<PAGE>
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
     1934

                  For the fiscal year ended December 31, 2001

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the transition period from____________________ to_________________.


                         Commission file number: 0-25620
                                                 -------

                                  A.S.V., INC.
                                 --------------
             (Exact name of registrant as specified in its charter)

            MINNESOTA                                   41-1459569
           -----------                               ------------------
 State or other jurisdiction of               I.R.S. Employer Identification No.
 incorporation of organization

840 LILY LANE, P.O. BOX 5160, GRAND RAPIDS, MN 55744         (218) 327-3434
----------------------------------------------------     -----------------------
      Address of principal executive offices             Registrant's telephone
                                                         number, including area
                                                                 code

  Securities registered under Section 12(b) of the Exchange Act:

                                      NONE
                                      ----
                               Title of each class

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

                          COMMON STOCK, $.01 PAR VALUE
                          ----------------------------
                               Title of each class

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

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

         Based on the closing sale price at March 15, 2002 of $12.70, the
aggregate market value of the registrant's Common Stock held by nonaffiliates
was $85,390,266.

         As of March 15, 2002, 10,179,319 shares of the registrant's Common
Stock were issued and outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE:
                      ------------------------------------

    Portions of the registrant's Proxy Statement for its May 31, 2002 Annual
 Meeting, which will be filed by April 30, 2002, are incorporated by reference
                                  in Part III.



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                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

         A.S.V., Inc. was incorporated in Minnesota in July 1983 and its
wholly-owned subsidiary, A.S.V. Distribution, Inc., was incorporated in
Minnesota in January 1989. A.S.V., Inc. and A.S.V. Distribution, Inc. are
collectively referred to herein as "ASV" or the "Company."

         ASV designs, manufactures and sells track-driven all-season vehicles.
The Company has three principal product lines, the Posi-Track(TM) product line,
the R-Series product line and the MTL undercarriage product line. All of these
product lines use a rubber track suspension system that takes advantage of the
benefits of both traditional rubber wheels and steel tracks. Rubber track
vehicles provide the traction, stability and low ground pressure necessary for
operation on soft, wet, muddy, rough, boggy, slippery, snowy or hilly terrain,
but, unlike steel track vehicles, can be driven on groomed, landscaped and paved
surfaces without causing damage. The Company's products are versatile machines
used in the construction, agricultural, landscaping, trail grooming and
maintenance, vineyard, military, wildlife management and other markets.

         The Company has the following models in its Posi-Track product line:
the MD-70, the 2800 series, the HD 4500 series and the 4810. The Company has
three models in its R-Series product line, the RC-30(TM), the R-50(TM) and the
RC-50(TM). The Company manufactures undercarriages for use by Caterpillar Inc.
(Caterpillar) on its Multi-Terrain Loader product line. The Company also private
label manufactures its RC-30 product for Polaris Industries Inc. (Polaris).

         The Company has also produced two models of machines primarily for
over-the-snow applications, the Track Truck(R) and the Posi-Track DX 4530.

         Track Truck is a registered trademark, and Posi-Track, RC-30, R-50,
RC-50, Maximum Traction Support System, Posi-Turn and Snow Saver are trademarks,
of ASV, Inc. This Annual Report also contains trademarks of other companies.

CURRENT YEAR DEVELOPMENTS

         Agreement with Caterpillar

         In October 2000, the Company and Caterpillar entered into an alliance
agreement to jointly develop and manufacture a new product line of Caterpillar
rubber track skid steer loaders called Multi-Terrain Loaders, or MTLs. The
product line, which is expected to include five new models, will feature
Caterpillar's patented skid steer loader technology and ASV's patented Maximum
Traction Support System(TM) rubber track undercarriage. The machines are
expected to complement existing models in both ASV's and Caterpillar's current
product lines. They are being sold through the Caterpillar dealer network. The
Company began manufacturing the undercarriage for use on two of the MTLs in the
second quarter of 2001, with the development of undercarriages on the remaining
models continuing.

         Agreement with Polaris

         In January 2001, the Company entered into a licensing agreement that
allows Polaris Industries Inc. (Polaris) to sell an ASV-built, rubber track,
all-surface utility loader similar to the Company's RC-30 All Surface Loader.
The agreement gives Polaris the right to market and sell the utility loader
under its own nameplate through its worldwide dealer network. Polaris purchases
the machines, as well as parts and attachments, directly from ASV. The agreement
also provides the option at some future point for Polaris to manufacture the
machines under a royalty arrangement if volume exceeds ASV's competitive
capabilities. The Company began manufacturing the private label machines for
Polaris in the first quarter of 2001.

         Stock Repurchase Plan

         In September 2001, the Company authorized the implementation of a stock
buy-back program under which ASV may repurchase up to $5 million of its common
stock in the open market. The Company is funding the



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repurchases with available funds. The repurchase program is expected to last not
more than twelve months or until such amount of stock is repurchased. As of
March 15, 2002, the Company had repurchased 52,780 shares of its common stock
under this buy-back program at an aggregate purchase price of approximately
$565,000.

         New Models

         In January 2002, the Company introduced two new models in its R-Series
product line, the R-50 and the RC-50. These two products are expected to compete
with skid-steers utilizing engines in the 44 to 50 horsepower range, weighing
between 4,500 and 5,500 pounds with an operating capacity of 1,350 to 1,600
pounds. Weighing 4,700 pounds, with an operating capacity of 1,500 pounds and a
50 horsepower engine, the R-50 and RC-50 fall between the Company's smaller
RC-30 and its larger Posi-Tracks. The main difference between the two models is
the type of track and loader controls each machine utilizes. The Company began
production of the RC-50 in March 2002 and expects to begin production of the
R-50 in April 2002.

EXPLANATORY NOTE

         With the increased production and sales volume of the Company's
Posi-Track crawler/tractors (specifically the MD-70, the 2800 series, the HD
4500 series and the 4810) over the last several years, and the introduction of
the R-Series product line, sales of the Company's original product, the Track
Truck, and its Posi-Track DX 4530 have declined. These two models are sold
primarily for over-the-snow applications and have a much more limited market
than the Company's crawler/tractor models or R-Series products. In 2001 and
2000, sales of the Track Truck and the Posi-Track DX 4530 accounted for less
than 1.0% of the Company's net sales. Therefore, unless specifically mentioned,
the following discussion will pertain only to the Posi-Track crawler/tractors
and the R-Series products. Hereafter, the term Posi-Track will refer to the
crawler/tractor models.

MARKETS FOR THE COMPANY'S PRODUCTS

         The Company believes the products in its Posi-Tracks and R-Series
product lines are very versatile and can be used in a wide variety of
applications. The following represents several of the primary markets where the
Company's products are currently used.

         Construction. The construction industry currently depends heavily on
skid-steer vehicles for a wide variety of functions. Skid-steers are small
four-wheeled vehicles that were originally designed and used primarily as
loaders, but in the last decade have become increasingly more popular for a
variety of functions and more versatile with the availability of attachments
such as backhoes, forklifts, breakers, planers, rakes and augers. Most
skid-steer attachments are designed to be used with an industry standard
quick-attach mechanism which allows attachments to be used on all similarly
equipped vehicles.

         The primary disadvantage of skid-steer vehicles is that they are
wheeled vehicles and are not designed for operation on wet, soft, slippery or
rough ground, which means that they are inherently limited as to when and where
they can function. Skid-steers often sit idle in the winter and spring or after
rain because the ground is not suitable for their operation. A wheeled
skid-steer exerts ten times or more ground pressure than a Posi-Track or
R-Series product, which makes a skid-steer less suitable for operation on
landscaped or groomed ground.

         Recognizing the benefits of tracked vehicles, a few manufacturers have
created tracks that can be placed around a skid-steer's wheels. Add-on tracks
are generally steel; however, rubber add-on tracks are now available due to the
limitations imposed by steel tracks. Although rubber add-on tracks can decrease
a skid-steer's ground pressure somewhat, the overall design of a Posi-Track or
R-Series product gives it more versatility and less ground pressure than a
skid-steer with add-on tracks.

         In addition to the tasks performed by skid-steers, Posi-Tracks are used
for construction jobs performed by small steel track dozers. A skid-steer's
design lacks the power, traction and stability necessary for moving dirt and
other materials efficiently. Therefore, dozers have remained single purpose
machines and, because of their steel tracks and significant ground pressure,
cannot be operated on soft, groomed, landscaped or paved surfaces.

         Landscaping. Like the construction industry, the landscaping industry
depends heavily on small dozers and skid-steers with loaders, backhoes, rakes
and other attachments. Landscapers have also been limited by these machines on
soft, wet, muddy, hilly or rough terrain or on groomed or paved surfaces,
thereby affecting productivity. Skid-steers



                                       3
<PAGE>

and dozers cause greater soil compaction than a Posi-Track or R-Series product,
which is a concern for landscapers because the more compact the soil, the more
difficult it is for plants to grow. The Posi-Track and R-Series product can also
be adapted to perform special functions in the landscaping industry. For
example, the Company manufactures attachments for the Posi-Track and R-Series
product which are used for laying a specially cut continuous roll of sod. The
sod is held in front of the vehicle and unrolls as the vehicle moves forward,
laying the sod on the ground. The vehicle's rubber tracks then move over the
sod, gently setting it in place. This procedure allows sod to be laid with
significantly less manual labor and on places such as sides of hills where
traditional smaller sod sections could be washed away by excessive rain.

         Agricultural. Posi-Tracks are used in the agricultural industry to
perform the functions of small tractors. The Posi-Tracks' three-point hitch and
reversible seating allow it to be used with pull-type attachments such as
roto-tillers, plows, disks and cultivators. The Posi-Track's hydraulic power
take off shaft allows it to be used for farming chores such as grinding and
unloading feed. Its low ground pressure and rubber tracks allow it to be used on
wet, soft, muddy ground that would not be possible with traditional wheeled
tractors, thereby increasing the number of productive days. In addition, the
Posi-Track's low ground pressure reduces compaction of soil. Posi-Tracks are
being used in several grape vineyards in California's Napa Valley as a
replacement to four-wheel drive tractors.

         Trail Grooming and Maintenance. The Posi-Track is used for maintaining
trails such as snowmobile, cross-country ski, biking and hiking trails. The
Posi-Track is used with a mower attachment to clear and maintain trails for
biking, hiking and other purposes.

         Wildlife Management. Posi-Tracks are used in wildlife management by
Federal agencies and the departments of natural resources of a number of states.
They are used to mow trails for wildlife and to mow clearings so that grass,
clover and other vegetation needed for wildlife can grow. They are also used to
clear cattails and other unwanted vegetation from swamps to provide access for
feeding ducks and other waterfowl. Posi-Tracks have also been equipped for use
in the management of controlled burning or the maintenance of fire lines to
prevent the spread of forest fires and for access to remote sites for a variety
of other purposes.

         Military Applications. The Posi-Track model MD-70 is being equipped
with robotic and video equipment to enable remote operation of the machine at
distances up to three miles. Current applications for this type of Posi-Track
include detonation and removal of land mines, clearing unexploded munitions on
bomb ranges and clearing bomb ranges of overgrown vegetation. For these types of
applications, the Company is selling the Posi-Track MD-70 to the Department of
the Defense who has it equipped with the necessary robotics and video equipment
to provide for the remote operation.

         The Company has been awarded a supply contract number for several of
its Posi-Track models by the Department of the Defense which allows Federal
governmental agencies to purchase them without going through a competitive
bidding process.

         Other. The versatility of the Posi-Track has allowed for their use in
areas where a typical skid-steer vehicle could not operate. For example, a grain
export company is using Posi-Track's in the hold of grain vessels to level the
grain for proper weight distribution or before adding more cargo, eliminating
many hours of hand labor.

PRODUCTS

         The Company's principal products are contained in three primary product
lines, the Posi-Track product line, the R-Series product line and the MTL
undercarriage product line. All products under these product lines utilize a
rubber track suspension system that takes advantage of the benefits of
traditional rubber wheels and steel tracks, without the disadvantages possessed
by each. Wheeled vehicles have less traction, are less stable than tracked
vehicles and cannot operate on soft, wet, slippery, rough or hilly terrain.
Steel tracks damage the surfaces on which they operate. Also, the significant
ground pressure of both wheeled and steel track vehicles creates compacted soil.
The rubber tracks utilized provide the traction, stability and mobility of
tracked vehicles, but do not damage surfaces. In addition, all machines produced
have extremely low ground pressure which means they will not cause significant
soil compaction.

         The rubber tracks used on the Company's products are made of molded
rubber reinforced with layers of nylon and polyester cord. The majority of the
Company's Posi-Track products and its R-Series products feature a
maintenance-free suspension with no grease fittings. The Company's products
utilize diesel engines manufactured by various engine manufacturers. The current
model Posi-Tracks and its R-Series products utilize engines manufactured by
Caterpillar and




                                       4
<PAGE>

Isuzu.

         The following table contains a summary of the Company's products:

<TABLE>
<CAPTION>
                                                            YEAR
                                    MODEL NAME           INTRODUCED                   SPECIAL FEATURES
                                    ----------           ----------       -------------------------------------------
<S>                               <C>                   <C>               <C>
      POSI-TRACK MODELS:               MD-70                1991          First rubber tracked crawler/tractor by
                                                                          ASV. Low ground pressure, bi-directional
                                                                          drive and loader capabilities.

                                      HD 4500               1997          Larger than MD-70.  Maintenance-free
                                                                          suspension.  Currently manufactured in
                                                                          limited quantities for select markets.

                                      DX 4530               1997          Largest Posi-Track.  Used primarily in
                                                                          over-the-snow application.

                                    2800 Series             1998          Size, weight and operating capabilities of
                                                                          the MD-70 plus maintenance-free under
                                                                          carriage.

                                       4810                 1999          Caterpillar engine and other Caterpillar
                                                                          components (replacement to HD 4500 series).


       R-SERIES MODELS:                RC-30                2000          Significantly smaller than current model
                                                                          Posi-Tracks.  Marketed to landscape,
                                                                          rental and landowner markets.

                                      Polaris               2001          Private label version of RC-30 sold by
                                      ASL-300                             Polaris.

                                     R-50 and               2002          Designed to compete with skid-steers with
                                       RC-50                              engines in the 44 to 50 hp range, weighing
                                                                          between 4,500 and 5,500 lbs. with an
                                                                          operating capacity of 1,350 to 1,600 lbs.


       OTHER PRODUCTS:                  MTL                 2001          ASV's undercarriages sold to Caterpillar
                                  Undercarriages                          for use in Caterpillar's MTL product
                                                                          line.  MTLs are being sold by Caterpillar
                                                                          through the Caterpillar dealer network.

                                    Track Truck             1984          Current model is the HPT 2800.  Used
                                                                          primarily in over-the-snow applications.
</TABLE>

         The vast majority of the Company's future production is expected to be
devoted to the 4810, the R-Series products and those products specified in the
Caterpillar and Polaris alliances. The Company may, from time to time, build its
other models on an as needed basis.



                                       5
<PAGE>

         Posi-Track Crawler/Tractor Models

         The Company believes its Posi-Tracks are ideal replacements to
skid-steers, small dozers and small tractors and can perform many of the jobs
handled by these vehicles without the disadvantages they possess. Their standard
quick-attach mechanism enables them to operate the attachments used by
skid-steers. They are also designed for use with a dozer attachment. In
addition, their three-point hitch attachment and reversible seating allow them
to function as a small tractor.

         The Posi-Track's weight is distributed over its two tracks, which have
a ground surface of approximately 102 x 18 inches per track, which results in an
average ground pressure of approximately 2-3 pounds per square inch, compared to
approximately 35 pounds per square inch for a typical wheeled skid-steer
weighing approximately the same as a Posi-Track. The Posi-Track's low ground
pressure allows it to operate on wet, soft, slippery, rough and hilly terrain.
Conventional wheeled vehicles may not be able to operate or may be destructive
in these conditions. The Posi-Track's low ground pressure also reduces
compaction which decreases the need for frequent tilling and conditioning of the
soil.

         Posi-Tracks are multi-purpose vehicles which the Company believes are
attractive to customers principally because of their:

         -        Size. Posi-Tracks equipped with a loader, weigh approximately
                  7,400 to 8,500 pounds, depending on model, and have an
                  approximate ground pressure of 3 pounds per square inch. The
                  overall size of a Posi-Track is comparable to a typical skid
                  steer.

         -        Features. The Posi-Track's loader includes a quick-attach
                  mechanism which allows for use of a wide range of attachments,
                  manufactured both by the Company and others such as a bucket,
                  forklift, rake, mower and snowblower. Posi-Tracks can accept a
                  category one or category two three-point hitch, depending on
                  model. A dozer blade and backhoe are also available for all
                  Posi-Tracks. Most Posi-Tracks now feature maintenance-free
                  undercarriages.

         -        Price. The current retail price of a Posi-Track ranges from
                  approximately $43,000 for a model 2800 with a loader, bucket
                  and quick-attach mechanism to approximately $55,000 for a 4810
                  with a loader, bucket and quick-attach mechanism. Although the
                  most common skid-steer vehicles have a slightly lower base
                  price, comparably equipped skid-steers cost approximately the
                  same as a Posi-Track 2800.

         -        Ease of Operation. Posi-Tracks feature a reversible driver's
                  seat which allows an operator to face either end of the
                  vehicle for better control. All Posi-Track models are
                  maneuverable and can easily turn in their own length.

         In addition to the attachments already available on the market from
other manufacturers, the Company also manufactures and sells attachments for the
Posi-Track for special functions not performed by other competing vehicles.
Because skid-steers are not designed for performing dozer functions, dozers have
traditionally been separate, single-function vehicles. However, because of its
rubber track and design, the Posi-Track is able to perform dozer functions with
the dozer attachment manufactured and sold by the Company. The Company also
modifies a mower attachment for the Posi-Track and designs, manufactures and
sells other attachments for special purposes.

         R-Series Products

         The Company has three models in its R-Series product line; the RC-30,
the R-50 and the RC-50.

         The RC-30 All Surface Loader

         The Company began sales of its RC-30 All Surface Loader in the third
quarter of 2000. Weighing approximately 3,000 pounds and built on a rubber track
suspension similar to the Posi-Track, the RC-30 is being marketed towards the
landscape, rental and landowner markets.

         The basic design of the RC-30 is similar to that of a Posi-Track with
its weight distributed over two tracks smaller than those found on a Posi-Track.
The RC-30 has tracks which have a ground surface of approximately 55 x 11 inches
per track, resulting in an average ground pressure of approximately 2-3 pounds
per square inch. This low ground pressure provides the RC-30 with the same
advantages in various operating environments as a Posi-Track.



                                       6
<PAGE>
         The RC-30 is also a multi-purpose vehicle which the Company believes is
attractive to customers principally because of their:

         -        Size. The RC-30 occupies approximately the same size footprint
                  as an all-terrain vehicle, with a width of approximately 46
                  inches and a length of approximately 91 inches without any
                  attachment on the loader. The width allows the RC-30 to fit
                  between the fender wells of a full-size pick-up truck. The
                  size of the RC-30 allows it to maneuver in compact areas,
                  easily turning within its own length.

         -        Features. The RC-30's loader includes a quick-attach mechanism
                  which allows for use of a wide range of attachments,
                  manufactured for the Company by others such as a bucket,
                  forklift, rake, backhoe and snowblower.

         -        Price. The current retail price of an RC-30 is approximately
                  $22,500 with a loader, bucket and quick-attach mechanism. The
                  Company believes its current retail price makes the RC-30 very
                  competitive against similarly equipped skid-steers.

         -        Ease of Operation. The RC-30 is a ride-on machine equipped
                  with pilot-operated hydraulic controls. Gauges and switches
                  are in the heads-up position for easy view and reach. Safety
                  features include full ROPS/FOPS canopy, lap bar, seat belt and
                  parking brake.

         The R-50 and RC-50 All Surface Loaders

         In January 2002, the Company introduced two new models in its R-Series
product line, the R-50 and the RC-50. These two products are expected to compete
with skid-steers utilizing engines in the 44 to 50 horsepower range, weighing
between 4,500 and 5,500 pounds with an operating capacity of 1,350 to 1,600
pounds. The Company began production of the RC-50 in March 2002 and expects to
begin production of the R-50 in April 2002.

         The design of the R-50 and RC-50 is similar to that of the RC-30, but
in a larger machine. The R-50 and RC-50 have tracks which have a ground surface
of approximately 59 x 15 inches per track, resulting in an average ground
pressure of approximately 2-3 pounds per square inch. The R-50 and RC-50 have a
larger engine, greater operating capacity, increased lift and dump heights and
greater speed than the RC-30. The R-50 and RC-50 share the same benefits of low
ground pressure as the RC-30 and Posi-Tracks. The main difference between the
two models is the type of track and loader controls each machine utilizes.

         The R-50 and RC-50 are multi-purpose vehicles which the Company
believes are attractive to customers principally because of their:

         -        Size. The R-50 and RC-50 are similar in size to mid-size skid
                  steers. This size skid steer is one of the most popular in the
                  skid-steer market.

         -        Features. The R-50 and RC-50's loader includes a quick-attach
                  mechanism similar to that found on skid-steers. This allows
                  for the use of a wide range of attachments, primarily
                  manufactured for the Company by others such as a bucket,
                  forklift, rake, backhoe and snowblower.

         -       Price. The current retail price of an R-50 is approximately
                  $28,000 with a loader and quick-attach mechanism. The current
                  retail price of an RC-50 is approximately $29,000 with a
                  loader and quick-attach mechanism. The Company believes its
                  current retail prices make the R-50 and RC-50 very competitive
                  against similarly equipped skid-steers.

         -        Ease of Operation. The R-50 and RC-50 is a ride-on machine
                  equipped with pilot-operated hydraulic controls. Gauges and
                  switches are in the heads-up position for easy view and reach.
                  Safety features include full ROPS/FOPS canopy, lap bar, seat
                  belt and parking brake.

         Over-the-Snow Models

         The Company manufactures two additional models, the Track Truck and the
DX 4530, which are primarily marketed towards over-the-snow applications, such
as snow trail grooming for snowmobile and ski trails. With the increased
popularity and production of the Company's Posi-Track crawler/tractor models,
the R-Series products and the MTL undercarriages, the production and sales of
the over-the-snow models has greatly decreased over the last several



                                       7
<PAGE>

years. In 2001 and 2000, sales related to over-the-snow models accounted for
less than 1.0% of the Company's net sales. The Company anticipates it may
manufacture the Track Truck in the future, but only on a build to order basis.

SALES AND MARKETING

         The Company sells its products through several distribution channels,
depending on the product. The Posi-Track is primarily sold through Caterpillar
dealers in the United States and Canada as well as a limited number of
independent equipment dealers in the United States, Canada and Australia. As of
March 1, 2002, 52 Caterpillar dealers and 22 independent dealers representing
approximately 350 locations sell and service the Company's Posi-Track machines.

         The R-Series products are sold primarily through independent equipment
dealers in the United States, Canada, Australia and Portugal, as well as a
limited number of Caterpillar dealers. As of March 1, 2002, 59 independent
dealers and 16 Caterpillar dealers representing approximately 150 locations sell
and service the R-Series product line.

         In 2002, the Company plans to increase the distribution of its products
through increased dealer outlets. In addition to expanding the dealer base for
the R-Series products, many of these dealers will now be able to carry the
larger Posi-Tracks, including the 4810, which had previously been sold primarily
through Caterpillar dealers. In the first quarter of 2002, the Company began a
program to open up trade areas to independent dealers in approximately one-half
the trade areas that were previously served only by Caterpillar dealers.

         The MTL products, which are Caterpillar products that incorporate the
Company's undercarriages, are available only through Caterpillar dealers. For
2001, 16 North American Caterpillar dealers carried the MTL product line. In
2002, all 69 Caterpillar dealers in North America are able to carry the MTL
product line. In 2003, it is anticipated the MTL product line will be available
to Caterpillar dealers on a worldwide basis.

         The Polaris version of the RC-30 is available only through Polaris
dealers, with the distribution of this product handled by Polaris. Polaris has a
North American dealer network of approximately 2,000 dealers, along with 52
international distributors in 125 countries.

         The construction, agricultural and landscape equipment industries, in
which the Posi-Track and R-Series products compete, have historically been
cyclical. Sales of construction, agricultural and landscape equipment are
generally affected by the level of activity in the construction and agricultural
industries as well as farm production and demand, weather conditions, interest
rates, construction levels (especially housing starts) and general economic
conditions. In addition, the demand for the Company's products may be affected
by the seasonal nature of the activities in which they are used. Sales of the
Posi-Track have generally been greater in the spring and summer. The Company
anticipates sales of its R-Series products will follow a pattern similar to the
Posi-Track.

         For 2001, the Company made sales to two customers who each accounted
for more than 10% of the Company's net sales. One customer, Caterpillar,
accounted for 17.8% of ASV's net sales for 2001 while the other unaffiliated
customer accounted for 16.4%. For the years 2000 and 1999, no customer accounted
for more than 10% of the Company's net sales.

         As of March 15, 2002, the Company had orders for approximately $6.4
million of its products. As of March 15, 2001, the Company had orders for
approximately $8.1 million of its products.

         The Company has arrangements with several finance companies to finance
the sale of the Company's vehicles to its dealers and end purchasers. In
addition, during 2001 and 2000, the Company offered extended payment terms on
the sale of its products to its dealers, generally not exceeding 180 days.

AFFILIATION WITH CATERPILLAR

         1998-1999 Agreements

         On October 14, 1998, ASV entered into a Securities Purchase Agreement
(the "Purchase Agreement") with Caterpillar. The transactions contemplated by
the Purchase Agreement were approved by the Company's shareholders on January
28, 1999 and closed January 29, 1999. Pursuant to the Purchase Agreement,
Caterpillar acquired, for an aggregate purchase price of $18,000,000, one
million newly issued shares of the Company's Common Stock and a



                                       8
<PAGE>

warrant to purchase an additional 10,267,127 newly issued shares of the
Company's Common Stock at a price of $21.00 per share. The Purchase Agreement
provided that, upon closing, the size of the Company's Board of Directors would
be increased and the Company's Board of Directors appointed two members
designated by Caterpillar. In 2000, in connection with the purchase of an
additional 500,000 newly-issued shares of ASV's Common Stock, the number of
shares subject to the warrant was reduced by 500,000 shares. See "2000
Agreements" below.

         In connection with entering into the Purchase Agreement, the Company
and Caterpillar entered into several ancillary agreements. First, the Company
and Caterpillar entered into a commercial alliance agreement (the "Commercial
Alliance Agreement") pursuant to which Caterpillar is providing the Company
access to its worldwide dealer network and has made various management,
financial and engineering resources available to the Company. In addition,
Caterpillar and the Company entered into various other agreements pursuant to
which Caterpillar and the Company will supply each other with certain
components, Caterpillar will agree to allow the Company to use certain of its
trademarks and trade dress in the event certain conditions are met and
Caterpillar and the Company will agree to share certain technologies, all at
certain costs. Material terms of these ancillary agreements are described below.

         The Commercial Alliance Agreement. The Commercial Alliance Agreement
provides that the Company and Caterpillar will enter into certain agreements,
each of which is discussed below.

         Marketing Agreement. The Marketing Agreement requires Caterpillar to
         provide the Company with access to its worldwide distribution network,
         in part, by promoting the sale of the Company's products to
         Caterpillar's dealers. Caterpillar is promoting ASV's products in North
         America and may gradually extend such promotion throughout other parts
         of the world. In addition, under the Marketing Agreement, Caterpillar
         handles orders for the Company's products and administer its
         warranties. In consideration for Caterpillar's services under the
         Marketing Agreement, ASV pays Caterpillar a commission equal to 5% of
         the dealer net price for complete machines (currently the 4810 model
         only) and 3% for replacement parts and Company-branded attachments sold
         to Caterpillar dealers plus the costs of certain services provided by
         Caterpillar. The Marketing Agreement was entered into between
         Caterpillar and the Company on January 29, 1999.

         Trademark and Trade Dress License Agreement. The Marketing Agreement
         provides that the Company and Caterpillar enter into a Trademark and
         Trade Dress License Agreement (the "License Agreement") at such time as
         the Company's products have been evaluated by Caterpillar and have been
         found to meet Caterpillar's quality and safety standards in accordance
         with Caterpillar's established testing and validation procedures. If
         entered into, the License Agreement will provide, in part, that
         Caterpillar will grant to the Company the non-exclusive,
         non-transferable right and license to use certain trademarks of
         Caterpillar on the Company's products for a fee equal to a percentage
         of the dealer net price for products sold to dealers with such
         trademarks. The term of the License Agreement will be five years from
         the date of the signing of the License Agreement, unless earlier
         terminated by mutual consent of the Company and Caterpillar. The
         Company anticipates that such an evaluation of its products by
         Caterpillar prior to entering into the License Agreement may take from
         two to four years, or longer. The Company and Caterpillar have
         currently chosen to focus on joint product offerings with the
         Caterpillar trademark (i.e. the MTL product line) rather than pursue
         this portion of the Marketing Agreement at the current time.

         Management Services Agreement. Under the Management Services Agreement,
         Caterpillar has made available to the Company general management
         support in connection with the day-to-day operation of its business,
         commercial development and marketing research services, financial
         planning services, such other administrative services as Caterpillar
         and the Company may subsequently agree to in writing, and manufacturing
         and engineering services. In consideration for Caterpillar's
         obligations under the Management Services Agreement, the Company pays
         Caterpillar a fee equal to Caterpillar's fully-loaded cost, as defined
         in the Management Services Agreement, plus an administrative surcharge
         (or such other fee as the parties may agree upon). The Management
         Services Agreement remains in effect indefinitely until otherwise
         terminated by the parties and was entered into between Caterpillar and
         the Company on January 29, 1999.

         Other Agreements. The Commercial Alliance Agreement also provides that
the Company and Caterpillar enter into several additional agreements relating to
(i) services to be provided to the Company by Caterpillar, (ii) the supply of
components to Caterpillar by the Company and to the Company by Caterpillar and
(iii) the license of technology by the Company to Caterpillar. None of these
agreements have been entered into, although Caterpillar has provided certain
services and supplied certain parts to the Company without the formal agreements
contemplated by the Commercial



                                       9
<PAGE>

Alliance Agreement in place. The Company and Caterpillar do not currently
anticipate pursuing events that would create the need to enter into any of these
agreements.

         The parties also agreed to enter into a Joint Venture Agreement
pursuant to which ASV and Caterpillar would establish a 50-50 joint venture
company to design and develop a line of agricultural tractors utilizing key
aspects of the parties' respective technology and know-how. Caterpillar and the
Company had preliminary discussions regarding the Joint Venture, but since that
time, Caterpillar has elected to change its strategy regarding production of
agricultural tractors. Rather than producing complete tractors, Caterpillar has
elected to provide components (i.e. engines, transmissions, etc.) to other
manufactures for incorporation into their products. As such, ASV does not
anticipate that it will be produce agricultural tractors under this Joint
Venture Agreement with Caterpillar.

         2000 Agreements

         In October 2000, the Company entered into another Securities Purchase
Agreement with Caterpillar pursuant to which Caterpillar purchased 500,000 newly
issued shares of ASV Common Stock at $18 per share. The Company also amended its
original warrant issued to Caterpillar reducing the number of shares of ASV
common stock available for purchase under the original warrant by 500,000
shares. The amended warrant with Caterpillar provides for the purchase of
9,767,127 newly issued shares of the Company's Common Stock at a price of $21.00
per share. The amended warrant is exercisable at any time until January 29,
2009, except that it may expire with respect to a portion of the shares in the
event the Company meets certain revenue levels and certain other conditions are
met.

         Also in October 2000, the Company and Caterpillar entered into an
alliance agreement under which they plan to jointly develop and manufacture a
new product line of Caterpillar rubber track skid steer loaders called
Multi-Terrain Loaders (MTLs). The product line, which is expected to include
five new models, will feature Caterpillar's patented skid steer loader
technology and ASV's patented Maximum Traction Support System rubber track
undercarriage. The machines will complement existing models in both ASV's and
Caterpillar's current product lines. The MTLs are not a commissionable product
under the Commercial Alliance Agreement. The Company began manufacturing
undercarriages for the first two MTL models in 2001. The MTLs are being sold
through the Caterpillar dealer network.

         As of March 15, 2002, Caterpillar owns 15.7% of the Company's
outstanding Common Stock (13.2% assuming the exercise of all outstanding options
and warrants) and has the right to own up to 52.0% of the Company's outstanding
Common Stock (assuming the exercise of all outstanding options and warrants)
upon exercise of the warrant.

COMPETITION

         The markets in which the Posi-Track competes are generally comprised of
small to medium sized tractor-type vehicles including skid-steers. The market is
dominated by large corporations producing models with substantial name
recognition, including Case, which manufactures the Uniloader skid-steer,
Ingersoll Rand which manufactures the Bobcat, Gehl, John Deere and Caterpillar.
The competitors primarily produce wheeled or steel track vehicles in the markets
in which the Posi-Track competes. Caterpillar, John Deere and Case sell rubber
track vehicles in the medium to large sized tractor market. Ingersoll Rand
manufactures two models of rubber track skid steers which are comparable in size
to the Company's 2800 series Posi-Track.

         The markets in which the RC-30 competes are also generally comprised of
vehicles manufactured by large corporations producing models with substantial
name recognition, including Toro, which manufactures the Dingo, as well as those
companies listed above that manufacture skid-steer products.

         The Company expects its products to compete in the market based on,
among other things: adaptability, versatility, performance, ease of operation,
features, size, brand loyalty, price and reputation. Some of the Company's
competitors possess significantly greater resources than the Company, as well as
established reputations within the industry. There is no assurance that a
competitor with greater capital resources will not enter and exploit the
Company's markets to the Company's detriment. The Company believes the
introduction of additional competitors could enhance market acceptance of rubber
track vehicles.

WARRANTY

         The Company provides a limited warranty to purchasers of its products.
The warranty covers defects in materials and workmanship for one year from the
delivery date to the first end user. The rubber tracks used on the



                                       10
<PAGE>

Company's products carry a pro-rated warranty up to 2,000 hours of usage. Those
components that are not manufactured by the Company are subject only to the
warranty of the manufacturer of the component and may be greater in length than
the limited warranty provided by the Company.

         The Company offers an extended warranty through an unaffiliated
company. This unaffiliated company would be responsible for administering and
paying all warranty claims under this extended warranty program.

MANUFACTURING AND SUPPLIERS

         The Company manufactures and assembles its products at its facility in
Grand Rapids, Minnesota. See "Item 2. Description of Property." The majority of
the component parts are purchased from outside vendors. Certain parts, such as
engines and transmissions, are standard "off-the-shelf" parts purchased by the
Company and incorporated into its vehicles. Others, such as the rubber track,
undercarriage components and loader, are manufactured specifically for the
Company. The remaining parts, such as the Posi-Track frame, are manufactured on
site for incorporation into the vehicles. In order to help reduce production
costs, the Company periodically reviews those parts that may be more
cost-effective to manufacture in-house.

         The Company owns the tooling used by outside vendors for manufacturing
customized parts. While current vendors are meeting the Company's quality and
performance expectations, the Company believes alternative contract
manufacturers are available should the necessity arise. However, shortages of
parts or the need to change vendors could result in production delays or
reductions in product shipments that could adversely affect the Company's
business. The Company believes that a change in suppliers for component parts
could occur without material disruption of the Company's business.

INTELLECTUAL PROPERTY RIGHTS

         In 1986, a patent was issued to the Company with respect to the
Posi-Turn power steering system. The steering system was invented by Gary Lemke,
President of the Company, and his rights with respect to the invention were
assigned by him to the Company. In connection with the assignment, the Company
did not pay any compensation to Mr. Lemke, but agreed that in the event the
Company licenses any of its rights under the patent to others, Mr. Lemke would
receive 25% of any royalties under such license. This royalty agreement was
terminated in January 1999, with no consideration paid to Mr. Lemke.

         During 2001, the Company was granted a patent by the U.S. Patent Office
pertaining to its undercarriage and drive sprocket mechanism. There can be no
guarantee that this patent will be a deterrent to other manufacturers from
producing similar technology.

         The Company has registered the trademark Track Truck(R) with the U.S.
Patent and Trademark Office and claims common law trademark rights in the names
Posi-Track(TM), RC-30(TM), R-50(TM), RC-50(TM), Maximum Traction Support
System(TM), Posi-Turn(TM) and Snow Saver(TM). Despite these protections, it may
be possible for competitors or users to copy aspects of the Company's products.

         The Company believes that patent and trademark protection is less
significant to its competitive position than the knowledge, ability and
experience of the Company's personnel, product enhancements, new product
development and the ongoing reputation of the Company.

RESEARCH AND DEVELOPMENT

         During the years ended December 31, 2001, 2000 and 1999, the Company
spent approximately $2,645,000, $679,000 and $531,000, respectively, on research
and development. The Company's research and development expenses have been
incurred in connection with development of new models, enhancements to existing
products and additional products to be offered through its alliances with
Caterpillar and Polaris.

         The Company's research and development expenses increased substantially
in 2001 as it worked to develop the undercarriages for the Multi-Terrain Loader
products with Caterpillar as well as worked on extensions of its own product
line. The Company anticipates research and development expenses will decrease in
2002 as it expects to complete the development of the Multi-Terrain Loaders with
Caterpillar in late 2002. The Company anticipates its investment in research and
development will be approximately $1 million less in 2002 as compared to 2001.



                                       11
<PAGE>

INSURANCE

         The Company maintains product liability insurance as well as a
commercial umbrella insurance policy in amounts the Company believes are
adequate. The Company also maintains key-person life insurance in the amount of
$1,000,000 on the life of Mr. Lemke.
EMPLOYEES

         As of March 15, 2002, the Company had 112 employees, two of whom are
part-time. The Company's employees include 3 in management, 21 in
administration, 12 in sales and marketing and 76 in manufacturing, engineering
and research and development. The Company believes its relations with its
employees are good. None of the Company's employees is represented by a labor
union. The Company also reimburses Caterpillar for the salary related costs of
two Caterpillar employees that work at the Company's Grand Rapids facility.

ITEM 2. DESCRIPTION OF PROPERTY

         The Company's manufacturing and office facilities are located in Grand
Rapids, Minnesota. These facilities consist of approximately 95,000 square feet
of production space and approximately 10,000 square feet of office space. The
facilities are leased under a 20-year lease from the Grand Rapids Economic
Development Authority. The lease agreement provides for monthly rental payments
to January 2018, with a balloon payment of approximately $543,000 in December
2006. The Grand Rapids facility has been the Company's primary production and
office facility since the original 40,000 square foot facility was first
occupied by the Company in May 1995. The facility was expanded to its present
size in 1997. The Company has an option to purchase the facility at any time at
the present value of the remaining lease payments plus the current purchase
price of the land on which the facility was constructed. The purchase price of
the land is currently $142,500, but can be reduced or forgiven over a remaining
period of five years if certain minimum employment levels are met and maintained
during the applicable year.

         The Company also owns a parcel of land located in Grand Rapids, MN
consisting of 63 acres and six buildings with a total of 47,000 square feet,
which it uses for its research and development facility and additional
warehousing.

         The Company believes that its properties are adequately covered by
insurance.

ITEM 3. LEGAL PROCEEDINGS

         ASV is a party to certain claims arising in the ordinary course of
business. In the opinion of management, the outcome of such claims will not
materially affect ASV's current or future financial position or results of
operation.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         There were no matters submitted to a vote of security holders during
the fourth quarter of the fiscal year covered by this report.

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

         The Company's common stock trades on the Nasdaq Stock Market(R) under
the ticker symbol ASVI. The following represents the high and low sales price
for the periods indicated:

<TABLE>
<CAPTION>
         Year Ended December 31, 2001                                           High             Low
         ----------------------------                                           ----             ---
<S>                                                                           <C>               <C>
         First Quarter                                                        $ 12.69           $ 8.00
         Second Quarter                                                         13.80            10.70
         Third Quarter                                                          15.50             9.80
         Fourth Quarter                                                         12.65             8.75
</TABLE>



                                       12
<PAGE>
<TABLE>
<CAPTION>
         Year Ended December 31, 2000                                           High             Low
         ----------------------------                                           ----             ---
<S>                                                                           <C>              <C>
         First Quarter                                                        $ 18.75          $ 12.75
         Second Quarter                                                         15.06            11.00
         Third Quarter                                                          16.00            12.38
         Fourth Quarter                                                         15.38             6.38
</TABLE>

         The above figures reflect inter-dealer prices, without retail mark-up,
mark-down or commissions, and may not represent actual transactions.

HOLDERS

         As of March 15, 2002, the Company had approximately 254 holders of
record of its Common Stock (not including beneficial holders). The Company
believes it has approximately 3,900 beneficial holders of its Common Stock.

DIVIDENDS

         The Company has never declared or paid a cash dividend on its Common
Stock. The Company currently intends to retain earnings for use in the operation
and expansion of its business and therefore does not anticipate paying any
dividends in the foreseeable future.

CHANGES IN SECURITIES AND USE OF PROCEEDS

         None.

ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
     (Dollar amounts in thousands,                                   YEAR ENDED DECEMBER 31,
     except per share data)                         2001         2000          1999         1998         1997
     ---------------------------------------------------------------------------------------------------------
<S>                                              <C>          <C>           <C>          <C>          <C>
     Net Sales..............................     $  50,081    $  43,860     $ 36,168     $ 39,019     $ 24,316
     Net Earnings...........................           756        1,451        1,412        3,366        2,324
     Net Earnings Per Share-Diluted.........           .07          .15          .14          .40          .28
     Total Assets...........................        57,941       55,006       48,650       29,533       19,215
     Long-Term Liabilities..................         2,013        2,117        2,197        2,464        7,021
     Shareholders' Equity...................        50,571       49,763       39,096       19,515        9,957
</TABLE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

CRITICAL ACCOUNTING POLICIES

         The following discussion and analysis of the Company's financial
condition and results of operations is based upon its financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements
requires management to make estimates and judgments that affect the reported
amounts of assets, liabilities and expenses, and related disclosures. On an
on-going basis, management evaluates its estimates and judgements, including
those related to accounts receivable, inventories and warranty obligations. By
their nature, these estimates and judgements are subject to an inherent degree
of uncertainty. Management bases its estimates and judgements on historical
experience, observance of trends in the industry, information provided by
customers and other outside sources and on various other factors that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgements about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.

         Management believes the following critical accounting policies, among
others, affect its more significant judgements and estimates used in the
preparation of its consolidated financial statements.

         Revenue Recognition and Accounts Receivable. Revenue is recognized when
persuasive evidence of an arrangement exists, delivery has occurred, the price
is fixed or determinable and collectibility is reasonably assured. The Company
generally obtains oral or written purchase authorizations from customers for a
specified amount of product at a



                                       13
<PAGE>

specified price and considers delivery to have occurred at the time of shipment.
ASV maintains an allowance for doubtful accounts for estimated losses resulting
from the inability of its customers to make required payments. If the financial
condition of ASV's customers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances may be required.

         Inventories. Inventories are stated at the lower of cost or market,
cost being determined on the first-in, first-out method. Adjustments to slow
moving and obsolete inventories to the lower of cost or market are provided
based on historical experience and current product demand. The Company evaluates
the adequacy of the inventories carrying value quarterly.

         Warranties. ASV provides for the estimated cost of product warranties
at the time revenue is recognized. While ASV engages in extensive product
quality programs and processes, including actively monitoring and evaluating the
quality of its component suppliers, ASV's warranty obligation is affected by
product failure rates, material usage and service delivery costs incurred in
correcting a product failure. Should actual product failure rates, material
usage or service delivery costs differ from ASV's estimates, revisions to the
estimated warranty liability may be required.

RESULTS OF OPERATIONS

         The following table sets forth, for the periods indicated, certain
Statements of Earnings data as a percentage of net sales:
<TABLE>
<CAPTION>
                                                                            YEAR ENDED DECEMBER 31,
                                                                        --------------------------------
                                                                         2001         2000         1999
                                                                         ----         ----         ----
<S>                                                                     <C>          <C>          <C>
              Net sales.......................................          100.0%       100.0%       100.0%
              Cost of goods sold..............................           81.9         79.3         76.7
              Gross profit....................................           18.1         20.7         23.3
              Selling, general & administrative expense.......           11.7         14.2         15.7
              Operating income................................            1.1          5.0          6.2
              Interest expense................................            0.3          0.6          0.8
              Net earnings....................................            1.5          3.3          3.9
</TABLE>

         Net Sales. Net sales for the year ended December 31, 2001 increased 14%
to approximately $50,081,000, compared with approximately $43,860,000 in 2000.
This increase was the result of several offsetting factors. First, the Company
began shipping the private label version of the RC-30 All Surface Loader under
its alliance with Polaris, the ASL-300, during the first quarter of 2001. The
ASL-300 accounted for approximately 27% of the Company's unit sales in 2001.
Second, in the second quarter of 2001, the Company began shipping undercarriages
to Caterpillar for the jointly developed MTL product line manufactured by
Caterpillar. Shipments of these undercarriages accounted for 34% of the
Company's unit sales for 2001. Offsetting these increases was a decrease in
sales of the Company's model 4810 Posi-Track. Unit sales of the 4810 Posi-Track
in 2001 were approximately one-half the unit sales in 2000. The Company believes
this decrease was primarily attributable to the overall softening of the
construction equipment market and the introduction of the MTL products. Unit
sales of the Company's other products (2800 series, MD-70, HD 4500 and Track
Truck) were approximately the same in 2001 as 2000.

         For the year ended December 31, 2000, net sales increased 21% to
approximately $43,860,000, compared with approximately $36,168,000 in 1999. This
increase was the result of several offsetting factors. First, sales of the
Company's model 4810 Posi-Track increased significantly as 2000 was the first
full year of production for this product. This product was available for less
than two quarters in 1999. Second, the Company introduced a new product in the
third quarter of 2000, the RC-30 All Surface Loader. The Company sold nearly all
its 2000 production of this model. Third, sales of used equipment increased in
2000 due to increased marketing efforts, including the opening of a retail store
in Grand Rapids, Minnesota in the second quarter of 2000. Lastly, offsetting
these factors was a decrease in sales relating to Posi-Track machines sold under
military contracts.

         Gross Profit. Gross profit for the year ended December 31, 2001 was
approximately $9,056,000, or 18.1% of net sales, compared with approximately
$9,065,000, or 20.7%, for 2000. The decrease in gross profit percentage was due
primarily to a change in the sales mix experienced in 2001. During 2001, the
Company had a high concentration of sales of the private label ASL-300, which
carries a lower gross profit than any of the Company's other products, but
requires significantly less sales and marketing costs. The Company experienced
fewer sales of its higher margin model 4810 Posi-Track due primarily to industry
wide softening of construction equipment sales and the introduction of the MTL
products. Finally, the Company continued to offer discounts off standard dealer
net terms to reduce its inventory



                                       14
<PAGE>

of the 2800 series Posi-Track. Offsetting this decrease was a warranty
reimbursement benefit. During the fourth quarter of 2001, ASV negotiated a
warranty reimbursement program with one of its suppliers, whereby the Company
will receive product at no cost over a three-year period to compensate ASV for
warranty claims incurred during 2001 plus any claims not yet filed. ASV
recognized a benefit of $542,600 under this program in the fourth quarter of
2001 as an offset to warranty costs previously incurred during the year.

         For the year ended December 31, 2000, gross profit increased 7.5% to
approximately $9,065,000 compared with approximately $8,429,000 for 1999. The
increase was a result of increased net sales for 2000 as discussed above, offset
in part by a decrease in the Company's gross profit percentage from 23.3% in
1999 to 20.7% in 2000. The decrease in gross profit percentage was due to
several factors. First, sales of the Company's model 4810 Posi-Track, its
highest gross profit product, decreased significantly during the second half of
the year, due in part to a nationwide slowdown in construction equipment
spending. Second, the Company experienced inefficiencies during its initial
start up of production of its RC-30 All Surface Loader during the third quarter
of 2000. Third, the Company offered discounts on certain of its models to lower
its inventory of finished goods. Finally, the Company had increased sales of
lower margin used equipment in 2000 compared with 1999 as discussed above.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased 5.7% to approximately $5,858,000 for the year
ended December 31, 2001, compared with approximately $6,211,000 for 2000. As a
percentage of net sales, these expenses decreased from 14.2% in 2000 to 11.7% in
2001. The decreased level of expenses was due primarily to decreased commissions
paid to Caterpillar as a result of the change in sales mix experienced during
2001. The Company pays no commission to Caterpillar on the sale of any MTL
undercarriages, the RC-30 or the ASL-300. Offsetting this decrease was the
establishment of a remarketing reserve of $250,000 in the fourth quarter of
2001. This reserve relates to potential costs associated with remarketing
existing machines at the locations of one dealer. The decrease in selling,
general and administrative expenses as a percentage of net sales was due to the
change in sales mix as discussed above and ASV having the necessary
infrastructure in place to support higher sales levels without commensurate
increases in staffing levels.

         For the twelve months ended December 31, 2000, selling, general and
administrative expenses increased 9.5% to approximately $6,211,000 from
approximately $5,671,000 in 2000. As a percentage of net sales, these expenses
decreased from 15.7% in 1999 to 14.2% in 2000. The increased level of expenses
was due primarily to two factors. First, the Company had increased marketing
expenses in 2000 consisting of additional dealer support programs and a full
year of costs for field service representatives hired during the fourth quarter
of 1999. Also, the Company paid a greater commission to Caterpillar in 2000 due
to increased sales to Caterpillar dealers and a full twelve months of
commissionable sales in 2000 compared with eleven months in 1999. The decrease
in selling, general and administrative expenses as a percentage of net sales was
due to sales increasing at a faster rate than expenses.

         Research and Development. Research and development expenses increased
289.5% in 2001 to approximately $2,645,000, compared with approximately $679,000
in 1999. The increase was due to the Company's alliance with Caterpillar for the
continued development, testing and integration of the undercarriages for the MTL
product line. In addition, during 2001, the Company was developing the newest
models in its R-Series product line, the R-50 and the RC-50, which were
introduced in January 2002.

         For the year ended December 31, 2000, research and development expenses
increased 27.8% to approximately $679,000 compared with approximately $531,000
in 1999. The increase was due primarily to the joint development of the
undercarriages for the first two of five expected models of MTLs with
Caterpillar and introduction of the Company's RC-30 All Surface Loader product.

         The Company anticipates research and development expenses will decrease
in 2002 as it expects to complete the development of the MTL product line with
Caterpillar in late 2002. The Company anticipates its investment in research and
development will be approximately $1 million less in 2002 as compared to 2001.

         Other Income (Expense). Interest expense was approximately $146,000 in
2001, compared with approximately $267,000 in 2000 and $306,000 in 1999. The
decrease in 2001 and 2000 was due to decreased line of credit usage. This was a
result of the proceeds received from the sale of common stock to Caterpillar in
the fourth quarter of 2000. In addition, in December 2001, the Company
refinanced approximately $784,000 of its long-term debt from 9.0% to 6.5% for a
five-year term.



                                       15
<PAGE>

         Other income was approximately $529,000 for 2001, compared with
approximately $302,000 for 2000 and approximately $246,000 for 1999. The
increases were due primarily to greater interest income from increased
short-term investments. This resulted from increased cash flow, due primarily to
the proceeds received from the sale of common stock to Caterpillar in the fourth
quarter of 2000

         Net Earnings. Net earnings for the year ended December 31, 2001 were
approximately $756,000, compared with approximately $1,451,000 for 2000.
Although net sales increased in 2001, this decrease resulted from a lower gross
profit percentage and increased research and development expenses. Offsetting
this decrease was a decrease in the Company's effective income tax rate in 2001
due to greater research and development tax credits.

         For the year ended December 31, 2000, net earnings were approximately
$1,451,000, compared with approximately $1,412,000 for 1999. This increase was
due to increased sales, offset in part by a lower gross profit percentage and
increased operating expenses. In addition, the Company's effective income tax
rate decreased in 2000 due to greater research and development tax credits.

LIQUIDITY AND CAPITAL RESOURCES

         At December 31, 2001, the Company had working capital of approximately
$47,790,000 compared with approximately $47,224,000 at December 31, 2000. While
overall working capital remained relatively the same during the year, several
components changed. First, cash and short-term investments decreased
approximately $4,815,000 due primarily to funding operations during the year.
Second, accounts receivable increased approximately $6,271,000 due to a 14%
increase in sales during the twelve months of 2001 over 2000, which included an
8% increase in sales during the fourth quarter of 2001. In 2001, the Company
offered extended payment terms, generally less than 180 days, on certain sales
of its products, thereby causing accounts receivable to increase. In addition,
one customer utilized a Company provided floor plan financing option as
discussed below. Also included in accounts receivable at December 31, 2001 is
the value of free product expected to be received under a warranty reimbursement
program with a vendor as described above. Third, inventory increased
approximately $549,000 from December 31, 2000 to December 31, 2001 with the
components of inventory changing in offsetting directions. Raw materials
increased approximately $405,000 due to slightly lower than expected production
levels of the RC-30 All Surface Loader. Finished goods increased approximately
$1,152,000 for several reasons. First, sales of the RC-30 were less than
expected, causing a greater number of finished units in inventory at December
31. Second, the resumption of production of the 2800 series Posi-Track caused
finished goods to increase as these machines have a slightly smaller
distribution network than ASV's other products. Finally, the Company
reclassified approximately $780,000 of units from used equipment to finished
goods to more accurately reflect the composition of these units. Prepaid
expenses and other assets increased approximately $792,000 due primarily to an
increase in deferred income tax assets related to currently non-deductible
income tax items. Working capital was also impacted by an increase in accounts
payable of approximately $626,000 at December 31, 2001 compared with December
31, 2000. These increased accounts payable were due primarily to increased
production levels and the reimbursement to Caterpillar for their research and
development costs for the MTL project.

         In October 2000, the Company and Caterpillar entered into an alliance
agreement pursuant to which they plan to jointly develop and manufacture a new
product line of Caterpillar rubber track skid steer loaders called Multi-Terrain
Loaders (MTL). The product line, which is expected to include five new models,
will feature Caterpillar's patented skid steer loader technology and ASV's
patented Maximum Traction Support System rubber track undercarriage. The
machines are expected to complement existing models in both ASV's and
Caterpillar's current product lines. They are being sold through the Caterpillar
dealer network.

         The Company recognizes as sales its cost for the undercarriage, as
defined in the agreement, plus a portion of the gross profit that Caterpillar
will recognize upon sale of the MTL to Caterpillar dealers, when the Company
ships undercarriages to Caterpillar. The MTLs are not a commissionable product
under the Company's Commercial Alliance Agreement with Caterpillar.

         In December 2000, the Company made a sale to one customer totaling
approximately $4.0 million. Due to physical space limitations at the customer's
facilities, delivery of the product was made during 2001. The Company agreed to
provide interest-free terms for these products until July 2001. The customer
agreed to pay for any product sold prior to July 2001 by the tenth day of the
month following the month of sale and also agreed to pay for a minimum of 80
units by July 2001. For any product not paid by July 2001, the Company agreed to
provide floor plan financing at the rate of 10% per annum, such interest to be
payable monthly. All remaining unpaid amounts and any accrued interest were to
be paid by December 31, 2001.



                                       16
<PAGE>

         One element of this customer's growth plan was their completion of a $5
million private placement offering of convertible preferred stock. Due to
difficult market conditions in 2001, the customer was not successful in closing
their offering. During 2001, this customer did not make payments in accordance
with the terms of its agreement with the Company, including approximately
$800,000 of machines sold by the customer for which payment was not remitted to
the Company. The total amount owed to the Company under the floor plan program
of approximately $3.5 million was not paid by December 31, 2001 and is included
in accounts receivable.

         The Company has been working closely with this customer to develop a
plan for the payment of the amounts owed. In January 2002, the Company and the
customer entered into a note agreement for the value of the machines that had
been previously sold by the customer for which payment was not remitted to the
Company. The amount of the note is $800,000 and is due in 48 monthly
installments plus interest at the prime rate plus 2%, beginning March 15, 2002.
The customer has made its first payment under this note. Should the customer be
successful in raising a minimum of $2.5 million through its private placement
offering, the Company has agreed to convert $500,000 of the note balance to
shares of convertible preferred stock in the private placement. The Company has
also obtained a security interest in the machines that have not yet been sold by
the customer. In addition, the customer has agreed to remit payment to the
Company for any machines it sells, which the customer has been doing.

         In the fourth quarter of 2001, the Company established a remarketing
reserve of $250,000 for any expected costs associated with remarketing existing
machines at this customer's locations. The Company believes it may be necessary
to remarket a portion of these machines to other customers to accelerate payment
to the Company.

         In January 2001, the Company entered into a licensing agreement that
allows Polaris to sell an ASV-built, rubber track, all-surface utility loader
similar to the Company's RC-30 All Surface Loader. The agreement gives Polaris
the worldwide exclusive right to market and sell the utility loader under its
own nameplate through its worldwide dealer network and market and sell the
utility loader to certain national rental centers. Polaris purchases the
machines, as well as parts and attachments, directly from ASV. The agreement
also provides the option for Polaris to manufacture the machines under a royalty
arrangement under certain circumstances.

         The Company sells the Polaris ASL-300 machine, as well as parts and
accessories, to Polaris on a cost plus basis. The gross profit on these machines
is less than the gross profit ASV recognizes on the sale of its RC-30 product,
parts and accessories. However, the Company does not incur significant sales and
marketing costs on the sale of products to Polaris.

         On September 24, 2001, the Company announced the implementation of a
stock buy-back program whereby ASV may repurchase up to $5 million of its common
stock in the open market. The Company is funding the repurchases with available
funds. The repurchase program is expected to last not more than twelve months or
until such amount of stock is repurchased. As of March 15, 2002, the Company had
repurchased 52,780 shares of its common stock under this buy-back program for an
aggregate purchase price of approximately $565,000.

         During 2001 and 2000, the Company provided extended term financing
programs, generally not exceeding 180 days, to its customers. This extended term
financing program contributed to the increase in the Company's accounts
receivable balance in 2001. The Company does not intend to utilize this type of
program in 2002. Instead, the Company has affiliated itself with several finance
companies that will be financing the sale of the Company's products. By using
these finance companies, the Company will be receiving payment for its products
shortly after their shipment. The Company does intend to pay a portion the
interest cost associated with financing these shipments that would normally be
paid by the customer, generally ranging from three to twelve months, depending
on the amount of down payment made by the customer.

         The Company believes this change in how the Company expects to receive
payment for the sale of its products, its existing cash and marketable
securities, together with its available, unused $10 million credit line, will
satisfy the Company's projected working capital needs and other cash
requirements for at least the next twelve months.

         The statements set forth above under "Liquidity and Capital Resources"
and elsewhere in this Form 10-K regarding ASV's plans to jointly develop and
manufacture rubber-tracked machines with Caterpillar, including the number of
models to be developed, the timing of their planned introduction, ASV's future
product mix and ASV's future profitability and expense levels are
forward-looking statements based on current expectations and assumptions, and
entail various risks and uncertainties that could cause actual results to differ
materially from those expressed in such forward-looking statements. Certain
factors may affect whether these anticipated events occur including ASV's
ability to successfully manufacture the machines, unanticipated delays, costs or
other difficulties in



                                       17
<PAGE>

the development and manufacture of the machines, market acceptance of the
machines, general market conditions, corporate developments at ASV, Polaris or
Caterpillar and ASV's ability to realize the anticipated benefits from its
alliances with Polaris and Caterpillar. Actual results might differ materially
from those anticipated in such forward-looking statements. Any forward-looking
statements provided from time-to-time by the Company represent only management's
then-best current estimate of future results or trends. Additional information
regarding these risk factors and uncertainties is detailed in the Risk Factors
filed as Exhibit 99 to its Current Report on Form 10-Q for the quarter ended
June 30, 2001.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company has no history of, and does not anticipate in the future,
investing in derivative financial instruments, derivative commodity instruments
or other such financial instruments. Transactions with international customers
are entered into in US dollars, precluding the need for foreign currency hedges.
Additionally, the Company invests in money market funds and fixed rate U.S.
government and corporate obligations, which experience minimal volatility. Thus,
the exposure to market risk is not material.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         FINANCIAL STATEMENTS

         The following financial statements and financial schedules are attached
as a separate section on pages F-1 through F-13 immediately following the
signature page of this Annual Report on Form 10-K:

         Consolidated Balance Sheets as of December 31, 2001 and 2000
         Consolidated Statements of Earnings for the years ended December 31,
         2001, 2000 and 1999
         Consolidated Statements of Changes in Shareholders' Equity for the
         years ended December 31, 2001, 2000 and 1999
         Consolidated Statements of Cash Flows for the years ended December 31,
         2001, 2000 and 1999
         Notes to Consolidated Financial Statements
         Report of Independent Certified Public Accountants

         SUPPLEMENTARY FINANCIAL INFORMATION

         The selected quarterly financial data is included in Note N to the
financial statements filed with this Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

         None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information required by Item 10 is incorporated by reference to the
sections entitled "Election of Directors", "Executive Officers" and "Section
16(a) Beneficial Ownership Compliance" in the Company's Proxy Statement for its
2002 Annual Meeting of Shareholders, which will be filed with the Securities and
Exchange Commission pursuant to Regulation 14A within 120 days of the Company's
fiscal year end.

ITEM 11. EXECUTIVE COMPENSATION

         The information required by Item 11 is incorporated by reference to the
section entitled "Executive Compensation" in the Company's Proxy Statement for
its 2002 Annual Meeting of Shareholders, which will be filed with the Securities
and Exchange Commission pursuant to Regulation 14A within 120 days of the
Company's fiscal year end.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT



                                       18
<PAGE>

         The information required by Item 12 is incorporated by reference to the
section entitled "Security Ownership of Certain Beneficial Owners and
Management" in the Company's Proxy Statement for its 2002 Annual Meeting of
Shareholders, which will be filed with the Securities and Exchange Commission
pursuant to Regulation 14A within 120 days of the Company's fiscal year end.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by Item 13 is incorporated by reference to the
section entitled "Certain Relationships and Related Transactions" in the
Company's Proxy Statement for its 2002 Annual Meeting of Shareholders, which
will be filed with the Securities and Exchange Commission pursuant to Regulation
14A within 120 days of the Company's fiscal year end.

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

         (a)(1)   FINANCIAL STATEMENTS

                  The financial statements filed as part of this report are
         listed under Item 8. Financial Statements and Supplementary Data.

         (a)(2)   FINANCIAL STATEMENT SCHEDULES

                  The following items are attached as a separate section on
         pages S-1 and S-2 immediately following the financial statements
         included in this Annual Report on Form 10-K:

                  Report of Independent Certified Public Accountants on the
                  Financial Statement Schedule for the years ended December 31,
                  2001, 2000 and 1999

                  Schedule II - Valuation and Qualifying Accounts for the years
                                ended December 31, 2001, 2000 and 1999

         (a)(3)   EXHIBITS

      Exhibit
      Number      Description

        3.1       Second Restated Articles of Incorporation of the Company (a)

        3.1a      Amendment to Second Restated Articles of Incorporation of the
                  Company filed January 6, 1997 (d)

        3.1b      Amendment to Second Restated Articles of Incorporation of the
                  Company filed May 4, 1998 (g)

        3.2       Bylaws of the Company (a)

        3.3       Amendment to Bylaws of the Company adopted April 13, 1999 (l)

        4.1       Specimen form of the Company's Common Stock Certificate (a)

        4.3 *     1994 Long-Term Incentive and Stock Option Plan (a)

        4.4       Warrant issued to Leo Partners, Inc. on December 1, 1996 (d)

        4.5 *     1996 Incentive and Stock Option Plan (e)

        4.6 *     1996 Incentive and Stock Option Plan, as amended (f)

        4.7 *     1998 Non-Employee Director Stock Option Plan (f)




                                       19
<PAGE>

        4.8 *     Amendment to 1998 Non-Employee Director Stock Option Plan (m)

        4.9       Securities Purchase Agreement dated October 14, 1998 between
                  Caterpillar Inc. and the Company (h)

        4.10      Warrant issued to Caterpillar Inc. on January 29, 1999 (i)

        4.11      Securities Purchase Agreement dated October 31, 2000 between
                  Caterpillar Inc. and the Company (n)

        4.12      Replacement Warrant issued to Caterpillar Inc. on October 31,
                  2000 (n)

        10.1      Development Agreement dated July 14, 1994 among the Iron
                  Range Resources and Rehabilitation Board, the Grand Rapids
                  Economic Development Authority ("EDA") and the Company (b)

        10.2      Lease and Option Agreement dated July 14, 1994 between the EDA
                  and the Company (b)

        10.3      Option Agreement dated July 14, 1994 between the EDA and the
                  Company (b)

        10.4      Supplemental Lease Agreement dated April 18, 1997 between the
                  EDA and the Company (e)

        10.5      Supplemental Development Agreement dated April 18, 1997
                  between the EDA and the Company (e)

        10.6      Line of Credit dated May 22, 1997 between Norwest Bank
                  Minnesota North, N.A. and the Company  (e)

        10.7 *    Employment Agreement dated October 17, 1994 between the
                  Company and Thomas R. Karges (c)

        10.8      Consulting Agreement between the Company and Leo Partners,
                  Inc. dated December 1, 1996 (d)

        10.9      Extension of Lease Agreement dated May 13, 1998 between the
                  EDA and the Company (g)

        10.10     First Amendment to Credit Agreement dated June 30, 1998
                  between Norwest Bank Minnesota  North,  N.A. and the
                  Company (g)

        10.11     Commercial Alliance Agreement dated October 14, 1998 between
                  Caterpillar Inc. and the Company (h)

        10.12     Management Services Agreement dated January 29, 1999 between
                  Caterpillar Inc. and the Company (j)

        10.13     Marketing Agreement dated January 29, 1999 between Caterpillar
                  Inc. and the Company (j)

        10.14     Third Amendment to Credit Agreement dated June 9, 1999 between
                  Norwest Bank Minnesota North, N.A. and the Company (k)

        10.15     Fourth Amendment to Credit Agreement dated June 1, 2000
                  between Norwest Bank Minnesota North,  N.A. and the Company
                  (m)

        10.16**   Multi-Terrain Rubber-Tracked Loader Alliance Agreement dated
                  October 31, 2000 between Caterpillar Inc. and the Company (n)

        10.17**   Manufacturing and Distribution Agreement dated January 2, 2001
                  between Polaris Industries Inc. and the Company (o)

        10.18     Fifth Amendment to Credit Agreement dated June 1, 2001 between
                  Wells Fargo Bank Minnesota, N.A. and the Company (p)

        11        Statement re: Computation of Per Share Earnings

        22        List of Subsidiaries (a)



                                       20
<PAGE>

        23        Consent of Grant Thornton LLP, independent certified public
                  accountants

        99        Risk Factors (p)

                  (a)      Incorporated by reference to the Company's
                           Registration Statement on Form SB-2 (File No.
                           33-61284C) filed July 7, 1994.

                  (b)      Incorporated by reference to the Company's
                           Post-Effective Amendment No. 1 to Registration
                           Statement on Form SB-2 (File No. 33-61284C) filed
                           August 3, 1994.

                  (c)      Incorporated by reference to the Company's Quarterly
                           Report on Form 10-QSB for the quarter ended September
                           30, 1994 (File No. 33-61284C) filed November 11,
                           1994.

                  (d)      Incorporated by reference to the Company's Annual
                           Report on Form 10-KSB for the year ended December 31,
                           1996 (File No. 0-25620) filed electronically March
                           28, 1997.

                  (e)      Incorporated by reference to the Company's Quarterly
                           Report on Form 10-QSB for the quarter ended June 30,
                           1997 (File No. 0-25620) filed electronically August
                           13, 1997.

                  (f)      Incorporated by reference to the Company's Definitive
                           Proxy Statement for the year ended December 31, 1997
                           (File No. 0-25620) filed electronically April 28,
                           1998.

                  (g)      Incorporated by reference to the Company's Quarterly
                           Report on Form 10-Q for the quarter ended June 30,
                           1998 (File No. 0-25620) filed electronically August
                           12, 1998.

                  (h)      Incorporated by reference to the Company's Current
                           Report on Form 8-K (File No. 0-25620) filed
                           electronically October 27, 1998.

                  (i)      Incorporated by reference to the Company's Current
                           Report on Form 8-K (File No. 0-25620) filed
                           electronically February 11, 1999.

                  (j)      Incorporated by reference to the Company's Annual
                           Report on Form 10-K for the year ended December 31,
                           1998 (File No. 0-25620) filed electronically March
                           26, 1999.

                  (k)      Incorporated by reference to the Company's Quarterly
                           Report on Form 10-Q for the quarter ended June 30,
                           1999 (File No. 0-25620) filed electronically August
                           9, 1999.

                  (l)      Incorporated by reference to the Company's Quarterly
                           Report on Form 10-Q for the quarter ended September
                           30, 1999 (File No. 0-25620) filed electronically
                           November 12, 1999.

                  (m)      Incorporated by reference to the Company's Quarterly
                           Report on Form 10-Q for the quarter ended June 30,
                           2000 (File No. 0-25620) filed electronically August
                           10, 2000.

                  (n)      Incorporated by reference to the Company's Quarterly
                           Report on Form 10-Q for the quarter ended September
                           30, 2000 (File No. 0-25620) filed electronically
                           November 13, 2000.

                  (o)      Incorporated by reference to the Company's Annual
                           Report on Form 10-K for the year ended December 31,
                           2000 (File No. 0-25620) filed electronically March
                           30, 2001.

                  (p)      Incorporated by reference to the Company's Quarterly
                           Report on Form 10-Q for the quarter ended June 30,
                           2001 (File No. 0-25620) filed electronically August
                           13, 2001.

                  *        Indicates management contract or compensation plan or
                           arrangement.

                  **       Certain information contained in this document has
                           been omitted and filed separately accompanied by a
                           confidential request pursuant to Rule 24b-2 of the
                           Securities Exchange Act of 1934.



                                       21
<PAGE>

         (b) REPORTS ON FORM 8-K

         The following current Report on Form 8-K was filed by the Company
during the quarter ended December 31, 2001:

         Current Report on Form 8-K dated October 24, 2001 reporting under Item
5. "Other Events" that on October 24, 2001, ASV issued a press release
disclosing its financial results for the three and nine months ended September
30, 2001. In addition, the press release contained information regarding a
conference call held October 24, 2001 during which ASV discussed its financial
results for the three and nine months ended September 30, 2001.




                                       22
<PAGE>
                                   SIGNATURES

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

<TABLE>
<CAPTION>
                                           A.S.V., INC.

<S>                                                                  <C>
             /s/ Gary Lemke                                          Date:  March 29, 2002
         ----------------------------------------                    ---------------------
         By:  Gary Lemke, President
</TABLE>

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.


<TABLE>
<S>                                                                  <C>
             /s/ Gary Lemke                                          Date:  March 29, 2002
         ----------------------------------------                    ---------------------
         By:  Gary Lemke, Chairman of the Board, President
              and Director (Chief Executive Officer)


             /s/ Jerome T. Miner                                     Date:  March 29, 2002
         ----------------------------------------                    ---------------------
         By:  Jerome T. Miner, Vice-Chairman of the Board
              and Director


             /s/ Edgar E. Hetteen                                    Date:  March 29, 2002
         ----------------------------------------                    ---------------------
         By:  Edgar E. Hetteen, Vice President and Director


             /s/ James Dahl                                          Date:  March 29, 2002
         ----------------------------------------                    ---------------------
         By:  James Dahl, Director


             /s/ Leland T. Lynch                                     Date:  March 29, 2002
         ----------------------------------------                    ---------------------
         By:  Leland T. Lynch, Director


             /s/ R. E. Turner, IV                                    Date:  March 29, 2002
         ----------------------------------------                    ---------------------
         By:  R. E. Turner, IV, Director


             /s/ Richard A. Benson                                   Date:  March 29, 2002
         ----------------------------------------                    ---------------------
         By:  Richard A. Benson, Director


             /s/ Robert Macier                                       Date:  March 29, 2002
         ----------------------------------------                    ---------------------
         By:  Robert Macier, Director


             /s/ Thomas R. Karges                                    Date:  March 29, 2002
         ----------------------------------------                    ---------------------
         By:  Thomas R. Karges, Chief Financial Officer
</TABLE>



                                       23
<PAGE>

FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

A.S.V., INC.

DECEMBER 31, 2001 AND 2000


























                                      F-1
<PAGE>
                                  A.S.V., INC.

                           CONSOLIDATED BALANCE SHEETS

                           DECEMBER 31, 2001 AND 2000

<TABLE>
<CAPTION>
                ASSETS                                                  2001           2000
                                                                      --------       --------
<S>                                                                  <C>           <C>
CURRENT ASSETS
   Cash and cash equivalents                                         $ 5,221,591   $ 9,483,861
   Short-term investments                                                725,249     1,278,282
   Accounts receivable (net of allowance for doubtful accounts
      of $75,000)                                                     16,828,489    10,557,907
   Inventories                                                        28,614,053    28,064,998
   Prepaid expenses and other                                          1,756,844       965,026
                                                                     -----------   -----------

                Total current assets                                  53,146,226    50,350,074

PROPERTY AND EQUIPMENT, net                                            4,794,578     4,656,118
                                                                     -----------   -----------

                                                                     $57,940,804   $55,006,192
                                                                     ===========   ===========

                LIABILITIES AND
                  SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
   Current portion of long-term liabilities                          $   106,008   $    82,090
   Accounts payable                                                    2,449,144     1,822,912
   Accrued liabilities
     Compensation                                                        269,919       270,956
     Warranty reimbursements                                             879,900          --
     Warranties                                                          500,000       450,000
     Other                                                               646,636       302,968
   Income taxes payable                                                  505,062       197,021
                                                                     -----------   -----------

                Total current liabilities                              5,356,669     3,125,947



LONG-TERM LIABILITIES, less current portion                            2,012,652     2,116,898


COMMITMENTS AND CONTINGENCIES                                               --            --


SHAREHOLDERS' EQUITY
   Capital stock, $.01 par value:
     Preferred stock, 11,250,000 shares authorized; no shares
       issued or outstanding                                                --            --
     Common stock, 33,750,000 shares authorized; shares issued
       and outstanding - 10,205,306 in 2001 and 10,209,997 in 2000       102,053       102,100
   Additional paid-in capital                                         40,123,200    40,070,685
   Retained earnings                                                  10,346,230     9,590,562
                                                                     -----------   -----------
                                                                      50,571,483    49,763,347
                                                                     -----------   -----------

                                                                     $57,940,804   $55,006,192
                                                                     ===========   ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                      F-2
<PAGE>
                                  A.S.V., INC.

                       CONSOLIDATED STATEMENTS OF EARNINGS

                  YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

<TABLE>
<CAPTION>
                                               2001            2000            1999
                                            ----------      ----------      ----------
<S>                                        <C>             <C>             <C>
Net sales                                  $ 50,081,376    $ 43,859,509    $ 36,168,415

Cost of goods sold                           41,025,009      34,794,783      27,739,554
                                           ------------    ------------    ------------

         Gross profit                         9,056,367       9,064,726       8,428,861

Operating expenses
   Selling, general and administrative        5,857,867       6,210,514       5,670,629
   Research and development                   2,645,476         679,233         531,375
                                           ------------    ------------    ------------

         Operating income                       553,024       2,174,979       2,226,857

Other income (expense)
   Interest expense                            (146,031)       (266,890)       (306,202)
   Interest income                              400,202         225,043         229,405
   Other, net                                   128,473          76,457          16,993
                                           ------------    ------------    ------------

         Income before income taxes             935,668       2,209,589       2,167,053

Provision for income taxes                      180,000         758,680         755,000
                                           ------------    ------------    ------------

         NET EARNINGS                      $    755,668    $  1,450,909    $  1,412,053
                                           ============    ============    ============

Net earnings per common share
     Basic                                 $        .07    $        .15    $        .15
                                           ============    ============    ============

     Diluted                               $        .07    $        .15    $        .14
                                           ============    ============    ============

Weighted average number of common shares
   outstanding
     Basic                                   10,215,855       9,782,919       9,586,032
                                           ============    ============    ============

     Diluted                                 10,352,468       9,966,661       9,941,616
                                           ============    ============    ============
</TABLE>

The accompanying notes are an integral part of these financial statements.


                                      F-3
<PAGE>
                                  A.S.V., INC.

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                  YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999


<TABLE>
<CAPTION>
                                                 Common stock            Additional
                                              -------------------         paid-in        Retained
                                            Shares          Amount        capital        earnings         Total
                                          ----------      ----------     ----------    ------------     ----------
<S>                                     <C>             <C>             <C>             <C>            <C>
Balance at December 31, 1998               8,601,835    $     86,018    $ 12,701,622    $  6,727,600   $ 19,515,240
   Issuance of common stock, net of
     issuing costs                         1,000,000          10,000      17,539,173            --       17,549,173
   Exercise of stock options                 115,740           1,158         801,541            --          802,699
   Tax benefit from exercise of stock
     options                                    --              --           270,000            --          270,000
   Cost of shares retired                    (31,118)           (311)       (604,133)           --         (604,444)
   Warrant earned                               --              --           151,200            --          151,200
   Net earnings                                 --              --              --         1,412,053      1,412,053
                                        ------------    ------------    ------------    ------------   ------------
Balance at December 31, 1999               9,686,457          96,865      30,859,403       8,139,653     39,095,921
   Issuance of common stock, net of
     issuing costs                           500,000           5,000       8,942,149            --        8,947,149
   Exercise of stock options                  26,750             267          95,288            --           95,555
   Tax benefit from exercise of stock
     options                                    --              --            60,000            --           60,000
   Cost of shares retired                     (3,210)            (32)        (37,355)           --          (37,387)
   Warrant earned                               --              --           151,200            --          151,200
   Net earnings                                 --              --              --         1,450,909      1,450,909
                                        ------------    ------------    ------------    ------------   ------------
Balance at December 31, 2000              10,209,997         102,100      40,070,685       9,590,562     49,763,347
   Exercise of stock options                  21,863             219         129,609            --          129,828
   Tax benefit from exercise of stock
     options                                    --              --            55,000            --           55,000
   Cost of shares retired                    (26,554)           (266)       (270,694)           --         (270,960)
   Warrant earned                               --              --           138,600            --          138,600
   Net earnings                                 --              --              --           755,668        755,668
                                        ------------    ------------    ------------    ------------   ------------
Balance at December 31, 2001              10,205,306    $    102,053    $ 40,123,200    $ 10,346,230   $ 50,571,483
                                        ============    ============    ============    ============   ============
</TABLE>


The accompanying notes are an integral part of these financial statements.

                                      F-4
<PAGE>
                                  A.S.V., INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999


<TABLE>
<CAPTION>
                                                                          2001            2000            1999
                                                                         ------          ------          ------
<S>                                                                  <C>             <C>             <C>
Cash flows from operating activities:
   Net earnings                                                      $    755,668    $  1,450,909    $  1,412,053
   Adjustments to reconcile net earnings to net cash provided by
     (used in) operating activities:
       Depreciation and amortization                                      441,684         413,268         380,750
       Interest accrued on capital lease obligation                          --              --            48,288
       Deferred income taxes                                             (535,000)          5,000        (110,000)
       Warrant earned                                                     138,600         151,200         151,200
       Tax benefit from stock option exercises                             55,000          60,000         270,000
       Changes in assets and liabilities:
          Accounts receivable                                          (6,270,582)     (1,896,858)     (4,097,209)
          Inventories                                                    (549,055)      4,326,258     (13,614,498)
          Prepaid expenses and other                                     (256,818)       (198,608)        290,697
          Accounts payable                                                626,232          47,029      (1,137,643)
          Accrued liabilities                                           1,272,531        (222,749)        361,601
          Income taxes                                                    308,041         236,679          84,673
                                                                     ------------    ------------    ------------

              Net cash provided by (used in) operating activities      (4,013,699)      4,372,128     (15,960,088)
                                                                     ------------    ------------    ------------

Cash flows from investing activities:
   Purchase of property and equipment                                    (580,144)       (273,712)       (612,428)
   Purchase of short-term investments                                  (1,766,960)       (278,475)     (4,523,188)
   Redemption of short-term investments                                 2,319,993         247,889       3,518,527
                                                                     ------------    ------------    ------------

              Net cash used in investing activities                       (27,111)       (304,298)     (1,617,089)
                                                                     ------------    ------------    ------------

Cash flows from financing activities:
   Proceeds from (payments on) line of credit, net                           --        (4,080,000)        545,000
   Principal payments on long-term liabilities                            (80,328)       (252,470)       (280,632)
   Proceeds from issuance of common stock, net                               --         8,947,149      17,549,173
   Proceeds from exercise of stock options                                129,828          95,555         802,699
   Retirement of common stock                                            (270,960)        (37,387)       (604,444)
                                                                     ------------    ------------    ------------

              Net cash provided by (used in) financing activities        (221,460)      4,672,847      18,011,796
                                                                     ------------    ------------    ------------

              Net increase (decrease) in cash and cash equivalents     (4,262,270)      8,740,677         434,619

Cash and cash equivalents at beginning of year                          9,483,861         743,184         308,565
                                                                     ------------    ------------    ------------

Cash and cash equivalents at end of year                             $  5,221,591    $  9,483,861    $    743,184
                                                                     ============    ============    ============

Supplemental disclosure of cash flow information:
   Cash paid for interest                                            $    180,640    $    331,468    $    287,262
   Cash paid for income taxes                                             390,765         473,322         535,145
                                                                     ============    ============    ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                      F-5
<PAGE>
                                  A.S.V., INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        DECEMBER 31, 2001, 2000 AND 1999



NOTE A  -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   The Company designs and manufactures track-driven, all-season vehicles and
   related accessories and attachments in northern Minnesota. The Company sells
   its products through Caterpillar and independent dealers.

   A summary of the significant accounting policies consistently applied in the
   preparation of the accompanying consolidated financial statements follows:

   Principles of Consolidation

   The consolidated financial statements include the accounts of A.S.V., Inc.
   and its wholly-owned subsidiary. All intercompany accounts and transactions
   have been eliminated in consolidation.

   Revenue Recognition

   The Company generally recognizes revenue on its product sales when persuasive
   evidence of an arrangement exists, delivery has occurred, the price is fixed
   or determinable and collectibility is reasonably assured. The Company
   considers delivery to have occurred at the time of shipment

   In 2000, pursuant to a contractual arrangement, revenues of $4 million were
   recognized for completed products held at the Company's warehouse. The
   customer requested the Company hold the products as it had physical space
   limitations at its facilities. The products were delivered in 2001.

   Fair Value of Financial Instruments

   The financial statements include the following financial instruments: cash
   equivalents, accounts receivable, accounts payable and bank debt. At December
   31, 2001 and 2000, the fair values of these financial instruments are not
   significantly different than their balance sheet carrying amounts.


   Cash Equivalents

   All highly liquid temporary cash investments with an original maturity of
   three months or less are considered to be cash equivalents. At December 31,
   2001 and 2000, the Company had cash equivalents of approximately $4,930,000
   and $9,765,000, which consisted of a money market account. The fair value of
   these investments approximates cost.

   Accounts Receivable

   The Company grants credit to customers in the normal course of business.
   Management performs on-going credit evaluations of customers and maintains
   allowances for potential credit losses which, when realized, have generally
   been within management expectations.

   Inventories

   Inventories are stated at the lower of cost (determined using the first-in,
   first-out method) or market.

   Property and Equipment

   Property and equipment are carried at cost. Depreciation is provided in
   amounts sufficient to relate the cost of depreciable assets to operations
   over their estimated service lives. Building and improvements are depreciated
   over periods of 18 to 39 years using the straight-line method. Tooling,
   machinery and equipment, and vehicles are depreciated over periods of 3 to 20
   years using straight-line and accelerated methods. Accelerated methods are
   used for income tax purposes.

   Warranties

   Provision for estimated warranty costs is recorded at the time of sale and
   periodically adjusted to reflect actual experience.

   Advertising Expense

   Advertising is expensed as incurred. Advertising expenses were approximately
   $295,000, $233,000 and $423,000 for 2001, 2000 and 1999.




                                      F-6
<PAGE>
                                  A.S.V., INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2001, 2000 AND 1999


NOTE A  -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

   Shipping and Handling Costs

   The Company includes shipping and handling (including warehousing) costs
   incurred in connection with the distribution of replacement parts in the
   "selling, general and administrative" line of the consolidated statements of
   earnings. Shipping and handling costs were approximately $832,000, $906,000
   and $745,000 for 2001, 2000 and 1999.

   Research and Development

   All research and development costs are expensed as incurred.

   Employee Savings and Profit Sharing Plan

   The Company has an employee savings and profit sharing plan which provides
   for participant salary deferrals of up to $10,500 and discretionary Company
   contributions. The plan covers employees who have completed three months of
   service, as defined in the plan, and who have attained the age of 20 and
   one-half. Company contributions were approximately $41,000, $45,000 and
   $37,000 for 2001, 2000 and 1999.

   Stock-Based Compensation

   The Company accounts for the issuance of stock options to employees using the
   intrinsic value method. Under this method, compensation expense is recognized
   for the amount by which the market price of the common stock on the date of
   grant exceeds the exercise price of an option.

   Accounting Estimates

   Preparing consolidated financial statements in conformity with accounting
   principles generally accepted in the United States of America requires
   management to make estimates and assumptions that affect the reported amounts
   of assets and liabilities, related revenues and expenses and disclosure of
   contingent assets and liabilities at the date of the financial statements.
   Actual results could differ from these estimates.


   Net Earnings Per Common Share

   Basic net earnings per share is computed by dividing net earnings by the
   weighted average number of outstanding common shares. Diluted net earnings
   per share is computed by dividing net earnings by the weighted average number
   of outstanding common shares and common share equivalents relating to stock
   options and warrants, when dilutive.

   For the years ended December 31, 2001, 2000 and 1999, 136,613, 183,742 and
   355,584 shares of common stock equivalents were included in the computation
   of diluted net earnings per share. Options and warrants to purchase
   11,229,876, 11,134,314 and 10,731,252, shares of common stock with a weighted
   average exercise price of $20.13, $20.21 and $20.88, were outstanding at
   December 31, 2001, 2000 and 1999, but were excluded from the computation of
   common share equivalents because they were anti-dilutive.

   Reclassifications

   Certain 2000 and 1999 amounts have been reclassified to conform to the 2001
   presentation.

   New Accounting Pronouncements

   In June 2001, the Financial Accounting Standards Board (FASB) issued
   Statement of Financial Accounting Standards (SFAS) 141, Business
   Combinations, and SFAS 142, Goodwill and Other Intangible Assets.

   These pronouncements, among other things, eliminate the pooling-of-interest
   method of accounting for business combinations and require intangible assets
   acquired in business combinations be recorded separately from goodwill. The
   pronouncements also eliminate the amortization of goodwill and other
   intangible assets with indefinite lives. SFAS 141 and the nonamortization
   provisions of SFAS 142 are effective for purchase business combinations
   completed after June 30, 2001. The remaining provisions of SFAS 142 are
   effective for the Company beginning January 1, 2002. Management does not
   believe the adoption of these pronouncements will have a material affect on
   the Company as the Company does not have any goodwill or other intangible
   assets with indefinite lives.



                                      F-7
<PAGE>
                                  A.S.V., INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2001, 2000 AND 1999


NOTE A  -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  -  Continued

   In September 2001, the FASB issued SFAS 144, Accounting for the Impairment or
   Disposal of Long-Lived Assets. SFAS 144 supercedes SFAS 121 and further
   clarifies the accounting for disposals of long-lived assets. This statement
   is effective for the Company beginning January 1, 2002. Management does not
   believe the adoption of this pronouncement will have a material effect on the
   Company.


NOTE B  -  SHORT-TERM INVESTMENTS

   Short-term investments consist primarily of a diversified portfolio of
   taxable governmental agency bonds, which mature between 2002 and 2004. The
   Company considers the investments as "available-for-sale." At December 31,
   2001 and 2000, cost was equal to fair value and no amount was included as a
   separate component of shareholders' equity.


NOTE C  -  INVENTORIES

   Inventories consist of the following:

<TABLE>
<CAPTION>
                              December 31,
                          2001          2000
                          -----         ----
<S>                    <C>           <C>
Raw materials, semi-
   finished and WIP
   inventory           $16,438,019   $16,032,996
Finished goods           7,723,738     6,561,815
Used equipment
   held for resale       4,452,296     5,470,187
                       -----------   -----------

                       $28,614,053   $28,064,998
                       ===========   ===========
</TABLE>

NOTE D  -  PROPERTY AND EQUIPMENT

   Property and equipment consist of the following:

<TABLE>
<CAPTION>
                          December 31,
                      2001          2000
                     ------        ------
<S>                <C>          <C>
Land               $  132,635   $  132,635
Buildings and
   improvements     3,691,018    3,651,732
Tooling               709,709      544,392
Machinery and
   equipment        2,030,936    1,655,927
Vehicles              317,042      338,998
                   ----------   ----------
                    6,881,340    6,323,684
Less accumulated
   depreciation     2,086,762    1,667,566
                   ----------   ----------

                   $4,794,578   $4,656,118
                   ==========   ==========
</TABLE>


NOTE E  -  LINES OF CREDIT

   The Company has a $10,000,000 line of credit agreement with a bank which is
   due on demand. The interest rate is variable at prime less one half percent
   (effective rate of 4.25% and 9.0% as of December 31, 2001 and 2000). As of
   December 31, 2001, there were no advances on this line of credit. The
   agreement requires the Company to maintain certain financial requirements
   including a minimum tangible net worth level and a cash flow coverage ratio.


NOTE F  -  LONG-TERM LIABILITIES

   Capital Lease Obligation

   The Company leases its manufacturing and office building from the Grand
   Rapids Economic Development Authority. The agreement provides for monthly
   payments to 2018 and a balloon payment of approximately $543,000 in December
   2006.

   Future minimum lease payments under this capital lease obligation at December
   31, 2001 are as follows:

<TABLE>
<S>                                          <C>
     2002                                    $  228,134
     2003                                       228,134
     2004                                       228,134
     2005                                       228,134
     2006                                       766,131
     Thereafter                               1,283,045
                                             ----------

     Total payments                           2,961,711
     Amounts representing interest (weighted
       average 6.09%)                           843,051
                                             ----------

     Present value of minimum
        capitalized lease payments           $2,118,660
                                             ==========
</TABLE>

   Assets related to the capital lease were $2,250,773 at December 31, 2001 and
   2000. Accumulated amortization was $275,334 and $219,065 at December 31, 2001
   and 2000.


NOTE G  -  PROVISION FOR INCOME TAXES

   The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
                 Year ended December 31,
                 -------------------------
               2001        2000        1999
              ------      ------      ------
<S>         <C>          <C>         <C>
Current
  Federal   $ 648,000    $ 683,680   $ 760,000
  State        67,000       70,000     105,000
            ---------    ---------   ---------
              715,000      753,680     865,000
Deferred     (535,000)       5,000    (110,000)
            ---------    ---------   ---------

            $ 180,000    $ 758,680   $ 755,000
            =========    =========   =========
</TABLE>

                                      F-8
<PAGE>
                                  A.S.V., INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2001, 2000 AND 1999


NOTE G  -  PROVISION FOR INCOME TAXES  -  Continued

   Net deferred income tax assets relate to the tax effect of temporary
   differences as follows:

<TABLE>
                              December 31,
                        -----------------------
                           2001         2000
                        ----------   ----------
<S>                     <C>          <C>
Accruals and reserves   $  940,000   $  445,000
Other                      130,000       90,000
                        ----------   ----------

                        $1,070,000   $  535,000
                        ==========   ==========
</TABLE>

   The net deferred tax asset is included with prepaid expenses and other in the
   financial statements.

   The following is a reconciliation of the Federal statutory income tax rate to
   the effective tax rate:
<TABLE>
<CAPTION>
                               2001       2000     1999
                              ------     ------   ------
<S>                          <C>        <C>       <C>
   Statutory federal rate     34.0%      34.0%     34.0%
   State income taxes, net
      of federal benefit       4.7        2.6       2.6
   Research and development
      tax credit             (16.9)        -         -
   Foreign tax credit         (4.2)        -         -
   Other                       1.6       (1.5)     (1.8)
                             -----      -----     -----

                              19.2%      35.1%     34.8%
                             =====      =====     =====
</TABLE>
   The Company realizes an income tax benefit from the exercise or early
   disposition of certain stock options. This benefit results in a decrease in
   current income taxes payable and an increase in additional paid-in capital.

   The Company generated and fully utilized research and development and foreign
   tax credits during 2001.


NOTE H  -  TRANSACTIONS WITH CATERPILLAR

   A Securities Purchase Agreement (the Agreement) with Caterpillar Inc. closed
   on January 29, 1999. Under the terms of the Agreement, Caterpillar acquired,
   for an aggregate purchase price of $18,000,000, one million newly issued
   shares of common stock and a warrant to purchase an additional 10,267,127
   newly issued shares of common stock at a price of $21.00 per share. The
   warrant is exercisable at any time through January 2009 subject to partial
   termination in the event the Company achieves certain financial goals. In
   connection with this transaction, the Company incurred expenses of
   approximately $450,000, which were offset against the proceeds for the issued
   shares.

   As a result of the Agreement, the board of directors was increased with two
   members appointed by Caterpillar. In addition, the Agreement contains other
   provisions which allow Caterpillar to maintain its proportionate potential
   ownership and that restricts certain situations including acquisitions, loans
   and the payment of dividends, without approval of at least one of the
   Caterpillar designated members of the Board.

   The warrant issued to Caterpillar provides for a potential change of control.
   As a result, in accordance with the 1994 and 1996 stock option plans, all
   previously issued stock options became fully vested upon the closing of the
   transaction.

   The Company and Caterpillar also entered into a Commercial Alliance Agreement
   pursuant to which Caterpillar will provide the Company with access to its
   dealer network and will make various management, financial and engineering
   resources available to the Company. Included in the Commercial Alliance
   Agreement is a Marketing Agreement which provides, among other things, that
   the Company will pay Caterpillar a commission equal to 5% of the dealer net
   price for complete machines and 3% for replacement parts and Company-branded
   attachments for all sales made to Caterpillar dealers. In addition, if the
   Company's products are sold under the Caterpillar brand name, the Company
   will pay Caterpillar a trademark license fee equal to 3% of the net sales of
   these products to Caterpillar dealers. The Company and Caterpillar also
   entered into other ancillary agreements for the benefit of both the Company
   and Caterpillar. Total commission expense under the agreement was
   approximately $464,000, $1,072,000 and $923,000 in 2001, 2000 and 1999.

   In October 2000, the Company completed another Securities Purchase Agreement
   with Caterpillar Inc. in which Caterpillar purchased 500,000 newly issued
   shares of common stock at a price of $18.00 per share. The Company also
   amended its original warrant issued to Caterpillar reducing the number of
   shares of Company common stock available for purchase under the original
   warrant by 500,000 shares.



                                      F-9
<PAGE>
                                  A.S.V., INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2001, 2000 AND 1999


NOTE H  -  TRANSACTIONS WITH CATERPILLAR  -  Continued

   Also in October 2000, the Company and Caterpillar entered into an alliance
   agreement to jointly develop and manufacture a new product line of
   Caterpillar rubber track skid steer loaders called Multi-Terrain Loaders, or
   MTLs. The product line, which is expected to include five new models, will
   feature Caterpillar's patented skid steer loader technology and ASV's
   patented Maximum Traction Support System (TM) rubber track undercarriage. The
   MTLs are being sold through the Caterpillar dealer network. The Company began
   manufacturing the undercarriage for use on two of the MTLs in the second
   quarter of 2001, with the development of undercarriages on the remaining
   models continuing.

   In connection with this alliance agreement, the Company has agreed to
   reimburse Caterpillar for their research and development costs related to the
   MTLs as it pertains to the combination of the Caterpillar portion of the
   machines with the Company's undercarriages. Total research and development
   costs reimbursed to Caterpillar were approximately $1,904,000 and $273,000 in
   2001 and 2000. The Company anticipates the research and development process
   for the MTLs will be completed in 2002.

   At December 31, 2001, Caterpillar owned approximately 16% of the Company's
   outstanding common stock and had the right to own up to approximately 52% of
   the Company's common stock (assuming the exercise of all outstanding options
   and warrants) upon exercise of the warrant.

   The Company purchases parts used in its products from Caterpillar. The
   Company also reimburses Caterpillar for the salary related costs of two
   Caterpillar employees that work on the Company's behalf. In addition, the
   Company utilizes Caterpillar's warranty processing system to handle warranty
   claims on its machines and reimburses Caterpillar for the warranty expense
   incurred by Caterpillar dealers. During 2001 and 2000, total parts purchases,
   salary and warranty reimbursements were approximately $6,877,000 and
   $3,828,000. Also, at December 31, 2001 and 2000, accounts payable to
   Caterpillar were $909,000 and $389,000. No amounts were paid or payable in
   1999 to Caterpillar for these costs.


   The Company recognizes as sales its cost for the undercarriage, as defined in
   the agreement, plus a portion of the gross profit that Caterpillar will
   recognize upon sale of the MTL to Caterpillar dealers, when the Company ships
   undercarriages to Caterpillar.

   During 2001, 18% of net sales were made to Caterpillar. At December 31, 2001,
   the accounts receivable balance due from Caterpillar was approximately
   $1,600,000. No sales were made to Caterpillar in 2000 and 1999.


   NOTE I  -  SHAREHOLDERS' EQUITY

   Stock Option Plans

   The Company has two stock option plans under which up to 3,375,000 shares of
   common stock are available for issuance. Stock options may be granted to any
   employee, including officers and directors of the Company, and certain
   non-employees, at a price not less than the fair market value of the
   Company's common stock on the date of grant. Options generally expire five to
   seven years from the date of grant. Options granted under the plans are
   generally exercisable in annual installments, beginning one year from the
   date of grant.

   Director Stock Option Plan

   The Company also has a stock option plan under which 450,000 shares of common
   stock are available for issuance. Stock options may be granted to directors
   who are not employees of the Company at a price not less than the fair market
   value of the Company's common stock on the date of grant. Options expire five
   years from date of grant and are exercisable in annual installments,
   beginning one year from the date of grant.

   The plan, as amended, provides that each eligible director shall receive an
   option to purchase 3,000 shares on the first business day of each calendar
   year. However, in 2000 and 1999, options to purchase 5,000 and 1,000 shares
   were granted to each director.



                                      F-10
<PAGE>
                                  A.S.V., INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2001, 2000 AND 1999



NOTE I  -  SHAREHOLDERS' EQUITY  -  Continued

   Option transactions under the plans during each of the three years in the
   period ended December 31, 2001 are summarized as follows:

<TABLE>
<CAPTION>
                                              Weighted
                                               Average
                                              Exercise
                                 Shares         Price
                               ---------      ---------
<S>                            <C>            <C>
     Outstanding at
       December 31, 1998       1,357,102         $13.16
          Granted                 55,752          17.88
          Exercised             (115,740)          6.94
                               ---------
     Outstanding at
       December 31, 1999       1,297,114          13.91
          Granted                149,500          15.40
          Exercised              (26,750)          3.57
          Canceled               (31,500)         16.49
                               ---------
     Outstanding at
       December 31, 2000       1,388,364          14.21
          Granted                143,500          11.71
          Exercised              (21,863)          5.93
          Canceled               (63,250)         13.46
                               ---------
     Outstanding at
       December 31, 2001       1,446,751          14.12
                               =========
</TABLE>

   At December 31, 2001, 2000 and 1999, 1,205,501, 1,208,802 and 1,242,114
   options were exercisable with a weighted average exercise price of $14.20,
   $13.96 and $13.74.

   The following information applies to grants that are outstanding at December
   31, 2001:

<TABLE>
<CAPTION>
                               Options outstanding
                       --------------------------------------
                                       Weighted-
                         Number        average      Weighted-
      Range of         outstanding     remaining     average
      exercise             at         contractual   exercise
       prices          period end        life         price
---------------------- -----------  -------------   ---------
<S>                    <C>          <C>             <C>
  $  3.11 - $  3.22        28,250     1.1 years      $ 3.16
     8.38 -   12.22       843,876     2.6 years       12.14
    13.25 -   18.33       574,625     3.2 years       17.57
                       ----------
                        1,446,751                    $14.12
                       ==========                    ======

<CAPTION>
                         Options exercisable
                       ------------------------
                         Number       Weighted-
      Range of         exercisable    average
      exercise             at         exercise
       prices          period end      price
---------------------- -----------   ---------
<S>                    <C>           <C>
  $  3.11 - $3.22          28,250      $ 3.16
     8.38 - 12.22         703,876       12.22
    13.25 - 18.33         473,375       17.79
                       ----------
                        1,205,501      $14.20
                       ==========      ======
</TABLE>

   The weighted average fair values of the options granted during 2001, 2000 and
   1999 are $6.34, $7.76 and $9.62. The fair value of each option grant is
   estimated on the date of grant using the Black-Scholes options-pricing model
   with the following weighted-average assumptions used for all grants in 2001,
   2000 and 1999; zero dividend yield; expected volatility of 47.3%, 42.5% and
   50.0%, risk-free interest rate of 4.33%, 4.93% and 6.83% and expected lives
   of 6.79, 6.60 and 6.78 years.

   The Company's pro forma net earnings and net earnings per common share for
   2001, 2000 and 1999, had the fair value based method been used, are set forth
   below:

<TABLE>
<CAPTION>
                                2001       2000        1999
                              --------  ----------  -----------
<S>             <C>           <C>       <C>         <C>
Net earnings    As            $755,668  $1,450,909  $ 1,412,053
   (loss)       reported
                Pro forma      261,996   1,114,566   (3,176,720)

Net earnings
   (loss) per
   common
   share
     Basic      As            $    .07  $      .15  $       .15
                reported
                Pro forma          .03         .11         (.33)

     Diluted    As                 .07         .15          .14
                reported
                Pro forma          .03         .11         (.33)
</TABLE>

   Shares Retired

   During 2001, 2000 and 1999, in connection with the exercise of stock options
   by employees and directors or repurchase agreements, the Company repurchased
   26,554, 3,210 and 31,118 shares of stock from various employees and directors
   of the Company for total consideration of $270,960, $37,387 and $604,444.
   These shares had been held for longer than six months and were considered
   mature shares.


NOTE J  -  RELATED PARTY TRANSACTION

   The Company uses a public relations firm that is affiliated with one of the
   Company's directors. Total fees paid to the public relations firm in 2001,
   2000 and 1999 were approximately $202,000, $201,000 and $229,000.


                                      F-11
<PAGE>
                                  A.S.V., INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2001, 2000 AND 1999


NOTE K  -  CONSULTING AGREEMENT

   The Company entered into a five year consulting agreement and issued a ten
   year warrant for the purchase of 337,500 shares of the Company's common stock
   at $7.33 per share, expiring December 1, 2006. Subsequently, an individual
   who contracts with the consulting firm was appointed a member of the Board of
   Directors. The warrant is exercisable and outstanding as of December 31,
   2001.

   The fair value of $2.24 per share was calculated on the date of grant using
   the average of the Black-Scholes and Shelton options-pricing models.
   Compensation costs were amortized over the life of the consulting agreement
   of $138,600 in 2001 and $151,200 in both 2000 and 1999.


NOTE L  -  COMMITMENTS AND CONTINGENCIES

   Litigation

   The Company is subject to litigation in the normal course of its business.
   Management believes the outcome of such litigation will not have a material
   adverse effect on the operations or financial position of the Company.

   Share Repurchase

   In September 2001, the Company authorized a stock buy-back program under
   which the Company may repurchase up to $5,000,000 of its common stock on the
   open market. The Company is funding the repurchases with available funds. The
   repurchase program is not expected to last more than twelve months or until
   such amount of common stock is repurchased. During 2001, the Company
   repurchased approximately $265,000 of common stock under this program.

   Warranty Reimbursement

   During the fourth quarter of 2001, ASV negotiated a warranty reimbursement
   program with one of its suppliers, whereby the Company will receive product
   at no cost over a three-year period to compensate for warranty claims
   incurred during 2001 plus any claims not yet filed. ASV recognized a benefit
   of $542,600 under this program in the fourth quarter of 2001 as an offset to
   warranty costs previously incurred during the year.



NOTE M  -  MAJOR CUSTOMERS

   During 2001, the Company had sales to two customers, each of whom accounted
   for more than 10% of the Company's net sales. One affiliated customer
   accounted for 18% of sales and one unaffiliated customer accounted for 16% of
   sales. During 2000 and 1999, no customers accounted for over 10% of net
   sales. At December 31, 2001, the accounts receivable balance from the
   affiliated customer was approximately $1,600,000 and the accounts receivable
   balance from the unaffiliated customer was approximately $706,000.


NOTE N  -  SUPPLEMENTARY FINANCIAL INFORMATION (unaudited)

   The following table summarizes quarterly, unaudited financial data for 2001
   and 2000.
<TABLE>
<CAPTION>
                                       2001
                     -----------------------------------------
Quarters                1st       2nd        3rd        4th
--------              ------    -------    -------    --------
(Dollars in thousands, except per share data)
<S>                  <C>        <C>        <C>        <C>
Net sales            $12,955    $14,226    $12,053    $10,848
Gross profit           2,207      2,048      2,205      2,597
Net earnings             204         91         93        368
Net earnings per
   common share
     Basic               .02        .01        .01        .04
     Diluted             .02        .01        .01        .04

<CAPTION>
                                       2000
                     -----------------------------------------
Quarters                1st       2nd        3rd        4th
--------              ------    -------    -------    --------
(Dollars in thousands, except per share data)
<S>                  <C>        <C>        <C>        <C>
Net sales            $11,184    $12,124    $10,533    $10,019
Gross profit           2,533      2,967      1,927      1,638
Net earnings             417        599        220        215
Net earnings per
   common share
     Basic               .04        .06        .02        .02
     Diluted             .04        .06        .02        .02
</TABLE>



                                      F-12
<PAGE>
[GRANT THORNTON LOGO]


REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors
A.S.V., Inc.

We have audited the accompanying consolidated balance sheets of A.S.V., Inc. as
of December 31, 2001 and 2000, and the related consolidated statements of
earnings, changes in shareholders' equity, and cash flows for each of the three
years in the period ended December 31, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above, present
fairly, in all material respects, the financial position of A.S.V., Inc. as of
December 31, 2001 and 2000, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States of
America.


/s/ GRANT THORNTON LLP

Minneapolis, Minnesota
February 22, 2002


                                      F-13
<PAGE>
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
                                   ON SCHEDULE


Board of Directors
A.S.V., Inc.

               In connection with our audit of the consolidated financial
statements of A.S.V., Inc. referred to in our report dated February 22, 2002,
which is included in the Annual Report of A.S.V., Inc. on Form 10-K for the year
ended December 31, 2001, we have also audited Schedule II for each of the three
years in the period ended December 31, 2001. In our opinion, this schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be set
forth therein.



                                                 /s/ GRANT THORNTON LLP


Minneapolis, Minnesota
February 22, 2002








                                      S-1
<PAGE>
                                  A.S.V., INC.
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                  YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999


<TABLE>
<CAPTION>
                                 BALANCE              ADDITIONS                                   BALANCE
                                BEGINNING            CHARGED TO                                   END OF
ACCRUED WARRANTIES              OF PERIOD              EXPENSE           DEDUCTIONS (A)           PERIOD
------------------              ---------              -------           --------------           ------
<S>                             <C>                  <C>                 <C>                      <C>
2001                             $450,000            $1,278,816             $1,228,816             $500,000

2000                             $450,000            $  964,947             $  964,947             $450,000

1999                             $400,000            $1,120,587             $1,070,587             $450,000
</TABLE>


(A)      Warranty credits issued







                                      S-2
<PAGE>
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT                                                                                 METHOD OF FILING
-------                                                                             -----------------------------

<S>               <C>                                                               <C>
   11             Statement re: Computation of Per Share Earnings                   Filed herewith electronically

   23             Consent of Grant Thornton LLP, independent certified
                  public accountants                                                Filed herewith electronically
</TABLE>





                                      X-1