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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

For the Fiscal Year ended September 30, 2003

Commission file number 0-13111

ANALYTICAL SURVEYS, INC.

(Exact name of registrant as specified in its charter)

11900 Crownpoint Drive, San Antonio, Texas 78233

(Address of principal executive offices)

(210) 657-1500

(Registrant’s telephone number, including area code)

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

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

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

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

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

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

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

Documents incorporated by reference: None

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PART I

Item 1. Business

Overview

Analytical Surveys, Inc. (“ASI”, “we”, “our” or the “Company”), formed in 1981, provides customized data conversion, spatial data management and technical services for the geographic information systems market. A geographic information system (“GIS”) is an “intelligent map” that allows users to input, update, query, analyze and display detailed information about a geographic area. We help customers by transforming raw, often confusing information from multiple sources (maps, blueprints, databases, aerial photography, satellite imagery, etc.) into a high-resolution, large-scale, richly detailed digital and visual representation that organizations can rely on to make better decisions with speed and confidence. We have historically targeted services to utilities and state and local governments, and are implementing strategies to expand the number of markets targeted and the range of GIS-related spatial data management and technical services offered.

We believe that the market for geographic information systems and services has historically grown due to:

We also believe that GIS users are increasingly outsourcing their data conversion and other GIS service projects to third-party providers such as ASI. We provide customers with a single source for all data conversion services necessary to achieve economic value from their investments in GIS.

Global economic conditions slowed the rate of growth in the GIS market since 2000. We expect delays in growth consistent with other technology-related companies until our utility customers resume significant spending on information technology products and services. The technologies utilized by our GIS customer base continue to advance and demand a current and accurate depiction of their spatially located assets. We believe, therefore, that the long-term outlook for the GIS industry is positive and that we are well positioned to serve evolving customer needs.

Strategy

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

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

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

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

ASI Services

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

Acquisitions, Dispositions and Facility Consolidations and Relocations

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

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

In April 2001, we sold substantially all of the assets of the Colorado Springs, Colorado-based digital orthophotography and photogrammetric mapping facility to Sanborn Map Company for a total

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consideration of $10.1 million. The sale agreement contains clauses that prohibit ASI from competing directly with the buyer in the orthophotography and photogrammetric markets for three years. Both companies agreed to cooperate to complete customer contracts where services are provided by more than one ASI production facility. The sale allowed us to reduce debt and to refocus attention on utility and municipal mapping services.

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

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

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

Customers

We derive revenues primarily from two core markets, utilities and state and local governments, and we also serve commercial businesses. Current customers include KeySpan Corporate Services LLC, Logica, Inc., Michigan Consolidated Gas Company, and Worldwide Services, Inc. (a division of Intergraph), each of which accounted for more than 10% of our consolidated revenues in fiscal 2003. One customer accounted for 58% of total accounts receivable and revenue in excess of billings at September 30, 2003. The loss of any of these customers would have a material adverse effect on us. See “Risk Factors – Dependence on Certain Customer Markets” and “– Terms of Customer Contracts,” and note 10—“Concentrations of Credit Risk”.

Sales and Marketing

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

Our sales cycle is generally lengthy, as customers normally take several months to go through the bidding/planning and award phases of a GIS project. Once awarded, it generally takes 30 to 60 days until the final contract is signed. Most projects take from 6 to 48 months to complete. See “Risk Factors—Dependence on Business Alliances”.

Subcontractors

We use subcontractors when necessary to expand capacity, meet deadlines, reduce production costs and manage workload. We are in the fifth year of a five-year supply agreement with InfoTech Enterprises, Ltd., an India-based company. The agreement provides us with exclusive access to InfoTech’s production capacity for data conversion and other related services. Under the agreement, we licensed certain

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proprietary production technology and provided certain assurances of production volume to InfoTech. We intend to continue to utilize offshore subcontractors for a large percentage of our production work in fiscal 2004 to reduce production costs and develop new services. We also employ certain select foreign and domestic subcontractors for tasks outside our expertise, or to augment in-house capacity (such as field data surveying). See “Risk Factors—Dependence on Subcontractors,” “—Dependence on Offshore Operations” and “Dependency on Key Personnel”.

Research and Development

We continue to develop new technology and to improve existing technology and procedures to enhance our ability to expand into additional markets and further improve our production capacity and productivity. Most of these activities occur as we develop software or design a product or process for a particular project. The costs of such efforts are generally included in project expenses, and are not charged to research and development expenses. We retain ownership of such proprietary software and products and often apply them to projects for other customers. Approximately three employees are substantially engaged in research and development efforts. See “Risk Factors—Reliance on Technology; Limited Protection of Proprietary Rights”.

Competition

The GIS services business is highly competitive and highly fragmented. Competitors include small regional firms, independent firms, large companies with GIS services divisions, customer in-house operations and international low-cost providers of data conversion services.

We seek to compete on the basis of:

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

To compete against low-cost providers, we minimize costs by using offshore subcontractors for a large percentage of our production work. See “Risk Factors—Dependence on Subcontractors”.

Personnel

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

We believe that retention of highly qualified managers and executive officers is critical to our ability to compete in the GIS data conversion industry. Almost all of our employees work on a full-time basis. We do not have a collective bargaining agreement with any of our employees and generally consider relations with our employees to be good. See “Risk Factors—Competition” and “—Dependence on Key Personnel.”

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RISK FACTORS

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

Dependence on Cash Resources for Liquidity

We currently do not have a line of credit with any lender. The terms of our senior secured convertible note restricts our ability to secure additional debt and also contain customary default provisions, which if triggered and exercised, would make it difficult for us to meet the debt payments. During the fiscal years of 2000 through 2003, we experienced significant operating losses with corresponding reductions in working capital and net worth, excluding the impact of debt forgiveness. Our revenues and backlog have also decreased substantially during the same period. These factors, among others raise substantial doubt about our ability to continue as a going concern. We rely solely on cash flow from operations to fund future operations and expenditures. We attempt to negotiate new contracts to minimize negative cash flow and frequently monitor and forecast our cash availability. There is no assurance that the cash flow from operations will be sufficient to meet our capital requirements. See “Risk Factors—Terms of Customer Contracts” and Item 7 – “Liquidity and Capital Resources”.

Dependence on Successful Implementation of Turnaround Efforts

The successful implementation of our turnaround efforts requires the cooperation of customers, subcontractors, vendors, lenders, and employees. There can be no assurance that the specific strategies designed to return our operations to profitability and positive cash flow can be implemented to the extent and in the timeframe planned. Delays and difficulties in achieving sales targets, realizing cost savings, maintaining funding, retaining employees and other turnaround efforts could have a material adverse effect on our operations.

Competition

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

Terms of Customer Contracts

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

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Fluctuations in Quarterly Operating Results

We have experienced and expect to continue to experience quarterly variations in revenues and operating income as a result of many factors, including the timing of customers’ budget processes, slowdowns or acceleration of work by customers, the number of operating days in each quarter and the impact of weather conditions on the ability of our or subcontractors to obtain satisfactory aerial photography or field data. General weak economic conditions may result in customer deferral of projects or cancellation in planned expenditures.

Reliance on Technology; Limited Protection of our Proprietary Rights

We have devoted significant resources to developing and acquiring specialized data collection and conversion hardware and software. In order to remain competitive, we must continue to select, invest in, acquire and develop new and enhanced technology on a timely basis. There can be no assurance that we will be successful in these efforts or in anticipating developments in data conversion technology. In addition, competitors could develop similar applications. We do not have any patent protection for our products or technology. Third parties could independently develop similar technology, obtain unauthorized access to our proprietary technology or misappropriate technology to which we have granted access.

Dependence On Certain Customer Markets

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

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Dependence on Maintaining a Skilled Labor Force

Our business is labor-intensive and requires trained employees. There can be no assurance that we will be able to continue to hire, train and retain sufficient numbers of qualified employees. A significant portion of our costs consists of wages to hourly workers. An increase in hourly wages, costs of employee benefits or employment taxes could have a material adverse effect on us. Turnover could increase for any of several reasons, including increased competition for labor. Higher turnover among our employees could increase our recruiting and training costs, could affect our ability to perform services and earn revenues on a timely basis and could decrease operating efficiencies and productivity.

Dependence on Key Personnel

Our success depends upon the continued service of our key employees. Our ability to retain our management team is an important factor in our turnaround program and our ability to pursue our overall business plan. While we have employment agreements with certain of our key personnel, there is no assurance that we will be able to retain the services of such key personnel. We do not maintain any key personal life insurance policies. Layoffs in recent years may impair our ability to retain and recruit key personnel. The loss of additional key personnel or the inability to obtain additional key personnel could have a material adverse effect on us.

Dependence On Subcontractors

We employ certain selected subcontractors for tasks outside our expertise, such as for the acquisition of aerial photography. We also use subcontractors for work similar to that performed by our own employees such as field data acquisition. These arrangements allow us to expand capacity, meet deadlines, reduce production costs, and manage workload. The inability to obtain the services of such qualified subcontractors when needed could have a material adverse effect on us.

Dependence on Offshore Operations

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

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Dependence on Business Alliances

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

Effect of Preferred Stock Provisions

Our Articles of Incorporation allow the Board of Directors to issue up to 2,500,000 shares of preferred stock and to fix the rights, privileges and preferences of those shares without any further vote or action by the shareholders. The rights of the holders of Common Stock will be subject to, and may be adversely affected by, the rights of the holders of the 1.6 million shares of preferred stock that we have previously issued and any preferred stock that we may issue in the future. Any such issuance could be used to discourage an unsolicited acquisition proposal by a third party. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”

Control by Single Shareholder

Tonga Partners, L.P. owns 261,458, or 24.1% of our outstanding common stock. Tonga Partners, L. P. also holds a senior secured convertible promissory note in the principal amount of $1,700,000 and warrants to purchase 500,000 shares of our common stock. Pursuant to the note and purchase agreement executed in April 2002, Tonga has the right to appoint of a majority of the board of directors. Accordingly, Tonga has the power to effectively control the election of our directors and to influence the outcome of various corporate actions requiring shareholder approval.

Volatility Of Stock Price

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

The trading price of the Common Stock may vary without regard to our operating performance.

Item 2. Property

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

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Item 3. Litigation

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

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

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

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

On January 23, 2002, we announced that the Securities and Exchange Commission had commenced a formal investigation of ASI, certain of our former officers, directors and others in connection with our accounting policies, procedures, disclosures and system of internal controls relating to the period from

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October 1998 through March 2000. On March 7, 2000, we restated earnings for the fiscal year ended September 30, 1999. We cooperated fully with the SEC in this investigation. On September 26, 2003, we signed a settlement with the SEC which included our entering into a Cease-and-Desist Order without admitting or denying the SEC’s allegations. The Order does not impose a fine, make a finding of fraud against the Company, or seek an injunction. This investigation is now closed.

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

Item 4. Submission Of Matters To A Vote Of Shareholders

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

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

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PART II.

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

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

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

On April 2, 2002, we issued a senior secured convertible promissory note to Tonga Partners, L.P. (“Tonga”) in the original principal amount of $2,000,000. As part of the same transaction, we issued to Tonga warrants to purchase 500,000 shares of our Common Stock. The sale and issuance of such securities were deemed to be exempt from registration under Section 4(2) of the Securities Act of 1933. In connection with the transaction, Tonga established to our satisfaction that it is an accredited investor.

On November 6, 2003, we issued 261,458 shares of our Common Stock pursuant to the partial conversion of the senior secured convertible debenture. The shares were issued at a price of $1.24 for an aggregate conversion of $300,000 of principal payable and $24,208 of interest payable. The $2 million debenture was exchanged for the shares and a $1.7 million debenture bearing the same terms. The newly issued shares increased our total common shares outstanding from 823,965 to 1,085,423. Tonga owned 24% of our outstanding shares immediately after the partial conversion.

Pursuant to the conversion, the exercise price of 75,000 shares underlying the warrant was set at $1.43 per share. The exercise price of the remaining shares will be set accordingly upon the conversion, if any, of the remainder of the note.

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Item 6. Selected Financial Data

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

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

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

Overview

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

We experience yearly and quarterly fluctuations in production costs, salaries, wages and related benefits and subcontractor costs. These costs may vary as a percentage of sales from period to period. We utilize InfoTech Enterprises Ltd., an India-based company, for a significant percentage of our offshore production services.

Backlog increases when new contracts are signed and decreases as revenues are recognized. Changes in macroeconomic and industry market conditions were first encountered in fiscal 2000 and have continued through fiscal 2003. These changes have resulted in a reduction of timely order flow. At September 30, 2003, backlog was $7.9 million as compared with $19.5 million at September 30, 2002. We believe these adverse market conditions were and continue to be primarily caused by the recessionary economic climate, consolidation in the utility industry, our adverse financial results for fiscal years 2001, 2002, and 2003 and increased competition from companies with offshore operations.

A number of the projects awarded to us are greater than $2 million or longer than two years in duration, which can increase risk due to inflation, as well as changes in customer expectations and funding availability. Our contracts are generally terminable on short notice, and while we rarely experience such termination, there is no assurance that we will receive all of the revenue anticipated under signed contracts. See Item 1. “Business — Risk Factors” and “– Risks Associated with Terms of Customer Contracts”.

Critical Accounting Policies

Revenue Recognition. We recognize revenue using the percentage of completion method of accounting on a cost-to-cost basis. For each contract, an estimate of total production costs is determined and these

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estimates are reevaluated monthly. The cost estimation process requires substantial judgements. The duration of the contracts and the technical challenges included in certain contracts affect the Company’s ability to estimate costs precisely. Production costs consist of internal costs, primarily salaries and wages, and external costs, primarily subcontractor costs. Internal and external production costs may vary considerably among projects and during the course of completion of each project. At each accounting period, the percentage of completion is based on production costs incurred to date as a percentage of total estimated production costs for each of our contracts. This percentage is then multiplied by the contract’s total value to calculate the sales revenue to be recognized. The percentage of completion is affected by any factors which influence either the estimate of future productivity or the production cost per hour used to determine future costs. We recognize losses on contracts in the period such loss is determined. Sales and marketing expenses associated with obtaining contracts are expensed as incurred.

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

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

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

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

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

Results Of Operations

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

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Fiscal Years Ended September 30, 2003 And 2002

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

Salaries, Wages and Benefits. Salaries, wages and benefits include employee compensation for production, marketing, selling, administrative and executive employees. Salaries, wages and benefits decreased 31.9% to $8.9 million for fiscal 2003 from $13.1 million for fiscal 2002. This decrease was primarily due to across-the-board staff reductions. As a percentage of revenues, salaries, wages and benefits decreased to 59.6% for fiscal 2003 from 68.6% for fiscal 2002.

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

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

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

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

Other Expense, Net. Other expense, net, is comprised primarily of interest expense, which increased to $356,000 for fiscal 2003 from $277,000 in fiscal year 2002. This increase is due to the recognition of accretion and discount on our preferred stock as interest expense during the fourth quarter of 2003 as required by FAS No. 150, offset by a decrease in interest paid on bank debt as a result of the extinguishment of bank debt in the first six months of fiscal 2002. Most of the interest expense in fiscal 2003 is non-cash in nature as it relates to accretion of discount or payment is deferred.

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

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

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

Net Earnings (Loss). Net loss available to common shareholders of $3.9 million in fiscal 2003 is an $8.4 million decrease from the $4.5 million net earnings in fiscal 2002. As discussed above, non-operational items accounted for the variance.

Fiscal Years Ended September 30, 2002 And 2001

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

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

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

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

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

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

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

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

Other Expense, Net. Other expense, net is primarily comprised of net interest. Interest expense decreased $277,000 for fiscal 2002 from $1.9 million in fiscal year 2001. This decrease was primarily due to reduced average debt outstanding and lower interest rates in fiscal 2002. Most of the interest expense in fiscal 2002 is non-cash in nature as it relates to accretion of discount or payment is deferred.

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

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

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

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

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

Liquidity And Capital Resources

Historically, our principal source of liquidity has consisted of cash flow from operations supplemented by secured lines-of-credit and other borrowings. We did not have a working capital line-of-credit as of September 30, 2003. Other borrowings consist of a $1.9 million senior secured convertible debenture and redeemable preferred stock.

On March 31, 2003, we made our final bank debt payment, paying in full a $175,000 unsecured promissory note that matured on March 31, 2003. The $1.9 million senior secured convertible note, which has a face value of $2.0 million maturing April 2, 2005, bears interest at an annual rate of five percent, but interest is not payable until maturity. The senior secured convertible note must be converted at maturity to Common Stock as described below.

The senior secured convertible note is convertible at any time into Common Stock at a price equal to the lesser of (i) $4.00, (ii) 90% of the average closing bid prices of the Common Stock for the 90 trading days ending the trading date immediately preceding the closing date of April 2, 2002 (calculated to be $4.69), and (iii) 90% of the average closing bid prices for the 3 trading days having the lowest closing bid price during the 20 trading days immediately prior to the conversion date, but under any event, the number of shares issuable upon full conversion of the note must constitute at least 38% of the issued and outstanding shares, on a fully diluted basis, as of the date of full conversion. If at the time of conversion of the note, the price of the Common Stock has dropped below $4.00 per share, the number of shares of Common Stock issuable upon conversion of the note and upon exercise of the warrants would increase. Similarly, if ASI issues shares of Common Stock at a price of less than $4.00 per share, the conversion price and the exercise price decrease to that lower price, and the number of shares issuable under the note and the warrants would therefore increase. At the time of conversion, any unpaid interest is to be paid in shares of Common Stock.

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

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The holder of the senior secured convertible note, Tonga Partners, L.P., also received warrants to purchase an additional 500,000 shares of Common Stock (subject to adjustment). One whole warrant entitles Tonga to acquire an additional share of Common Stock at an exercise price equal to 115% of the conversion price of the note. Assuming an exercise price of $1.37 per share (115% of $1.19), the aggregate exercise price for the warrants would be $685,000 for the issuance of 500,000 shares of Common Stock, but the shares issuable upon conversion of the note and exercise of warrants are to be no less than 55% of the outstanding Common Stock (unless Tonga exercises the warrants in a cashless exercise where Tonga uses the value of some of the warrants to pay the exercise price for other warrants).

On November 6, 2003, we issued 261,458 shares of our Common Stock pursuant to the partial conversion of the senior secured convertible debenture. The shares were issued at a price of $1.24 for an aggregate conversion of $300,000 of principle payable and $24,208 of interest payable. The $2 million debenture was exchanged for the shares and a $1.7 million debenture bearing the same terms. The newly issued shares increased our total common shares outstanding from 823,965 to 1,085,423. Tonga owned 24% of our outstanding shares immediately after the partial conversion.

Pursuant to the conversion, the exercise price of 75,000 shares underlying the warrant was set at $1.43 per share. The exercise price of the remaining shares will be set accordingly upon the conversion, if any, of the remainder of the note.

We are required to register the shares underlying the note and warrants. Also, ASI is generally restricted from issuing additional equity securities without Tonga’s consent, and the Holder has a right of first refusal as to certain subsequent financings. In addition, we are obligated to continue the listing of our Common Stock on the Nasdaq SmallCap Market pursuant to the Note and Warrant Purchase Agreement entered into with Tonga , our controlling beneficial shareholder, and any breach of this obligation might result in the acceleration of the Company’s obligations under the senior secured convertible note payable to Tonga.

As part of the transaction, Tonga was granted the opportunity to appoint a majority of ASI’s board of directors and, as a result, controls ASI. In addition, upon exercise of the warrants and conversion of the note, Tonga will own a majority of the Common Stock, thereby giving Tonga additional control over ASI.

On December 28, 2001, we issued 1.6 million shares of no par value Series A Preferred Stock, at an original issue price of $2.00 per share. We are entitled to redeem the shares within one year of issuance at $1.00 per share ($1.6 million), and the redemption price increases $.20 per year until the fifth anniversary, at which time the shares must be redeemed at a price of $2.00 per share. As of the date of this report, we have not redeemed the shares. The agreement calls for a mandatory payment of $800,000 by the third anniversary. The preferred stock earns a dividend at the annual rate of 5.00% of the then redemption price on a cumulative, non-participating basis and has a liquidation preference equal to the then redemption value of shares outstanding at the time of such liquidation.

During the fiscal years of 2000 through 2003, we experienced significant operating losses with corresponding reductions in working capital and net worth, excluding the impact of debt forgiveness, and do not currently have any external financing in place to support operating cash flow requirements. Our revenues and backlog have also decreased substantially during the same period. Our senior secured convertible note also contains customary default provisions, which if triggered and exercised, would make it difficult for us to meet these debt payments.

To address the going concern issue, management has implemented financial and operational restructuring plans designed to improve operating efficiencies, reduce and eliminate cash losses and position ASI for profitable operations. In fiscal 2002, we improved our working capital position by reducing our bank debt

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through the issuance of preferred stock and convertible debt and with the collection of a $1.2 million federal income tax refund. The consolidation of our production operations in fiscal 2003 to two solution centers has resulted in lower general and administrative costs and improved operating efficiencies. Additionally, the relocation of our corporate headquarters has resulted in additional savings realized with a smaller corporate staff and efficiencies in occupancy and travel related expenses. Our sales and marketing team is pursuing market opportunities in both our traditional digital mapping and newly launched data management initiatives. We continue to focus on cost control as we develop the data management initiative.

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

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

These accounts, which represent a significant investment by us in our business, affect our cash flow as projects are signed, performed, billed and collected. At September 30, 2003, we had multiple contracts with four customers, each of which accounted for more than 10% of our consolidated revenues in fiscal 2003. One customer accounted for 58% of total accounts receivable and revenue in excess of billings at September 30, 2003. At September 30, 2002, three customers represented 72% (43%, 17% and 12%, respectively) of the total balance of net accounts receivable and revenue in excess of billings. Billing terms are negotiated in a competitive environment and, as stated above, are based on reaching project milestones. We anticipate that sufficient billing milestones will be achieved during fiscal 2004 such that revenue in excess of billings for these customer contracts will begin to decline.

Our operating activities used $0.9 million cash in fiscal 2003 and provided positive cash flow of $2.3 million in fiscal 2002 and $0.3 million in fiscal 2001. Contract-related accounts described in the previous paragraph declined $1.5 million, $6.0 million, and $8.7 million in fiscal 2003, 2002, and 2001, respectively. Accounts payable and accrued expenses increased $0.5 million in fiscal 2003 and decreased $2.0 million in fiscal 2002 and $3.5 million in fiscal 2001. The decrease in fiscal 2001 reflects the Company’s reduced size of operations, in part due to the sale of our Colorado Springs, Colorado office. Prepaid expenses remained constant in fiscal 2003, decreased by $0.5 million in fiscal 2002 and increased by $0.2 million in fiscal 2001.

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

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Cash used by financing activities for fiscal years 2003, 2002, and 2001 was $0.1 million, $0.5 million, and $10.1 million, respectively. Financing activities consisted primarily of net borrowings and payments under lines of credit for working capital purposes and net borrowings and payments of long-term debt used in operations and the purchase of equipment and leasehold improvements. We reduced debt by $6.0 million with proceeds from the sale of our Colorado Springs, Colorado office in fiscal 2001.

Table Of Contractual Obligations

Below is a schedule (by period due) of the future payments (in thousands) which we are obligated to make based on agreements in place as of September 30, 2003. The $2 million senior secured note, which matures in 2005, carries a mandatory redemption clause that provides for its conversion into our common stock at the then-current conversion rate. On November 4, 2003, that obligation was reduced to $1,700,000 when the holder converted $300,000 in the note into our common stock.

Quarterly Financial Information

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

Impact Of Recently Issued Accounting Pronouncements

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

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

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

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

Item 7a. Quantitative And Qualitative Disclosures About Market Risk

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

Item 8. Financial Statements And Supplementary Data

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INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholders

Analytical Surveys, Inc.:

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

We conducted our audits in accordance with 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 Analytical Surveys, Inc. and subsidiaries as of September 30, 2003 and 2002, and the results of their operations and their cash flows for each of the years in the three-year period ended September 30, 2003, in conformity with accounting principles generally accepted in the United States of America.

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

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in note 14 to the consolidated financial statements, the Company has suffered significant operating losses in 2003 and 2002 and does not currently have any external financing in place to fund working capital and debt requirements, which raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to this matter are also described in note 14. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES

Consolidated Balance Sheets

September 30, 2003 and 2002

(In thousands)

See accompanying notes to consolidated financial statements.

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ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES

Consolidated Statements of Operations

Years ended September 30, 2003, 2002 and 2001

(In thousands, except per share amounts)

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ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES

Consolidated Statements of Operations (cont.)

Years ended September 30, 2003, 2002, and 2001

(In thousands, except for per share amounts)

See accompanying notes to consolidated financial statements.

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ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES

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

Years ended September 30, 2003, 2002, and 2001

(In thousands)