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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q/A



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



For the quarterly period ended December 31, 2003



or



| ̈ | 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)



---



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 past twelve (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 ninety (90) days.    Yes  x    No ̈



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



The number of shares of common stock outstanding as of February 6, 2004, was 1,085,423.



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TABLE OF CONTENTS



|              |  |                                                                |  |     
|------------- |  | -------------------------------------------------------------- |  | ----
|              |  |                                                                |  | PAGE
|PART 1.       |  | FINANCIAL INFORMATION                                          |  |     
|              |  |                                                               
|Item 1.       |  | Financial Statements                                           |  | 1   
|              |  |                                                               
|Item 2.       |  | Managements Discussion and Analysis and Results of Operations |  | 19  
|              |  |                                                               
|Item 3.       |  | Quantitative and Qualitative Disclosures About Market Risk     |  | 30  
|              |  |                                                               
|Item 4.       |  | Controls and Procedures                                        |  | 31  
|              |  |                                                               
|PART 2.       |  | OTHER INFORMATION                                              |  |     
|              |  |                                                               
|Item 1.       |  | Legal Proceedings                                              |  | 32  
|              |  |                                                               
|Item 6.       |  | Exhibits and Reports of Form 8-K                               |  | 33  
|              | 
|SIGNATURES    |  | 34                                                            
|              | 
|EXHIBIT INDEX |  |                                                               
|              |  |                                                               
|Exhibit 31.1  |  | Section 302 Certification of Chief Executive Officer           |  |     
|              |  |                                                               
|Exhibit 31.2  |  | Section 302 Certification of Chief Financial Officer           |  |     
|              |  |                                                               
|Exhibit 32.1  |  | Section 906 of the Sarbanes-Oxley Act of 2002                  |  |     
|              |  |                                                               
|Exhibit 32.2  |  | Section 906 of the Sarbanes-Oxley Act of 2002                  |  |     





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EXPLANATORY NOTE



This Amendment No. 1 on Form 10-Q/A for the quarter ended December 31, 2003, 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, (see Note 11 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 Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q/A in its entirety.



Material Developments



The following material developments have occurred since the filing of our original Quarterly Report on Form 10-Q on February 16, 2004:



On March 22, 2004, Mr. Wayne Fuquay was appointed Chief Executive Officer. J. Livingston Kosberg, our current Chairman of the Board, served
as interim Chief Executive Officer. 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 2004.



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##### Table of Contents

Part I

Financial Information



Item 1. Financial Statements



ANALYTICAL
SURVEYS, INC.

CONSOLIDATED BALANCE SHEETS

(In
thousands)



|                                                                             |  |                   |        |   |                    |        |  
|---------------------------------------------------------------------------- |  | ----------------- | ------ | - | ------------------ | ------ | -
|                                                                             |  | December 31, 2003 |        |   | September 30, 2003 |       
|                                                                             |  | (Unaudited)       |        |   |                    |       
|ASSETS                                                                       |  |                   |        |   |                    |        |  
|                                                                             |  |                  
|Current assets:                                                              |  |                   |        |   |                    |        |  
|Cash                                                                         |  | $                 | 2,032  |   |                    | 1,952  |  
|Accounts receivable, net of allowance for doubtful accounts of $100 and $100 |  |                   | 2,037  |   |                    | 3,029  |  
|Revenue in excess of billings                                                |  |                   | 5,713  |   |                    | 6,112  |  
|Prepaid expenses and other                                                   |  |                   | 308    |   |                    | 166    |  
|                                                                             |  |                   |        |   |                    |        |  
|Total current assets                                                         |  |                   | 10,090 |   |                    | 11,259 |  
|                                                                             |  |                   |        |   |                    |        |  
|Equipment and leasehold improvements, at cost:                               |  |                   |        |   |                    |        |  
|Equipment                                                                    |  |                   | 4,899  |   |                    | 4,896  |  
|Furniture and fixtures                                                       |  |                   | 484    |   |                    | 484    |  
|Leasehold improvements                                                       |  |                   | 267    |   |                    | 267    |  
|                                                                             |  |                   |        |   |                    |        |  
|                                                                             |  |                   | 5,650  |   |                    | 5,647  |  
|Less accumulated depreciation and amortization                               |  |                   | (5,211 | ) |                    | (5,126 | )
|                                                                             |  |                   |        |   |                    |        |  
|Net equipment and leasehold improvements                                     |  |                   | 439    |   |                    | 521    |  
|                                                                             |  |                   |        |   |                    |        |  
|Total assets                                                                 |  | $                 | 10,529 |   |                    | 11,780 |  
|                                                                             |  |                   |        |   |                    |        |  



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ANALYTICAL SURVEYS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)



|                                                                                                                                                                                                                |  |                   |         |   |                    |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ------------------ | ------- | -
|                                                                                                                                                                                                                |  | December 31, 2003 |         |   | September 30, 2003 |        
|                                                                                                                                                                                                                |  | (Unaudited)       |         |   |                    |        
|                                                                                                                                                                                                                |  | (As restated)     |         |   | (As restated)      |        
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                            |  |                   |         |   |                    |         |  
|Current liabilities:                                                                                                                                                                                            |  |                   |         |   |                    |         |  
|Current portion of long-term debt                                                                                                                                                                               |  |                   | 75      |   |                    | 74      |  
|Billings in excess of revenue                                                                                                                                                                                   |  |                   | 262     |   |                    | 162     |  
|Accounts payable                                                                                                                                                                                                |  |                   | 2,379   |   |                    | 2,504   |  
|Accrued liabilities                                                                                                                                                                                             |  |                   | 615     |   |                    | 647     |  
|Accrued interest  related party                                                                                                                                                                                |  |                   | 148     |   |                    | 150     |  
|Redeemable preferred stock  current portion                                                                                                                                                                    |  |                   | 800     |   |                    |        |  
|Accrued payroll and related benefits                                                                                                                                                                            |  |                   | 830     |   |                    | 958     |  
|Fair value of derivative features  related party                                                                                                                                                               |  |                   | 260     |   |                    | 207     |  
|                                                                                                                                                                                                                |  |                   |         |   |                    |         |  
|Total current liabilities                                                                                                                                                                                       |  |                   | 5,369   |   |                    | 4,702   |  
|                                                                                                                                                                                                                |  |                   |         |   |                    |         |  
|Long-term debt:                                                                                                                                                                                                 |  |                   |         |   |                    |         |  
|                                                                                                                                                                                                                |  |                  
|Notes payable, less current portion                                                                                                                                                                             |  |                   | 33      |   |                    | 53      |  
|Long-term debt  related party                                                                                                                                                                                  |  |                   | 1,561   |   |                    | 1,832   |  
|Redeemable preferred stock; no par value. Authorized 2,500 shares; 1,600 shares issued and outstanding at December 31 and September 30
(liquidation value $2,240 and $1,600 respectively, less current portion) |  |                   | 800     |   |                    | 1,450   |  
|                                                                                                                                                                                                                |  |                   |         |   |                    |         |  
|Total long-term debt                                                                                                                                                                                            |  |                   | 2,394   |   |                    | 3,335   |  
|                                                                                                                                                                                                                |  |                   |         |   |                    |         |  
|Total liabilities                                                                                                                                                                                               |  |                   | 7,763   |   |                    | 8,037   |  
|                                                                                                                                                                                                                |  |                   |         |   |                    |         |  
|Stockholders equity:                                                                                                                                                                                           |  |                   |         |   |                    |         |  
|Common stock; no par value. Authorized 10,000 shares; 1,085 and 824 shares issued and outstanding at December 31 and September 30,
respectively                                                                 |  |                   | 33,163  |   |                    | 32,839  |  
|Accumulated deficit                                                                                                                                                                                             |  |                   | (30,397 | ) |                    | (29,096 | )
|                                                                                                                                                                                                                |  |                   |         |   |                    |         |  
|Total stockholders equity                                                                                                                                                                                      |  |                   | 2,766   |   |                    | 3,743   |  
|                                                                                                                                                                                                                |  |                   |         |   |                    |         |  
|Total liabilities and stockholders equity                                                                                                                                                                      |  | $                 | 10,529  |   |                    | 11,780  |  
|                                                                                                                                                                                                                |  |                   |         |   |                    |         |  



See
accompanying notes to consolidated financial statements



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ANALYTICAL SURVEYS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS



(In thousands,
except per share amounts)

(Unaudited)



|                                                                |  |                                |        |   |               |       |  
|--------------------------------------------------------------- |  | ------------------------------ | ------ | - | ------------- | ----- | -
|                                                                |  | Three Months Ended December 31 |       
|                                                                |  | 2003                           |        |   | 2002          |      
|                                                                |  | (As restated)                  |        |   | (As restated) |      
|Revenues                                                        |  | $                              | 2,554  |   |               | 4,285 |  
|                                                                |  |                                |        |   |               |       |  
|Costs and expenses                                              |  |                                |        |   |               |       |  
|Salaries, wages and related benefits                            |  |                                | 1,809  |   |               | 2,596 |  
|Subcontractor costs                                             |  |                                | 796    |   |               | 621   |  
|Other general and administrative                                |  |                                | 864    |   |               | 1,257 |  
|Depreciation and amortization                                   |  |                                | 85     |   |               | 145   |  
|Severance and related costs                                     |  |                                | 22     |   |               | 253   |  
|                                                                |  |                                |        |   |               |       |  
|                                                                |  |                                | 3,576  |   |               | 4,872 |  
|                                                                |  |                                |        |   |               |       |  
|Loss from operations                                            |  |                                | (1,022 | ) |               | (587  | )
|                                                                |  |                                |        |   |               |       |  
|Other income (expense)                                          |  |                                |        |   |               |       |  
|Interest expense, net                                           |  |                                | (226   | ) |               | (61   | )
|Other                                                           |  |                                | (53    | ) |               | 104   |  
|                                                                |  |                                |        |   |               |       |  
|                                                                |  |                                | (279   | ) |               | 434   |  
|                                                                |  |                                |        |   |               |       |  
|Net loss                                                        |  |                                | (1,301 | ) |               | (544  | )
|                                                                |  |                               
|Accretion of discount and dividends on preferred shares         |  |                                |       |   |               | (220  | )
|                                                                |  |                                |        |   |               |       |  
|Net loss available to common shareholders                       |  | $                              | (1,301 | ) |               | (764  | )
|                                                                |  |                                |        |   |               |       |  
|Basic loss per common share: available to common shareholders   |  | $                              | (1.33  | ) |               | (0.93 | )
|                                                                |  |                                |        |   |               |       |  
|Diluted loss per common share: available to common shareholders |  | $                              | (1.33  | ) |               | (0.93 | )
|                                                                |  |                                |        |   |               |       |  
|Weighted average common shares:                                 |  |                                |        |   |               |       |  
|Basic                                                           |  |                                | 980    |   |               | 824   |  
|Diluted                                                         |  |                                | 980    |   |               | 824   |  



See
accompanying notes to consolidated financial statements



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ANALYTICAL SURVEYS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY



For the Three Months Ended December 31, 2003

(In thousands)



(Unaudited)



|                                                                              |  |              |  |                    |        |  |         |   |  |        |  
|----------------------------------------------------------------------------- |  | ------------ |  | ------------------ | ------ |  | ------- | - |  | ------ | -
|                                                                              |  | Common Stock |  | AccumulatedDeficit |        |  | Total   |  
|                                                                              |  | Shares       |  | Amount             |        | 
|Balances at September 30, 2003 (as restated)                                  |  | 824          |  | $                  | 32,839 |  | (29,096 | ) |  | 3,743  |  
|                                                                              |  |              |  |                   
|Common Stock issued pursuant to conversion of senior secured convertible note |  | 261          |  |                    | 324    |  |        |   |  | 324    |  
|                                                                              |  |              |  |                   
|Net loss (as restated)                                                        |  |             |  |                    |       |  | (1,301  | ) |  | (1,301 | )
|                                                                              |  |              |  |                    |        |  |         |   |  |        |  
|Balances at December 31, 2003 (as restated)                                   |  | 1,085        |  | $                  | 33,163 |  | (30,397 | ) |  | 2,766  |  
|                                                                              |  |              |  |                    |        |  |         |   |  |        |  



See
accompanying notes to consolidated financial statements.



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ANALYTICAL SURVEYS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



|                                                                                          |  |                                |        |   |               |       |  
|----------------------------------------------------------------------------------------- |  | ------------------------------ | ------ | - | ------------- | ----- | -
|                                                                                          |  | Three Months Ended December 31 |       
|                                                                                          |  | 2003                           |        |   | 2002          |      
|                                                                                          |  | (As restated)                  |        |   | (As restated) |      
|Cash flow from operating activities:                                                      |  |                                |        |   |               |       |  
|Net loss                                                                                  |  | $                              | (1,301 | ) |               | (544  | )
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |  |                                |        |   |               |       |  
|Depreciation                                                                              |  |                                | 85     |   |               | 145   |  
|Accretion of interest expense on preferred stock and convertible debtrelated party       |  |                                | 179    |   |               | 28    |  
|Change in fair value of derivative featuresrelated party                                 |  |                                | 53     |   |               | (64   | )
|Changes in operating assets and liabilities:                                              |  |                                |        |   |               |       |  
|Accounts receivable, net                                                                  |  |                                | 992    |   |               | (676  | )
|Revenue in excess of billings                                                             |  |                                | 399    |   |               | 1,731 |  
|Prepaid expenses and other                                                                |  |                                | (142   | ) |               | (76   | )
|Billings in excess of revenue                                                             |  |                                | 100    |   |               | 74    |  
|Accounts payable and other accrued liabilities                                            |  |                                | (135   | ) |               | (536  | )
|Accrued payroll and related benefits                                                      |  |                                | (128   | ) |               | (199  | )
|                                                                                          |  |                                |        |   |               |       |  
|Net cash provided by (used in) operating activities                                       |  |                                | 102    |   |               | (117  | )
|                                                                                          |  |                                |        |   |               |       |  
|Cash flows used in investing activities:                                                  |  |                                |        |   |               |       |  
|Purchase of equipment and leasehold improvements                                          |  |                                | (3     | ) |               | (108  | )
|                                                                                          |  |                                |        |   |               |       |  
|Cash flows used in financing activities:                                                  |  |                                |        |   |               |       |  
|Principal payments on long-term debt, net                                                 |  |                                | (19    | ) |               | (43   | )
|                                                                                          |  |                                |        |   |               |       |  
|Net increase (decrease) in cash                                                           |  |                                | 80     |   |               | (268  | )
|Cash at beginning of period                                                               |  | $                              | 1,952  |   |               | 3,114 |  
|                                                                                          |  |                                |        |   |               |       |  
|Cash at end of period                                                                     |  | $                              | 2,032  |   |               | 2,846 |  
|                                                                                          |  |                                |        |   |               |       |  
|Supplemental disclosure of cash flow information:                                         |  |                                |        |   |               |       |  
|Cash paid for interest                                                                    |  | $                              | 2      |   |               | 21    |  
|                                                                                          |  |                                |        |   |               |       |  
|Issuance of common stock pursuant to conversion of debtrelated party                     |  | $                              | 324    |   |               |      |  
|                                                                                          |  |                                |        |   |               |       |  
|Accretion of preferred stock                                                              |  | $                              | 150    |   |               | 200   |  
|                                                                                          |  |                                |        |   |               |       |  



See
accompanying notes to consolidated financial statements.



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Notes to Consolidated Financial Statements

(Unaudited)



1. Summary of
Significant Accounting Policies



The accompanying unaudited interim
consolidated financial statements have been prepared by management in accordance with the accounting policies described in our annual report for the year ended September 30, 2003. The consolidated financial statements include the accounts of
Analytical Surveys, Inc. (ASI, we, our or the Company) and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Certain information and note
disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been omitted. These condensed consolidated financial statements should be read in conjunction with the
audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended September 30, 2003.



The consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary to present fairly the financial position of ASI, and its
subsidiaries at December 31, 2003, the results of their operations for the three months ended December 31, 2003 and 2002 and cash flows for the three months ended December 31, 2003 and 2002.



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



Stock Based Compensation.
As permitted by Statement of Financial Standards (SFAS) No. 123, we account for our stock-based compensation utilizing the intrinsic-value method in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees, and related interpretations. No stock-based employee compensation expense related to our stock option plans is reflected in net loss, as all options granted under those plans had an exercise price equal to the market value
of the underlying common stock on the date of grant. Pro forma information regarding net loss and loss per share is required by SFAS No. 148. This information has been estimated at the date of grant using the fair value method.



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|                                                       |  |                                 |        |   |      |   |       |  
|------------------------------------------------------ |  | ------------------------------- | ------ | - | ---- | - | ----- | -
|                                                       |  | Three Months Ended December 31, |       
|                                                       |  | 2003                            |        |   | 2002 |  
|                                                       |  | (in thousands)                  |       
|                                                       |  | (As restated)                   |       
|Net loss, available to common shareholders as reported |  | $                               | (1,301 | ) |      | $ | (764  | )
|                                                       |  |                                
|Less: Pro forma option expense                         |  |                                 | 15     |   |      |   | 50    |  
|                                                       |  |                                 |        |   |      |   |       |  
|Pro forma net loss                                     |  | $                               | (1,316 | ) |      | $ | (814  | )
|                                                       |  |                                 |        |   |      |   |       |  
|Basic loss per share, as reported                      |  | $                               | (1.33  | ) |      | $ | (0.93 | )
|                                                       |  |                                
|Less: Pro forma option expense                         |  |                                 | (0.02  | ) |      |   | (0.06 | )
|                                                       |  |                                 |        |   |      |   |       |  
|Pro forma basic loss per share                         |  | $                               | (1.35  | ) |      | $ | (.99  | )
|                                                       |  |                                 |        |   |      |   |       |  
|Diluted loss per share, as reported                    |  | $                               | (1.33  | ) |      | $ | (0.93 | )
|                                                       |  |                                
|Less: Pro forma option expense                         |  |                                 | (0.02  | ) |      |   | (0.06 | )
|                                                       |  |                                 |        |   |      |   |       |  
|Pro forma diluted loss per share                       |  | $                               | (1.35  | ) |      | $ | (.99  | )
|                                                       |  |                                 |        |   |      |   |       |  



2. 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 include the effects of the potential dilution of outstanding options, warrants, and convertible debt on our common stock,
determined using the treasury stock method.



All dilutive common stock
equivalents are reflected in our earnings per share calculation; the conversion of 958,880 shares under the convertible debt agreement is antidilutive for the three-month period ended December 31, 2003. Additionally, for the three-month periods
ended December 31, 2003 and 2002, potential dilutive common shares under the warrant agreement and stock option plans were not included in the calculation of diluted earnings per share as these shares were antidilutive.



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3. Impact of Recently Issued Accounting Pronouncements



In December 2003, the Financial Accounting Standards Board (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 our disclosures and not our financial results. See Note 1.



In May 2003, the FASB issued SFAS No. 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 No. 150 required the reclassification of the redeemable preferred stock as debt and future preferred stock dividends to 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 $1.3 million.



4. Accrued Payroll and Related Benefits



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



|                                     |  |                   |     |                   |   |    
|------------------------------------ |  | ----------------- | --- | ----------------- | - | ---
|                                     |  | December 31, 2003 |     | September 30,2003
|Accrued payroll                      |  | $                 | 317 |                   | $ | 447
|Accrued health benefits              |  |                   | 223 |                   |   | 205
|Accrued vacation                     |  |                   | 290 |                   |   | 306
|                                     |  |                   |     |                   |   |    
|Accrued payroll and related benefits |  | $                 | 830 |                   | $ | 958
|                                     |  |                   |     |                   |   |    



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5. Debt



Our debt is summarized as follows (in thousands).



|                                                |  |                   |       |   |                   |   |       |  
|----------------------------------------------- |  | ----------------- | ----- | - | ----------------- | - | ----- | -
|                                                |  | December 31, 2003 |       |   | September 30,2003 |  
|Long-Term Debt                                  |  |                   |       |   |                   |   |       |  
|Senior secured convertible note - related party |  | $                 | 1,561 |   |                   | $ | 1,832 |  
|Other                                           |  |                   | 108   |   |                   |   | 127   |  
|Redeemable preferred stock                      |  |                   | 1,600 |   |                   |   | 1,450 |  
|                                                |  |                   |       |   |                   |   |       |  
|                                                |  |                   | 3,269 |   |                   |   | 3,409 |  
|Less current portion                            |  |                   | (875  | ) |                   |   | (74   | )
|                                                |  |                   |       |   |                   |   |       |  
|                                                |  | $                 | 2,394 |   |                   | $ | 3,335 |  
|                                                |  |                   |       |   |                   |   |       |  



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 5.00%. Accrued interest is not payable in cash but is to be converted into common stock upon a voluntary conversion date or maturity of the Note as described below. 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 feature, respectively.



The provisions of the Note and the 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 under the terms of the Note. As a
result, both the warrants and the Notes conversion feature (derivative features) are classified as current liabilities.



The original carrying value of the Note is being accreted to its face value as we record interest expense over its three-year term at a rate of $28,000 per fiscal
quarter. The effective rate of interest on the Note is 12.5%. The $336,000 liability relating to the derivative features of the Note will be adjusted over its three-year term and will be increased or decreased to reflect the 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



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accordance with the changes in the fair value of our common stock. Accordingly, our quarterly results will vary in
accordance with these fluctuations as we record non-cash expense or gains as a result of the increase or decrease in the fair value of the derivative features.



The carrying value at December 31, 2003, is $1.56 million and represents the $1.7 million outstanding principal less the unearned discount. The unearned discount
represents the estimated fair value of the derivative features of $336,000 less accretion totaling $196,000 as of December 31, 2003. The fair value of the derivative features totaled $260,000 and $207,000 on December 31, 2003 and September 30, 2003,
respectively. Accordingly, we recorded other expense totaling $53,000 for the three-month period ended December 31, 2003. The fair value of the derivative features decreased from $246,000 on September 30, 2002 to $182,000 on December 31, 2002.
Accordingly, we recorded other income totaling $64,000 for the three-month period ended December 31, 2002.



The Note is convertible at any time into our common stock (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. 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
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).



Tonga also received warrants to purchase an additional 500,000 shares of Common Stock
(subject to adjustment). One whole warrant entitles Tonga to acquire shares of Common Stock at an exercise price equal to 115% of the Conversion Price in effect on the date of the exercise 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.



On October 29, 2003, we received from Tonga a notice of conversion of $300,000 principal. On November 6, 2003, we issued 241,936 shares at a
Conversion Price equal to $1.24, which represented 90% of the average closing bid prices for the three trading days having the lowest closing bid price during the twenty trading days immediately prior to October 29. We also issued 19,522 shares at
the same conversion price for $24,208 accrued interest on the converted principal. The $2 million debenture was exchanged for the shares and a $1.7 million debenture 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.



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For illustration purposes, if the $1,700,000 debenture had been converted in full on February 2, 2004, the Conversion
Price would have been $2.42, and we would have issued 767,946 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 February 2. If the warrants had been exercised on February 2, 2004, the exercise price would have been $2.78 (115% of $2.42), and the aggregate exercise price for the warrants would have been $1,391,500 for the issuance of 500,000 shares
of Common Stock. Tonga would have owned 65% of our outstanding shares immediately after such full conversion and warrant exercise.



On December 30, 2003, we filed a Registration Statement on Form S-3 to register the shares issued in November 2003 as well as shares issuable pursuant to the conversion
of the note and exercise of the warrant. Tonga may accelerate the Note if the Registration Statement is not declared effective by the Securities and Exchange Commission (SEC) by May 28, 2004, which is 150 days after the filing date.



We are generally restricted from issuing additional equity securities without
Tongas consent, and Tonga has a right of first refusal as to certain subsequent financings. The Note is subject to mandatory conversion in three years and is secured by all of our assets. As part of the transaction, for a period of three years
from the date of the Note, Tonga has the right to appoint a majority of our board of directors. Tonga has appointed three members to the Board and as a result, controls ASI. In addition, 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.



6. 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. Until December 27, 2004, we are entitled to redeem the shares at $1.40 per share ($2.24 million). The redemption price increases $0.20 per year to
$1.60 on December 28, 2004, $1.80 on December 28, 2005 and $2.00 on December 28, 2006.



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The Agreement calls for a mandatory redemption payment of $800,000 on or before December 28, 2004, plus any accrued
dividends on such shares. Since its issuance, we have accrued but not declared or paid dividends on the preferred stock. If we pay 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 shares of the preferred stock. We must also pay accrued dividends totaling $96,000 on the mandatory redemption date. Further, 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 totaling approximately $367,000. The preferred stock earns a dividend at the annual rate of 5.00% of the then applicable redemption price on a cumulative, non-participating basis and has a
liquidation preference equal to the then applicable redemption value of shares outstanding at the time of liquidation.



The carrying value for the preferred stock is $1.6 million at December 31, 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.



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.



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7. Segment Information



We evaluate operations and make key strategic and resource decisions based on the 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 its 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 three months ended December 31, 2002, 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 and prepaid expenses (in thousands).



|                                     |  |                      |        |   |                      |       |                      |   |                 |        |   |      |   |             |       |   |       |        |  
|------------------------------------ |  | -------------------- | ------ | - | -------------------- | ----- | -------------------- | - | --------------- | ------ | - | ---- | - | ----------- | ----- | - | ----- | ------ | -
|                                     |  | Utilities Location A |        |   | Utilities Location B |       | Utilities Location C |   | Total Utilities |        |   | Land |   | Non-Segment |       |   | Total |       
|                                     |  |                      |        |   |                      |       |                     
|Three months ended December 31, 2003 |  |                      |        |   |                      |       |                      |   |                 |        |   |      |   |             |       |   |       |        |  
|Operations (as originally reported)  |  |                      |        |   |                      |       |                      |   |                 |        |   |      |   |             |       |   |       |        |  
|Revenues                             |  | $                    | 1,408  |   |                      | 1,146 |                      |  |                 | 2,554  |   |      |  |             |      |   |       | 2,554  |  
|Income/(loss) from operations        |  |                      | (1,164 | ) |                      | 142   |                      |  |                 | (1,022 | ) |      |  |             |      |   |       | (1,022 | )
|Interest expense, net                |  |                      |       |   |                      |      |                      |  |                 |       |   |      |  |             | (214  | ) |       | (214   | )
|                                     |  |                      |        |   |                      |       |                      |   |                 |        |   |      |   |             |       |   |       |        |  
|Net loss                             |  |                      |        |   |                      |       |                      |   |                 |        |   |      |   |             |       |   |       | (1,236 | )
|                                     |  |                      |        |   |                      |       |                      |   |                 |        |   |      |   |             |       |   |       |        |  
|Operations (as restated)             |  |                      |        |   |                      |       |                      |   |                 |        |   |      |   |             |       |   |       |        |  
|Revenues                             |  | $                    | 1,408  |   |                      | 1,146 |                      |  |                 | 2,554  |   |      |  |             |      |   |       | 2,554  |  
|Income/(loss) from operations        |  |                      | (1,164 | ) |                      | 142   |                      |  |                 | (1,022 | ) |      |  |             |      |   |       | (1,022 | )
|Interest expense, net                |  |                      |       |   |                      |      |                      |  |                 |       |   |      |  |             | (226  | ) |       | (226   | )
|                                     |  |                      |        |   |                      |       |                      |   |                 |        |   |      |   |             |       |   |       |        |  
|Other                                |  |                      |       |   |                      |      |                      |  |                 |       |   |      |  |             | (53   | ) |       | (53    | )
|                                     |  |                      |        |   |                      |       |                      |   |                 |        |   |      |   |             |       |   |       |        |  
|Net loss                             |  |                      |        |   |                      |       |                      |   |                 |        |   |      |   |             |       |   |       | (1,301 | )
|                                     |  |                      |        |   |                      |       |                      |   |                 |        |   |      |   |             |       |   |       |        |  
|Assets at December 31, 2003          |  |                      |        |   |                      |       |                      |   |                 |        |   |      |   |             |       |   |       |        |  
|Segment assets                       |  | $                    | 6,007  |   |                      | 1,809 |                      |  |                 |       |   |      |  |             |      |   |       | 7,816  |  
|Non-segment assets                   |  |                      |       |   |                      |      |                      |  |                 |       |   |      |  |             | 2,713 |   |       | 2,713  |  
|                                     |  |                      |        |   |                      |       |                      |   |                 |        |   |      |   |             |       |   |       |        |  
|Consolidated assets                  |  |                      |       |   |                      |      |                      |  |                 |       |   |      |  |             |      |   |       | 10,529 |  
|                                     |  |                      |        |   |                      |       |                      |   |                 |        |   |      |   |             |       |   |       |        |  



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|                                     |  |                     |       |   |                      |       |                      |     |   |                 |       |   |      |      |   |             |       |   |       |        |  
|------------------------------------ |  | ------------------- | ----- | - | -------------------- | ----- | -------------------- | --- | - | --------------- | ----- | - | ---- | ---- | - | ----------- | ----- | - | ----- | ------ | -
|                                     |  | UtilitiesLocation A |       |   | Utilities Location B |       | Utilities Location C |     |   | Total Utilities |       |   | Land |      |   | Non-Segment |       |   | Total |       
|Three months ended December 31, 2002 |  |                     |       |   |                      |       |                      |     |   |                 |       |   |      |      |   |             |       |   |       |        |  
|Operations (as originally reported)  |  |                     |       |   |                      |       |                      |     |   |                 |       |   |      |      |   |             |       |   |       |        |  
|Revenues                             |  | $                   | 2,367 |   |                      | 1,874 |                      | 104 |   |                 | 4,285 |   |      |     |   |             |      |   |       | 4,285  |  
|Income/(loss) from operations        |  |                     | (516  | ) |                      | 197   |                      | (15 | ) |                 | (334  | ) |      | (253 | ) |             |      |   |       | (587   | )
|Interest expense, net                |  |                     |      |   |                      |      |                      |    |   |                 |      |   |      |     |   |             | (50   | ) |       | (50    | )
|Other                                |  |                     |      |   |                      |      |                      |    |   |                 |      |   |      |     |   |             | 40    |   |       | 40     |  
|                                     |  |                     |       |   |                      |       |                      |     |   |                 |       |   |      |      |   |             |       |   |       |        |  
|Net loss                             |  |                     |       |   |                      |       |                      |     |   |                 |       |   |      |      |   |             |       |   |       | (597   | )
|                                     |  |                     |       |   |                      |       |                      |     |   |                 |       |   |      |      |   |             |       |   |       |        |  
|Operations (as restated)             |  |                     |       |   |                      |       |                      |     |   |                 |       |   |      |      |   |             |       |   |       |        |  
|Revenues                             |  | $                   | 2,367 |   |                      | 1,874 |                      | 104 |   |                 | 4,285 |   |      |     |   |             |      |   |       | 4,285  |  
|Income/(loss) from operations        |  |                     | (516  | ) |                      | 197   |                      | (15 | ) |                 | (334  | ) |      | (253 | ) |             |      |   |       | (587   | )
|Interest expense, net                |  |                     |      |   |                      |      |                      |    |   |                 |      |   |      |     |   |             | (61   | ) |       | (61    | )
|Other                                |  |                     |      |   |                      |      |                      |    |   |                 |      |   |      |     |   |             | 104   |   |       | 104    |  
|                                     |  |                     |       |   |                      |       |                      |     |   |                 |       |   |      |      |   |             |       |   |       |        |  
|Net loss                             |  |                     |       |   |                      |       |                      |     |   |                 |       |   |      |      |   |             |       |   |       | (544   | )
|                                     |  |                     |       |   |                      |       |                      |     |   |                 |       |   |      |      |   |             |       |   |       |        |  
|Assets at September 30, 2003         |  |                     |       |   |                      |       |                      |     |   |                 |       |   |      |      |   |             |       |   |       |        |  
|Segment assets                       |  | $                   | 7,743 |   |                      | 1,284 |                      |    |   |                 |      |   |      |     |   |             |      |   |       | 9,027  |  
|Non-segment assets                   |  |                     |      |   |                      |      |                      |    |   |                 |      |   |      |     |   |             | 2,753 |   |       | 2,753  |  
|                                     |  |                     |       |   |                      |       |                      |     |   |                 |       |   |      |      |   |             |       |   |       |        |  
|Consolidated assets                  |  |                     |      |   |                      |      |                      |    |   |                 |      |   |      |     |   |             |       |   |       | 11,780 |  
|                                     |  |                     |       |   |                      |       |                      |     |   |                 |       |   |      |      |   |             |       |   |       |        |  



8. Litigation and Other
Contingencies



On June 26, 2002, two of our shareholders, the Epner Family
Limited Partnership and the Braverman Family Limited Partnership, (Claimants), initiated arbitration proceedings against us. They alleged that certain representations and warranties which we made in connection with our acquisition of
Cartotech in June 1998 were false because our financial condition allegedly was worse than depicted in its financial statements for 1997 and the unaudited reports for the first two quarters of fiscal 1998. In December 2003, an American Arbitration
Association panel ruled in our favor, awarding zero damages to the Claimants and ordering each side to bear its own attorneys fees. The Claimants also filed suit against four of our former officers for alleged violation of Texas and Indiana
securities laws in connection with our acquisition of Cartotech, Inc. The case was dismissed on January 30, 2004.



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We submitted to our insurance carrier legal bills for the defense of the proceedings initiated by the Claimants. Defense
costs through December 31, 2003 totaled approximately $2,100,000. Prior to December 31, 2003, we received $1,400,000 from our insurance carrier as an initial reimbursement of these defense costs. We also received a $1,000,000 overpayment from our
insurer immediately prior to December 31, 2003 which we recorded as a current liability. We remitted the overpayment to our insurer in January 2004. We recorded approximately $450,000 of defense costs as a current liability as of December 31, 2003.
We have also recorded a receivable representing an amount we expect to receive as reimbursement of defense costs from our insurer.



Robert Montgomery, one of our former officers, 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 are vigorously defending this lawsuit.



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.



9. Concentration of Credit Risk



At December 31, 2003, we had multiple contracts with three customers that represented 75% (54%, 11% and 10%, respectively) of the total balance of net accounts receivable
and revenue in excess of billings. Revenues from these customers for the fiscal quarter ended December 31, 2003 were 48% (8%, 10%, and 30%, respectively) of total revenue. Additionally, for the quarter ended December 31, 2003, one other customer
comprised another 19% of total revenues. At September 30, 2003, these three customers represented 73% (58%, 7% and 8%, 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 that sufficient billing milestones or contract completion will be achieved during fiscal 2004 and the first quarter of fiscal 2005 such that the majority of revenue
in excess of billings for these customer contracts will be collected.



10.
Liquidity



The accompanying financial statements have been prepared on a
going concern basis that contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During the fiscal years of 2000 through 2004, we experienced significant operating losses with corresponding
reductions in working capital and net worth, excluding the impact of



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debt forgiveness, and we do not currently have a line of credit in place to support operating cash flow requirements. Our
revenues and backlog have also decreased substantially during the same period. The Note also has certain immediate call provisions that are outside of our control, and if triggered and exercised, would make it difficult for us to meet accelerated
debt payments. These factors, among others, raise substantial doubt about our ability to continue as a going concern.



To address the going concern issue, we have implemented financial and operational restructuring plans designed to improve operating efficiencies, reduce and eliminate
cash losses and position ASI for profitable operations. The consolidation of our production operations 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, management believes that our continued turnaround efforts, if successful, will improve operations and generate sufficient cash to meet our obligations in a timely manner.



|11. | Restatement
|--- | -----------



We have restated our unaudited consolidated balance sheets at December 31, 2003, and our unaudited consolidated statements of operations, shareholders equity, and cash flows for the three-month periods ended
December 31, 2003 and 2002. This Form 10-Q/A includes adjustments made in Form 10K/A for the year ended September 30, 2003, which restated our consolidated balance sheets at September 30, 2003 and 2002, and our consolidated statements of operations,
shareholders 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.



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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 re-evaluated the accounting treatment of the Note, the warrants and the conversion features under Emerging Issues Task Force (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 net cash
settlement by the holder of the Notes conversion feature and warrants 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 is not effective 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 with 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.



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.



The adjustments required in order to comply with EITF 00-19 are non-operational in nature and include non-cash interest charges and non-cash other income, there are no
adjustments with respect to EITF 00-19 that affect the consolidated statements of cash flows other than the change in net earnings (loss).



Effects of the Restatement on the Quarter Ended December 31, 2003



The derivative instruments have been recognized at fair value as of December 31, 2003, resulting in a $53,000 increase to other expense. The carrying value of the Note
has been adjusted to record the amortization of the discount,which resulted in an additional $12,000 interest expense for the quarters ended December 31, 2003. The net result of these adjustments increased the net loss available to common
shareholders and the accumulated deficit by $65,000. Net loss per share available to common shareholders increased by $0.07.



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Effects of the Restatement on the Quarter Ended December 31, 2002



The derivative instruments have been recognized at fair value as of December 31, 2002,
resulting in a $64,000 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 $12,000 interest expense for the quarters ended December 31, 2002. The net
result of these adjustments decreased the net loss available to common shareholders and the accumulated deficit by $53,000. Net loss per share available to common shareholders decreased by $0.06.



The restatements have the following impact on the consolidated balance sheets as of December
31 [and September 30], 2003, and the related consolidated statements of operations and shareholders equity for the quarters ended December 31, 2003 and 2002:



|                                                |  |                              |         |   |                    |   |         |                       |  |   |             |   |  |   |         |  
|----------------------------------------------- |  | ---------------------------- | ------- | - | ------------------ | - | ------- | --------------------- |  | - | ----------- | - |  | - | ------- | -
|                                                |  | December 31, 2003(unaudited) |         |   | September 30, 2003 |  
|                                                |  | AsPreviously Reported        |         |   | As Restated        |   |         | AsPreviously Reported |  |   | As Restated |  
|                                                |  | (In thousands)               |        
|CONSOLIDATED BALANCE SHEET:                     |  |                              |         |   |                    |   |         |                       |  |   |             |   |  |   |         |  
|Fair value of derivative features-related party |  |                              |        |   |                    |   | 260     |                       |  |   |            |   |  |   | 207     |  
|Total current liabilities                       |  |                              | 5,109   |   |                    |   | 5,369   |                       |  |   | 4,495       |   |  |   | 4,702   |  
|Long-term debtrelated party                    |  | $                            | 1,617   |   |                    | $ | 1,561   |                       |  | $ | 1,900       |   |  | $ | 1,832   |  
|Total long-term debt                            |  |                              | 2,450   |   |                    |   | 2394    |                       |  |   | 3,403       |   |  |   | 3,335   |  
|Total liabilities                               |  |                              | 7,559   |   |                    |   | 7,763   |                       |  |   | 7,898       |   |  |   | 8,037   |  
|Common stock                                    |  |                              | 33,363  |   |                    |   | 32,839  |                       |  |   | 33,039      |   |  |   | 32,839  |  
|Accumulated deficit                             |  |                              | (30,393 | ) |                    |   | (30,397 | )                     |  |   | (29,157     | ) |  |   | (29,096 | )
|Total shareholders equity                      |  |                              | 2,970   |   |                    |   | 2,766   |                       |  |   | 3,882       |   |  |   | 3,743   |  



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|                                                             |  |                           |        |   |             |   |        |                       |  |   |             |   |  |   |       |  
|------------------------------------------------------------ |  | ------------------------- | ------ | - | ----------- | - | ------ | --------------------- |  | - | ----------- | - |  | - | ----- | -
|                                                             |  | 2003                      |        |   | 2002        |  
|                                                             |  | AsPreviously Reported     |        |   | As Restated |   |        | AsPreviously Reported |  |   | As Restated |  
|                                                             |  | (Unaudited, in thousands) |        |   |             |   |        |                       | 
|CONSOLIDATED STATEMENTS OF OPERATIONS:                       |  |                           |        |   |             |   |        |                       |  |   |             |   |  |   |       |  
|Interest expense, net                                        |  | $                         | (214   | ) |             | $ | (226   | )                     |  | $ | (50         | ) |  | $ | (61   | )
|Other income (expense)                                       |  |                           |       |   |             |   | (53    | )                     |  |   | 40          |   |  |   | 104   |  
|Total other income (expense)                                 |  |                           | (214   | ) |             |   | (278   | )                     |  |   | (10         | ) |  |   | 43    |  
|Net loss                                                     |  |                           | (1,236 | ) |             |   | (1,301 | )                     |  |   | (597        | ) |  |   | (544  | )
|Net loss available to common shareholders                    |  |                           | (1,236 | ) |             |   | (1,301 | )                     |  |   | (817        | ) |  |   | (764  | )
|Basic loss per common share: available to common shareholder |  |                           | (1.26  | ) |             |   | (1.33  | )                     |  |   | (0.99       | ) |  |   | (0.93 | )



12. Subsequent Event



On January 28, 2004, our Chief Executive Officer, J. Norman Rokosh,
resigned as our President and Chief Executive Officer, effective February 29, 2004, and as a member of the Board of Directors, effective January 28, 2004, for personal and family reasons. Mr. Rokosh will continue to work with the Company after
February to ensure a smooth transition to new leadership subject to mutually acceptable terms which have yet to be finalized.



Item 2. Managements Discussion and Analysis and Results of Operations.



THE DISCUSSION OF THE 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-Q/A. THIS FORM 10-Q/A CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE STATEMENTS CONTAINED IN THIS FORM 10-Q/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-Q/A, OR IN THE DOCUMENTS INCORPORATED BY REFERENCE INTO THIS FORM 10-Q/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 REGARDING THE COMPANYS STRATEGY, FUTURE
SALES, FUTURE EXPENSES, FUTURE LIQUIDITY AND CAPITAL RESOURCES. ALL FORWARD-LOOKING STATEMENTS IN THIS FORM 10-Q/A ARE BASED UPON INFORMATION AVAILABLE TO THE COMPANY ON THE DATE OF THIS FORM 10-Q/A, AND THE COMPANY ASSUMES NO OBLIGATION TO UPDATE
ANY SUCH FORWARD-LOOKING STATEMENTS. THE COMPANYS ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN THIS FORM 10-Q/A. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES (CAUTIONARY STATEMENTS) INCLUDE, BUT ARE
NOT LIMITED TO, THOSE DISCUSSED IN ITEM 1. BUSINESSRISK FACTORS AND ELSEWHERE IN THE COMPANYS ANNUAL REPORT ON FORM 10-K, WHICH ARE INCORPORATED BY REFERENCE HEREIN AND IN THIS REPORT. ALL SUBSEQUENT WRITTEN AND ORAL
FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY, OR PERSONS ACTING ON THE COMPANYS BEHALF, ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS.



Overview



Founded in 1981, we are a provider of data conversion and digital mapping services to users of customized geographic information systems. Since fiscal 2000, our operating
results have been affected by a downturn in macroeconomic and industry market conditions and increased



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competition primarily from offshore competitors. These factors have resulted in a reduction of timely order flow and a
corresponding reduction in revenue generated and continued operating losses. In response to reduced demand, we have reduced the size of our operations as well as our general and administrative functions. We added $4.2 million in new contracts during
the quarter ended December 31, 2003. We must continue to enter into new contracts in order to achieve profitability.



Our operating results have also been adversely affected by litigation resulting from the restatement of our financial statements for fiscal 1999, requiring the use of
both financial resources and managements time and focus. The final claim against the Company related to this matter was resolved in December 2003 when an arbitration panel ruled in our favor.



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.



During a review of the terms and provisions of the Note that we issued on April 2, 2002, we concluded that a default provision in the Note requires the warrant and conversion feature to be accounted for as
derivatives. 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 derivatives.



We restated our financial statements for fiscal 2003 and 2002 to reflect the proper
accounting for the derivative features of the Note and warrants. The warrants were reclassified to current liabilities, which resulted in a $200,000 decrease to Common Stock. We adjusted the original carrying value of the Note to $1.664 million
after giving effect to the $336,000 fair value of the derivative features. The carrying value will accrete to the face value of the Note as we record interest expense over its three-year term at a rate of $28,000 per fiscal quarter. The $336,000
liability relating to these derivative features will be decreased over its three-year term 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. Accordingly, 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 derivative features.



We have restated our consolidated financial statements for the quarters ended December 31, 2003 and 2002. The adjustments are non-operational in nature and include non-cash interest charges and non-cash other income
and expense. The derivative instruments have been recognized at fair value as of December 31, 2003, resulting in other expense totaling $53,000.



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The change in fair value of the derivative instruments for the quarter ending December 31, 2002, resulted in other income
totaling $64,000. Amortization of the derivative instruments resulted in an additional $12,000 and $11,000 interest expense for the quarters ended December 31, 2003 and 2002, respectively. The net result of these adjustments increased the net loss
available to common shareholders and the accumulated deficit by $65,000 and net loss per share available to common shareholders increased by $0.07 in the quarter ended December 31, 2003. The net result of these adjustments decreased the net loss
available to common shareholders and the accumulated deficit by $53,000 and net loss per share available to common shareholders decreased by $0.06 in the quarter ended December 31, 2002.



We will be in default of the Note if the Registration Statement on Form S-3 filed with the SEC on December 30, 2003, registering shares of
common stock issued or issuable upon conversion of the Note and exercise of the warrant is not declared effective on or prior to May 28, 2004.



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. 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 our 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 that 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.



We experience annual and quarterly fluctuations in production costs, salaries, wages and
related benefits and subcontractor costs. These fluctuations are the result of various factors, including: worker utilization and productivity; availability and quality of customer required deliverables and information; customer responsiveness and
turnaround on inquires and deliveries; and weather conditions that impact ground survey requirements. We utilize InfoTech Enterprises Ltd., an India-based company, for more than 90% of our offshore production services. These offshore services
currently represent less than 10% of our total production costs.



Backlog
increases when new contracts are signed and decreases as revenues are recognized. As of December 31, 2003, our backlog was $9.7 million, $6.5 million of which we expect to fill in the remaining nine months of fiscal 2004. Backlog totaled $7.9
million at September 30, 2003 and $17.4 million at December 31, 2002. We believe backlog levels reflect changes in macroeconomic and industry market conditions. Adverse market conditions were first encountered in fiscal 2000 which have continued
through fiscal 2004.



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We have been awarded several projects that are greater than $2 million or longer than two years in duration, which can
increase our risk due to inflation, as well as changes in schedule, customer expectations and funding availability. Our contracts are generally terminable on short notice, and while in our experience such termination is rare, there is no assurance
that we will receive all of the revenue anticipated under signed contracts.



We
engage in research and development activities, however these amounts are not significant and represent less than $100,000 per year. The majority of these activities occur as we develop software or design a product 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. We
retain ownership of such proprietary software or products. These amounts are not significant and represent less than 5% of our total operating expense.



We streamlined our operations throughout fiscal year 2002 and 2003, and consolidated our four main production centers to two solution centers in Texas and Wisconsin. On
January 2, 2003, we relocated our headquarters from Indianapolis, Indiana, to our lower-cost facility in San Antonio, Texas. Beginning in 2003 and through fiscal 2004, we reduced the number of corporate and administrative staff by 40%, including a
reduction in the number of highly compensated administrative personnel. We have reduced our legal and professional fees as we settled litigation against the Company. We currently employ approximately 137 full-time employees.



Results of Operations



The following table sets forth, for the periods indicated, selected consolidated statements of operations data expressed as a percentage of
sales:



|                                                        |  |                                 |    |  |       |   
|------------------------------------------------------- |  | ------------------------------- | -- |  | ----- | --
|                                                        |  | Three months ended December 31, |   
|                                                        |  | 2003                            |    |  | 2002  |   
|                                                        |  | (As restated)                   |   
|PERCENTAGE OF REVENUES:                                 |  |                                 |    |  |       |   
|Revenues                                                |  | 100.0                           | %  |  | 100.0 | % 
|                                                        |  |                                 |    |  |       |   
|Costs and expenses                                      |  |                                 |    |  |       |   
|Salaries, wages and related benefits                    |  | 70.8                            |    |  | 60.6  |   
|Subcontractor costs                                     |  | 31.2                            |    |  | 14.5  |   
|Other general and administrative                        |  | 33.8                            |    |  | 29.3  |   
|Depreciation and amortization                           |  | 3.3                             |    |  | 3.4   |   
|Severance and related costs                             |  | 0.9                             |    |  | 5.9   |   
|                                                        |  |                                 |    |  |       |   
|Loss from operations                                    |  | (40.0                           | )  |  | (13.7 | ) 
|Other income (expense), net                             |  | (10.9                           | )  |  | 1.0   |   
|                                                        |  |                                 |    |  |       |   
|Net loss                                                |  | (50.9                           | )  |  | (12.7 | ) 
|                                                        |  |                                
|Accretion of discount and dividends on preferred shares |  |                                |    |  | (5.2  | ) 
|                                                        |  |                                 |    |  |       |   
|Net loss available to common shareholders               |  | (50.9                           | )% |  | (17.9 | )%
|                                                        |  |                                 |    |  |       |   



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Three Months Ended December 31, 2003 and 2002



Revenues. We recognize revenues as services are performed. Our revenues decreased 40% for the three months ended December 31, 2003,
and totaled $2.6 million as compared to $4.3 million for the same period in fiscal 2003, a decrease of $1.7 million. The decrease in revenues is due to a lower number of active contracts in the fiscal 2004 quarter, as well as the impact of a change
in the estimated percentage of completion on several contracts. The level of new contract signings in fiscal 2002 and 2003 was lower than in previous years and, as a result, revenues have decreased as well. We believe this decrease in contract
signings is attributable to lower demand for and reduced spending levels in information technology products and services both in general and specific to the GIS industry.



Salaries, Wages and Related Benefits. Salaries, wages and related benefits include employee compensation for production, marketing,
selling, and administrative and executive employees. Salaries, wages and related benefits decreased $787,000 for the first quarter of fiscal 2004 as compared to the same quarter in fiscal 2003. The decrease was a result of reductions in our
workforce related to reduced revenue volume, our decision to subcontract a portion of our production work to offshore subcontractors, and our use of domestic subcontractors to manage fluctuating labor needs.



Subcontractor Costs. Subcontractor costs include production costs incurred through the
use of third parties for production tasks such as data conversion services to meet contract requirements, and field survey services. The use of domestic subcontractors enables us to better manage the fluctuations in labor requirements as we complete
and begin new projects as well as during the various phases of contracts. Subcontractor costs increased $175,000 for the three months ended December 31, 2003, as compared to the same period in fiscal 2003 due to our increased use of subcontractors
on certain projects. A decrease in production salaries, wages and related benefits offset the increase.



Other General and Administrative Costs. Other general and administrative costs include rent, maintenance, travel, supplies, utilities, insurance and professional services. Such costs decreased $393,000 for the
first quarter of fiscal 2004 from the comparable period in fiscal 2003, a decrease of 31%. The decrease was a result of the implementation of controls, the reduced cost related to fewer general and administrative employees, and lower professional
fee expenses.



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Depreciation.Depreciation decreased $60,000 in the first three months of fiscal 2004 as compared to the fiscal
2003 quarter due to some equipment becoming fully depreciated. The replacement cost on computer equipment is significantly lower than the replaced items. Additionally, we have been able to upgrade existing equipment, which has minimized our need to
purchase new equipment. Accordingly, depreciation expense has decreased in recent periods.



Severance and Related Costs. We incurred severance expense of $22,000 for the three-month period ended December 31, 2003, as compared to $253,000 for the fiscal 2003 quarter. The expense in the fiscal 2003
quarter was incurred as a result of the termination of an employment contract that provided for a significant severance payment.



Interest Expense. Interest expense increased $165,000 in the first quarter of fiscal 2004 as compared to the first quarter of fiscal 2003. The increase was 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, and for the first fiscal
quarter of 2003, the accretion was recorded as a charge to retained earnings. See Note 6. Other interest expense is comprised principally from interest charges related to the Note. See Note 5.



Other. Other income or expense is principally a result of the change in fair value of
the derivative features of the Note. The fair value of the derivative features totaled $260,000 and $207,000 on December 31, 2003 and September 30, 2003, respectively. Accordingly, we recorded other expense totaling $53,000 for the three-month
period ended December 31, 2003. The fair value of the derivative features decreased from $246,000 on September 30, 2002 to $182,000 on December 31, 2002. Accordingly, we recorded other income totaling $64,000 for the three-month period ended
December 31, 2002.



Income Taxes. Federal income tax expense for fiscal
year 2004 is projected to be zero. Accordingly, an effective federal income tax rate of 0% was recorded for the three months ended December 31, 2003 and 2002. As a result of the uncertainty that sufficient future taxable income can be recognized to
realize additional deferred tax assets, no income tax benefit has been recognized for the three months ended December 31, 2003, and 2002.



Net Loss. Our net loss of $1,301,000 in the first quarter of fiscal 2004 was $757,000 higher compared to the $544,000 net loss from the same period of fiscal 2003.
The higher net loss is principally due to the lower level of revenue generated by fewer contracts and completion of less profitable contracts as compared to the same period in fiscal 2003.



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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 December 31, 2003. The Note, which matures in 2005, carries a mandatory redemption clause that provides for its conversion into Common Stock at the then-current conversion rate. See Note 5.



|                           |  |                                    |      |                                 |      |       |      |   |       |       |  |   |      
|-------------------------- |  | ---------------------------------- | ---- | ------------------------------- | ---- | ----- | ---- | - | ----- | ----- |  | - | -----
|                           |  | Nine monthsendingSeptember 30 2004 |      | Fiscal year ending September 30 |      |      
|                           |  |                                    | 2005 |                                 | 2006 |       | 2007 |   | Total
|Operating Leases           |  | $                                  | 226  |                                 | $    | 103   |      |  |       |      |  | $ | 329  
|Debt                       |  |                                    | 56   |                                 |      | 1,752 |      |  |       |      |  |   | 1,808
|Preferred Stock redemption |  |                                    |     |                                 |      | 800   |      |  |       | 1,851 |  |   | 2,651
|                           |  |                                    |      |                                 |      |       |      |   |       |       |  |   |      
|Total                      |  | $                                  | 282  |                                 | $    | 2,655 |      |  |       | 1,851 |  | $ | 4,788
|                           |  |                                    |      |                                 |      |       |      |   |       |       |  |   |      



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 December 31, 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 will not 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.



It is an event of default if we do not have a Registration Statement filed with the SEC on December 30, 2003 is not declared effective on or prior to May 28, 2004, which date is 150 days after the filing of the
Registration Statement. 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 28, 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 the 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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We may owe liquidated damages to Tonga until such time as our Registration Statement on Form S-3 filed with the SEC on
December 30, 2003 is declared effective. Under the terms of the Registration Rights Agreement, liquated damages may be sought beginning on April 29, 2004, if the Registration Statement filed on December 30, 2003, has not been declared effective by
the SEC. If Tonga requests, we will be obligated to pay an amount in cash or shares of our common stock, as liquidated damages to Tonga, equal to 2% for each calendar month or portion thereof of the principal amount of the Note plus the principal
amount of the Note that has been converted to the extent any of the conversion shares issued upon such conversion have not been sold from April 29, 2004 and the time at which the Registration Statement becomes effective. The liquidated damages
payments are due and payable immediately upon demand in immediately available funds. If Tonga elects to be paid in our Common Stock, the number of shares will be based on the liquidated damage amount divided by the Conversion Rate (as defined in the
Note).



Historically, the principal source of our liquidity has consisted of
cash flow from operations supplemented by secured lines-of-credit and other borrowings. At December 31, 2003, our debt obligations included the Note with a face value of $1.7 million that is convertible into common stock upon its maturity in April
2005, redeemable preferred stock with a current redemption value of $2.24 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 Tongas consent. Tonga also has a right of first refusal as to certain subsequent financings.



Until December 28, 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 he December 28, 2006, at which time the outstanding shares must be redeemed at a price of $2.00 per share. Since its issuance, we have accrued, but not
declared or paid, dividends on the preferred stock. Accrued dividends are included as a current liability on our consolidated balance sheet. The preferred stock earns a dividend at the annual rate of 5% 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.



On December 28, 2004, we must redeem $800,000 of our preferred stock and pay $96,000 in accrued dividends. If we make the $800,000 mandatory redemption payment on or
before December 27, 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 $1.40 per share prior to 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 outstanding Note, plus accrued interest, automatically converts into Common Stock upon its maturity on April 2, 2005,
at a conversion rate specified in the Note (see Note 5). Tonga, at its option, may convert the outstanding principal and accrued interest into Common Stock at any time at the Conversion Price in effect at the time of conversion. If Tonga converts
the Note in full and exercises the related warrants, they will hold a majority ownership in ASI. The maximum potential ownership by Tonga will be dependent upon the Conversion Price, which varies with the fluctuation of 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 55% of our Common Stock upon full conversion
and exercise of the warrants.



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. On November 6, 2003, we issued 241,936 shares for the conversion of the $300,000 principal 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 in payment of $24,208 accrued interest 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.



We are generally restricted from issuing additional equity securities without Tongas consent, and Tonga has a right of first refusal as to certain subsequent financings. The Note is subject to mandatory
conversion in three years and is secured by all of our assets. As part of the transaction, for a period of three years from the date of the Note, Tonga has the right to appoint a majority of our Board of Directors. Tonga has appointed three members
to the Board and as a result, controls ASI. In addition, 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 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 in the September 30, 2003, financial statements that expressed substantial doubt about our ability to
continue as a going concern.



To address the going concern issue, we have
implemented financial and operational restructuring plans designed to improve operating efficiencies, reduce and eliminate cash losses and position the Company for profitable operations. The consolidation of our production operations to two solution
centers has resulted in lower general and administrative costs and improved operating



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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 if we are 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.



Our cash flow is significantly affected by customer contract terms and progress achieved on projects. Fluctuations in cash flow from operations 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, an account 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 perform 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 December 31, 2003, we had multiple contracts with three customers that represented 75% (54%, 11% and 10%, 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 that sufficient billing milestones or contract completion will be achieved during fiscal 2004 and the first fiscal quarter of 2005 such that the majority of
revenue in excess of billings for these customer contracts will be collected and generate cash during those fiscal periods.



Our operating activities generated $102,000 cash during the first three months of fiscal 2004, compared to net cash used totaling $117,000 in the same period in fiscal
2003. We collected a significant amount of cash related to accounts receivable in the first three months of fiscal 2004 period and reduced our current liabilities with the proceeds of these collections. We also received a duplicate payment from our
insurer of $1 million immediately prior to the end of the quarter. We recorded the erroneous payment as a current liability and returned the funds immediately subsequent to the end of the quarter. Net cash generated from collections and payments
related to such insurance activity totaled $573,000 and is included in the net cash generated from our operating activities.



We purchased equipment totaling $3,000 in the quarter ending December 31, 2003 as compared to purchases totaling $108,000 in the quarter ending December 31, 2002. We made
principal payments on notes payable totaling $19,000 and $43,000 in the quarters ending December 31, 2003 and 2002, respectively.



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In order to fund our short term operating activities, including completing existing contracts and funding new contracts,
we must collect more cash from our customers than we will pay to our employees and suppliers. We must reduce our revenue in excess of billings through substantial completion of the related contracts in order to meet our debt obligations in fiscal
2004 and 2006.



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 significant subjective 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 our 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 many 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. This could also result in the recognition of losses in the final stages of the contract. 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. We routinely assess 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. This could negatively affect our operating results.



Litigation.We are subject to various claims, lawsuits and administrative proceedings.
Liabilities and costs associated with these matters require estimates and judgment based on professional knowledge and experience of management and our legal counsel. When the estimates of our exposure for claims or pending or threatened litigation
matters meet the criteria of SFAS No. 5, Accounting for Contingencies, amounts are recorded as charges to net earnings. The ultimate resolution of our exposure may change as further facts and circumstances become known.



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Income Taxes.Fiscal year 2002 was the only year out of the last three fiscal years in which we have reported net
income (and taxable income), and we reported a net loss in fiscal 2003. Prior fiscal year losses have 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 an 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 might 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 40% 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.



Litigation



We have been a party to various litigation matters which are described in Note 8 to our
Financial Statements included herein and in Part II, Item 1 of this quarterly report on Form 10-Q/A, the majority of other litigation matters have been settled as of the date of this filing. We recorded liabilities arising from these matters and a
receivable from our insurer for a portion of those liabilities. We expect to recover an amount from our insurer equivalent to our recorded liabilities, although we cannot assure that such amount will be collected.



Item 3. 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 are used for speculative or trading purposes and the amounts
involved are not considered material. We did not utilize any such techniques during the current reporting period, but may employ such techniques in future periods.



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Item 4. Controls and Procedures.



We carried out
an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer carried out an evaluation 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)) as of the end of the period covered by this quarterly report. Based upon that evaluation, the Chief Executive Officer
and Chief Financial Officer have concluded that the disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to ASI (including its 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-15(f) and 15d-15(f) of the Exchange Act) that occurred during the period covered by this quarterly report that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.



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Part II

Other Information



Item 1. Legal Proceedings.



Information regarding
our legal proceedings can be found under Note 8, Litigation and Other Contingencies, to the Condensed Consolidated Financial Statements.



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Item 6. Exhibits and Reports on Form 8-K.



(a)
Exhibits:



|     |  |                                                     
|---- |  | ----------------------------------------------------
|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 Forms 8-K:



|                                                                                                                      
|----------------------------------------------------------------------------------------------------------------------
|Current Report on Form 8-K filed on December 18, 2003 announcing the Companys Prevailing in Epner Arbitration        
|                                                                                                                      
|Current Report on Form 8-K filed on December 29, 2003 announcing the Companys Year End Results                       
|                                                                                                                      
|Current Report on Form 8-K filed on January 6, 2004 announcing the Companys Provision of an Update On Auditor
Opinion
|                                                                                                                      
|Current Report on Form 8-K filed on January 28, 2004 announcing the Resignation of the Companys CEO                  



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SIGNATURES



Pursuant to the requirements 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. (Registrant)
|                   | 
|Date: May 17, 2004 |  | /s/ Wayne B. Fuquay                  
|                   |  | Wayne B. Fuquay                      
|                   |  | President and Chief Executive Officer
|                   | 
|Date: May 17, 2004 |  | /s/ Lori A. Jones                    
|                   |  | Lori A. Jones                        
|                   |  | Chief Financial Officer              



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