considered the advisability of using employment agreements and has determined that it is in our best interests because it permits us to achieve our desired goals of motivating and retaining the best
possible executive talent. Each employment agreement separately reflects the terms that the compensation committee felt were appropriate and/or necessary to recruit and retain the services of the particular executive officer, within the framework of
our compensation policies.



Components of Executive
Compensation. Each executive officers compensation package is comprised of three elements: base salary, which is designed to be competitive with salary levels of similar companies that compete with us for executive talent and reflects
individual performance and the executives contribution; performance bonuses, which is based on the terms of employment agreements; and long-term stock option awards, which create common interests for the executive officers and the
shareholders.



Base Salary. The salaries paid to the
executive officers in fiscal 2003 were based on the terms of their employment agreements and are set forth in the summary compensation table.



Bonuses. The executive officers are entitled to annual bonuses based upon the terms of their employment agreements (see Employment
Contracts above) and discretionary bonuses based on their respective performance. The bonuses paid to executive officers in fiscal 2003 under the terms of their employment agreements or at the discretion of the Board of Directors are set forth
in the Summary Compensation Table.



Stock Option Plans.
We have the Analytical Surveys, Inc. 1993 Non-Qualified Stock Option Plan, the Analytical Surveys, Inc. 1997 Incentive Stock Option Plan, the Analytical Surveys, Inc. Officer and Employee Recruitment Stock Incentive Plan and the Analytical Surveys,
Inc. Year 2000 Stock Incentive Plan and the Analytical Surveys, Inc. 2003 Non-Qualified Stock Option Plan, as amended and supplemented. The Analytical Surveys, Inc. 1993 Non-Qualified Stock Option Plan expired on September 30, 2003. The 49,899
options outstanding under the plan will expire between April 2006 and August 2013 unless otherwise forfeited, cancelled or exercised. The option plans are long-term incentive plans for employees and are intended to align shareholder and employee
interests by establishing a direct link between long-term rewards and the value of our Common Stock. The compensation committee believes that long-term stock incentives for executive officers and employees are an important factor in retaining valued
employees. Because the value of an option bears a direct relationship to our Common Stock price, the compensation committee believes that options motivate officers and employees to manage the Company in a manner that will benefit all shareholders.



The options granted to the executive officers in fiscal 2003
were made in accordance with the terms of their employment agreements (see Employment Contracts ) or at the discretion of the Board. Information with respect to option grants in fiscal 2003 to the executive officers is set forth in the
Option Grants Table. The compensation committee views stock option grants as an important component of our long-term, performance-based compensation philosophy.



CEO Compensation. The compensation paid to Mr. Rokosh during fiscal 2003 is based upon the terms of his employment agreement. Such agreement is
described under Employment Contracts. Pursuant to the terms of the employment agreement, Mr. Rokoshs annual base salary for fiscal 2003 remained constant at $250,000. Mr. Rokoshs base salary is designed to be competitive with
salary levels of chief executive officers of similar companies that compete with us for executive talent and to be reflective of his performance and contribution to the Company. Mr. Rokosh is eligible for bonus compensation of up to $37,500 per
quarter. The bonus is awarded at the discretion of the Board and is based upon the achievement of specific quantifiable objectives, some of which incorporate our overall performance. During fiscal 2003, Mr. Rokosh was paid a $50,000 bonus for the
achievement of fiscal 2002 corporate goals, which were related to the acquisition of working capital. Mr. Rokosh was also paid $24,375 for the achievement of fiscal 2003 corporate goals that included the realignment of and reduction in the expense
of corporate functions.



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Deductibility of Executive Compensation. The compensation committee is responsible for addressing
the issues raised by Internal Revenue Code Section 162(m). Section 162 (m) limits to $1 million our deduction for compensation paid to certain of our executive officers which does not qualify as performance-based. To qualify as
performance based under Section 162(m), compensation payments must be made pursuant to a plan that is administered by a committee of outside directors and must be based on achieving objective performance goals. In addition, the material terms of the
plan must be disclosed to and approved by shareholders, and the compensation committee must certify that the performance goals were achieved before payments can be awarded. We believe that all compensation paid to our executive officers listed in
the summary compensation table in fiscal 2003 is fully deductible and that compensation paid under the plans will continue to be deductible. The committees present intention is to comply with the requirements of Section 162(m) unless and until
the committee determines that compliance would not be in the best interest of the Company and our shareholders.



By the Compensation Committee

Christopher S. Dean, Chairman

J. Livingston Kosberg

Christopher D. (Kit) Illick



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PERFORMANCE GRAPH



The following graph compares the cumulative total return on the Companys Common Stock with the index of the cumulative total return for the Nasdaq
Stock Market (U.S.) (Total U.S.) and the index of the Nasdaq Computer and Data Processing Services Stocks (DP&S). The graph assumes that $100 was invested on October 1, 1997, and that all dividends, if any, were
reinvested.



LOGO



The following data points were used in constructing
the performance graph:



|                                  |  |                         |  |          |  |          |  |          |  |          |  |         
|--------------------------------- |  | ----------------------- |  | -------- |  | -------- |  | -------- |  | -------- |  | --------
|                                  |  | Cumulative Total Return
|                                  |  | 10/01/98                |  | 10/01/99 |  | 10/01/00 |  | 10/01/01 |  | 10/01/02 |  | 10/01/03
|ANALYTICAL SURVEYS, INC           |  | 100.00                  |  | 67.74    |  | 8.60     |  | 2.97     |  | 0.86     |  | 0.65    
|NASDAQ STOCK MARKET (U.S.)        |  | 100.00                  |  | 163.12   |  | 217.03   |  | 88.74    |  | 69.90    |  | 106.49  
|NASDAQ COMPUTER & DATA PROCESSING |  | 100.00                  |  | 169.73   |  | 213.10   |  | 76.43    |  | 60.10    |  | 90.15   



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Item 12. Security Ownership of Certain Beneficial Owners and Management



The following table sets forth as of December 1, 2003, certain information with respect to the ownership of our Common Stock by (i) each person (or group
of affiliated persons) that we know to be the beneficial owner of more than 5% of our outstanding Common Stock (based on filings with the Securities and Exchange Commission), (ii) each director, (iii) each named executive officer and (iv) all
executive officers and directors as a group. Except as otherwise noted in the table, each person or group identified possesses sole voting and investment power with respect to such shares, subject to community property laws, where applicable, and
the address of each holder of more than 5% of our Common Stock is c/o Analytical Surveys, Inc., 11900 Crownpoint Drive, San Antonio, Texas 78233.



|                                                            |  |                         |     |  |                     |  
|----------------------------------------------------------- |  | ----------------------- | --- |  | ------------------- | -
|Name of Beneficial Owner                                    |  | SharesBeneficiallyOwned |     |  | Percentof Class (1) |  
|Tonga Partners, L.P.                                        |  | 2,097,368               | (2) |  | 71.8                | %
|J. Livingston Kosberg                                       |  | 3,750                   | (3) |  | *                   |  
|Christopher D. (Kit) Illick                                 |  | 3,750                   | (3) |  | *                   |  
|Christopher S. Dean                                         |  | 3,750                   | (3) |  | *                   |  
|Joshua C. Huffard                                           |  | 3,750                   | (3) |  | *                   |  
|J. Norman Rokosh                                            |  | 33,500                  | (4) |  | 3.0                 | %
|Lori A. Jones                                               |  | 6,250                   | (5) |  | *                   |  
|Thomas W. Bannon                                            |  | 13,500                  | (6) |  | 0.1                 | %
|All directors and executive officers as a group (8 persons) |  | 68,250                  | (7) |  | 5.9                 | %

---

|* | Denotes less than 1%
|- | --------------------



|(1) | Based on 1,085,423 shares of Common Stock outstanding as of December 1, 2003.
|--- | -----------------------------------------------------------------------------



|(2) | On April 2, 2002, we issued a convertible promissory note in the principal amount of $2,000,000 and warrants to purchase 500,000 shares of Common Stock to Tonga Partners, L.P.
(Tonga). On November 6, 2003, Tonga converted $300,000 plus accrued interest into 261,458 shares of Common Stock. Tonga may convert the remaining unpaid principal amount of the promissory note (plus accrued interest) into shares of
Common Stock at any time As of December 1, 2003, the principal and accrued interest due under the promissory note was $1,843,556. The conversion price of the note is equal to the lesser of (i) $4.00 and (ii) 90% of the average closing bid prices for
the Companys Common Stock for the three trading days having the lowest closing bid price during the 20 trading days immediately prior to the conversion date. For purposes of stating the number of shares beneficially owned by Tonga that are
attributable to its ownership of the promissory note, the table assumes that Tonga converted the note plus accrued interest on December 1, 2003 at a conversion price of $1.38. Also included in the number of shares beneficially owned by Tonga are
500,000 shares that are issuable upon exercise of the warrants held by Tonga.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Includes 3,750 shares of Common Stock underlying options that are exercisable within 60 days of December 1, 2003.
|--- | -----------------------------------------------------------------------------------------------------------------



|(4) | Includes 33,500 shares of Common Stock underlying options that are exercisable within 60 days of December 1, 2003.
|--- | ------------------------------------------------------------------------------------------------------------------



|(5) | Includes 6,250 shares of Common Stock underlying options that are exercisable within 60 days of December 1, 2003.
|--- | -----------------------------------------------------------------------------------------------------------------



|(6) | Includes 13,500 shares of Common Stock underlying options that are exercisable within 60 days of, December 1 2003.
|--- | ------------------------------------------------------------------------------------------------------------------



|(7) | Includes 68,250 shares of Common Stock underlying options that are exercisable within 60 days of December 1, 2003.
|--- | ------------------------------------------------------------------------------------------------------------------



Change in Control



On April 2, 2002, Tonga Partners, L.P. (Tonga) invested $2,000,000 in ASI in exchange for the issuance of a
senior secured convertible promissory note in the principal amount of $2,000,000 and the issuance of warrants to purchase 500,000 (subject to adjustment) shares of our Common Stock and the right to appoint a majority of our Board of Directors (the
Change in Control Transaction). The note is convertible at any time into Common Stock, and the warrants are exercisable at any time through April 2, 2007. Pursuant to the terms of the note and the warrants, if the total number of shares
issuable upon full conversion of the note and exercise of all warrants constitutes less than 55% of the number of shares of Common Stock outstanding as of the date the note has been fully converted and the warrants have been fully exercised, we are
obligated to issue additional shares of Common Stock to Tonga such that Tonga will own at least 55% of the issued and outstanding shares of Common Stock on a fully diluted basis. In addition, as part of the transaction, for a period of three years
from the date of the note (until April 2, 2005) Tonga has the right to appoint a majority of our Board of Directors. Currently, all three outside directors are Tonga appointees. The right to appoint directors arises solely from the provisions of the
note and not from Tongas ownership of our Common Stock. The source of the $2,000,000 that Tonga invested in the Company was available cash. On November 6, 2003, we issued 261,458 shares of our Common Stock pursuant to the partial conversion of
the senior secured convertible note. The shares were issued at a price of $1.24 for an aggregate conversion of $300,000 of principal payable and $24,208 of interest payable. The $2 million note was exchanged for the shares and a $1.7 million note
bearing the same terms. The newly issued shares increased our total common shares outstanding from



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823,965 to 1,085,423. Tonga owned 24% of our outstanding shares immediately after the partial conversion. As of December
1, 2003, Tonga beneficially owned 71.8% of our Common Stock. See Security Ownership of Certain Beneficial Owners and Management.



Equity Compensation Plan Information



The following table gives information about equity awards under our equity compensation plans.



|                                                           |  |                                                                                          |  |                                                                          |       |                                                                                                                                       |        
|---------------------------------------------------------- |  | ---------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------ | ----- | ------------------------------------------------------------------------------------------------------------------------------------- | -------
|                                                           |  | (a)                                                                                      |  | (b)                                                                      |       | (c)                                                                                                                                  
|Plan category                                              |  | Number of securities to beissued upon exercise ofoutstanding options,warrants and rights |  | Weighted-average exerciseprice of outstandingoptions, warrants andrights |       | Number of securitiesremaining availablefor future issuanceunder equitycompensation plans(excluding
securitiesreflected in column (a))
|Equity compensation plans approved by security holders     |  | 87,499                                                                                   |  | $                                                                        | 15.37 |                                                                                                                                       | 132,245
|Equity compensation plans not approved by security holders |  | 61,571                                                                                   |  | $                                                                        | 11.93 |                                                                                                                                       | 38,430 
|Total                                                      |  | 149,070                                                                                  |  | $                                                                        | 13.95 |                                                                                                                                       | 170,675



Summary Description of Equity
Compensation Plans That Have Not Been Approved by the Shareholders



2000 Stock Incentive Plan



In September 2000,
the Board of Directors adopted the 2000 Stock Incentive Plan (the 2000 Plan). Pursuant to applicable law, the 2000 Plan has not been approved by the shareholders. The 2000 Plan provides for the granting of incentive stock options and
non-qualified stock options, as determined by a committee appointed by the Board of Directors.



Number of Shares Subject to the 2000 Plan. The 2000 Plan authorizes the grant of options relating to an aggregate of 50,000 shares of Common Stock. If any corporate transaction occurs which causes a change in
our capitalization (for example, a reorganization, recapitalization, stock split, stock dividend, or the like), the number of shares of stock available and the number of shares of stock subject to outstanding options granted under the 2000 Plan will
be adjusted appropriately and equitably to prevent dilution or enlargement of a participants rights.



Eligibility for Participation. Individuals eligible to participate in the 2000 Plan are employees of the Company and our subsidiaries, but not any
officers of the Company or our subsidiaries.



Terms of
Options. Options granted to employees may be either incentive stock options (ISOs), which satisfy the requirements of Internal Revenue Code Section 422, or nonstatutory stock options (NSOs), which are not intended to satisfy such requirements.
The exercise price for the grant of an NSO under the 2000 Plan may be any price that is greater than or equal to 85% of the fair market value of the Common Stock on the date the NSO is granted. The exercise price of an ISO must be at least equal to
100% (110% for 10%-shareholders) of the fair market value of the Common Stock on the date the ISO is granted. Options expire at the times determined by the committee, as specified in the applicable award agreement. However, no option is exercisable
later than the tenth anniversary of the grant date, and any ISO granted to a 10%-shareholder must be exercisable on or before the fifth anniversary of the grant date.



Vesting and Acceleration. Options vest at the times determined by the committee, as specified in the applicable award
agreement. A participants options become fully vested upon the termination of the participants employment as a result of a reduction in force and upon the occurrence of a change in control of the Company. In general, a change in control
will be deemed to have occurred upon the acquisition by any person of more than 50% of our outstanding voting securities (or securities subject to conversion into voting securities), the acquisition by any person of the power to elect a majority of
the directors of the Company, certain mergers and other corporate transactions if the holders of our voting securities before the transaction receive less than 50% of the outstanding voting securities of the reorganized, merged or consolidated
entity, after the transaction, and a complete liquidation or dissolution of the Company, or the sale of all or substantially all of the assets of the Company, if approval of our shareholders is required for the transaction.



Deduction to the Company. We will be entitled to an income tax
deduction equal to the amount of ordinary income recognized by a participant. The deduction generally will be allowed for the Companys taxable year in which occurs the last day of the calendar year in which the participant recognizes ordinary
income.



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Term. The 2000 Plan expires on September 8, 2010.



2000 Officer and Employee Recruitment Stock Incentive Plan



In September 2000, the Board of Directors adopted the 2000 Officer and
Employee Recruitment Stock Incentive Plan (the 2000 Recruitment Plan). Pursuant to applicable law, the 2000 Recruitment Plan has not been approved by the shareholders. The 2000 Recruitment Plan provides for the granting of incentive
stock options and non-qualified stock options, as determined by a committee appointed by the Board of Directors.



Number of Shares Subject to the 2000 Recruitment Plan. The 2000 Recruitment Plan authorizes the grant of options relating to an aggregate of 50,000
shares of Common Stock, subject to adjustment in the case of a change in the capitalization of the Company in the same manner as is provided in the 2000 Plan (described above).



Eligibility for Participation. An individual is eligible for participation in the 2000 Recruitment Plan if such
individual has not been previously employed by the Company and the award of options is made in connection with the entry into an employment contract with such individual.



Terms of Options. The options granted under the 2000 Recruitment Plan have the same terms as are described above with
respect to the 2000 Plan.



Vesting and Acceleration. The
options granted under the 2000 Recruitment Plan are subject to the same vesting and acceleration provisions as are described above with respect to the 2000 Plan.



Deduction to the Company. We will be entitled to deductions for options granted under the 2000 Recruitment Plan as
described above with respect to the 2000 Plan.



Term.
The 2000 Recruitment Plan expires on September 8, 2010.



Item 13. Certain relationships and Related Party Transactions.



On April 2, 2002, Tonga Partners, L.P. (Tonga) invested $2,000,000 in ASI in exchange for the issuance of a senior secured convertible promissory note in the principal amount of $2,000,000 and the issuance
of warrants to purchase 500,000 (subject to adjustment) shares of our Common Stock and the right to appoint a majority of our Board of Directors. The note is convertible at any time into Common Stock, and the warrants are exercisable at any time
through April 2, 2007. One whole warrant entitles Tonga to acquire one share of Common Stock at an exercise price equal to 115% of the conversion price on the date of the exercise of the warrants. The conversion price is the amount equal to the
least of (i) $4.00, (ii) 90% of the average closing bid prices of our Common Stock for the 90 trading days ending the trading date immediately preceding the closing date, and (iii) 90% of the average closing bid prices for our Common Stock for the
three trading days having the lowest closing bid price during the 20 trading days immediately prior to the date of the exercise of the warrants. Pursuant to the terms of the note and the warrants, if the total number of shares issuable upon full
conversion of the note and exercise of all warrants constitutes less than 55% of the number of shares of Common Stock outstanding as of the date the note has been fully converted and the warrants have been fully exercised, we are obligated to issue
additional shares of Common Stock to Tonga such that Tonga will own at least 55% of the issued and outstanding shares of Common Stock on a fully diluted basis. In addition, under the terms of the Note for a period of three years from the date of the
note (until April 2, 2005), Tonga has the right to appoint a majority of the members of our Board of Directors. Currently, all three outside members of our Board are Tonga appointees. In addition, upon full conversion of the note and exercise of the
warrants, Tonga will own a majority of our Common Stock thereby holding additional control of ASI.



Item 14. Principal Accountant Fees and Services.



|(a) | Audit Fees
|--- | ----------



As of December 22, 2003, audit fees billed by KPMG LLP for the audit of our annual financial statements for the fiscal year ended September 30, 2003, and for the review of the financial statements included in our
Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission for that year were $97,500.



|(b) | Financial Information Systems, Design and Implementation Fees.
|--- | --------------------------------------------------------------



None.



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|(c) | All Other Fees.
|--- | ---------------



As of December 22, 2003, other fees billed by KPMG LLP, which consist of fees for tax compliance and preparation, totaled $11,100.



PART IV.



Item 15. Exhibits, Financial Statement Schedules, And Reports On Form 8-K.



|   |   |  |     |  |                                                                                                                                                                                                                           
|-- | - |  | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |   | 
|(a | ) |  | (1) |  | Financial Statements                                                                                                                                                                                                      
|   |   | 
|   |   |  |     |  | Included in Part II of this Report:                                                                                                                                                                                       
|   |   | 
|   |   |  |     |  | Independent Auditors Report                                                                                                                                                                                              
|   |   | 
|   |   |  |     |  | Consolidated Balance Sheets, September 30, 2003 and 2002                                                                                                                                                                  
|   |   | 
|   |   |  |     |  | Consolidated Statements of Operations, Years Ended September 30, 2003, 2002 and 2001                                                                                                                                      
|   |   | 
|   |   |  |     |  | Consolidated Statements of Stockholders Equity, Years Ended September 30, 2003, 2002 and 2001                                                                                                                            
|   |   | 
|   |   |  |     |  | Consolidated Statements of Cash Flows, Years Ended September 30, 2003, 2002 and 2001                                                                                                                                      
|   |   | 
|   |   |  |     |  | Notes to Consolidated Financial Statements, September 30, 2003, 2002 and 2001                                                                                                                                             
|   |   | 
|   |   |  |     |  | Notes to Consolidated Financial Statements, September 30, 2002, 2001 and 2000                                                                                                                                             
|   |   | 
|   |   |  | (2) |  | Financial statement schedules                                                                                                                                                                                             
|   |   | 
|   |   |  |     |  | Included in Part IV of this report:                                                                                                                                                                                       
|   |   | 
|   |   |  |     |  | Financial statement schedules required to be filed have been omitted because they are not applicable, or the required information is set forth in the applicable financial statements or notes
thereto.                   
|   |   | 
|   |   |  | (3) |  | Exhibits                                                                                                                                                                                                                  
|   |   | 
|   |   |  |     |  | The following exhibits are filed herewith or incorporated by reference herein (according to the number assigned to them in Item 601 of Regulation S-K), as noted:                                                         
|   |   | 
|   |   |  | 3.0 |  | Articles of Incorporation and By-Laws                                                                                                                                                                                     
|   |   | 
|   |   |  | 3.1 |  | Articles of Incorporation, as amended (incorporated by reference to ASIs Registration Statement on Form S-18, (Registration No. 2-93108-D)).                                                                             
|   |   | 
|   |   |  | 3.3 |  | By-Laws (incorporated by reference to ASIs Registration Statement on Form S-18 (Registration No. 2-93108-D).                                                                                                             
|   |   | 
|   |   |  | 3.3 |  | Amendment to By-laws (incorporated by reference to ASIs Annual Report on Form 10-K for the year ended September 30, 1998).                                                                                               
|   |   | 
|   |   |  | 4.0 |  | Instruments defining the rights of Security Holders including Indentures                                                                                                                                                  
|   |   | 
|   |   |  | 4.1 |  | Form of Stock Certificate (incorporated by reference to ASIs Registration Statement on Form S-18 (Registration No. 2-93108-D)).                                                                                          
|   |   | 
|   |   |  | 4.2 |  | Convertible Senior Secured Promissory Note of Analytical Surveys, Inc., dated April 2, 2002 (incorporated by reference to ASIs Annual Report on Form 10-K for the year ended September 30,
2002).                        
|   |   | 
|   |   |  | 4.3 |  | Warrant to Purchase Shares of Common Stock of Analytical Surveys, Inc., dated April 2, 2002 (incorporated by reference to ASIs Annual Report on Form 10-K for the year ended September 30,
2002).                        
|   |   | 
|   |   |  | 4.4 |  | Registration Rights Agreement dated July 2, 1997, between ASI and Sol C. Miller (incorporated by reference to ASIs Current Report on Form 8-K dated July 16, 1997, as amended on September
9, 1997).                     
|   |   | 
|   |   |  | 4.5 |  | Note and Warrant Purchase Agreement dated as of March 21, 2002, by and between Analytical Surveys, Inc. and Tonga Partners, L.P. (incorporated by reference to ASIs Current Report on Form
8-K dated March 22, 2002).    
|   |   | 
|   |   |  | 4.6 |  | Registration Rights Agreement by and between Analytical Surveys, Inc. and Tonga Partners, L.P., dated April 2, 2002 (incorporated by reference to ASIs Annual Report on Form 10-K for the
year ended September 30, 2002).



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| |  |       |  |                                                                                                                                                                                                                                                                            
| |  | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |      
| |  | 4.7   |  | Second Amendment to the Registration Rights Agreement by and between the Company and Tonga Partners, L.P., a Delaware limited partnership, effective as of February 27, 2003 (incorporated by
reference to ASIs Current Report on Form 8-K dated February 27, 2003).      
| |  |      
| |  | 4.8   |  | Third Amendment to Registration Rights Agreement by and between the Company and Tonga Partners, L.P., a Delaware limited partnership, effective as of August 1, 2003 (incorporated by reference
to ASIs Quarterly Report on Form 10-Q for the period ended June 30, 2003).
| |  |      
| |  | 4.9   |  | Fourth Amendment to Registration Rights Agreement by and between the Company and Tonga Partners, L.P., a Delaware limited partnership, effective as of December 1, 2003.                                                                                                   
| |  |      
| |  | 4.10  |  | Convertible Senior Secured Promissory Note of Analytical Surveys, Inc., dated November 4, 2003.                                                                                                                                                                            
| |  |      
| |  | 10.0  |  | Material Contracts                                                                                                                                                                                                                                                         
| |  |      
| |  | 10.1  |  | Employment Agreement dated June 27, 1994 between ASI and Sidney V. Corder, Chief Executive Officer and President, (incorporated by reference to ASIs Quarterly Report on Form 10-QSB for
the quarter ended June 30, 1994.)                                                
| |  |      
| |  | 10.2  |  | Stock Option Plan dated December 17, 1987 as amended on August 31, 1992 (incorporated by reference to ASIs Annual Report on Form 10-K for the fiscal year ended September 30,
1992.)                                                                                      
| |  |      
| |  | 10.3  |  | 1993 Non-Qualified Stock Option Plan dated December 11, 1992 (incorporated by reference to ASIs Proxy Statement dated January 11, 1993.)                                                                                                                                  
| |  |      
| |  | 10.4  |  | Analytical Surveys, Inc. Incentive Bonus Plan (incorporated by reference to ASIs Annual Report on Form 10-K for fiscal year ended September 30, 1992.)                                                                                                                    
| |  |      
| |  | 10.5  |  | 1995 Non-Qualified Stock Option Plan dated August 22, 1995 (incorporated by reference to ASIs Annual Report on Form 10-KSB for the fiscal year ended September 30,
1995.)                                                                                                 
| |  |      
| |  | 10.6  |  | Real Estate Lease between MSE Realty, LLC and MSE Corporation, dated July 2, 1997 (incorporated by reference to ASIs Annual Report on Form 10-K for the fiscal year ended September 30,
1997.)                                                                            
| |  |      
| |  | 10.7  |  | Analytical Surveys, Inc. 1997 Incentive Stock Option Plan, as amended and restated (incorporated by reference to ASIs Proxy Statement dated January 8, 1998.)                                                                                                             
| |  |      
| |  | 10.8  |  | Credit Agreement between ASI and Bank One, Colorado, N.A. dated June 3, 1998 (including Exhibits A-1, A-2, A-3, C D and E thereto) (incorporated by reference to ASIs Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998.)                                 
| |  |      
| |  | 10.9  |  | Amendment No. 1 to Credit Agreement between ASI and BankOne, Colorado, N.A. dated as of July 10, 1998 (incorporated by reference to ASIs Annual Report on Form 10-K for the year ended
September 30, 1998).                                                               
| |  |      
| |  | 10.10 |  | Amendment No. 2. To Credit Agreement between ASI and BankOne, Colorado, N.A. dated as of October 20, 1998 (incorporated by reference to ASIs Annual Report on Form 10-K for the year
ended September 30, 1998).                                                           
| |  |      
| |  | 10.11 |  | Amendment No. 3 to Credit Agreement between ASI and BankOne, Colorado, N.A. dated as of November 24, 1998 (incorporated by reference to ASIs Annual Report on Form 10-K for the year
ended September 30, 1998).                                                           
| |  |      
| |  | 10.12 |  | Employment Agreement dated July 10, 2000, between ASI and J. Norman Rokosh (incorporated by reference to ASIs Annual Report on Form 10-K/A for the year ended September 30,
2000).                                                                                        
| |  |      
| |  | 10.13 |  | Employment Agreement dated February 9, 2000, between ASI and Michael A. Renninger (incorporated by reference to ASIs Annual Report on Form 10-K/A for the year ended September 30,
2000).                                                                                 
| |  |      
| |  | 10.14 |  | Employment Agreement dated January 31, 2000 between ASI and David O. Hicks (incorporated by reference to ASIs Annual Report on Form 10-K/A for the year ended September 30,
2000).                                                                                        
| |  |      
| |  | 10.15 |  | Analytical Surveys, Inc. Officer and Employee Recruitment Stock Incentive Plan and form of stock option agreement (incorporated by reference to ASIs Annual Report on Form 10-K/A for the
year ended September 30, 2000).                                                 
| |  |      
| |  | 10.16 |  | Analytical Surveys, Inc. Year 2000 Stock Incentive Plan and form of agreement (incorporated by reference to ASIs Annual Report on Form 10-K/A for the year ended September 30,
2000).                                                                                     
| |  |      
| |  | 10.17 |  | Analytical Surveys, Inc. Year 2003 Stock Option Plan and form of agreement (incorporated by reference to ASIs Proxy Statement dated July 21, 2003, for its 2003 Annual
Meeting).                                                                                          



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|  |   |  |       |  |                                                                                                                                                                                                                             
|- | - |  | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |   | 
|  |   |  | 10.18 |  | Amendment No. 4 to Credit Agreement between ASI and BankOne, Colorado, N.A. dated as of January 1, 1999 (incorporated by reference to ASIs Annual Report on Form 10-K/A for the year ended
September 30, 2000).            
|  |   | 
|  |   |  | 10.19 |  | Amendment No. 5 to Credit Agreement between ASI and BankOne, Colorado, N.A. dated as of November 24, 1998 (incorporated by reference to ASIs Quarterly Report on Form 10-Q for the quarter
ended December 31, 1999).       
|  |   | 
|  |   |  | 10.20 |  | Amendment No. 6 to Credit Agreement between ASI and BankOne, Colorado, N.A. dated as of May 30, 2000 (incorporated by reference to ASIs Annual Report on Form 10-K/A for the year ended
September 30, 2000).               
|  |   | 
|  |   |  | 10.21 |  | Amendment No. 7 to Credit Agreement between ASI and BankOne, Colorado, N.A. dated as of August 1, 2000 (incorporated by reference to ASIs Annual Report on Form 10-K/A for the year ended
September 30, 2000).             
|  |   | 
|  |   |  | 10.22 |  | Amendment No. 8 to Credit Agreement between ASI and BankOne, Colorado, N.A. dated as of September 8, 2000 (incorporated by reference to ASIs Annual Report on Form 10-K/A for the year ended
September 30, 2000).          
|  |   | 
|  |   |  | 10.23 |  | Amendment No. 9 to Credit Agreement between ASI and BankOne, Colorado, N.A. dated as of December 28, 2000 (incorporated by reference to ASIs Annual Report on Form 10-K/A for the year ended
September 30, 2000).          
|  |   | 
|  |   |  | 10.24 |  | Amendment No. 10 to Credit Agreement between ASI and BankOne, Colorado, N.A. dated as of March 31, 2001 (incorporated by reference to ASIs Quarterly Report on Form 10-Q for the period
ended March 31, 2001).             
|  |   | 
|  |   |  | 10.25 |  | Amendment No. 11 to Credit Agreement between ASI and BankOne, Colorado, N.A. dated as of May 31, 2001 (incorporated by reference to ASIs Quarterly Report on Form 10-Q for the period ended
June 30, 2001).                
|  |   | 
|  |   |  | 10.26 |  | Employment Agreement dated July 10, 2001, between ASI and J. Norman Rokosh (incorporated by reference to ASIs Annual Report on Form 10-K for the year ended September 30,
2001).                                           
|  |   | 
|  |   |  | 10.27 |  | Amendment No. 12 to Credit Agreement between ASI and BankOne, Colorado, N.A. dated as of December 28, 2001 (incorporated by reference to ASIs Annual Report on Form 10-K for the year ended
September 30, 2001).           
|  |   | 
|  |   |  | 10.28 |  | Security Agreement by and between Analytical Surveys, Inc. and Tonga Partners, L.P., dated April 2, 2002 (incorporated by reference to ASIs Annual Report on Form 10-K for the year ended
September 30, 2002).             
|  |   | 
|  |   |  | 10.29 |  | First Amendment to Employment Agreement dated September 26, 2002, between ASI and J. Norman Rokosh (incorporated by reference to ASIs Annual Report on Form 10-K for the year ended
September 30, 2002).                   
|  |   | 
|  |   |  | 10.30 |  | Employment Agreement dated January 20, 2003, by and between Analytical Surveys, Inc. and Lori Jones (incorporated by reference to Exhibit 10 to ASIs Quarterly Report on Form 10-Q for the
period ended December 31, 2002).
|  |   | 
|  |   |  | 10.31 |  | First Amendment to Employment Agreement dated November 26, 2003, by and between Analytical Surveys, Inc. and Lori Jones.                                                                                                    
|  |   | 
|  |   |  | 11.1  |  | Statement Regarding Computation of Per Share Earnings                                                                                                                                                                       
|  |   | 
|  |   |  | 14.1  |  | Code of Ethics                                                                                                                                                                                                              
|  |   | 
|  |   |  | 23.   |  | Consent of KPMG LLP                                                                                                                                                                                                         
|  |   | 
|  |   |  | 31.1  |  | Section 302 Certification of Chief Executive Officer                                                                                                                                                                        
|  |   | 
|  |   |  | 31.2  |  | Section 302 Certification of Chief Financial Officer                                                                                                                                                                        
|  |   | 
|  |   |  | 32.1  |  | Section 906 Certification of Chief Executive Officer                                                                                                                                                                        
|  |   | 
|  |   |  | 32.2  |  | Section 906 Certification of Chief Financial Officer                                                                                                                                                                        
|  |   | 
|b | ) |  |       |  | Reports on Form 8-K filed during the quarter ended September 30, 2003.                                                                                                                                                      
|  |   | 
|  |   |  |       |  | 8-K filed August 15, 2003  concerning Third Quarter Results                                                                                                                                                                
|  |   | 
|  |   |  |       |  | 8-K filed November 6, 2003  concerning Convertible Partial Conversion of Senior Secured Convertible Debenture by Tonga Partners LP                                                                                         



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SIGNATURES



Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                         |  |  |  |                                       |  |                      
|------------------------ |  |  |  | ------------------------------------- |  | ---------------------
|Analytical Surveys, Inc. |  | 
|                         |  |  | 
|By:                      |  |  |  | /s/ Wayne B. Fuquay                   |  | Date: August 12, 2004
|                         |  |  |  | Wayne B. Fuquay                       |  |                      
|                         |  |  |  | President and Chief Executive Officer |  |                      
|                         |  |  | 
|By:                      |  |  |  | /s/ Lori A. Jones                     |  | Date: August 12, 2004
|                         |  |  |  | Lori A. Jones                         |  |                      
|                         |  |  |  | Chief Financial Officer               |  |                      
|                         |  |  | 
|By:                      |  |  |  | /s/ J. Livingston Kosberg             |  | Date: August 12, 2004
|                         |  |  |  | J. Livingston Kosberg                 |  |                      
|                         |  |  |  | Chairman of the Board                 |  |                      
|                         |  |  | 
|By:                      |  |  |  | /s/ Christopher D. Illick             |  | Date: August 12, 2004
|                         |  |  |  | Christopher D. Illick                 |  |                      
|                         |  |  |  | Director                              |  |                      
|                         |  |  | 
|By:                      |  |  |  | /s/ Christopher S. Dean               |  | Date: August 12, 2004
|                         |  |  |  | Christopher S. Dean                   |  |                      
|                         |  |  |  | Director                              |  |                      



63