<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, 2002

[ ]  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. [ ]

         Indicate by check mark if the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). [X] Yes [ ] No

         Based on the closing sale price at June 28, 2002 of $11.92, the
aggregate market value of the registrant's Common Stock held by nonaffiliates
was $80,152,500.

         As of March 14, 2003, 10,063,901 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 30, 2003 Annual
 Meeting, which will be filed by April 30, 2003, are incorporated by reference
                                  in Part III.


<PAGE>
                                     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 Multi-Terrain Loader, or 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 six
models in its R-Series product line, the RC-30(TM), the R-50(TM), the RC-50(TM),
the RC-30 Turf Edition, the RC-50 Turf Edition and the RC-100. The Company
manufactures undercarriages for use by Caterpillar Inc. (Caterpillar) on its MTL
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 includes five new models, features Caterpillar's patented
skid steer loader technology and ASV's patented Maximum Traction Support
System(TM) rubber track undercarriage. The machines 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. The
Company began manufacturing the undercarriage for use on two additional MTLs in
the second quarter of 2002, with production of the undercarriage for the last
MTL model started in the first quarter of 2003.

         Stock Repurchase Plan

         In September 2001, the Company authorized a stock buy-back program
under which ASV may repurchase up to $5 million of its common stock in the open
market. Under this program, which expired in September 2002, the Company
repurchased 71,780 shares of its own common stock at an aggregate purchase price
of approximately $756,000.

         In October 2002, the Company authorized a new 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 repurchases with available funds. The
repurchase program is expected to last not more than twelve months or until such
amount of common stock is repurchased. As of March 14, 2003, the Company had
repurchased 110,700 shares of its common stock under this new buy-back program
at an aggregate purchase price of approximately $1,004,000. The Company intends
to continue actively repurchasing our shares as conditions permit.

<PAGE>


         Rental Marketing Emphasis

         In October 2002, the Company began an emphasis to market its RC-30 and
RC-50 All Surface Loader models to the rental market. In its marketing, the
Company identifies rental facilities that have a desire to rent these products.
The Company has partnered with an unaffiliated finance company to provide lease
financing to the rental facilities.

         New Models

         In January 2003, the Company introduced two new models in its R-Series
product line, the RC-30 Turf Edition and the RC-50 Turf Edition. The R-Series
Turf Edition products have smooth, green, rubber tracks that allow the equipment
to leave grass virtually untouched, while also providing excellent traction for
digging and grading. ASV expects the Turf Edition products to be available in
the second quarter of 2003.

         In January 2003, the Company introduced a new model in its R-Series
product line, the RC-100. The RC-100 is the largest model in the R-Series
product line, with more features and power than any other R-Series product. The
Company began production of the RC-100 in March 2003.

         Agreement with Jacobsen

         In February 2003, the Company announced it had entered into a sales
alliance with Jacobsen (a Textron company). Under the alliance, Jacobsen direct
dealers will market the ASV RC-30 and RC-50 Turf Edition(TM) all-surface loaders
designed for the golf and sports turf markets. The R-Series Turf Edition
All-Surface Loaders will be available primarily through Jacobsen dealers.
Jacobsen and ASV entered into a formal marketing agreement in March 2003.

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 2002 and
2001, 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.



<PAGE>
         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 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
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. Agricultural applications of
Posi-Tracks include grape vineyards, specialty crop farms (celery, strawberries)
and tree nurseries. In most agricultural applications, Posi-Tracks are being
used 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, clearing bomb ranges of overgrown vegetation and security vehicles.
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.



<PAGE>
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 Caterpillar and 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.
</TABLE>

<PAGE>


<TABLE>
<S>                             <C>                     <C>               <C>

 R-SERIES MODELS (CONTINUED):     RC-30 and RC-50           2003          Smooth track version of the RC-30 and
                                   Turf Edition                           RC-50. Expected to be sold primarily
                                                                          through the Jacobsen dealer network and
                                                                          R-Series dealers.


                                      RC-100                2003          Largest model R-Series product. Two speed
                                                                          drive motors, hydraulic quick-attach
                                                                          mechanism, turbo-charged engine.


       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.
</TABLE>

         The vast majority of the Company's future production is expected to be
devoted to 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.

         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. Certain Posi-Tracks feature a reversible
                  driver's seat which allows an operator to

<PAGE>

                  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 six models in its R-Series product line, the RC-30(TM),
the R-50(TM), the RC-50(TM), the RC-30 Turf Edition, the RC-50 Turf Edition and
the RC-100.

         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.

         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 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

<PAGE>

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 and RC-50 is
                  approximately $28,000-$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.

         The RC-30 and RC-50 Turf Editions

         In January 2003, the Company introduced two new models in its R-Series
product line, the RC-30 Turf Edition and the RC-50 Turf Edition. The R-Series
Turf Edition products have smooth, green, rubber tracks that allow the equipment
to leave grass virtually untouched, while also providing excellent traction for
digging and grading. ASV expects the Turf Edition products to be available in
the second quarter of 2003.

         The RC-100

         In January 2003, the Company introduced a new model in its R-Series
product line, the RC-100. The RC-100 is the largest model in the R-Series
product line, with more features and power than any other R-Series product. The
Company began production of the RC-100 in March 2003.

         The RC-100 is expected to be marketed to the construction and
industrial user due to its size, power and features. The RC-100 utilizes a
Caterpillar 100-horsepower turbo-diesel engine and has two speed drive motors to
facilitate faster cycle times. The RC-100 features standard high-flow hydraulics
to power attachments requiring this feature.

         The RC-100 shares the same basic design as the other products in the
R-Series product line, but in a larger version. The RC-100 has tracks which have
a ground surface of approximately 72 x 18 inches per track, resulting in an
average ground pressure of approximately 3-4 pounds per square inch.

         The current retail price of an RC-100 is approximately $48,000 with a
loader and quick-attach mechanism. The Company believes its current retail price
makes the RC-100 very competitive against similarly equipped skid-steers.

         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 years. In
2002 and 2001, 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.



<PAGE>

SALES AND MARKETING

         The Company sells its products through Caterpillar dealers in the
United States and Canada and also through independent equipment dealers in the
United States, Canada, Australia, New Zealand and Portugal. As of March 1, 2003,
52 Caterpillar dealers and 101 independent dealers sell and service the
Company's products.

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

         In 2002, sales to Caterpillar accounted for 31.7% of the Company's net
sales, while in 2001, sales to Caterpillar accounted for 17.8% of its net sales.
In 2001, the Company also made sales to an unaffiliated customer that accounted
for 16.4% of the Company's net sales.

         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.

         In October 2002, the Company began a program to market its RC-30 and
RC-50 products directly to rental facilities. Under this program, ASV identifies
rental facilities that will lease ASV machines from an unaffiliated finance
company. ASV records the sale of the machines to the finance company when they
are delivered to the rental facility and receives payment from the finance
company at that time. The lease agreement between the rental facility and the
finance company provides the rental facility a 90-day period during which any
rental income generated is split between the rental facility and ASV. After the
90-day period has expired, the rental facility has the option of terminating the
lease, in which case ASV is responsible for the costs associated with
transferring the machines to another rental facility. If the rental facility
elects to continue the lease, ASV will refund any rental payments received
during the 90-day period. At the end of the four-year lease, should the rental
facility elect not to purchase the leased machines, ASV has guaranteed to pay a
residual value equal to 25% of the original selling price of the financed
equipment should the rental facility choose not to make the residual payment. At
that point, ASV would take possession of the equipment. As of December 31, 2002,
the total amount of future residual payments the Company may be required to make
in the event of nonpayment by rental facilities totaled approximately $185,000.
The Company believes the value of the related equipment will equal or exceed the
amount of residual payment. Accordingly, the Company does not anticipate any
loss will be incurred should any residual payments need to be made.

         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
Company's products have generally been greater in the spring and summer.

         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, the Company offered extended payment terms on the sale of
its products to its dealers, generally not exceeding 180 days.

         The Company has also agreed to assist one finance company with the
costs related to remarketing certain financed equipment should it become
necessary for the finance company to take possession of the equipment in the
event of nonpayment by the debtor. As of March 14, 2003, the Company was not
obligated to the finance company for any costs related to the remarketing of any
financed equipment due to nonpayment by the debtor.

         As of March 14, 2003, the Company had orders for approximately $16.0
million of its products. As of March 15, 2002, the Company had orders for
approximately $6.4 million of its products.

         In 2003, the Company intends to focus its marketing efforts on
increasing the number of dealer outlets for its products and also increase the
number of rental facilities that have the R-Series products available for rent.



<PAGE>

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 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 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

<PAGE>


         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 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 undercarriage for the
next two MTL models went into production in the second quarter of 2002. The MTLs
are being sold through the Caterpillar dealer network.

         As of March 14, 2003, Caterpillar owns 15.9% of the Company's
outstanding Common Stock (13.0% assuming the exercise of all outstanding options
and warrants, exclusive of the amended warrant) and has the right to own up to
51.4% of the Company's outstanding Common Stock (assuming the exercise of all
outstanding options and warrants) upon exercise of the amended 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 three models of rubber track skid steers, two of which are slightly
larger than the Company's RC-50 and the other which is comparable to the
Company's RC-100. Takeuchi of Japan manufactures two models of rubber track
skid-steers, one of which is larger than the Company's RC-50 and the other which
is comparable to the Company's RC-100. Takeuchi also private label manufactures
these two models for Gehl and Mustang.



<PAGE>

         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 Company's
products carry a pro-rated warranty up to 1,500 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, machine chassis and loader, are manufactured
specifically for the Company. Certain fabricated parts 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 the majority of
component parts could occur without material disruption of the Company's
business. However, certain parts, such as bogie wheels and rubber tracks, have a
limited number of vendors and a disruption in supply could affect the Company's
ability to deliver finished goods.

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. The Company has
also applied for additional patents pertaining to its undercarriage systems.
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

<PAGE>

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, 2002, 2001 and 2000, the Company
spent approximately $1,803,000, $2,645,000 and $679,000, 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 2002 and 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 development of these undercarriages was completed
in 2002 and the Company anticipates research and development expenses will
decrease to approximately 1% of net sales in 2003. The Company anticipates its
future research and development expenditures will be focused on improvements to
its existing products and extensions of its product lines.

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 14, 2003, the Company had 112 employees, two of whom are
part-time. The Company's employees include 3 in management, 20 in
administration, 10 in sales and marketing and 79 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 $122,500, but can be reduced or forgiven over a remaining
period of four 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.



<PAGE>

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, 2002                                           High             Low
         ----------------------------                                           ----             ---
<S>                                                                           <C>               <C>
         First Quarter                                                        $ 13.70           $10.50
         Second Quarter                                                         12.70            10.80
         Third Quarter                                                          11.80             7.90
         Fourth Quarter                                                         10.20             6.55
<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>

         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 14, 2003, the Company had approximately 262 holders of
record of its Common Stock (not including beneficial holders). The Company
believes it has approximately 3,400 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.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

EQUITY COMPENSATION PLAN INFORMATION
<TABLE>
<CAPTION>
PLAN CATEGORY               NUMBER OF SECURITIES     WEIGHTED AVERAGE         NUMBER OF SECURITIES REMAINING
                            TO BE ISSUED UPON        EXERCISE PRICE OF        AVAILABLE FOR FUTURE ISSUANCE UNDER
                            EXERCISE OF              OUTSTANDING OPTIONS,     EQUITY COMPENSATION PLANS
                            OUTSTANDING OPTIONS,     WARRANTS AND RIGHTS      (EXCLUDING SECURITIES
                            WARRANTS AND RIGHTS                               REFLECTED IN COLUMN (a))
                            (a)                      (b)                      (c)
--------------------------- ------------------------ ------------------------ ---------------------------------------
<S>                         <C>                      <C>                      <C>
EQUITY COMPENSATION
PLANS APPROVED BY              1,423,062                    $13.67                  1,989,437
SECURITY HOLDERS

EQUITY COMPENSATION
PLANS NOT APPROVED BY            337,500                   $  7.33                       ----
SECURITY HOLDERS

TOTAL                          1,760,562                    $12.45                  1,989,437

</TABLE>


<PAGE>

RECENT SALES OF UNREGISTERED SECURITIES; USE OF PROCEEDS FROM REGISTERED
SECURITIES

         None.

ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
     (Dollar amounts in thousands,                                   YEAR ENDED DECEMBER 31,
     except per share data)                         2002         2001          2000         1999         1998
     ---------------------------------------------------------------------------------------------------------
<S>                                              <C>          <C>          <C>           <C>          <C>
     Net Sales..............................     $  44,237    $  50,081    $  43,860     $ 36,168     $ 39,019
     Net Earnings...........................         1,353          756        1,451        1,412        3,366
     Net Earnings Per Share-Diluted.........           .13          .07          .15          .14          .40
     Total Assets...........................        57,210       57,941       55,006       48,650       29,533
     Long-Term Liabilities..................         1,980        2,013        2,117        2,197        2,464
     Shareholders' Equity...................        50,467       50,571       49,763       39,096       19,515
</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 judgements 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 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.



<PAGE>

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,
                                                                            -----------------------
                                                                         2002         2001         2000
                                                                         ----         ----         ----
<S>                                                                     <C>          <C>          <C>
              Net sales.......................................          100.0%       100.0%       100.0%
              Gross profit....................................           19.5         18.1         20.7
              Selling, general & administrative expense.......           11.4         11.7         14.2
              Research & development..........................            4.1          5.3          1.5
              Operating income................................            4.0          1.1          5.0
              Net earnings....................................            3.1          1.5          3.3
</TABLE>

         Net Sales. For the year ended December 31, 2002, net sales totaled
approximately $44,237,000, an 11.7% decrease over net sales for the year ended
December 31, 2001 due to several offsetting factors. First, the Company had no
machine sales of the private label version of the RC-30 All Surface Loader under
its alliance with Polaris, the ASL-300, in 2002, which had accounted for
approximately $7.9 million in 2001. Second, the Company had decreased sales of
its 4810 and 2800 series Posi-Tracks, due to the introduction of additional MTL
models in 2002 and the continued softness in the overall construction equipment
sales market. Partially offsetting these decreases were increased MTL
undercarriage sales of approximately $3.3 million, as ASV began supplying
undercarriages for two additional MTL models that were introduced by Caterpillar
in 2002. The Company also experienced increased sales of approximately $8.0
million from its R-Series product line due to the introduction of the RC-50 and
R-50 products in the first quarter of 2002. In addition, sales of service parts
increased in 2002 as the number of machines and undercarriages in the field
continued to increase.

         Net sales for the year ended December 31, 2001 increased 14.2% 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 Polaris ASL-300, during the first quarter of 2001. The ASL-300
accounted for approximately 26.8% 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.

         Gross Profit. For the year ended December 31, 2002, gross profit was
approximately $8,622,000, or 19.5% of net sales, compared with approximately
$9,056,000, or 18.1% of net sales for 2001. The decrease in gross profit was due
primarily to the decreased sales for 2002. The increase in the gross profit
percentage was due to the following offsetting factors. First, as discussed
above, the Company had no Polaris ASL-300 sales in 2002, which carry a lower
gross profit than the Company's other products, thereby causing an increase in
the gross profit percentage for 2002 compared to 2001. Second, the Company had
increased sales of service parts in 2002, which generally carry a higher gross
profit than finished goods. Offsetting these increases, the Company sold a
greater concentration of lower margin MTL undercarriages in 2002 as compared to
2001 as Caterpillar was not able to produce its two larger MTL models for the
majority of 2002 due to a production issue unrelated to ASV's undercarriage. In
addition, the Company experienced fewer sales of its higher margin model 4810
Posi-Track as discussed above.

         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 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

<PAGE>

cost in the future 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 incurred
during the year.

         Selling, General and Administrative Expenses. For the year ended
December 31, 2002, selling, general and administrative expenses decreased 14.1%
to approximately $5,029,000 compared with approximately $5,858,000 for the year
ended December 31, 2001. The decreased level of expenses was due to the
following two items. First, in 2001, the Company established a remarketing
reserve of $250,000. The Company established this reserve for costs associated
with remarketing existing machines at one customer's locations, some of which
were ultimately returned to the Company. ASV had originally anticipated these
machines would be remarketed to other dealers, but instead chose to have certain
of these machines returned to ASV for use in its program of marketing to rental
facilities. As these machines were returned to ASV and reflected as sales
returns with a corresponding decrease in gross profit of approximately $184,000,
a portion of the remarketing reserve was no longer needed. The Company reversed
the portion of the remarketing reserve that related to the returned machines,
which decreased selling, general and administrative expenses by approximately
$184,000 in 2002. Second, the Company had decreased commissions to Caterpillar
as the number of commissionable products sold to Caterpillar dealers decreased
in 2002.

         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. 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 costs associated
with remarketing existing machines at the locations of one dealer.

         Research and Development. For the year ended December 31, 2002,
research and development expenses decreased $843,000 to approximately
$1,803,000, compared with approximately $2,645,000 for the year ended December
31, 2001. This decrease was due primarily to the completion of the development,
testing and integration of the final undercarriages used in Caterpillar's MTL
product line.

         Research and development expenses increased 289.5% in 2001 to
approximately $2,645,000, compared with approximately $679,000 in 2000. 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.

         The Company anticipates research and development expenses will decrease
again in 2003 as the development of the undercarriages for Caterpillar's MTL
product line was completed in 2002. The Company anticipates its investment in
research and development will approximate 1% of its net sales for 2003.

         Other Income (Expense). For the year ended December 31, 2002, interest
expense decreased to approximately $126,000, compared with approximately
$146,000 for the year ended December 31, 2001. The decrease was due to the
Company refinancing approximately $784,000 of its long-term debt from 9.0% to
6.5% for a five-year term in December 2001.

         Interest expense was approximately $146,000 in 2001, compared with
approximately $267,000 in 2000. The decrease in 2001 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.

         Other income was approximately $264,000 for 2002, compared with
approximately $529,000 for 2001 and approximately $302,000 for 2000. The
decrease in 2002 was due primarily to lower interest income from lower interest
rates and decreased short-term investments as the Company used these investments
to fund operations in 2002. The increase in 2001 was 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



<PAGE>

         Net Earnings. For the year ended December 31, 2002, net earnings
increased to approximately $1,353,000, compared with approximately $756,000 in
2001. The increase in net earnings was due to lower operating expenses and an
increased gross profit percentage, offset in part by decreased sales and an
increased effective income tax rate.

         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.

LIQUIDITY AND CAPITAL RESOURCES

         At December 31, 2002, the Company had working capital of approximately
$47,366,000 compared with approximately $47,790,000 at December 31, 2001. While
overall working capital remained relatively the same during the period, several
components changed. First, cash and short-term investments decreased
approximately $1,149,000 due primarily to funding operations during 2002.
Second, accounts receivable decreased approximately $2,431,000 from better
accounts receivable management and a greater use of finance companies to finance
certain customer sales. Third, inventories increased approximately $3,221,000
from December 31, 2001. The majority of this increase was due to an increase in
finished goods of approximately $3,055,000 due to lower than anticipated sales
in the first and third quarter of 2002. In addition, the Company elected to
produce the majority of the RC-30s and 2800 series Posi-Tracks it expected to
need for 2002 when it could not complete MTL undercarriages during the first
quarter. Current liabilities decreased approximately $593,000 at December 31,
2002 compared with December 31, 2001, due primarily to the Company having no
income tax liability at December 31, 2002. This was due to Company utilizing the
additional depreciation deduction available for income tax purposes, as well as
the utilization of a research and development tax credit carryforward from 2001.

         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 includes five new models, features Caterpillar's patented
skid steer loader technology and ASV's patented Maximum Traction Support
System(TM) rubber track undercarriage. The machines 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. The Company
anticipates its 2003 sales of MTL undercarriages to Caterpillar could approach
$30 million.

          In December 2000, the Company made a sale to one customer totaling
approximately $4.0 million. 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 and attachments sold by the customer for
which payment was not remitted to the Company. 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 initial amount
of the note was $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 payments
on a timely basis under this note. Should the customer be successful in raising
a minimum of $2.5 million through a 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 September 2002, the Company's stock buy-back program expired. Under
that program, the Company repurchased 71,780 shares of its common stock at an
aggregate purchase price of approximately $756,000.




<PAGE>

         On October 7, 2002, the Company announced a new 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 to October 7, 2003 or until such amount
of common stock is repurchased. As of March 14, 2003, the Company had
repurchased 110,700 shares of its common stock under this new buy-back program
at an aggregate purchase price of approximately $1,004,000.

         In October 2002, the Company began a program to market its RC-30 and
RC-50 products directly to rental facilities. Under this program, ASV identifies
rental facilities that will lease ASV machines from an unaffiliated finance
company. ASV records the sale of the machines to the finance company when they
are delivered to the rental facility and receives payment from the finance
company at that time. The lease agreement between the rental facility and the
finance company provides the rental facility a 90-day period during which any
rental income generated is split between the rental facility and ASV. After the
90-day period has expired, the rental facility has the option of terminating the
lease, in which case ASV is responsible for the costs associated with
transferring the machines to another rental facility. If the rental facility
elects to continue the lease, ASV will refund any rental payments received
during the 90-day period. At the end of the four-year lease, should the rental
facility elect not to purchase the leased machines, ASV has guaranteed to pay a
residual value equal to 25% of the original selling price of the financed
equipment should the rental facility choose not to make the residual payment. At
that point, ASV would take possession of the equipment. As of December 31, 2002,
the total amount of future residual payments the Company may be required to make
in the event of nonpayment by rental facilities totaled approximately $185,000.
The Company believes the value of the related equipment will equal or exceed the
amount of residual payment. Accordingly, the Company does not anticipate any
loss will be incurred should any residual payments need to be made.

         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 did not utilize this type of program to
the same extent in 2002. Instead, the Company affiliated itself with several
finance companies that finance the sale of the Company's products. By using
these finance companies, the Company receives payment for its products shortly
after their shipment. The Company pays a portion of 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 is also providing twelve-month terms
for one machine to be used for demonstration purposes for each qualifying
dealer.

         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 the next twelve months and for the foreseeable future.

         New Accounting Pronouncements. FIN 45, Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others, was released in November 2002. This Interpretation
states that a guarantor is required to measure and recognize the fair value of
the guarantee at inception. It must also provide new disclosures regarding the
nature of any guarantees and certain other items, including product warranties.
The disclosure requirements are effective for the Company for the year ending
December 31, 2002. The initial recognition and measurement provisions are
effective prospectively, that is, for guarantees issued or modified on or after
January 1, 2003. Management does not believe the adoption of this pronouncement
will have a material effect on the Company. The Company has disclosed the
required information in the "Warranties" section of note A to the financial
statements filed with this Annual Report on Form 10-K.

         SFAS 143, Accounting for Asset Retirement Obligations. This statement
establishes standards for recognition and measurement of legal obligations
associated with the retirement of a tangible long-lived asset that results from
the acquisition, construction, or development and (or) normal operation of a
long-lived asset. This statement is effective for the Company beginning January
1, 2003. Management does not believe the adoption of this pronouncement will
have a material effect on the Company.

         SFAS 146, Accounting for Costs Associated with Exit or Disposal
Activities. This statement provides financial and reporting guidance for costs
associated with exit or disposal activities, including one-time terminations
benefits, contract termination costs other than for a capital lease, and costs
to consolidate facilities or relocate employees. This

<PAGE>

statement is effective for the Company for all exit and disposal activities
initiated after December 31, 2002. Management does not believe the adoption of
this pronouncement will have a material effect on the Company.

         SFAS 148, Accounting for Stock-Based Compensation -- Transition and
Disclosure, an amendment to FASB Statement No. 123, requires certain disclosures
about stock-based compensation plan in the Company's policy note. The Statement
also provides three transition methods for entities voluntarily adopting the
fair value method in periods beginning before December 16, 2003. The amendments
to the disclosure and transition provisions of Statement 123 are effective for
the Company for the year ending December 31, 2002. The Company has disclosed the
required information in the "Stock-Based Compensation" section of Note A to the
financial statements filed with this Annual Report on Form 10-K.

         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 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. 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 the Current Report on Form 10-Q for the period ended June
30, 2002.

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-15 following the signature page and
certifications of this Annual Report on Form 10-K:

         Consolidated Balance Sheets as of December 31, 2002 and 2001
         Consolidated Statements of Earnings for the years ended December 31,
         2002, 2001 and 2000
         Consolidated Statements of Changes in Shareholders' Equity for the
         years ended December 31, 2002, 2001 and 2000
         Consolidated Statements of Cash Flows for the years ended December 31,
         2002, 2001 and 2000
         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.



<PAGE>

                                    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
2003 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 2003 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 AND
         RELATED STOCK HOLDER MATTERS

         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 2003 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 2003 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. CONTROLS AND PROCEDURES

         The Company's Chief Executive Officer and Chief Financial Officer have
concluded, based on their evaluation within 90 days of the filing date of this
report, that the Company's disclosure controls and procedures are adequately
designed to ensure that information required to be disclosed by the Company in
the reports that it files or submits under the Securities and Exchange Act of
1934, as amended, is recorded, processed, summarized and reported, within the
time periods specified in applicable rules and forms. There have not been any
significant changes in the Company's internal controls or in other factors that
could significantly affect those controls, subsequent to the date of such
evaluation, including any corrective actions taken with regard to significant
deficiencies and material weaknesses.

ITEM 15. 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,
                  2002, 2001 and 2000


<PAGE>

                  Schedule II - Valuation and Qualifying Accounts for the years
                  ended December 31, 2002, 2001 and 2000

         (a)(3)   EXHIBITS

<TABLE>
<CAPTION>
      Exhibit
      Number      Description
      ------      -----------
<S>               <C>
        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)

        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)
</TABLE>



<PAGE>

<TABLE>
<S>               <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, 20021 between Wells Fargo Bank Minnesota, N.A.
                  and the Company (p)

        10.19     Sixth Amendment to Credit Agreement dated June 1, 2002 between Wells Fargo Bank Minnesota, N.A.
                  and the Company (q)

        10.20     Seventh Amendment to Credit Agreement dated June 1, 2002 between Wells Fargo Bank Minnesota, N.A.
                  and the Company (r)

        11        Statement re: Computation of Per Share Earnings

        22        List of Subsidiaries (a)

        99.1      Risk Factors (q)

        99.2      Certification of the Chief Executive Officer

        99.3      Certification of the Chief Financial Officer
</TABLE>
               -----------------------------------------------------------------
               (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.



<PAGE>



               (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.

               (q)  Incorporated by reference to the Company's Quarterly Report
                    on Form 10-Q for the quarter ended June 30, 2002 (File No.
                    0-25620) filed electronically August 14, 2002.

               (r)  Incorporated by reference to the Company's Quarterly Report
                    on Form 10-Q for the quarter ended September 30, 2002 (File
                    No. 0-25620) filed electronically November 14, 2002.

               *    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.


         (b) REPORTS ON FORM 8-K

         The following current Reports on Form 8-K were filed by the Company
during the quarter ended December 31, 2002:

         Current Report on Form 8-K dated October 7, 2002 reporting under Item
9. "Regulation FD Disclosure" that on October 7, 2002 ASV issued a press release
announcing the implementation of a stock buy-back program whereby ASV may
repurchase up to $5 million of its common stock on the open market.


<PAGE>

         Current Report on Form 8-K dated October 14, 2002 reporting under Item
9. "Regulation FD Disclosure" that on October 14, 2002 ASV issued a press
release disclosing a revision in its expected net sales and net earnings for
third quarter 2002 and fiscal 2002. ASV also provided initial guidance in
regards to its anticipated level of net sales and net earnings for 2003. In
addition, the press release contained information regarding a conference call
held October 14, 2002 during which ASV discussed the items described in the
press release.

         Current Report on Form 8-K dated October 29, 2002 reporting under Item
9. "Regulation FD Disclosure" that on October 29, 2002 ASV issued a press
release disclosing its financial results for the three and nine months ended
September 30, 2002. In addition, the press release contained information
regarding a conference call held October 29, 2002 during which ASV discussed its
financial results for the three and nine months ended September 30, 2002 and its
outlook for the balance of 2002 and fiscal 2003.



<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:

                                  A.S.V., INC.

             /s/ Gary Lemke                                Date:  March 28, 2003
         ----------------------------------------          ---------------------
         By: Gary Lemke, President


         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.


             /s/ Gary Lemke                                Date:  March 28, 2003
         ----------------------------------------          ---------------------
         By: Gary Lemke, Chairman of the Board,
             President and Director
             (Chief Executive Officer)

             /s/ Jerome T. Miner                           Date:  March 28, 2003
         ----------------------------------------          ---------------------
         By: Jerome T. Miner, Vice-Chairman of
             the Board and Director

             /s/ Edgar E. Hetteen                          Date:  March 28, 2003
         ----------------------------------------          ---------------------
         By: Edgar E. Hetteen, Vice President
             and Director

             /s/ James Dahl                                Date:  March 28, 2003
         ----------------------------------------          ---------------------
         By:  James Dahl, Director

             /s/ Leland T. Lynch                           Date:  March 28, 2003
         ----------------------------------------          ---------------------
         By: Leland T. Lynch, Director

             /s/ R. E. Turner, IV                          Date:  March 28, 2003
         ----------------------------------------          ---------------------
         By: R. E. Turner, IV, Director

             /s/ Richard A. Benson                         Date:  March 28, 2003
         ----------------------------------------          ---------------------
         By: Richard A. Benson, Director

             /s/ Robert Macier                             Date:  March 28, 2003
         ----------------------------------------          ---------------------
         By: Robert Macier, Director

             /s/ Thomas R. Karges                          Date:  March 28, 2003
         ----------------------------------------          ---------------------
         By: Thomas R. Karges, Chief Financial
             Officer


<PAGE>

                                 CERTIFICATIONS

I, Gary Lemke, President of A.S.V., Inc., certify that:

1.       I have reviewed this annual report on Form 10-K of A.S.V., Inc.;

2.       Based on my knowledge, this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this annual report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this annual report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this annual report;

4.       The registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         we have:

         a)       designed such disclosure controls and procedures to ensure
                  that material information relating to the registrant,
                  including its consolidated subsidiary, is made known to us by
                  others within those entities, particularly during the period
                  in which this annual report is being prepared;

         b)       evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date");
                  and

         c)       presented in this annual report our conclusions about the
                  effectiveness of the disclosure controls and procedures based
                  on our evaluation as of the Evaluation Date;

5.       The registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent function):

         a)       all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial data and have identified for the registrant's
                  auditors any material weaknesses in internal controls; and

         b)       any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal controls; and

6.       The registrant's other certifying officers and I have indicated in this
         annual report whether or not there were significant changes in internal
         controls or in other factors that could significantly affect internal
         controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.


Date:  March 28, 2003                            /s/ Gary Lemke
       ----------------                          -------------------------------
                                                 President



<PAGE>


I, Thomas R. Karges, Chief Financial Officer of A.S.V., Inc., certify that:

1.       I have reviewed this annual report on Form 10-K of A.S.V., Inc.;

2.       Based on my knowledge, this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this annual report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this annual report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this annual report;

4.       The registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         we have:

         a)       designed such disclosure controls and procedures to ensure
                  that material information relating to the registrant,
                  including its consolidated subsidiary, is made known to us by
                  others within those entities, particularly during the period
                  in which this annual report is being prepared;

         b)       evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date");
                  and

         c)       presented in this annual report our conclusions about the
                  effectiveness of the disclosure controls and procedures based
                  on our evaluation as of the Evaluation Date;

5.       The registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent function):

         a)       all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial data and have identified for the registrant's
                  auditors any material weaknesses in internal controls; and

         b)       any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal controls; and

6.       The registrant's other certifying officers and I have indicated in this
         annual report whether or not there were significant changes in internal
         controls or in other factors that could significantly affect internal
         controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.


Date:  March 28, 2003                            /s/ Thomas R. Karges
       ----------------                          -------------------------------
                                                 Chief Financial Officer


<PAGE>

FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

A.S.V., INC.

DECEMBER 31, 2002 AND 2001





















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

                           CONSOLIDATED BALANCE SHEETS

                           DECEMBER 31, 2002 AND 2001




<TABLE>
<CAPTION>
                ASSETS                                                            2002                  2001
                                                                               ----------            ----------

<S>                                                                           <C>                   <C>
CURRENT ASSETS
   Cash and cash equivalents                                                  $ 4,058,091           $ 5,221,591
   Short-term investments                                                         739,307               725,249
   Accounts receivable (net of allowance for doubtful accounts
      of $75,000)                                                              14,397,958            16,828,489
   Inventories                                                                 31,834,620            28,614,053
   Prepaid expenses and other                                                   1,099,685             1,756,844
                                                                               ----------            ----------

                Total current assets                                           52,129,661            53,146,226

PROPERTY AND EQUIPMENT, net                                                     5,080,536             4,794,578
                                                                               ----------            ----------

                                                                              $57,210,197           $57,940,804
                                                                               ==========            ==========

                LIABILITIES AND
                  SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
   Current portion of long-term liabilities                                     $ 129,550             $ 106,008
   Accounts payable                                                             2,838,370             2,449,144
   Accrued liabilities
     Compensation                                                                 265,649               269,919
     Warranty reimbursements                                                      555,200               879,900
     Warranties                                                                   600,000               500,000
     Other                                                                        374,707               646,636
   Income taxes payable                                                                -                505,062
                                                                               ----------            ----------

                Total current liabilities                                       4,763,476             5,356,669



LONG-TERM LIABILITIES, less current portion                                     1,979,798             2,012,652


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 -- 10,063,901 in 2002 and 10,205,306 in 2001               100,639               102,053
   Additional paid-in capital                                                  38,666,925            40,123,200
   Retained earnings                                                           11,699,359            10,346,230
                                                                               ----------            ----------
                                                                               50,466,923            50,571,483
                                                                               ----------            ----------

                                                                              $57,210,197           $57,940,804
                                                                               ==========            ==========
</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, 2002, 2001 AND 2000
<TABLE>
<CAPTION>
                                                                          2002               2001                2000
                                                                         ------             ------              ------
<S>                                                                    <C>                <C>                 <C>
Net sales                                                              $44,236,876        $50,081,376         $43,859,509

Cost of goods sold                                                      35,614,846         41,025,009          34,794,783
                                                                        ----------         ----------          ----------

         Gross profit                                                    8,622,030          9,056,367           9,064,726

Operating expenses
   Selling, general and administrative                                   5,029,307          5,857,867           6,210,514
   Research and development                                              1,802,960          2,645,476             679,233
                                                                        ----------         ----------            --------

         Operating income                                                1,789,763            553,024           2,174,979

Other income (expense)
   Interest expense                                                       (126,098)          (146,031)           (266,890)
   Interest income                                                         119,712            400,202             225,043
   Other, net                                                              144,752            128,473              76,457
                                                                        ----------         ----------            --------

         Income before income taxes                                      1,928,129            935,668           2,209,589

Provision for income taxes                                                 575,000            180,000             758,680
                                                                        ----------         ----------            --------

         NET EARNINGS                                                  $ 1,353,129          $ 755,668         $ 1,450,909
                                                                        ==========           ========          ==========

Net earnings per common share
     Basic                                                             $       .13          $     .07         $       .15
                                                                        ==========           ========          ==========

     Diluted                                                           $       .13          $     .07         $       .15
                                                                        ==========           ========          ==========

Weighted average number of common shares outstanding
     Basic                                                              10,170,645         10,215,855           9,782,919
                                                                        ==========         ==========          ==========

     Diluted                                                            10,229,057         10,352,468           9,966,661
                                                                        ==========         ==========          ==========
</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, 2002, 2001 AND 2000

<TABLE>
<CAPTION>
                                                    Common stock                  Additional
                                         ---------------------------------         paid-in            Retained
                                            Shares               Amount            capital            earnings          Total
                                         ------------         ------------       ------------       ------------     ------------
<S>                                      <C>                  <C>                <C>                <C>              <C>
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

   Exercise of stock options                   18,000                  180             64,449                  -           64,629

   Cost of shares retired                    (159,405)              (1,594)        (1,520,724)                 -       (1,522,318)

   Net earnings                                     -                    -                  -          1,353,129        1,353,129
                                         ------------         ------------       ------------       ------------     ------------

Balance at December 31, 2002               10,063,901         $    100,639       $ 38,666,925       $ 11,699,359     $ 50,466,923
                                         ============         ============       ============       ============     ============
</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, 2002, 2001 AND 2000


<TABLE>
<CAPTION>
                                                                              2002               2001                2000
                                                                          -----------         -----------         -----------
<S>                                                                       <C>                 <C>                 <C>
Cash flows from operating activities:
   Net earnings                                                           $ 1,353,129         $   755,668         $ 1,450,909
   Adjustments to reconcile net earnings to net cash provided by
     (used in) operating activities:
       Depreciation and amortization                                          474,583             441,684             413,268
       Deferred income taxes                                                  232,000             (25,000)              5,000
       Warrant earned                                                               -             138,600             151,200
       Tax benefit from stock option exercises                                      -              55,000              60,000
       Changes in assets and liabilities:
          Accounts receivable                                               2,430,531          (6,270,582)         (1,896,858)
          Inventories                                                      (3,220,567)           (549,055)          4,326,258
          Prepaid expenses and other                                          158,381            (256,818)           (198,608)
          Accounts payable                                                    389,226             626,232              47,029
          Accrued liabilities                                                (500,899)          1,272,531            (222,749)
          Income taxes                                                       (238,284)           (201,959)            236,679
                                                                          -----------         -----------         -----------

              Net cash provided by (used in) operating activities           1,078,100          (4,013,699)          4,372,128
                                                                          -----------         -----------         -----------

Cash flows from investing activities:
   Purchase of property and equipment                                        (760,541)           (580,144)           (273,712)
   Purchase of short-term investments                                        (734,217)         (1,766,960)           (278,475)
   Redemption of short-term investments                                       720,159           2,319,993             247,889
                                                                          -----------         -----------         -----------

              Net cash used in investing activities                          (774,599)            (27,111)           (304,298)
                                                                          -----------         -----------         -----------

Cash flows from financing activities:
   Payments on line of credit, net                                                  -                   -          (4,080,000)
   Proceeds from long-term liabilities                                         98,363                   -                   -
   Principal payments on long-term liabilities                               (107,675)            (80,328)           (252,470)
   Proceeds from issuance of common stock, net                                      -                   -           8,947,149
   Proceeds from exercise of stock options                                     64,629             129,828              95,555
   Retirement of common stock                                              (1,522,318)           (270,960)            (37,387)
                                                                          -----------         -----------         -----------

              Net cash provided by (used in) financing activities          (1,467,001)           (221,460)          4,672,847
                                                                          -----------         -----------         -----------

              Net increase (decrease) in cash and cash equivalents         (1,163,500)         (4,262,270)          8,740,677

Cash and cash equivalents at beginning of year                              5,221,591           9,483,861             743,184
                                                                          -----------         -----------         -----------

Cash and cash equivalents at end of year                                  $ 4,058,091         $ 5,221,591         $ 9,483,861
                                                                          ===========         ===========         ===========

Supplemental disclosure of cash flow information:
   Cash paid for interest                                                 $   158,437         $   180,640         $   331,468
   Cash paid for income taxes                                               1,112,000             390,765             473,322
</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, 2002, 2001 AND 2000


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 dealers in the United States and Canada and
independent dealers in the United States, Canada, Australia, New Zealand and
Portugal.

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 generally
obtains oral or written purchase authorizations from customers for a specified
amount of product at a specified price and considers delivery to have occurred
at the time of shipment.

In 2000, pursuant to a contractual arrangement, revenues of approximately $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, short-term investments, accounts receivable, accounts payable and
bank debt. At December 31, 2002 and 2001, 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, 2002 and
2001, the Company had cash equivalents of approximately $3,992,000 and
$4,930,000, which consisted of a money market account. The fair value of these
investments approximates cost. The Company maintains its cash balance at one
financial institution and, at times, this balance may be in excess of federally
insured limits.

Accounts Receivable

The Company grants credit to customers in the normal course of business.
Management performs on-going credit evaluations of customers. The Company
determines its allowance by considering a number of factors, including the
length of time trade accounts receivable are past due, the Company's previous
loss history, the customer's current ability to pay its obligation to the
Company, and the condition of the general economy and the industry as a whole.
The Company writes-off accounts receivable when they become uncollectible, and
payments subsequently received on such receivables are credited to the allowance
for doubtful accounts.

Inventories

Inventories are stated at the lower of cost (determined using the first-in,
first-out method) or market. Adjustments of slow moving and obsolete inventories
to the lower of cost or market are provided based on historical experience and
current product demand.

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. Buildings 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.




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

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

                        DECEMBER 31, 2002, 2001 AND 2000

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued

Warranties

The Company provides a limited warranty to its customers. Provision for
estimated warranty costs are recorded when revenue is recognized based on
product failure rates, material usage and service delivery costs incurred in
correcting a product failure. Should actual failure rates, material usage or
service delivery costs differ from the Company's estimates, revisions to the
accrued warranty liability may be required.

Changes in the Company's accrued warranty liability are as follows:

<TABLE>
<CAPTION>
                                         December 31,
                                   -----------------------
                                      2002         2001
                                   ---------     ---------

<S>                                <C>           <C>
     Balance, beginning of year    $ 500,000     $ 450,000
     Expense related to accrual
        revisions for prior year
        warranties                   100,000        50,000
     Expense for new warranties
        issued                     1,299,950     1,228,816
     Warranty claims              (1,299,950)   (1,228,816)
                                   ---------     ---------

     Balance, end of year          $ 600,000     $ 500,000
                                    ========      ========
</TABLE>

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. During 2002 and 2001, ASV recognized
a benefit of $324,700 and $542,600 under this program, recorded as an offset to
warranty expense.

Advertising Expense

Advertising is expensed as incurred. Advertising expenses were approximately
$308,000, $295,000 and $233,000 for 2002, 2001 and 2000.

Shipping and Handling Costs

The Company includes shipping and handling (including warehousing) costs
incurred in connection with the distribution of replacement parts in selling,
general and administrative expenses. Shipping and handling costs were
approximately $838,000, $832,000 and $906,000 for 2002, 2001 and 2000.

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 permits
participant salary deferrals up to certain limits set by law and provides for
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 $42,000,
$41,000 and $45,000 for 2002, 2001 and 2000.

Stock-Based Compensation

At December 31, 2002, the Company has three stock-based compensation plans,
which are described more fully in Note I. The Company accounts for those plans
under the recognition and measurement principles of APB Opinion No. 25,
Accounting for Stock Issued to Employees, and related Interpretations. No
stock-based employee compensation cost is reflected in net earnings, as all
options granted under those plans had an exercise price equal to the market
value of the underlying common stock on the date of grant.

The following table illustrates the effect on net earnings and earnings per
share if the Company had applied the fair value recognition provisions of FASB
Statement No. 123, Accounting for Stock-Based Compensation, using the
assumptions described in note I, to its stock-based employee plans.



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

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

                        DECEMBER 31, 2002, 2001 AND 2000

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  --  Continued

<TABLE>
<CAPTION>
                                 Year ended December 31,
                         ---------------------------------------
                            2002          2001           2000
                         ----------    ---------      ----------
<S>                      <C>           <C>            <C>
   Net earnings, as
     reported            $1,353,129    $ 755,668      $1,450,909

   Deduct: Total
     stock-based
     employee
     compensation
     determined under
     fair value based
     methods for all
     awards                 496,648      493,672         336,343
                         ----------    ---------      ----------


   Pro forma net
     earnings            $  856,481    $ 261,996      $1,114,566
                         ==========    =========      ==========



   Earnings per share:

     Basic -- as
       reported          $     0.13    $    0.07      $     0.15
                         ==========    =========      ==========

     Basis -- pro
       forma             $     0.08    $    0.03      $     0.11
                         ==========    =========      ==========

     Diluted -- as
       reported          $     0.13    $    0.07      $     0.15
                         ==========    =========      ==========

     Diluted -- pro
       forma             $     0.08    $    0.03      $     0.11
                         ==========    =========      ==========
</TABLE>

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, 2002, 2001 and 2000, 58,412, 136,613 and
183,742 shares of common stock equivalents were included in the computation of
diluted net earnings per share. Options and warrants to purchase 11,166,939,
11,229,876 and 11,134,314, shares of common stock with a weighted average
exercise price of $20.10, $20.13 and $20.21, were outstanding at December 31,
2002, 2001 and 2000, but were excluded from the computation of common share
equivalents because they were anti-dilutive.

Reclassifications

Certain 2001 amounts have been reclassified to conform to the 2002 presentation.

New Accounting Pronouncements

FIN 45, Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others, was released in
November 2002. This Interpretation states that a guarantor is required to
measure and recognize the fair value of the guarantee at inception. It must also
provide new disclosures regarding the nature of any guarantees and certain other
items, including product warranties. The disclosure requirements are effective
for the Company for the year ending December 31, 2002. The initial recognition
and measurement provisions are effective prospectively, that is, for guarantees
issued or modified on or after January 1, 2003. Management does not believe the
adoption of this pronouncement will have a material effect on the Company.

The Company has disclosed the required information in the "Warranties" section
of note A.

SFAS 143, Accounting for Asset Retirement Obligations. This statement
establishes standards for recognition and measurement of legal obligations
associated with the retirement of a tangible long-lived asset that results from
the acquisition, construction, or development and (or) normal operation of a
long-lived asset. This statement is effective for the Company beginning January
1, 2003. Management does not believe the adoption of this pronouncement will
have a material effect on the Company.



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

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

                        DECEMBER 31, 2002, 2001 AND 2000

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued

SFAS 146, Accounting for Costs Associated with Exit or Disposal Activities. This
statement provides financial and reporting guidance for costs associated with
exit or disposal activities, including one-time terminations benefits, contract
termination costs other than for a capital lease, and costs to consolidate
facilities or relocate employees. This statement is effective for the Company
for all exit and disposal activities initiated after December 31, 2002.
Management does not believe the adoption of this pronouncement will have a
material effect on the Company.

SFAS 148, Accounting for Stock-Based Compensation -- Transition and Disclosure,
an amendment to FASB Statement No. 123, requires certain disclosures about
stock-based compensation plan in the Company's policy note. The Statement also
provides three transition methods for entities voluntarily adopting the fair
value method in periods beginning before December 16, 2003. The amendments to
the disclosure and transition provisions of Statement 123 are effective for the
Company for the year ending December 31, 2002.

The Company has disclosed the required information in the "Stock-Based
Compensation" section of Note A.

NOTE B -- SHORT-TERM INVESTMENTS

Short-term investments consist primarily of a diversified portfolio of taxable
governmental agency bonds, which will mature in 2003. The Company considers the
investments as "available-for-sale." At December 31, 2002 and 2001, 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,
                             --------------------------
                                2002           2001
                             -----------    -----------
<S>                          <C>            <C>
     Raw materials, semi-
        finished and WIP
        inventory            $16,502,994    $16,438,019
     Finished goods           10,779,010      7,723,738
     Used equipment
        held for resale        4,552,616      4,452,296
                              ----------     ----------

                             $31,834,620    $28,614,053
                              ==========     ==========
</TABLE>

NOTE D -- PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
                                     December 31,
                              -------------------------
                                2002            2001
                              ----------     ----------
<S>                           <C>            <C>
     Land                     $  132,635     $  132,635
     Buildings and
        improvements           3,695,152      3,691,018
     Tooling                   1,182,839        709,709
     Machinery and
        equipment              2,146,664      2,030,936
     Vehicles                    409,739        317,042
                               ---------      ---------
                               7,567,029      6,881,340
     Less accumulated
        depreciation           2,486,493      2,086,762
                               ---------      ---------

                              $5,080,536     $4,794,578
                               =========      =========
</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 or June 1, 2003. The interest rate is variable at prime less one half
percent (effective rates of 3.75% and 4.25% as of December 31, 2002 and 2001).
As of December 31, 2002 and 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.
Management expects to renew the agreement at substantially the same terms and
conditions.

NOTE F -- LONG-TERM LIABILITIES

Notes Payable

The Company has three notes payable to a finance company totaling $95,084 at
December 31, 2002. The notes require monthly payments through October 2007 and
have an effective rate of interest of 0% at December 31, 2002.

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.



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

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

                        DECEMBER 31, 2002, 2001 AND 2000

NOTE F -- LONG-TERM LIABILITIES -- Continued

Future minimum lease payments under this capital lease obligation at December
31, 2002 are as follows:

<TABLE>
<S>                                          <C>
     2003                                    $  228,134
     2004                                       228,134
     2005                                       228,134
     2006                                       766,131
     2007                                       135,554
     Thereafter                               1,147,491
                                              ---------

     Total payments                           2,733,578
     Amounts representing interest (weighted
       average 6.09%)                           719,314
                                              ---------

     Present value of minimum
        capitalized lease payments           $2,014,264
                                              =========
</TABLE>

Assets related to the capital lease were $2,250,773 at December 31, 2002 and
2001. Accumulated amortization was $331,603 and $275,334 at December 31, 2002
and 2001.

NOTE G -  PROVISION FOR INCOME TAXES

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
                            Year ended December 31,
                       --------------------------------
                         2002        2001        2000
                       --------    --------    --------
<S>                    <C>         <C>         <C>
     Current
       Federal         $301,000    $138,000    $683,680
       State             42,000      67,000      70,000
                        -------     -------     -------
                        343,000     205,000     753,680
     Deferred           232,000     (25,000)      5,000
                        -------    --------      ------

                       $575,000    $180,000    $758,680
                        =======     =======     =======
</TABLE>

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

<TABLE>
<CAPTION>
                                       December 31,
                                  ---------------------
                                    2002         2001
                                  --------     --------
<S>                               <C>          <C>
       Accruals and reserves      $292,000     $430,000
       Other                        36,000      130,000
                                   -------      -------

                                  $328,000     $560,000
                                   =======      =======
</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>
                              2002       2001     2000
                             ------     ------   ------
<S>                          <C>        <C>      <C>
   Statutory federal rate     34.0%      34.0%     34.0%
   State income taxes, net
      of federal benefit       3.6        4.7       2.6
   Research and development
      tax credit              (4.9)     (16.9)       -
   Foreign tax credit         (2.8)      (4.2)       -
   Other                      (0.1)       1.6      (1.5)
                             -----       ----     -----

                              29.8%      19.2%     35.1%
                              ====      =====      ====
</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 2002 and 2001.

NOTE H -- TRANSACTIONS WITH CATERPILLAR

Prior to 2000, the Company entered into a Securities Purchase Agreement (the
Agreement) with Caterpillar Inc. (Caterpillar). 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.

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 restricts acquisitions, loans and the payment of dividends,
without approval of at least one of the Caterpillar designated members of the
Board.



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

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

                        DECEMBER 31, 2002, 2001 AND 2000

NOTE H -- TRANSACTIONS WITH CATERPILLAR  --  Continued

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 companies. Total commission expense
under the agreement was approximately $215,000, $464,000 and $1,072,000 in 2002,
2001 and 2000.

In October 2000, the Company completed another Securities Purchase Agreement
with Caterpillar 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.

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 includes five 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 is manufacturing the undercarriage for use on four
of the MTLs, with the development of the undercarriage for the remaining model
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 $1,000,000, $1,904,000 and $273,000 in 2002, 2001
and 2000. The Company does not anticipate any research and development costs
related to the MTLs during 2003.

At December 31, 2002, 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 amended 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 2002, 2001 and 2000, total parts purchases, salary
and warranty reimbursements were approximately $7,140,000, $6,877,000 and
$3,828,000. Also, at December 31, 2002 and 2001, accounts payable to Caterpillar
were approximately $1,213,000 and $909,000.

When the Company ships undercarriages to Caterpillar it 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.

During 2002 and 2001, 32% and 18% of net sales were made to Caterpillar. At
December 31, 2002 and 2001, the accounts receivable balance due from Caterpillar
was approximately $2,000,000 and $1,600,000. No sales were made to Caterpillar
in 2000.



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

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

                        DECEMBER 31, 2002, 2001 AND 2000

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, options to purchase 5,000 shares were granted to each
director.

Option transactions under the plans during each of the three years in the period
ended December 31, 2002 are summarized as follows:

<TABLE>
<CAPTION>
                                               Weighted
                                                Average
                                               Exercise
                                 Shares          Price
                                --------        -------
<S>                            <C>            <C>
     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
          Granted                159,500          10.95
          Exercised              (18,000)          3.59
          Canceled              (165,189)         16.11
                               ---------
     Outstanding at
       December 31, 2002       1,423,062         $13.67
                               =========          =====
</TABLE>

At December 31, 2002, 2001 and 2000, 1,145,937, 1,205,501 and 1,208,802 options
were exercisable with a weighted average exercise price of $14.00, $14.20 and
$13.96.

The following information applies to grants that are outstanding at December 31,
2002:

<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>
   $           3.22        11,250     0.3 years     $  3.22

   $ 8.38 -- $12.25       950,687     2.3 years       11.96

   $13.25 -- $18.33       461,125     2.5 years       17.43
                        ---------

                        1,423,062                   $ 13.67
                        =========                    ======
<CAPTION>
                                Options exercisable
                       -------------------------------------
                               Number          Weighted-
        Range of             exercisable        average
        exercise                  at            exercise
         prices              period end          price
------------------------     -----------       ---------
<S>                          <C>                <C>
    $           3.22             11,250             $ 3.22

    $ 8.38 -- $12.25            730,937              12.19

    $13.25 -- $18.33            403,750              17.58
                              ---------

                              1,145,937             $14.00
                              =========              =====
</TABLE>

The weighted average fair values of the options granted during 2002, 2001 and
2000 are $5.47, $6.34 and $7.76. 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 2002,
2001 and 2000; zero dividend yield; expected volatility of 40.8%, 47.3% and
42.5%, risk-free interest rate of 4.71%, 4.33% and 4.93% and expected lives of
6.85, 6.79 and 6.60 years.

Shares Repurchased and Retired

In October 2002, the Company authorized a new 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.

                                      F-12
<PAGE>
                                  A.S.V., INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

                        DECEMBER 31, 2002, 2001 AND 2000

NOTE I -- SHAREHOLDERS' EQUITY -- Continued

In September 2001, the Company authorized a stock buy-back program under which
the Company could repurchase up to $5,000,000 of its common stock in the open
market. This program was replaced in 2002 by the above-mentioned program.

During 2002, 2001 and 2000, in connection with repurchase agreements, the
Company repurchased 159,405, 26,554 and 3,210 shares of stock for total
consideration of $1,522,318, $270,960 and $37,387.

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 this firm in 2002, 2001 and 2000 were
approximately $188,000, $202,000 and $201,000.

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, 2002.

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 2000. The compensation cost was fully amortized in 2001.

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.

NOTE L -- COMMITMENTS AND CONTINGENCIES  --  Continued

Lease Residual Guarantee

The Company has guaranteed certain residual amounts of equipment financed by
customers, generally 25% of the financed amount at the end of four years. Should
the Company be required to make this payment, it will take title of the financed
equipment. As of December 31, 2002, the total amount of future residual payments
the Company may be required to make in the event of nonpayment by the customer
was approximately $185,000. The Company believes the value of the acquired
equipment will equal or exceed the amount of residual payment. Accordingly, the
Company does not anticipate any loss will be incurred should any residual
payment need to be made.

Note Receivable

The Company has a note receivable from a customer which is included with
accounts receivable (balance of approximately $633,000 at December 31, 2002).
The note bears interest at prime plus 2% (effective rate of 6.25% at December
31, 2002). The note is due in 48 monthly installments beginning March 2002. If
the customer is successful in raising a minimum of $2.5 million through a
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.

NOTE M -- MAJOR CUSTOMERS

Other than sales to Caterpillar (see note H), the Company had sales to one
unaffiliated customer in 2001, which accounted for 16% of sales. No other
customers accounted for over 10% of sales in the years presented. At December
31, 2001, the accounts receivable balance from the unaffiliated customer was
approximately $706,000.



                                      F-13
<PAGE>
                                  A.S.V., INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

                        DECEMBER 31, 2002, 2001 AND 2000

NOTE N -- SUPPLEMENTARY FINANCIAL INFORMATION (unaudited)

The following table summarizes quarterly, unaudited financial data for 2002 and
2001.

<TABLE>
<CAPTION>
                                       2002
                    ------------------------------------------
Quarters               1st        2nd        3rd        4th
--------            ---------  ---------  ---------  ---------
(Dollars in thousands, except per share data)
<S>                 <C>        <C>        <C>        <C>
Net sales            $ 6,178    $14,714    $11,475    $11,870
Gross profit           1,425      3,472      2,122      1,603
Net earnings            (366)     1,014        527        178
(loss)
Net earnings
   (loss) per
   common share
     Basic             (.04)        .10        .05        .02
     Diluted           (.04)        .10        .05        .02

<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
</TABLE>


                                      F-14
<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, 2002 and 2001, 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, 2002. 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, 2002 and 2001, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2002, in conformity
with accounting principles generally accepted in the United States of America.


/S/ GRANT THORNTON LLP

Minneapolis, Minnesota
February 21, 2003



                                      F-15
<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 21, 2003, which is
included in the Annual Report of A.S.V., Inc. on Form 10-K for the year ended
December 31, 2002, we have also audited Schedule II for each of the three years
in the period ended December 31, 2002. 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 21, 2003




                                      S-1
<PAGE>

                                  A.S.V., INC.
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000



<TABLE>
<CAPTION>
                                 BALANCE              ADDITIONS                                   BALANCE
                                BEGINNING            CHARGED TO                                   END OF
ACCRUED WARRANTIES              OF PERIOD              EXPENSE           DEDUCTIONS (A)           PERIOD
------------------              ---------              -------           --------------           ------
<S>                             <C>                 <C>                  <C>                     <C>
2002                             $500,000            $1,399,550             $1,299,550             $600,000

2001                             $450,000            $1,278,816             $1,228,816             $500,000

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

   99.1      Certification of the Chief Executive Officer                      Filed herewith electronically

   99.2      Certification of Chief Financial Officer                          Filed herewith electronically
</TABLE>