10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

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

For the Fiscal Year ended September 30, 2003

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

Commission file number 0-13111

ANALYTICAL SURVEYS, INC.

(Exact name of registrant as specified in its charter)

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

11900 Crownpoint Drive, San Antonio, Texas 78233

(Address of principal executive offices)

(210) 657-1500

(Registrant’s telephone number, including area code)

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

Title Of Each Class	Name Of Each Exchange On Which Registered
Common Stock, par value $0.              per share	Nasdaq

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

TABLE OF CONTENTS

		Page
PART I.
Item 1.	Business	1
Item 2.	Property	8
Item 3.	Litigation	9
Item 4.	Submission of Matters to a Vote of Shareholders	10
PART II.
Item 5.	Market for the Registrant’s Common Stock and Related Shareholder Matters	11
Item 6.	Selected Financial Data	12
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 7a.	Quantitative and Qualitative Disclosure about Market Risks	23
Item 8.	Financial Statements and Supplementary Data	23
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	48
Item 9a.	Statement on Disclosure Control and Procedures	48
PART III.
Item 10.	Directors and Executive Officers of the Registrant	48
Item 11.	Executive Compensation	50
Item 12.	Security Ownership of Other Beneficial Owners and Management	58
PART IV.
Item 14.	Principal Accountant Fees and Services	62
Item 15.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K	62
Signatures and Certifications		67
Exhibits		68

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:

• Growing awareness of the benefits of GIS technology;

• Significant reductions in computer hardware prices;

• Increased capability and reliability of hardware and software;

• Deregulation and consolidation in the utility industry; and

• Increased demand for geographic information systems in growing communities.

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:

• Reduced corporate borrowing;

• Settled a class action lawsuit;

• Settled a formal SEC investigation;

• Standardized project management and cost estimation processes;

• Consolidated accounting systems;

1

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

• Strengthened operational management and reduced corporate and overhead expenses; and

• Focused on the government and utility conversion and data management sectors of the market.

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

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

ASI Services

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

Acquisitions, Dispositions and Facility Consolidations and Relocations

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

• Intelligraphics, Inc. located in Wisconsin in December 1995;

• Westinghouse Landmark GIS, Inc. located in North Carolina in July 1996;

• MSE Corporation (“MSE”) located in Indiana in July 1997;

• Cartotech, Inc. located in Texas in June 1998; and

• The assets of Measurement Sciences, Inc. located in Colorado in December 1998.

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

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

2

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:

• Maintaining relationships and forming alliances with regional businesses offering complementary services;

• Obtaining referrals, either directly or indirectly, from consultants in the GIS industry;

• Maintaining memberships in professional and trade associations; and

• Actively participating in industry conferences.

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

3

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:

• The quality of our products and the breadth of our services;

• The accuracy, responsiveness and efficiency with which we provide services to customers; and

• Our capacity to perform large complex projects.

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:

• Transitioned a greater percentage of work to less expensive offshore subcontractors;

• Continued efforts to improve operational efficiencies;

• Adjusted expenses to match forecasted revenues; and

• Flattened our organizational structure to shorten the internal communications hierarchy.

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

4

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:

• Our ability to estimate our costs accurately is critical to ensuring the profitability of projects.

• Our skill at controlling costs under such fixed-price contracts once in production.

5

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

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

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

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

• Contracts are generally terminable by the customer on relatively short notice, and the terms of some contracts may make it difficult for us to recoup our investment in a project terminated prior to completion. Termination of any of our long-term contracts therefore may have a material adverse impact on our operations.

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

• Contracts may contain billing terms that are based on achievement of milestones or on deliverable units and not necessarily in accordance with costs incurred.

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.

6

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.

7

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:

• Actual or anticipated variations in our quarterly operating results;

• The introduction of new services or technologies by us or our competitors;

• Changes in other conditions in the GIS industry or in the industries of any of our customers;

• Changes in governmental regulation, government spending levels or budgetary procedures; and

• Changes in the industry generally; or seasonal, general market or economic conditions.

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

Item 2. Property

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

8

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

9

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:

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

10

PART II.

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

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

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

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

On April 2, 2002, we issued a senior secured convertible promissory note to Tonga Partners, L.P. (“Tonga”) in the original principal amount of $2,000,000. As part of the same transaction, we issued to Tonga warrants to purchase 500,000 shares of our Common Stock. 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.

11

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.)

12

	2003			2002		2001 (1)		2000		1999
Consolidated Statement of Operations Data:
Revenues	$	14,973		19,072		40,941		60,085		103,254
Cost and expenses:
Salaries, wages and benefits		8,903		13,081		25,003		44,027		57,571
Subcontractor costs		3,540		3,617		8,293		14,476		15,628
Other general and administrative		5,120		5,669		12,528		19,031		18,112
Depreciation and amortization		482		915		2,849		5,107		5,661
Impairment of goodwill		—		—		—		16,513		—
Gain on sale of assets		—		—		(3,542	)	—		(1,084	)
		18,045		23,282		45,131		99,154		95,888
Earnings (loss) from operations		(3,072	)	(4,210	)	(4,190	)	(39,069	)	7,366
Other income (expenses), net		(274	)	11,578		(2,767	)	(2,804	)	(2,523	)
Earnings (loss) before income taxes and cumulative effect of a change in accounting principle		(3,346	)	7,368		(6,957	)	(41,873	)	4,843
Income taxes (benefit)		—		(1,240	)	2,781		(3,294	)	2,053
Earnings (loss) before cumulative effect of a change in accounting principle		(3,346	)	8,608		(9,738	)	(38,579	)	2,790
Cumulative effect of a change in accounting principle		—		(3,557	)	—		—		—
Net earnings (loss)		(3,346	)	5,051		(9,738	)	(38,579	)	2,790
Accretion of discount and dividends on preferred shares		(568	)	(560	)	—		—		—
Net earnings (loss) available to common shareholders	$	(3,914	)	4,491		(9,738	)	(38,579	)	2,790
Basic earnings (loss) per share (2)	$	(4.75	)	6.14		(13.95	)	(55.43	)	4.08
Diluted earnings (loss) per share (2)	$	(4.75	)	2.42		(13.95	)	(55.43	)	3.89
Weighted average common shares outstanding: (2)
Basic		824		731		698		696		683
Diluted		824		1,859		698		696		718
Consolidated Balance Sheet Data:
Working capital	$	6,764		9,710		(2,748	)	7,073		40,029
Total assets	$	11,780		15,503		23,819		50,262		89,242
Long-term debt, less current portion	$	3,403		2,760		200		5,952		20,339
Total stockholders’ equity	$	3,882		7,796		2,204		12,070		50,663

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

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

13

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

14

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:

15

Percentage of Sales:	2003		2002		2001
Revenues	100.0	%	100.0	%	100.0	%
Costs and expenses:
Salaries, wages and benefits	59.6		68.6		61.1
Subcontractor costs	23.6		19.0		20.2
Other general and administrative	31.6		28.9		25.8
Bad debts (recoveries)	(0.2	)	0.3		4.3
Depreciation and amortization	3.2		4.8		7.0
Severance and related costs	2.7		0.5		0.5
Gain on sale of assets	—		—		(8.7	)
Earnings (loss) from operations	(20.5	)	(22.1	)	(10.2	)
Other income (expense), net	1.8		(0.7	)	(7.5	)
Gain of extinguishment of debt	—		61.4		0.7
Earnings (loss) before income taxes and cumulative effect of a change in accounting principle	(22.3	)	38.6		(17.0	)
Income taxes (benefit)	—		(6.5	)	6.8
Net earnings (loss) before cumulative effect of a change in accounting principle	(22.3	)	45.1		(23.8	)
Cumulative effect of a change in accounting principle	—		(18.6	)	—
Net earnings (loss)	(22.3	)%	26.5	%	(23.8	)%

Fiscal Years Ended September 30, 2003 And 2002

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

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

16

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.

17

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

18

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.

19

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

20

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

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

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

• “Accounts receivable” is created when an amount becomes due from a customer, which typically occurs when an event specified in the contract triggers a billing.

• “Revenues in excess of billings” occur when we have performed under a contract even though a billing event has not been triggered.

• “Billings in excess of revenues” occur when we receive an advance or deposit against work yet to be performed.

These accounts, which represent a significant investment by us in our business, affect our cash flow as projects are signed, performed, billed and collected. At September 30, 2003, we had multiple contracts with four customers, each of which accounted for 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.

21

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.

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

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):

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Fiscal Year Total
2003
Revenues	$	4,285		$	3,672		$	3,753		$	3,263		$	14,973
Loss before income taxes		(597	)		(663	)		(462	)		(1,624	)		(3,346	)
Loss available to common shareholders		(817	)		(851	)		(623	)		(1,623	)		(3,914	)
Net loss per share
Basic		(0.99	)		(1.03	)		(0.76	)		(1.97	)		(4.75	)
Diluted		(0.99	)		(1.03	)		(0.76	)		(1.97	)		(4.75	)
2002
Revenues	$	5,635		$	4,968		$	4,304		$	4,165		$	19,072
Earnings (loss) before income taxes and cumulative effect of a change in accounting principle		7,604			256			1,667			(919	)		8,608
Net earnings (loss) available to common shareholders		4,047			156			1,447			(1,159	)		4,491
Net earnings (loss) per share
Basic		5.80			0.22			1.96			(1.52	)		6.14
Diluted		5.80			0.22			0.91			(1.52	)		6.14

Impact Of Recently Issued Accounting Pronouncements

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

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

22

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

23

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.

KPMG LLP

San Antonio, Texas

December 22, 2003

24

ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES

Consolidated Balance Sheets

September 30, 2003 and 2002

(In thousands)

	2003			2002
Assets
Current assets:
Cash and cash equivalents	$	1,952		3,114
Accounts receivable, net of allowance for doubtful accounts of $100 and $479		3,029		2,444
Revenue earned in excess of billings		6,112		8,915
Prepaid expenses and other		166		184
Total current assets		11,259		14,657
Equipment and leasehold improvements:
Equipment		4,896		6,296
Furniture and fixtures		484		484
Leasehold improvements		267		267
		5,647		7,047
Less accumulated depreciation and amortization		(5,126	)	(6,201	)
Net equipment and leasehold improvements		521		846
Total assets		11,780		15,503
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt		74		270
Billings in excess of revenue earned		162		887
Accounts payable and other accrued liabilities		3,301		2,214
Accrued payroll and related benefits		958		1,576
Total current liabilities		4,495		4,947
Long-term debt, less current portion		1,953		1,960
Redeemable preferred stock; no par value. Authorized 2,500 shares; 1,600 shares issued and outstanding at September 30, 2003 (liquidation value $1,600)		1,450		800
Total long-term liabilities		3,403		2,760
Total liabilities		7,898		7,707
Stockholders’ equity:
Common stock, no par value. Authorized 10,000 shares; issued and outstanding 824 and 824 shares		33,039		33,039
Accumulated deficit		(29,157	)	(25,243	)
Total stockholders’ equity		3,882		7,796
Commitments and contingencies
Total liabilities and stockholders’ equity	$	11,780		15,503

See accompanying notes to consolidated financial statements.

25

ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES

Consolidated Statements of Operations

Years ended September 30, 2003, 2002 and 2001

(In thousands, except per share amounts)

	2003			2002		2001
Revenues	$	14,973		19,072		40,941
Costs and expenses:
Salaries, wages and benefits		8,903		13,081		25,003
Subcontractor costs		3,540		3,617		8,293
Other general and administrative		4,738		5,504		10,558
Bad debts (recoveries)		(28	)	68		1,740
Depreciation and amortization		482		915		2,849
Severance and related costs		410		97		230
Gain on sale of assets		—		—		(3,542	)
		18,045		23,282		45,131
Loss from operations		(3,072	)	(4,210	)	(4,190	)
Other income (expense):
Interest expense, net		(356	)	(277	)	(1,916	)
Litigation settlement costs		—		—		(748	)
Other, net		82		147		(403	)
Gain on extinguishment of debt, net of tax		—		11,708		300
		(274	)	11,578		(2,767	)
Earning (loss) before income taxes		(3,346	)	7,368		(6,957	)
Income tax expense (benefit)		—		(1,240	)	2,781
Earnings (loss) before cumulative effect of a change in accounting principle		(3,346	)	8,608		(9,738	)
Cumulative effect of a change in accounting principle		—		(3,557	)	—
Net earnings (loss)		(3,346	)	5,051		(9,738	)
Accretion of discount and dividends on preferred shares		(568	)	(560	)	—
Net earnings (loss) available to common shareholders	$	(3,914	)	4,491		(9,738	)

26

ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES

Consolidated Statements of Operations (cont.)

Years ended September 30, 2003, 2002, and 2001

(In thousands, except for per share amounts)

	2003			2002		2001
Basic earnings (loss) per common share:
Income (loss) before cumulative effect of a change in accounting principle	$	(4.75	)	11.01		(13.95	)
Cumulative effect of a change in accounting principle		—		(4.87	)	—
Net earnings (loss) available to common shareholders	$	(4.75	)	6.14		(13.95	)
Diluted earnings (loss) per common share:
Income (loss) before cumulative effect of a change in accounting principle	$	(4.75	)	4.33		(13.95	)
Cumulative effect of a change in accounting principle		—		(1.91	)	—
Net earnings (loss) available to common shareholders	$	(4.75	)	2.42		(13.95	)
Weighted average common shares:
Basic		824		731		698
Diluted		824		1,859		698

See accompanying notes to consolidated financial statements.

27

ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES

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

Years ended September 30, 2003, 2002, and 2001

(In thousands)

	Common Stock			Retained Earnings		Accumulated Other Comprehensive Loss		Total
	Shares	Amount
Balances at October 1, 2000	697	$	32,185	(19,996	)	(119	)	12,070
Net loss	—		—	(9,738	)	—		(9,738	)
Unrealized change in investment securities, net of tax	—		—	—		(134	)	(134	)
Comprehensive loss								(9,872	)
Exercise of stock options	1		6	—		—		6
Balances at September 30, 2001	698		32,191	(29,734	)	(253	)	2,204
Net earnings	—		—	5,051		—		5,051
Realized change in investment securities, net of reclassification adjustment of $168, net of income taxes of $0	—		—	—		253		253
Comprehensive earnings								5,304
Issuance of common shares in litigation settlement	126		648	—		—		648
Accretion of discount and dividends on preferred shares	—		—	(560	)	—		(560	)
Issuance of warrants in connection with convertible debt	—		200	—		—		200
Balances at September 30, 2002	824		33,039	(25,243	)	—		7,796
Net loss	—		—	(3,346	)	—		(3,346	)
Accretion of discount and dividends on preferred shares	—		—	(568	)	—		(568	)
Balances at September 30, 2003	824	$	33,039	(29,157	)	—		3,882

See accompanying notes to consolidated financial statements.

28

ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended September 30, 2003, 2002, and 2001

(In thousands)

	2003			2002		2001
Cash flows from operating activities:
Net earnings (loss)	$	(3,346	)	5,051		(9,738	)
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Gain on sale of assets				—		(3,542	)
Depreciation and amortization		482		914		2,849
Gain on extinguishment of debt		—		(11,708	)	(300	)
Cumulative effect of a change in accounting principle		—		3,557		—
(Gain)/loss on sale of equipment		(14	)	70		415
Deferred income taxes		—		—		2,487
Changes in operating assets and liabilities:
Accounts receivable, net		(584	)	3,666		5,091
Revenue earned in excess of billings		2,802		1,652		4,826
Income taxes refundable or payable		—		—		3,125
Prepaid expenses and other		17		455		(150	)
Billings in excess of revenue earned		(725	)	643		(1,181	)
Accounts payable and other accrued liabilities		1,085		(1,643	)	(2,524	)
Accrued payroll and related benefits		(618	)	(384	)	(1,009	)
Net cash provided (used) by operating activities		(901	)	2,273		349
Cash flows from investing activities:
Purchase of equipment and leasehold improvements		(156	)	(434	)	(376	)
Cash proceeds from sale of Colorado assets		—		—		8,603
Cash proceeds from sale of assets		18		452		75
Net cash provided (used) by investing activities		(138	)	18		8,302
Cash flows from financing activities:
Net borrowings (payments) under lines-of-credit		—		—		(1,490	)
Principal payments on long-term debt		(123	)	(2,528	)	(8,641	)
Proceeds from issuance of senior secured convertible debt		—		2,000		—
Proceeds from exercise of stock options		—		—		6
Net cash (used) by financing activities		(123	)	(528	)	(10,125	)
Net increase (decrease) in cash		(1,162	)	1,763		(1,474	)
Cash and cash equivalents at beginning of year		3,114		1,351		2,825
Cash and cash equivalents at end of year	$	1,952		3,114		1,351
Supplemental disclosures of cash flow information:
Cash paid for interest	$	22		249		2,066
Refund of income taxes	$	—		1,255		2,831
Issuance of preferred stock to retire debt	$	—		300		—
Issuance of common stock in litigation settlement	$	—		648		—

See accompanying notes to consolidated financial statements.

29

ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2003, 2002, and 2001

(1) Summary of Significant Accounting Policies

(a) Business and Basis of Financial Statement Presentation

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

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

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

(b) Equipment and Leasehold Improvements

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

(c) Revenue and Cost Recognition

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

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

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

(d) Goodwill Impairment

We have elected early adoption of FASB Statement No. 142, Goodwill and Other Intangible Assets. As a result of this election, we tested the carrying value of our goodwill for

30

ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2003, 2002, and 2001

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

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

(e) Investment Securities

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

(f) Income Taxes

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

31

ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2003, 2002, and 2001

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

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

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

(h) Stock-Based Compensation

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

(i) Earnings Per Share

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

	Year Ended September 30
	2003	2002	2001
Weighted-average common shares outstanding	824	731	698
Dilutive effect of:
Stock options	—	—	—
Convertible debt	—	1,128	—
Weighted-average common shares outstanding, assuming dilution	824	1,859	698

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

32

ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2003, 2002, and 2001

(j) Reverse Stock Split

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

(k) Financial Instruments

The carrying amounts of financial instruments are estimated to approximate estimated fair values. The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties. The carrying amounts of cash, receivables, accounts payable and accrued liabilities approximate fair value due to the short maturity of these instruments. The carrying amounts of debt approximate fair value due to the variable nature of the interest rates and short-term maturities of these instruments.

(l) Operating Cycle

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

(2) Sale of Subsidiaries and Sale of Colorado Assets

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

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

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

33

ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2003, 2002, and 2001

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

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

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

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

(4) Debt

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

	2003			2002
Long-Term Debt
Note payable	$	—		175
Senior secured convertible note		1,900		1,833
Capital lease obligation		—		27
Other		127		195
Redeemable preferred stock		1,450		800
		3,477		3,030
Less current portion		(74	)	(270	)
	$	3,403		2,760

34

ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2003, 2002, and 2001

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

On April 2, 2002, we completed the sale of a $2.0 million senior secured convertible note and warrants to purchase ASI common stock (“Common Stock”). We used the proceeds to repay $700,000 to senior lenders, pay transaction expenses of approximately $95,000 and fund operations. Senior lenders accepted the $700,000 cash payment and a $175,000 unsecured promissory note in full satisfaction of the $3.0 million note payable outstanding at March 31, 2002.

On March 31, 2003, we paid the $175,000 unsecured promissory note in full together with interest totaling $10,048. The senior secured convertible note matures April 2, 2005 and bears interest at an annual rate of five percent. Interest is not payable until maturity or may be converted to Common Stock as described below.

The senior secured convertible note has a face value of $2.0 million and is convertible at any time into Common Stock at a price equal to the least of (i) $4.00, (ii) 90% of the average closing bid prices of the Common Stock for the 90 trading days ending the trading date immediately preceding the closing date, and (iii) 90% of the average closing bid prices for the three trading days having the lowest closing bid price during the 20 trading days immediately prior to the conversion date, 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.

Tonga Partners, L.P., the holder of the senior secured convertible note, 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).

35

ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2003, 2002, and 2001

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.

Under the terms of the note and related purchase agreement and pursuant to an extension granted by Tonga, we are required to register the shares underlying the note and warrants by December 31, 2003. On January 17, 2003, Tonga waived its rights pursuant to the requirement that we maintain our listing on Nasdaq Small Cap Market, as set forth in the note. We are generally restricted from issuing additional equity securities without Tonga’s consent, and Tonga has a right of first refusal as to certain subsequent financings.

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

The carrying value of the senior secured convertible note is $1.90 million at September 30, 2003 and represents the cash received of $2.0 million less the estimated fair value of the warrants of $200,000 which was recorded in Common Stock. The carrying value of the senior secured convertible note is being accreted to the face amount by charges to interest expense through the maturity date.

Tonga converted $300,000 of the note into Common Stock subsequent to September 30, 2003. See Note 15, Subsequent Events.

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

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

36

ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2003, 2002, and 2001

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

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

(5) Redeemable Preferred Stock

Pursuant to the Agreement with senior lenders described in Note 4, on December 28, 2001, we issued preferred stock in the form of 1.6 million shares of no par value Series A Preferred Stock, at an original issue price of $2.00 per share. Until December 28, 2003, we are entitled to redeem the shares at $1.20 per share ($1.8 million), and the redemption price increases $.20 per year until the fifth anniversary, or December 28, 2006, at which time the shares must be redeemed at a price of $2.00 per share. The Agreement calls for a mandatory payment toward the redemption price of $800,000 on December 28, 2004. The preferred stock earns a dividend at the annual rate of 5.00% of the then applicable redemption price on a cumulative, non-participating basis and has a liquidation preference equal to the then applicable redemption value of shares outstanding at the time of liquidation.

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

We adopted SFAS 150 on July 1, 2003, which required the reclassification of the redeemable preferred stock as debt and future preferred stock dividends as interest expense. Effective July 1, 2003, we reclassified mandatorily redeemable shares that were issued prior to May 31, 2003 as liabilities. The total amount of the reclassification was $1,300,000.

(6) Operating Leases

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

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

37

ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2003, 2002, and 2001

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

(7) Income Taxes

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

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

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

	2003			2002		2001
Computed “expected” income tax expense, (benefit)	$	(1,138	)	1,296		(2,467	)
State income taxes, net of federal tax effect		(8	)	—		213
Amortization of non-deductible goodwill		—		—		101
Impairment of non-deductible goodwill		—		1,190		—
Change in deferred tax valuation allowance		1930		(4,188	)	5,415
Other, net		(784	)	462		(481	)
Actual income tax expense (benefit)	$	—		(1,240	)	2,781

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

38

ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2003, 2002, and 2001

	2003			2002
Deferred tax assets:
Accrued liabilities, primarily due to accrued compensated absences for financial statement purposes	$	119		186
Severance accruals		40		42
Bad debt and revenue earned in excess of billing allowances		78		78
NOL carryforward		8,643		6,508
Impairment of deductible goodwill		2,470		2,807
Accrued marketing incentives		67		—
Other, net		98		30
Valuation allowance		(11,207	)	(9,277	)
Total deferred tax assets		308		374
Deferred tax liabilities:
Equipment and leasehold improvements, primarily due to differences in depreciation		(308	)	(374	)
Net deferred tax asset	$	—		—

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

(8) Stockholders’ Equity and Stock Options

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

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

39

ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2003, 2002, and 2001

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

	Year ended September 30,
	2003			2002		2001
Net income (loss), available to common shareholders as reported	$	(3,914	)	4,491		(9,738	)
Less: Pro forma option expense		(203	)	(750	)	(1,838	)
Pro forma net income (loss)	$	(4,117	)	3,740		(11,576	)
Basic earnings (loss) per share, as reported	$	(4.75	)	6.14		(13.95	)
Less: Pro forma option expense		(0.25	)	(1.03	)	(2.63	)
Pro forma basic earnings (loss) per share	$	(5.00	)	5.12		(16.58	)
Diluted earnings (loss) per share, as reported	$	(4.75	)	2.42		(13.95	)
Less: Pro forma option expense		(0.25	)	(0.40	)	(2.63	)
Pro forma diluted earnings (loss) per share	$	(5.00	)	2.01		(16.58	)

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

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

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

40

ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2003, 2002, and 2001

	Number of Options		Weighted Average Exercise price Per share
Balance, October 1, 2000	171		$	135.30
Granted	60			14.70
Exercised	(1	)		15.80
Canceled	(57	)		142.40
Balance, September 30, 2001	173			83.70
Granted	37			4.46
Exercised	—			—
Canceled	(91	)		181.05
Balance, September 30, 2002	119			31.00
Granted	70			1.14
Exercised	—			—
Canceled	(40	)		42.08
Balance, September 30, 2003	149		$	13.95

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

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

(9) Employee Benefit Plan

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

41

ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2003, 2002, and 2001

(10) Concentrations of Credit Risk

At September 30, 2003, we had multiple contracts with one customer that represented 58% of the total balance of net accounts receivable and revenue in excess of billings. Revenues from this and three other customers for the fiscal year ended September 30, 2003 totaled 68% (18%, 17% and 20% and 13%, respectively) of total revenue. At September 30, 2002, two of these customers represented 30% (13% and 17%, respectively) of the total balance of net accounts receivable and revenue in excess of billings. Billing terms are negotiated in a competitive environment and are based on reaching project milestones. We anticipate that sufficient billing milestones will be achieved during fiscal 2004 such that revenue in excess of billings for these customer contracts will begin to decline.

(11) Litigation and Other Contingencies

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

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

42

ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2003, 2002, and 2001

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 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.

(12) Segment Information

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

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

43

ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2003, 2002, and 2001

	Utilities Location A			Utilities Location B	Utilities Location C		Total Utilities		Land	Non-Segment		Total
2003
Operations
Revenues	$	9,082		5,673	217		14,972		—	—		14,973
Income (loss) from operations		(3,319	)	275	(27	)	(3,071	)	—	—		(3,072	)
Interest expense, net		—		—	—		—		—	(356	)	(356	)
Other		—		—	—		—		—	82		82
Net loss												(3,346	)
Assets
Segment assets	$	7,743		1,284	—		—		—	—		9,027
Non-segment assets		—		—	—		—		—	2,753		2,753
Consolidated assets												11,780

	Utilities Location A			Utilities Location B	Utilities Location C		Total Utilities		Land		Non- Segment		Total
2002
Operations
Revenues	$	9,346		7,621	1,309		18,276		796		—		19,072
Income (loss) from operations		(2,012	)	301	(837	)	(2,548	)	(1,662	)	—		(4,210	)
Interest expense, net		—		—	—		—		—		(277	)	(277	)
Other		—		—	—		—		—		11,855		11,855
Income tax benefit		—		—	—		—		—		1,240		1,240
Cumulative effect of a change in accounting principle		—		—	—		—		—		(3,557	)	(3,557	)
Net earnings													5,051
Assets
Segment assets	$	9,185		2,858	118		12,161		—		—		12,161
Non-segment assets		—		—	—		—		—		3,342		3,342
Consolidated assets													15,503

44

ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2003, 2002, and 2001

	Utilities Location A			Utilities Location B	Utilities Location C		Total Utilities		Land		Non- Segment		Total
2001
Operations
Revenues	$	10,611		13,707	5,825		30,143		10,798		—		40,941
Income (loss) from operations		(3,349	)	1,657	(3,773	)	(5,465	)	(2,267	)	3,542		(4,190	)
Interest expense, net		—		—	—		—		—		(1,916	)	(1,916	)
Litigation settlement costs		—		—	—		—		—		(748	)	(748	)
Other		—		—	—		—		—		(103	)	(103	)
Income tax expense		—		—	—		—		—		(2,781	)	(2,781	)
Net loss													(9,738	)
Assets
Segment assets	$	12,238		4,790	2,060		19,088		2,065		—		21,153
Non-segment assets		—		—	—		—		—		2,666		2,666
Consolidated assets													23,819

(13) Impact of Recently Issued Accounting Pronouncements

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

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

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

45

ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2003, 2002, and 2001

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.

(14) Liquidity

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During the fiscal years of 2000 through 2003, we experienced significant operating losses with corresponding reductions in working capital and net worth, excluding the impact of debt forgiveness, and do not currently have any external financing in place to support operating cash flow requirements. Our revenues and backlog have also decreased substantially during the same period. Our senior secured convertible note also has customary default provisions, which if triggered and exercised, would make it difficult for us to meet these debt payments. These factors among others raise substantial doubt about our ability to continue as a going concern.

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

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

(15) Subsequent Events

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

46

ANALYTICAL SURVEYS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2003, 2002, and 2001

$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.

On December 18, 2003 we announced that we prevailed in arbitration proceedings first brought against us on June 26, 2002, by two former owners of Cartotech, Inc. Cartotech merged with ASI in 1998. The former owners, the Epner Family Limited Partnership and the Braverman Family Limited Partnership (together the “Claimants”), alleged that certain representations and warranties made by us in the merger agreement were false. The Claimants alleged that our financial condition was worse than depicted in our year-end financial statements for 1997 and the unaudited reports for the first two quarters of fiscal 1998. The Claimants also asserted that we violated the Texas and Indiana Securities Acts, and that we breached warranties in the merger agreement. The Claimants sought rescission and damages in the principle amount of $5,546,533, plus interest 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 we breached any of its representations and warranties or that we made material misrepresentations in connection with the publicly filed financial statements issued prior to the closing date of the merger. The panel awarded zero damages to the Claimants and ordered each side to bear its own attorneys’ fees.

47

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

None.

Item 9a. Statement on Disclosure Control and Procedures

Our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of our “disclosure controls and procedures” (as defined in rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act)) as of the end of the period covered by this Form 10-K and have concluded that the disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company (including our consolidated subsidiaries) which is required to be included in our periodic filings under the Exchange Act.

PART III.

Item 10. Directors and Executive Officers of the Registrant

Directors

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

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

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

Christopher S. Dean, 39, has served as a director of the Company since August 13, 2002. Mr. Dean is the senior vice president of marketing and business development at FaceTime Communications, Inc. a leading vendor of security, management and control solutions for instant messaging within an

48

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

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

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

Executive Officers

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

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

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

Thomas W. Bannon, 39, senior vice president - operations. Mr. Bannon joined the Company in October 2001 as senior vice president - operations. From May 1997 to October 2001, Mr. Bannon held a number of management positions with SchlumbergerSema, formerly known as Convergent Group, a

49

provider of end-to-end business transformation solutions, most recently as vice president and executive program director. From 1986 to May 1997, he held account and project managerial positions for Electronic Data Systems.

Section 16(a) Beneficial Ownership Reporting Compliance

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

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

Code of Ethics

In July 2003 we adopted a code of ethics which our senior financial officers, executive officers, and general and project managers are expected to adhere to and promote throughout the organization and which may be found on our website at www.anlt.com.

Item 11. Executive Compensation

Executive Officers

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

50

Name and Title	Year	Annual Compensation					Long Term Compensation Awards	All Other Compensation(3)
		Salary		Bonus	Other Annual Compensation (1)		Stock Options(2)
		$		$	$		(#)	$
J. Norman Rokosh President and Chief Executive Officer	2003 2002 2001	253,969 250,000 250,000		74,875 —   200,000	—   —   —		—   2,000 20,000	5,079 5,408 4,808	(3)
Lori A. Jones Chief Financial Officer	2003 2002 2001	88,269 —   —	(4)	3,500 —   —	—   —   —		25,000 —   —	1,558 —   —
Thomas W. Bannon Senior Vice President - Operations	2003 2002 2001	200,892 188,462 —	(5)	35,500 12,500 —	—   57,607 —	(6)	5,000 20,000 —	2,769 —   —
Don Fryhover(7) Senior Vice President - - Sales and Marketing	2003 2002 2001	163,453 143,494 —		20,000 17,500 —	—   —   —		5,000 4,000 —	—   —   —

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

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

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

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

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

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

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

51

Options/SAR Grants in Last Fiscal Year

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

Name	Number of Securities Underlying Options Granted(1)	Percent of Total Options to Employees In Fiscal Year	Exercise Price ($/sh)	Expiration Date	Potential Realizable Value(2) at Assumed Annual Rates of Stock Appreciation for Option Term
					5% ($)	10% ($)
Lori A. Jones	20,000	50.00	0.72	02/19/13	9,056	22,950
	5,000	12.50	1.73	07/30/13	5,440	13,786
Thomas W. Bannon	5,000	12.50	1.80	08/06/13	5,660	14,344
Don Fryhover	5,000	13.84	1.73	09/27/12	5,440	13,786

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

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

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

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

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

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

52

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

Compensation of Directors

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

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

Employment Contracts

Chief Executive Officer

Effective July 10, 2001, we entered into a new employment agreement with Mr. Rokosh, providing for a base salary of $250,000 which was extended until September 30, 2003. Pursuant to the employment agreement, Mr. Rokosh is entitled to receive a quarterly bonus of up to $37,500, as determined in the discretion of the Board of Directors, and reimbursement of certain expenses incurred in connection with the relocation of our corporate offices to San Antonio. Mr. Rokosh also participates all other plans that we maintain for the benefit of our executives or employees in general.

Upon termination of Mr. Rokosh’s employment without cause or if he resigns his employment for “good reason,” (which includes a termination of employment in connection with a change of control), Mr. Rokosh will continue to receive salary for a period of 12 months after such termination or resignation. If Mr. Rokosh is terminated for “cause” (as defined in the employment agreement) or if he terminates his employment voluntarily, Mr. Rokosh will not be entitled to receive severance pay.

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

Chief Financial Officer

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

53

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

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

Senior Vice President – Operations

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

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

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

Report of the Compensation Committee

The compensation committee follows established rationale and policies for compensating our executive officers. The following report of the compensation committee describes these policies and rationales with respect to the compensation paid to such executive officers for the fiscal year ended September 30, 2003.

Officer Compensation Policy. The compensation committee’s fundamental policy is to provide a compensation program for executive officers that will enable us to attract and retain the services of highly-qualified individuals and offer our executive officers competitive compensation opportunities based upon overall performance and their individual contribution to our financial success. The compensation committee uses third party compensation surveys and information to assure that executive compensation is set at levels within the current market range for companies in a similar industry and stage as ASI. It is the committee’s objective to have a substantial portion of each officer’s compensation contingent upon our performance, as well as upon such officer’s own level of performance.

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

54

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

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

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

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

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

CEO Compensation. The compensation paid to Mr. Rokosh during fiscal 2003 is based upon the terms of his employment agreement. Such agreement is described under “Employment Contracts.” Pursuant to the terms of the employment agreement, Mr. Rokosh’s annual base salary for fiscal 2003 was $250,000. Mr. Rokosh is also eligible for bonus compensation pursuant to the terms of the agreement. The bonus is awarded at the discretion of the Board and is based upon the achievement of specific quantifiable objectives, some of which incorporate our overall performance. Mr. Rokosh voluntarily waived the receipt of any bonus compensation in fiscal 2002. In addition, he was granted options as set forth in the Options Grants Table, pursuant to the terms of the employment agreement.

Deductibility of Executive Compensation. The compensation committee is responsible for addressing the issues raised by Internal Revenue Code Section 162(m). Section 162 (m) limits to $1 million our deduction for compensation paid to certain of our executive officers which does not qualify as

55

“performance-based.” To qualify as performance based under Section 162(m), compensation payments must be made pursuant to a plan that is administered by a committee of outside directors and must be based on achieving objective performance goals. In addition, the material terms of the plan must be disclosed to and approved by shareholders, and the compensation committee must certify that the performance goals were achieved before payments can be awarded. We believe that all compensation paid to our executive officers listed in the summary compensation table in fiscal 2003 is fully deductible and that compensation paid under the plans will continue to be deductible. The committee’s present intention is to comply with the requirements of Section 162(m) unless and until the committee determines that compliance would not be in the best interest of the Company and our shareholders.

By the Compensation Committee

Christopher S. Dean, Chairman

J. Livingston Kosberg

Christopher D. (Kit) Illick

56

PERFORMANCE GRAPH

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

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

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

57

Item 12. Security Ownership of Certain Beneficial Owners and Management

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

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

* Denotes less than 1%

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

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

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

58

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

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

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

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

Change in Control

On April 2, 2002, Tonga Partners, L.P. (“Tonga”) invested $2,000,000 in ASI in exchange for the issuance of a senior secured convertible promissory note in the principal amount of $2,000,000 and the issuance of warrants to purchase 500,000 (subject to adjustment) shares of our Common Stock and the right to appoint a majority of our board of directors (the “Change in Control Transaction”). The note is convertible at any time into Common Stock, and the warrants are exercisable at any time through April 2, 2007. Pursuant to the terms of the note and the warrants, if the total number of shares issuable upon full conversion of the note and exercise of all warrants constitutes less than 55% of the number of shares of Common Stock outstanding as of the date the note has been fully converted and the warrants have been fully exercised, we are obligated to issue additional shares of Common Stock to Tonga such that Tonga will own at least 55% of the issued and outstanding shares of Common Stock on a fully diluted basis. In addition, until April 2, 2005, Tonga has the right to appoint (and, has appointed) a majority of the members of our board of directors. The source of the $2,000,000 that Tonga invested in the company was available cash. On November 6, 2003, we issued 261,458 shares of our Common Stock pursuant to the partial conversion of the senior secured convertible 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. As of December 1, 2003, Tonga beneficially owned 71.8% of our Common Stock. See “Security Ownership of Certain Beneficial Owners and Management.”

59

Equity Compensation Plan Information

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

	(a)	(b)		(c)
Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders	87,499	$	15.37	132,245
Equity compensation plans not approved by security holders	61,571	$	11.93	38,430
Total	149,020	$	13.95	170,675

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

2000 Stock Incentive Plan

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

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

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

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

Vesting and Acceleration. Options vest at the times determined by the committee, as specified in the applicable award agreement. A participant’s options become fully vested upon the termination of the participant’s employment as a result of a reduction in force and upon the occurrence of a change in

60

control of the Company. In general, a change in control will be deemed to have occurred upon the acquisition by any person of more than 50% of our outstanding voting securities (or securities subject to conversion into voting securities), the acquisition by any person of the power to elect a majority of the directors of the company, certain mergers and other corporate transactions if the holder’s of our voting securities before the transaction receive less than 50% of the outstanding voting securities of the reorganized, merged or consolidated entity, after the transaction, and a complete liquidation or dissolution of the company, or the sale of all or substantially all of the assets of the company, if approval of our shareholders is required for the transaction.

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

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

2000 Officer and Employee Recruitment Stock Incentive Plan

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

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

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

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

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

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

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

61

Item 14. Principal Accountant Fees and Services.

(a) Audit Fees

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

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

None.

(c) All Other Fees.

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

PART IV.

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

(a)	(1)	Financial Statements
		Included in Part II of this Report:
		Independent Auditors’ Report
		Consolidated Balance Sheets, September 30, 2003 and 2002
		Consolidated Statements of Operations, Years Ended September 30, 2003, 2002 and 2001
		Consolidated Statements of Stockholders’ Equity, Years Ended September 30, 2003, 2002 and 2001
		Consolidated Statements of Cash Flows, Years Ended September 30, 2003, 2002 and 2001
		Notes to Consolidated Financial Statements, September 30, 2003, 2002 and 2001
		Notes to Consolidated Financial Statements, September 30, 2002, 2001 and 2000
	(2)	Financial statement schedules
		Included in Part IV of this report:
		Financial statement schedules required to be filed have been omitted because they are not applicable, or the required information is set forth in the applicable financial statements or notes thereto.
	(3)	Exhibits
		The following exhibits are filed herewith or incorporated by reference herein (according to the number assigned to them in Item 601 of Regulation S-K), as noted:
	3.0	Articles of Incorporation and By-Laws

62

3.1	Articles of Incorporation, as amended (incorporated by reference to ASI’s Registration Statement on Form S-18, (Registration No. 2-93108-D)).
3.3	By-Laws (incorporated by reference to ASI’s Registration Statement on Form S-18 (Registration No. 2-93108-D).
3.3	Amendment to By-laws (incorporated by reference to ASI’s Annual Report on Form 10-K for the year ended September 30, 1998).
4.0	Instruments defining the rights of Security Holders including Indentures
4.1	Form of Stock Certificate (incorporated by reference to ASI’s Registration Statement on Form S-18 (Registration No. 2-93108-D)).
4.2	Convertible Senior Secured Promissory Note of Analytical Surveys, Inc., dated April 2, 2002 (incorporated by reference to ASI’s Annual Report on Form 10-K for the year ended September 30, 2002).
4.3	Warrant to Purchase Shares of Common Stock of Analytical Surveys, Inc., dated April 2, 2002 (incorporated by reference to ASI’s Annual Report on Form 10-K for the year ended September 30, 2002).
4.4	Registration Rights Agreement dated July 2, 1997, between ASI and Sol C. Miller (incorporated by reference to ASI’s Current Report on Form 8-K dated July 16, 1997, as amended on September 9, 1997).
4.5	Note and Warrant Purchase Agreement dated as of March 21, 2002, by and between Analytical Surveys, Inc. and Tonga Partners, L.P. (incorporated by reference to ASI’s Current Report on Form 8-K dated March 22, 2002).
4.6	Registration Rights Agreement by and between Analytical Surveys, Inc. and Tonga Partners, L.P., dated April 2, 2002 (incorporated by reference to ASI’s Annual Report on Form 10-K for the year ended September 30, 2002).
4.7	Second Amendment to the Registration Rights Agreement by and between the Company and Tonga Partners, L.P., a Delaware limited partnership, effective as of February 27, 2003 (incorporated by reference to ASI’s Current Report on Form 8-K dated February 27, 2003).
4.8	Third Amendment to Registration Rights Agreement by and between the Company and Tonga Partners, L.P., a Delaware limited partnership, effective as of August 1, 2003 (incorporated by reference to ASI’s Quarterly Report on Form 10-Q for the period ended June 30, 2003).
4.9	Fourth Amendment to Registration Rights Agreement by and between the Company and Tonga Partners, L.P., a Delaware limited partnership, effective as of December 1, 2003.

63

4.10	Convertible Senior Secured Promissory Note of Analytical Surveys, Inc., dated November 4, 2003.
10.0	Material Contracts
10.1	Employment Agreement dated June 27, 1994 between ASI and Sidney V. Corder, Chief Executive Officer and President, (incorporated by reference to ASI’s Quarterly Report on Form 10-QSB for the quarter ended June 30, 1994.)
10.2	Stock Option Plan dated December 17, 1987 as amended on August 31, 1992 (incorporated by reference to ASI’s Annual Report on Form 10-K for the fiscal year ended September 30, 1992.)
10.3	1993 Non-Qualified Stock Option Plan dated December 11, 1992 (incorporated by reference to ASI’s Proxy Statement dated January 11, 1993.)
10.4	Analytical Surveys, Inc. Incentive Bonus Plan (incorporated by reference to ASI’s Annual Report on Form 10-K for fiscal year ended September 30, 1992.)
10.5	1995 Non-Qualified Stock Option Plan dated August 22, 1995 (incorporated by reference to ASI’s Annual Report on Form 10-KSB for the fiscal year ended September 30, 1995.)
10.6	Real Estate Lease between MSE Realty, LLC and MSE Corporation, dated July 2, 1997 (incorporated by reference to ASI’s Annual Report on Form 10-K for the fiscal year ended September 30, 1997.)
10.7	Analytical Surveys, Inc. 1997 Incentive Stock Option Plan, as amended and restated (incorporated by reference to ASI’s Proxy Statement dated January 8, 1998.)
10.8	Credit Agreement between ASI and Bank One, Colorado, N.A. dated June 3, 1998 (including Exhibits A-1, A-2, A-3, C D and E thereto) (incorporated by reference to ASI’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.)
10.9	Amendment No. 1 to Credit Agreement between ASI and BankOne, Colorado, N.A. dated as of July 10, 1998 (incorporated by reference to ASI’s Annual Report on Form 10-K for the year ended September 30, 1998).
10.10	Amendment No. 2. To Credit Agreement between ASI and BankOne, Colorado, N.A. dated as of October 20, 1998 (incorporated by reference to ASI’s Annual Report on Form 10-K for the year ended September 30, 1998).
10.11	Amendment No. 3 to Credit Agreement between ASI and BankOne, Colorado, N.A. dated as of November 24, 1998 (incorporated by reference to ASI’s Annual Report on Form 10-K for the year ended September 30, 1998).
10.12	Employment Agreement dated July 10, 2000, between ASI and J. Norman Rokosh (incorporated by reference to ASI’s Annual Report on Form 10-K/A for the year ended September 30, 2000).
10.13	Employment Agreement dated February 9, 2000, between ASI and Michael A. Renninger (incorporated by reference to ASI’s Annual Report on Form 10-K/A for the year ended September 30, 2000).

64

10.14	Employment Agreement dated January 31, 2000 between ASI and David O. Hicks (incorporated by reference to ASI’s Annual Report on Form 10-K/A for the year ended September 30, 2000).
10.15	Analytical Surveys, Inc. Officer and Employee Recruitment Stock Incentive Plan and form of stock option agreement (incorporated by reference to ASI’s Annual Report on Form 10-K/A for the year ended September 30, 2000).
10.16	Analytical Surveys, Inc. Year 2000 Stock Incentive Plan and form of agreement (incorporated by reference to ASI’s Annual Report on Form 10-K/A for the year ended September 30, 2000).
10.17	Analytical Surveys, Inc. Year 2003 Stock Option Plan and form of agreement (incorporated by reference to ASI’s Proxy Statement dated July 21, 2003, for its 2003 Annual Meeting).
10.18	Amendment No. 4 to Credit Agreement between ASI and BankOne, Colorado, N.A. dated as of January 1, 1999 (incorporated by reference to ASI’s Annual Report on Form 10-K/A for the year ended September 30, 2000).
10.19	Amendment No. 5 to Credit Agreement between ASI and BankOne, Colorado, N.A. dated as of November 24, 1998 (incorporated by reference to ASI’s Quarterly Report on Form 10-Q for the quarter ended December 31, 1999).
10.20	Amendment No. 6 to Credit Agreement between ASI and BankOne, Colorado, N.A. dated as of May 30, 2000 (incorporated by reference to ASI’s Annual Report on Form 10-K/A for the year ended September 30, 2000).
10.21	Amendment No. 7 to Credit Agreement between ASI and BankOne, Colorado, N.A. dated as of August 1, 2000 (incorporated by reference to ASI’s Annual Report on Form 10-K/A for the year ended September 30, 2000).
10.22	Amendment No. 8 to Credit Agreement between ASI and BankOne, Colorado, N.A. dated as of September 8, 2000 (incorporated by reference to ASI’s Annual Report on Form 10-K/A for the year ended September 30, 2000).
10.23	Amendment No. 9 to Credit Agreement between ASI and BankOne, Colorado, N.A. dated as of December 28, 2000 (incorporated by reference to ASI’s Annual Report on Form 10-K/A for the year ended September 30, 2000).
10.24	Amendment No. 10 to Credit Agreement between ASI and BankOne, Colorado, N.A. dated as of March 31, 2001 (incorporated by reference to ASI’s Quarterly Report on Form 10-Q for the period ended March 31, 2001).
10.25	Amendment No. 11 to Credit Agreement between ASI and BankOne, Colorado, N.A. dated as of May 31, 2001 (incorporated by reference to ASI’s Quarterly Report on Form 10-Q for the period ended June 30, 2001).
10.26	Employment Agreement dated July 10, 2001, between ASI and J. Norman Rokosh (incorporated by reference to ASI’s Annual Report on Form 10-K for the year ended September 30, 2001).

65

	10.27	Amendment No. 12 to Credit Agreement between ASI and BankOne, Colorado, N.A. dated as of December 28, 2001 (incorporated by reference to ASI’s Annual Report on Form 10-K for the year ended September 30, 2001).
	10.28	Security Agreement by and between Analytical Surveys, Inc. and Tonga Partners, L.P., dated April 2, 2002 (incorporated by reference to ASI’s Annual Report on Form 10-K for the year ended September 30, 2002).
	10.29	First Amendment to Employment Agreement dated September 26, 2002, between ASI and J. Norman Rokosh (incorporated by reference to ASI’s Annual Report on Form 10-K for the year ended September 30, 2002).
	10.30	Employment Agreement dated January 20, 2003, by and between Analytical Surveys, Inc. and Lori Jones (incorporated by reference to Exhibit 10 to ASI’s Quarterly Report on Form 10-Q for the period ended December 31, 2002).
	10.31	First Amendment to Employment Agreement dated November 26, 2003, by and between Analytical Surveys, Inc. and Lori Jones.
	14.1	Code of Ethics
	23.	Consent of KPMG LLP
	31.1	Section 302 Certification of Chief Executive Officer
	31.2	Section 302 Certification of Chief Financial Officer
	32.1	Section 906 Certification of Chief Executive Officer
	32.2	Section 906 Certification of Chief Financial Officer
b)		Reports on Form 8-K filed during the quarter ended September 30, 2003.
		8-K filed August 15, 2003 – concerning Third Quarter Results
		8-K filed November 6, 2003 – concerning Convertible Partial Conversion of Senior Secured Convertible Debenture by Tonga Partners LP

66

SIGNATURES

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

Analytical Surveys, Inc.
By:	/s/ J. Norman Rokosh	Date:	December 23, 2003
	J. Norman Rokosh
	President, Chief Executive Officer and Director
By:	/s/ Lori A. Jones	Date:	December 23, 2003
	Lori A. Jones
	Chief Financial Officer

By:	/s/ J. Livingston Kosberg	Date:	December 23, 2003
	J. Livingston Kosberg
	Chairman of the Board
By:	/s/ Christopher D. Illick	Date:	December 23, 2003
	Christopher D. Illick
	Director

By:	/s/ Christopher S. Dean	Date:	December 23, 2003
	Christopher S. Dean
	Director
By:	/s/ Joshua C. Huffard	Date:	December 23, 2003
	Joshua C. Huffard
	Director

67

EX-4.9

EXHIBIT 4.9

FOURTH AMENDMENT TO

REGISTRATION RIGHTS AGREEMENT

This Fourth Amendment to Registration Rights Agreement (this “Third Amendment”) is made and entered into effective as of December 1, 2003, by and between Analytical Surveys, Inc., a Colorado corporation (the “Company”), and Tonga Partners, L.P., a Delaware limited partnership (“Tonga”).

RECITALS

A. In connection with an investment by Tonga in the Company, the parties entered into a Registration Rights Agreement dated as of April 2, 2002, a First Amendment to Registration Rights Agreement dated effective as of June 1, 2002, and a Second Amendment to Registration Rights Agreement dated effective as of February 27, 2003, and a Third Amendment to Registration Rights Agreement dated effective as of August 1, 2003 (as amended, the “Registration Rights Agreement”).

B. The Registration Rights Agreement obligates the Company to file a registration statement covering the Registrable Securities (as such term is defined therein) on Form S-1 no later than December 31, 2003.

C. The parties desire to amend the Registration Rights Agreement on the terms and conditions hereinafter set forth.

AGREEMENT

1. The parties hereby amend the second sentence of Section 2 of the Registration Rights Agreement as follows:

“The Registration Statement shall be on Form S-3.”

2. A new third sentence to Section 4 of the Registration Rights Agreement shall be added to read as follows:

“Notwithstanding the foregoing, the Holder shall reimburse the Company for its reasonable expenses described in clauses (i) through (iv) of the immediately preceding sentence, as well as the fees and expenses of the Company’s independent public accountants in connection with the preparation of the Registration Statement (including the expenses of any comfort letters or costs associated with the delivery by independent public accounts of a comfort letter or comfort letters) other than the conduct of the annual audit of the Company’s financial statements.”

3. Except as otherwise expressly provided in this Fourth Amendment, all of the terms and conditions of the Registration Rights Agreement shall remain in full force and effect.

4. This Fourth Amendment shall be binding upon and inure to the benefit of the parties and their successors and assigns. This Fourth Amendment shall be governed by and construed in accordance with the internal laws of the State of New York without giving effect to choice of law provisions. This Fourth Amendment may be executed in counterparts, each of which will be deemed an original, and all of which together will constitute one and the same instrument.

[signatures appear on next page]

IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to Registration Rights Agreement to be duly executed by their respective authorized officers as of the date first above written.

ANALYTICAL SURVEYS, INC.

By:

Name:

Title:

TONGA PARTNERS, L.P.

By:

Name:

Title:

2

EX-4.10

EXHIBIT 4.10

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE REASONABLY ACCEPTABLE TO THE MAKER) IN THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE MAKER THAT THIS NOTE MAY BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS.

ANALYTICAL SURVEYS, INC.

Senior Secured Convertible Promissory Note

due April 2, 2005

No. CN-02-1	$1,700,000.00
Dated: November 4, 2003

For value received, ANALYTICAL SURVEYS, INC., a Colorado corporation (the “Maker”), hereby promises to pay to the order of TONGA PARTNERS, L.P. (together with its successors, representatives, and permitted assigns, the “Holder”), in accordance with the terms hereinafter provided, the principal amount of One Million Seven Hundred Thousand Dollars ($1,700,000.00), together with interest thereon.

All payments under or pursuant to this Note shall be made in United States Dollars in immediately available funds to the Holder at the address of the Holder first set forth above or at such other place as the Holder may designate from time to time in writing to the Maker or by wire transfer of funds to the Holder’s account, instructions for which are attached hereto as Exhibit A. The outstanding principal balance of this Note shall be due and payable on April 2, 2005 (the “Maturity Date”) or at such earlier time as provided herein; provided, however, if the Mandatory Conversion Date is extended pursuant to Section 3.5(b)(x) hereof, the Maturity Date shall be extended to the Mandatory Conversion Date.

ARTICLE I

Section 1.1 Purchase Agreement. This Note has been executed and delivered pursuant to the Note and Warrant Purchase Agreement, dated as of March 21, 2002 (the “Purchase Agreement”), by and between the Maker and the purchasers listed therein. Capitalized terms used and not otherwise defined herein shall have the meanings set forth for such terms in the Purchase Agreement.

Section 1.2 Interest. Beginning on the date hereof, the outstanding principal balance of this Note shall bear interest at a rate per annum equal to five percent (5%), payable upon conversion unless earlier converted or prepaid as provided herein. Interest shall be computed on the basis of a 360-day year of twelve (12) 30-day months and shall accrue commencing on the issuance date of this Note (the “Issuance Date”). The interest shall be payable in shares of the Maker’s common stock, no par value per share (the “Common Stock”); provided, that the Maker shall issue to the Holder registered and freely tradable shares of Common Stock. The number of shares of Common Stock to be issued as payment of accrued and unpaid interest shall be determined by dividing (a) the total amount of accrued and unpaid interest to be converted into Common Stock by (b) the Conversion Price (as defined in Section 3.2(a) hereof). Furthermore, upon the occurrence of an Event of Default (as defined in Section 2.1 hereof), then to the extent permitted by law, the Maker will pay interest to the Holder, payable on demand, on the outstanding principal balance of the Note from the date of the Event of Default until such Event of Default is cured at the rate of the lesser of fifteen percent (15%) and the maximum applicable legal rate per annum.

Section 1.3 Security Agreement. The obligations of the Maker hereunder shall be secured by, and the Holder shall be entitled to the rights and security granted by the Maker pursuant to, the Security Agreement dated as of April 2, 2002 by the Maker for the benefit of the Holder (the “Security Agreement”).

Section 1.4 Senior Note. This Note shall be senior to all other indebtedness of the Maker.

Section 1.5 Payment on Non-Business Days. Whenever any payment to be made shall be due on a Saturday, Sunday or a public holiday under the laws of the State of New York, such payment may be due on the next succeeding business day and such next succeeding day shall be included in the calculation of the amount of accrued interest payable on such date.

Section 1.6 Transfer. This Note may be transferred or sold, subject to the provisions of Section 4.8 of this Note, or pledged, hypothecated or otherwise granted as security by the Holder.

Section 1.7 Replacement. Upon receipt of a duly executed, notarized and unsecured written statement from the Holder with respect to the loss, theft or destruction of this Note (or any replacement hereof), and without requiring an indemnity bond or other security, or, in the case of a mutilation of this Note, upon surrender and cancellation of such Note, the Maker shall issue a new Note, of like tenor and amount, in lieu of such lost, stolen, destroyed or mutilated Note.

ARTICLE II

EVENTS OF DEFAULT; REMEDIES

Section 2.1 Events of Default. The occurrence of any of the following events shall be an “Event of Default” under this Note:

-2-

(a) the Maker shall fail to make the payment of any amount of principal outstanding on the date such payment is due hereunder; or

(b) the Maker shall fail to make any payment of interest in shares of Common Stock for a period of five (5) days after the date such interest is due; or

(c) the failure of the Registration Statement to be declared effective by the Securities and Exchange Commission (“SEC”) on or prior to the date which is one hundred fifty (150) days after the Filing Date (as defined in the Registration Rights Agreement); or

(d) the suspension from listing or the failure of the Common Stock to be listed on The Nasdaq SmallCap Market for a period of five (5) consecutive Trading Days; or

(e) the Maker’s notice to the Holder, including by way of public announcement, at any time, of its inability to comply (including for any of the reasons described in Section 3.8(a) hereof) or its intention not to comply with proper requests for conversion of this Note into shares of Common Stock; or

(f) the Maker shall fail to (i) timely deliver the shares of Common Stock upon conversion of this Note or any interest accrued and unpaid, (ii) timely file the Registration Statement (as defined in the Registration Rights Agreement) or (iii) make the payment of any fees and/or liquidated damages under this Note, the Purchase Agreement or the Registration Rights Agreement, which failure in the case of items (i) and (iii) of this Section 2.1(f) is not remedied within seven (7) business days after the incurrence thereof; or

(g) while the Registration Statement is required to be maintained effective pursuant to the terms of the Registration Rights Agreement, the effectiveness of the Registration Statement lapses for any reason (including, without limitation, the issuance of a stop order) or is unavailable to the Holder for sale of the Registrable Securities (as defined in the Registration Rights Agreement) in accordance with the terms of the Registration Rights Agreement, and such lapse or unavailability continues for a period of ten (10) consecutive Trading Days, provided that the cause of such lapse or unavailability is not due to factors primarily within the control of Holder; or

(h) default shall be made in the performance or observance of (i) any material covenant, condition or agreement contained in this Note (other than as set forth in Section 3.7(m) hereof and clause (f) of this Section 2.1) and such default is not fully cured within ten (10) business days after the occurrence thereof or (ii) any material covenant, condition or agreement contained in the Purchase Agreement, the Security Agreement, or the Registration Rights Agreement which is not covered by any other provisions of this Section 2.1 and such default is not fully cured within ten (10) business days after the occurrence thereof; or

(i) any material representation or warranty made by the Maker herein or in the Purchase Agreement, the Security Agreement or the Registration Rights Agreement shall prove to have been false or incorrect or breached in a material respect on the date as of which made; or

-3-

(j) the Maker shall issue any debt securities which are not subordinate to this Note other than on such terms as are acceptable to the Holders of a majority of the outstanding principal amount of this Note purchased under the Purchase Agreement; provided, however, that the provisions of this Section 2.1(j) shall be of no force or effect if the Maker consummates a subsequent financing with a third party in an aggregate amount of $4,000,000 or greater; or

(k) the consummation of any of the following transactions: (i) the consolidation, merger or other business combination of the Maker with or into a person or entity (other than (A) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Maker or (B) a consolidation, merger or other business combination in which holders of the Maker’s voting power immediately prior to the transaction continue after the transaction to hold, directly or indirectly, the voting power of the surviving entity or entities necessary to elect a majority of the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities), except if in the case of a consolidation, merger or other business combination of the Maker, the Maker shall have given the Holder not less than fifteen (15) business days prior written notice thereof (the “Transaction Notice”) and shall have furnished the Holder with such information regarding the consolidation, merger or other business combination (including, without limitation, the counterparties thereto) as the Holder may reasonably request in order for the Holder to determine if it will exercise its conversion rights hereunder prior to the consummation of such consolidation, merger or other business combination; (ii) the sale or transfer of all or substantially all of the Maker’s assets; or (iii) the consummation of a purchase, tender or exchange offer made to the holders of more than 30% of the outstanding shares of Common Stock; or

(l) the Maker shall (i) default in any payment of any amount or amounts of principal of or interest on any Indebtedness (other than the Indebtedness hereunder) the aggregate principal amount of which Indebtedness is in excess of $25,000 or (ii) default in the observance or performance of any other material agreement or condition relating to any Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders or beneficiary or beneficiaries of such Indebtedness to cause with the giving of notice if required, such Indebtedness to become due prior to its stated maturity; or

(m) the Maker shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property or assets, (ii) make a general assignment for the benefit of its creditors, (iii) commence a voluntary case under the United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic), (iv) file a petition seeking to take advantage of any bankruptcy, insolvency, moratorium, reorganization or other similar law affecting the enforcement of creditors’ rights generally, (v) acquiesce in writing to any petition filed against it in an involuntary case under United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic), or (vi) take any action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing; or

-4-

(n) a proceeding or case shall be commenced in respect of the Maker, without its application or consent, in any court of competent jurisdiction, seeking (i) the liquidation, reorganization, moratorium, dissolution, winding up, or composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of it or of all or any substantial part of its assets in connection with the liquidation or dissolution of the Maker or (iii) similar relief in respect of it under any law providing for the relief of debtors, and such proceeding or case described in clause (i), (ii) or (iii) shall continue undismissed, or unstayed and in effect, for a period of seventy-five (75) days or any order for relief shall be entered in an involuntary case under United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic) against the Maker or action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing shall be taken with respect to the Maker and shall continue undismissed, or unstayed and in effect for a period of seventy-five (75) days.

Section 2.2 Remedies Upon An Event of Default. If an Event of Default shall have occurred and shall be continuing, the Holder of this Note may at any time at its option (a) declare the entire unpaid principal balance of this Note, together with all interest accrued hereon, due and payable, and thereupon, the same shall be accelerated and so due and payable, without presentment, demand, protest, or notice, all of which are hereby expressly unconditionally and irrevocably waived by the Maker; provided, however, that upon the occurrence of an Event of Default described in (i) Sections 2.1 (m), (n) or (o), the outstanding principal balance and accrued interest hereunder shall be automatically due and payable and (ii) Sections 2.1 (c)-(l), demand the prepayment of this Note pursuant to Section 3.7 hereof, (b) demand that the principal amount of this Note then outstanding and all accrued and unpaid interest thereon shall be converted into shares of Common Stock at a Conversion Price per share calculated pursuant to Section 3.1 hereof assuming that the date that the Event of Default occurs is the Conversion Date (as defined in Section 3.2(a) hereof), or (c) exercise or otherwise enforce any one or more of the Holder’s rights, powers, privileges, remedies and interests under this Note, the Purchase Agreement, the Security Agreement, the Registration Rights Agreement or applicable law. No course of delay on the part of the Holder shall operate as a waiver thereof or otherwise prejudice the right of the Holder. No remedy conferred hereby shall be exclusive of any other remedy referred to herein or now or hereafter available at law, in equity, by statute or otherwise.

ARTICLE III

CONVERSION; ANTIDILUTION; PREPAYMENT

Section 3.1 Conversion Option. At any time on or after the Issuance Date, this Note shall be convertible (in whole or in part), at the option of the Holder (the “Conversion Option”), into such number of fully paid and non-assessable shares of Common Stock (the “Conversion Rate”) as is determined by dividing (x) that portion of the outstanding principal balance under this Note as of such date that the Holder elects to convert by (y) the Conversion Price (as hereinafter defined) then in effect on the date on which the Holder faxes a notice of conversion (the “Conversion Notice”), duly executed, to the Maker (facsimile number(210) 657-1304, Attn.: Chief Financial Officer) (the “Voluntary Conversion Date”), provided, however, that the Conversion Price shall be subject to adjustment as described in Section 3.6 below.

-5-

Section 3.2 Conversion Price.

(a) Subject to the provisions of subsection (b) below, the term “Conversion Price” shall mean an amount equal to the lesser of (i) the Closing Price (as defined below) and (ii) ninety percent (90%) of the average of the Per Share Market Value of the Common Stock for the three (3) Trading Days having the lowest Per Share Market Value during the twenty (20) Trading Days immediately prior to the Voluntary Conversion Date or the Mandatory Conversion Date (as defined in Section 3.5 hereof), as applicable, except that if during any period (a “Black-out Period”), a Holder is unable to trade any Common Stock issued or issuable upon conversion of the Notes immediately due to the postponement of filing or delay or suspension of effectiveness of a registration statement or because the Maker has otherwise informed such Holder that an existing prospectus cannot be used at that time in the sale or transfer of such Common Stock, such Holder shall have the option but not the obligation on any Voluntary Conversion Date or Mandatory Conversion Date, as the case may be, within ten (10) Trading Days following the expiration of the Black-out Period of using the Conversion Price applicable on such Conversion Date or any Conversion Price selected by such Holder that would have been applicable had such Conversion Date been at any earlier time during the Black-out Period or within the ten (10) Trading Days thereafter.

(b) The term “Closing Price” shall mean an amount equal to the lesser of (i) $.40 if the Reverse Stock Split is not effected prior to the Closing Date or $2.00 if the Reverse Stock Split is effected prior to the Closing Date and (ii) ninety percent (90%) of the average Per Share Market Value of the Common Stock for the ninety (90) Trading Days immediately prior to the Closing Date. The term “Per Share Market Value” means on any particular date (a) the closing bid price of the Common Stock on such date on The Nasdaq SmallCap Market or other registered national stock exchange on which the Common Stock is then listed or if there is no such price on such date, then the closing bid price on such exchange or quotation system on the date nearest preceding such date, or (b) if the Common Stock is not listed then on The Nasdaq SmallCap Market or any registered national stock exchange, then the lowest intra-day price for a share of Common Stock, as reported by Bloomberg L.P. or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (c) if the intra-day price for a share of Common Stock is not then reported, then the average of the “Pink Sheet” quotes for the relevant conversion period, as determined in good faith by the Holder, or (d) if the Common Stock is not then publicly traded the fair market value of a share of Common Stock as determined by an Independent Appraiser (as defined in Section 4.13 hereof) selected in good faith by the Holders of a majority in interest of the Notes; provided, however, that the Maker, after receipt of the determination by such Independent Appraiser, shall have the right to select an additional Independent Appraiser, in which case, the fair market value shall be equal to the average of the determinations by each such Independent Appraiser; and provided, further that all determinations of the Per Share Market Value shall be appropriately adjusted for any stock dividends, stock splits or other similar transactions during such period. The determination of fair market value by an Independent Appraiser shall be based upon the fair market value of the Issuer determined on a going concern basis as between a willing buyer and a willing seller and taking into account all relevant factors determinative of value, and shall be final and binding on all parties. In determining the fair market value of any shares of Common Stock, no consideration shall be given to any restrictions on transfer of the Common Stock imposed by agreement or by federal or state securities laws, or to the existence or absence of, or any limitations on, voting rights.

-6-

(c) Upon the conversion of the final portion of this Note (the “Final Conversion”), if the total number of Conversion Shares previously issued to the Holder plus the number of Conversion Shares issued in connection with the Final Conversion is less than thirty-eight percent (38%) of the number of shares of Common Stock outstanding on a fully diluted basis as of the date of the Final Conversion, the Company shall issue additional shares of Common Stock to the Holder on a pro rata basis so that the Holder owns in the aggregate at least thirty-eight percent (38%) of the number of shares of Common Stock outstanding on a fully diluted basis as of the date of the Final Conversion.

Section 3.3 Mechanics of Conversion.

(a) Not later than three (3) Trading Days after any Conversion Date, the Maker will deliver to the applicable Holder by express courier (A) a certificate or certificates which shall be free of restrictive legends and trading restrictions (other than those required by Section 5.1 of the Purchase Agreement) representing the number of shares of Common Stock being acquired upon the conversion of this Note and (B) one or more new promissory notes representing the amount of this Note not converted. If in the case of any Conversion Notice such certificate or certificates are not delivered to or as directed by the applicable Holder by the third Trading Day after the Conversion Date (the “Delivery Date”), the Holder shall be entitled by written notice to the Maker at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Maker shall immediately return this Note tendered for conversion, whereupon the Maker and the Holder shall each be restored to their respective positions immediately prior to the delivery of such notice of revocation, except that any amounts described in Sections 3.3(b) and (c) shall be payable through the date notice of rescission is given to the Maker.

(b) The Maker understands that a delay in the delivery of the shares of Common Stock upon conversion of this Note and failure to deliver one or more new promissory notes representing the unconverted principal amount of this Note beyond the Delivery Date could result in economic loss to the Holder. If the Maker fails to deliver to the Holder such certificate or certificates pursuant to this Section hereunder by the Delivery Date, the Maker shall pay to such Holder, in cash, an amount per Trading Day for each Trading Day until such certificates are delivered, together with interest on such amount at a rate of 10% per annum, accruing until such amount and any accrued interest thereon is paid in full, equal to the greater of (A) (i) 1% of the aggregate principal amount of the Notes requested to be converted for the first five (5) Trading Days after the Delivery Date and (ii) 2% of the aggregate principal amount of the Notes requested to be converted for each Trading Day thereafter and (B) $2,000 per day (which amount shall be paid as liquidated damages and not as a penalty). Nothing herein shall limit a Holder’s right to pursue actual damages for the Maker’s failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein (including, without limitation, damages relating to any purchase of shares of Common Stock by such Holder to make delivery on a sale effected in anticipation of receiving certificates representing shares of Common Stock upon conversion, such damages to be in an amount equal to (A) the aggregate amount paid by such Holder for the shares of Common Stock so purchased minus (B) the

-7-

aggregate amount of net proceeds, if any, received by such Holder from the sale of the shares of Common Stock issued by the Maker pursuant to such conversion), and such Holder shall have the right to pursue all remedies available to it at law or in equity (including, without limitation, a decree of specific performance and/or injunctive relief). Notwithstanding anything to the contrary contained herein, the Holder shall be entitled to withdraw a Conversion Notice, and upon such withdrawal the Maker shall only be obligated to pay the liquidated damages accrued in accordance with this Section 3.3(b) through the date the Conversion Notice is withdrawn.

(c) In addition to any other rights available to the Holder, if the Maker fails to deliver to the Holder such certificate or certificates pursuant to Section 3.3(a) by the Delivery Date and if after the Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Holder of the Conversion Shares which the Holder anticipated receiving upon such conversion, provided that the sale occurs prior to the time of receipt of the certificate or certificates (a “Buy-In”), then the Maker shall pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount by which (A) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (B) the aggregate principal amount of this Note for which such conversion was not timely honored, together with interest thereon at a rate of the lesser of 15% and the maximum applicable legal rate per annum, accruing until such amount and any accrued interest thereon is paid in full (which amount shall be paid as liquidated damages and not as a penalty). For example, if the Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of $10,000 aggregate principal amount of this Note, the Maker shall be required to pay the Holder $1,000, plus interest. The Holder shall provide the Maker written notice indicating the amounts payable to the Holder in respect of the Buy-In.

Section 3.4 Intentionally Omitted.

Section 3.5 Mandatory Conversion.

(a) On the Mandatory Conversion Date (as defined below), this Note shall, automatically and without any action on the part of the holder hereof, convert into a number of fully paid and nonassessable shares of Common Stock equal to the quotient of (i) the principal amount of this Note outstanding on the Mandatory Conversion Date divided by (ii) the Conversion Price in effect on the Mandatory Conversion Date.

(b) As used herein, the “Mandatory Conversion Date” shall be the date which is three (3) years from the date of issuance of this Note, provided, that the Mandatory Conversion Date shall be extended for the following periods: (x) for as long as (A) the conversion of this Note would violate Section 3.4 hereof but shall not be extended for more than a total of ninety (90) days, (B) a Triggering Event (as defined in Section 3.7(f) hereof) shall have occurred and be continuing or (C) any event shall have occurred and be continuing which with the passage of time and the failure to cure would result in a Triggering Event, (y) for those number of days that the Registration Statement (as defined in the Registration Rights Agreement) was not in effect during the Effectiveness Period (as defined in the Registration Rights Agreement) and (z) one day for each day in any Blackout Period (as defined in Section 3.2(a) hereof). The Mandatory Conversion Date and the Voluntary Conversion Date collectively are referred to in this Note as the “Conversion Date.”

-8-

(c) On the Mandatory Conversion Date, the outstanding principal balance of this Note plus all accrued and unpaid interest shall be converted automatically without any further action by the holder of this Note and whether or not this Note is surrendered to the Company or its transfer agent; provided, however, that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon conversion of this Note unless this Note is either delivered to the Company or the holder notifies the Company this Note has been lost, stolen, or destroyed, and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection therewith. Upon the occurrence of the automatic conversion of this Note pursuant to this Section 3.5, the holder of this Note shall surrender this Note for which the Mandatory Conversion Date has occurred to the Company and the Company shall deliver the shares of Common Stock issuable upon such conversion (in the same manner set forth in Section 3.3 hereof) to the holder within three (3) Trading Days of the holder’s delivery of this Note.

Section 3.6 Adjustment of Conversion Price.

(a) The Conversion Price shall be subject to adjustment from time to time as follows:

(i) Adjustments for Stock Splits and Combinations. If the Maker shall at any time or from time to time after the Issuance Date, effect a stock split of the outstanding Common Stock, the applicable Conversion Price in effect immediately prior to the stock split shall be proportionately decreased. If the Maker shall at any time or from time to time after the Issuance Date, combine the outstanding shares of Common Stock, the applicable Conversion Price in effect immediately prior to the combination shall be proportionately increased. Any adjustments under this Section 3.6(a)(i) shall be effective at the close of business on the date the stock split or combination occurs.

(ii) Adjustments for Certain Dividends and Distributions. If the Maker shall at any time or from time to time after the Issuance Date, make or issue or set a record date for the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in shares of Common Stock, then, and in each event, the applicable Conversion Price in effect immediately prior to such event shall be decreased as of the time of such issuance or, in the event such record date shall have been fixed, as of the close of business on such record date, by multiplying, as applicable, the applicable Conversion Price then in effect by a fraction:

(1) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date; and

(2) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.

-9-

(iii) Adjustment for Other Dividends and Distributions. If the Maker shall at any time or from time to time after the Issuance Date, make or issue or set a record date for the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in other than shares of Common Stock, then, and in each event, an appropriate revision to the applicable Conversion Price shall be made and provision shall be made (by adjustments of the Conversion Price or otherwise) so that the holders of this Note shall receive upon conversions thereof, in addition to the number of shares of Common Stock receivable thereon, the number of securities of the Maker which they would have received had this Note been converted into Common Stock on the date of such event and had thereafter, during the period from the date of such event to and including the Conversion Date, retained such securities (together with any distributions payable thereon during such period), giving application to all adjustments called for during such period under this Section 3.6(a)(iii) with respect to the rights of the holders of this Note.

(iv) Adjustments for Reclassification, Exchange or Substitution. If the Common Stock issuable upon conversion of this Note at any time or from time to time after the Issuance Date shall be changed to the same or different number of shares of any class or classes of stock, whether by reclassification, exchange, substitution or otherwise (other than by way of a stock split or combination of shares or stock dividends provided for in Sections 3.6(a)(i), (ii) and (iii), or a reorganization, merger, consolidation, or sale of assets provided for in Section 3.6(a)(v)), then, and in each event, an appropriate revision to the Conversion Price shall be made and provisions shall be made (by adjustments of the Conversion Price or otherwise) so that the holder of this Note shall have the right thereafter to convert this Note into the kind and amount of shares of stock and other securities receivable upon reclassification, exchange, substitution or other change, by holders of the number of shares of Common Stock into which such Note might have been converted immediately prior to such reclassification, exchange, substitution or other change, all subject to further adjustment as provided herein.

(v) Adjustments for Reorganization, Merger, Consolidation or Sales of Assets. If at any time or from time to time after the Issuance Date there shall be a capital reorganization of the Maker (other than by way of a stock split or combination of shares or stock dividends or distributions provided for in Section 3.6(a)(i), (ii) and (iii), or a reclassification, exchange or substitution of shares provided for in Section 3.6(a)(iv)), or a merger or consolidation of the Maker with or into another corporation, or the sale of all or substantially all of the Maker’s properties or assets to any other person (an “Organic Change”), then as a part of such Organic Change an appropriate revision to the Conversion Price shall be made and provision shall be made (by adjustments of the Conversion Price or otherwise) so that the holder of this Note shall have the right thereafter to convert such Note into the kind and amount of shares of stock and other securities or property of the Maker or any successor corporation resulting from Organic Change. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 3.6(a)(v) with respect to the rights of the holder of this Note after the Organic Change to the end that the provisions of this Section 3.6(a)(v) (including any adjustment in the applicable Conversion Price then in effect and the number of shares of stock or other securities deliverable upon conversion of this Note) shall be applied after that event in as nearly an equivalent manner as may be practicable.

-10-

(vi) Adjustments for Issuance of Additional Shares of Common Stock.

(1) In the event the Maker, shall, at any time, from time to time, issue or sell any shares of Additional Shares of Common Stock (including Treasury Shares) for a consideration per share less than the Conversion Price or Closing Price then in effect for the Note immediately prior to the time of such issue or sale, then, forthwith upon such issue or sale, the Conversion Price or the Closing Price, as the case may be, then in effect for the Notes shall be reduced to a price equal to the consideration per share paid for such Common Stock and the number of shares of Common Stock for which this Note is convertible shall be increased by the product of the number of shares of Common Stock for which this Note is convertible immediately prior to such issuance or sale multiplied by the Dilution Percentage. “Dilution Percentage” shall mean the percentage by which the Conversion Price then in effect is reduced pursuant to this Section 3.6(a)(vi).

(2) The provisions under this subsection 3.6(a)(vi) shall not apply under any of the circumstances for which an adjustment is provided in subsections (i), (ii), (iii), (iv) or (v) of this Section 3.6(a). No adjustment of the applicable Conversion Price or Closing Price shall be made under this subsection (a)(vi) upon the issuance of any Additional Shares of Common Stock which are issued pursuant to any Common Stock Equivalent (as defined below) if upon the issuance of such Common Stock Equivalent (x) any adjustment shall have been made pursuant to subsection (vii) of this Section 3.6(a) or (y) no adjustment was required pursuant to subsection (vii) of this Section 3.6(a). No adjustment of the applicable Conversion Price shall be made under this subsection (vi) in an amount less than $.01 per share, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment, if any, which together with any adjustments so carried forward shall amount to $.01 per share or more; provided that upon any adjustment of the applicable Conversion Price as a result of any dividend or distribution payable in Common Stock or Convertible Securities (as defined below) or the reclassification, subdivision or combination of Common Stock into a greater or smaller number of shares, the foregoing figure of $.01 per share (or such figure as last adjusted) shall be adjusted (to the nearest one-half cent) in proportion to the adjustment in the applicable Conversion Price.

(vii) Issuance of Common Stock Equivalents. If the Maker, at any time after the Issuance Date, shall issue any securities convertible into or exchangeable for, directly or indirectly, Common Stock (“Convertible Securities”), other than this Note, or any rights or warrants or options to purchase any such Common Stock or Convertible Securities, shall be issued or sold (collectively, the “Common Stock Equivalents”) and the price per share for which Additional Shares of Common Stock may be issuable thereafter pursuant to such Common Stock Equivalent shall be less than the applicable Conversion Price then in effect, or if, after any such issuance of Common Stock Equivalents, the price per share for which Additional Shares of Common Stock may be issuable thereafter is amended or adjusted, and such price as so amended shall be less than the applicable Conversion Price in effect at the time of such amendment, then the applicable Conversion Price upon each such issuance or amendment shall be adjusted as provided in the first sentence of subsection (vi) of this Section 3.6(a) on the basis that (1) the maximum number of Additional Shares of Common Stock issuable pursuant to all such Common Stock Equivalents shall be deemed to have been issued (whether or not such Common Stock Equivalents are actually then exercisable, convertible or exchangeable in whole or in part) as of the earlier of (A) the date on which the Maker shall enter into a firm contract for the issuance of such Common Stock Equivalent, or (B) the date of actual issuance of such Common Stock

-11-

Equivalent, and (2) the aggregate consideration for such maximum number of Additional Shares of Common Stock shall be deemed to be the minimum consideration received or receivable by the Maker for the issuance of such Additional Shares of Common Stock pursuant to such Common Stock Equivalent. No adjustment of the applicable Conversion Price shall be made under this subsection (vii) upon the issuance of any Convertible Security which is issued pursuant to the exercise of any warrants or other subscription or purchase rights therefor, if any adjustment shall previously have been made to the exercise price of such warrants then in effect upon the issuance of such warrants or other rights pursuant to this subsection (vii). If no adjustment is required under this subsection (vii) upon issuance of any Common Stock Equivalent or once an adjustment is made under this subsection (vii) based upon the Per Share Market Value in effect on the date of such adjustment, no further adjustment shall be made under this subsection (vii) based solely upon a change in the Per Share Market Value after such date.

(viii) Consideration for Stock. In case any shares of Common Stock or any Common Stock Equivalents shall be issued or sold:

(1) in connection with any merger or consolidation in which the Maker is the surviving corporation (other than any consolidation or merger in which the previously outstanding shares of Common Stock of the Maker shall be changed to or exchanged for the stock or other securities of another corporation), the amount of consideration therefore shall be, deemed to be the fair value, as determined reasonably and in good faith by the Board of Directors of the Maker, of such portion of the assets and business of the nonsurviving corporation as such Board may determine to be attributable to such shares of Common Stock, Convertible Securities, rights or warrants or options, as the case may be; or

(2) in the event of any consolidation or merger of the Maker in which the Maker is not the surviving corporation or in which the previously outstanding shares of Common Stock of the Maker shall be changed into or exchanged for the stock or other securities of another corporation, or in the event of any sale of all or substantially all of the assets of the Maker for stock or other securities of any corporation, the Maker shall be deemed to have issued a number of shares of its Common Stock for stock or securities or other property of the other corporation computed on the basis of the actual exchange ratio on which the transaction was predicated, and for a consideration equal to the fair market value on the date of such transaction of all such stock or securities or other property of the other corporation. If any such calculation results in adjustment of the applicable Conversion Price, or the number of shares of Common Stock issuable upon conversion of the Notes, the determination of the applicable Conversion Price or the number of shares of Common Stock issuable upon conversion of the Notes immediately prior to such merger, consolidation or sale, shall be made after giving effect to such adjustment of the number of shares of Common Stock issuable upon conversion of the Notes.

(b) Record Date. In case the Maker shall take record of the holders of its Common Stock for the purpose of entitling them to subscribe for or purchase Common Stock or Convertible Securities, then the date of the issue or sale of the shares of Common Stock shall be deemed to be such record date.

(c) Certain Issues Excepted. Anything herein to the contrary notwithstanding, the Maker shall not be required to make any adjustment of the number of shares of Common

-12-

Stock issuable upon conversion of the Notes upon the grant after the Issuance Date of, or the exercise after the Issuance Date of, (i) shares of Common Stock issuable upon exercise of the Warrants; (ii) shares of Common Stock issuable upon conversion of this Note; (iii) shares of Common Stock to be issued to strategic partners and/or in connection with a strategic merger or acquisition; (iv) shares of Common Stock or the issuance of options to purchase shares of Common Stock to employees, officers, directors, consultants and vendors in accordance with the Issuer’s existing employee stock ownership plans; (v) the issuance of Securities pursuant to the conversion or exercise of convertible or exercisable securities issued or outstanding prior to the date hereof; and (vi) the issuance of securities in exchange for assets.

(d) No Impairment. The Maker shall not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Maker, but will at all times in good faith, assist in the carrying out of all the provisions of this Section 3.6 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the Holder against impairment. In the event a Holder shall elect to convert any Notes as provided herein, the Maker cannot refuse conversion based on any claim that such Holder or any one associated or affiliated with such Holder has been engaged in any violation of law, violation of an agreement to which such Holder is a party or for any reason whatsoever, unless, an injunction from a court, or notice, restraining and or adjoining conversion of all or of said Notes shall have issued and the Maker posts a surety bond for the benefit of such Holder in an amount equal to 130% of the amount of the Notes the Holder has elected to convert, which bond shall remain in effect until the completion of arbitration/litigation of the dispute and the proceeds of which shall be payable to such Holder in the event it obtains judgment.

(e) Certificates as to Adjustments. Upon occurrence of each adjustment or readjustment of the Conversion Price or number of shares of Common Stock issuable upon conversion of this Note pursuant to this Section 3.6, the Maker at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to the Holder a certificate setting forth such adjustment and readjustment, showing in detail the facts upon which such adjustment or readjustment is based. The Maker shall, upon written request of the Holder, at any time, furnish or cause to be furnished to such holder a like certificate setting forth such adjustments and readjustments, the applicable Conversion Price in effect at the time, and the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon the conversion of this Note. Notwithstanding the foregoing, the Maker shall not be obligated to deliver a certificate unless such certificate would reflect an increase or decrease of at least one percent (1%) of such adjusted amount.

(f) Issue Taxes. The Maker shall pay any and all issue and other taxes, excluding federal, state or local income taxes, that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of this Note pursuant thereto; provided, however, that the Maker shall not be obligated to pay any transfer taxes resulting from any transfer requested by any holder in connection with any such conversion.

(g) Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of this Note. In lieu of any fractional shares to which the Holder would

-13-

otherwise be entitled, the Maker shall pay cash equal to the product of such fraction multiplied by the average of the Per Share Market Values of the Common Stock for the five (5) consecutive Trading Days immediately preceding the Conversion Date.

(h) Reservation of Common Stock. The Maker shall at all times when this Note shall be outstanding, reserve and keep available out of its authorized but unissued Common Stock, 10,000,000 shares of Common Stock to effect the conversion of this Note and all interest accrued thereon; provided that the number of shares of Common Stock so reserved shall at no time be less than 125% of the number of shares of Common Stock for which this Note and all interest accrued thereon are at any time convertible. The Maker shall, from time to time in accordance with the Colorado General Corporation Law, as amended, increase the authorized number of shares of Common Stock if at any time the unissued number of authorized shares shall not be sufficient to satisfy the Maker’s obligations under this Section 3.6(h).

(i) Regulatory Compliance. If any shares of Common Stock to be reserved for the purpose of conversion of this Note or any interest accrued thereon require registration or listing with or approval of any governmental authority, stock exchange or other regulatory body under any federal or state law or regulation or otherwise before such shares may be validly issued or delivered upon conversion, the Maker shall, at its sole cost and expense, in good faith and as expeditiously as possible, endeavor to secure such registration, listing or approval, as the case may be.

Section 3.7 Prepayment.

(a) Prepayment Upon an Event of Default. Notwithstanding anything to the contrary contained herein, upon the occurrence of an Event of Default described in Sections 2.1(c)-(k) hereof, the Holder shall have the right, at such Holder’s option, to require the Maker to prepay all or a portion of this Note at a price equal to the Triggering Event Prepayment Price (as defined in Section 3.7(c) below) applicable at the time of such request. Nothing in this Section 3.7(a) shall limit the Holder’s rights under Section 2.2 hereof.

(b) Prepayment Option Upon Major Transaction. In addition to all other rights of the holder of this Note contained herein, simultaneous with the occurrence of a Major Transaction (as defined below), the holder of this Note shall have the right, at such holder’s option, to require the Maker to prepay all or a portion of such holder’s Notes at a price equal to the greater of (i) 130% of the aggregate principal amount of the Notes and (ii) the product of (A) the Conversion Rate and (B) the Per Share Market Value of the Common Stock on the Trading Day immediately preceding such Major Transaction (“Major Transaction Prepayment Price”).

(c) Prepayment Option Upon Triggering Event. In addition to all other rights of the holder of this Note contained herein, after a Triggering Event (as defined below), the holder of this Note shall have the right, at such holder’s option, to require the Maker to prepay all or a portion of such holder’s Notes at a price equal to the greater of (i) 130% of the aggregate principal amount of this Note and (ii) the product of (A) the Conversion Rate at such time and (B) the Per Share Market Value of the Common Stock calculated as of the date immediately preceding such Triggering Event on which the exchange or market on which the Common Stock is traded is open (“Triggering Event Prepayment Price”).

-14-

(d) Intentionally Omitted.

(e) “Major Transaction.” A “Major Transaction” shall be deemed to have occurred at such time as any of the following events:

(i) the consolidation, merger or other business combination of the Maker with or into another Person (as defined in Section 4.13 hereof) (other than (A) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Maker or (B) a consolidation, merger or other business combination in which holders of the Maker’s voting power immediately prior to the transaction continue after the transaction to hold, directly or indirectly, the voting power of the surviving entity or entities necessary to elect a majority of the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities).

(ii) the sale or transfer of all or substantially all of the Maker’s assets; or

(iii) consummation of a purchase, tender or exchange offer made to the holders of more than 30% of the outstanding shares of Common Stock.

(f) “Triggering Event.” A “Triggering Event” shall be deemed to have occurred at such time as any of the following events:

(i) the failure of the Registration Statement to be declared effective by the SEC on or prior to the date which is one hundred fifty (150) days after the Closing Date;

(ii) while the Registration Statement is required to be maintained effective pursuant to the terms of the Registration Rights Agreement, the effectiveness of the Registration Statement lapses for any reason (including, without limitation, the issuance of a stop order) or is unavailable to the holder of this Note for sale of the Registrable Securities (as defined in the Registration Rights Agreement) in accordance with the terms of the Registration Rights Agreement, and such lapse or unavailability continues for a period of ten (10) consecutive Trading Days, provided that the cause of such lapse or unavailability is due to factors within the control of the Maker and not due to factors solely within the control of the holder of this Note;

(iii) the suspension from trading or the failure of the Common Stock to be traded on The Nasdaq SmallCap Market for a period of five (5) consecutive days, provided, that such suspension from listing or failure to be listed is due to factors within the control of the Maker, including, but not limited to, failure to timely file all reports required to be filed with the SEC or to meet the net tangible assets requirements for listing, if any;

(iv) the Maker’s notice to any holder of the Notes, including by way of public announcement, at any time, of its inability to comply (including for any of the reasons described in Section 3.8) or its intention not to comply with proper requests for conversion of any of the Notes into shares of Common Stock;

-15-

(v) the Maker’s failure to comply with a Conversion Notice tendered within ten (10) business days after the receipt by the Maker of the Conversion Notice and the original Note; or

(vi) any material representation, warranty or covenant made by the Maker herein or in the Purchase Agreement, the Security Agreement or the Registration Rights Agreement shall prove to have been false or incorrect or breached in a material respect on the date as of which made.

(g) Intentionally Omitted.

(h) Mechanics of Prepayment at Option of Holder Upon Major Transaction. No sooner than fifteen (15) days nor later than ten (10) days prior to the consummation of a Major Transaction, but not prior to the public announcement of such Major Transaction, the Maker shall deliver written notice thereof via facsimile and overnight courier (“Notice of Major Transaction”) to the holder of this Note. At any time after receipt of a Notice of Major Transaction (or, in the event a Notice of Major Transaction is not delivered at least ten (10) days prior to a Major Transaction, at any time within ten (10) days prior to a Major Transaction), any holder of the Notes then outstanding may require the Maker to prepay, effective immediately prior to the consummation of such Major Transaction, all of the holder’s Notes then outstanding by delivering written notice thereof via facsimile and overnight courier (“Notice of Prepayment at Option of Holder Upon Major Transaction”) to the Maker, which Notice of Prepayment at Option of Holder Upon Major Transaction shall indicate (i) the number of Notes that such holder is electing to prepay and (ii) the applicable Major Transaction Prepayment Price, as calculated pursuant to Section 3.7(b) above.

(i) Mechanics of Prepayment at Option of Holder Upon Triggering Event. Within one (1) day after the occurrence of a Triggering Event, the Maker shall deliver written notice thereof via facsimile and overnight courier (“Notice of Triggering Event”) to each holder of the Notes. At any time after the earlier of a holder’s receipt of a Notice of Triggering Event and such holder becoming aware of a Triggering Event, any holder of this Note then outstanding may require the Maker to prepay all of the Notes on a pro rata basis by delivering written notice thereof via facsimile and overnight courier (“Notice of Prepayment at Option of Holder Upon Triggering Event”) to the Maker, which Notice of Prepayment at Option of Holder Upon Triggering Event shall indicate (i) the number of Notes that such holder is electing to prepay and (ii) the applicable Triggering Event Prepayment Price, as calculated pursuant to Section 3.7(c) above.

(j) Intentionally Omitted.

(k) Payment of Prepayment Price. Upon the Maker’s receipt of a Notice(s) of Prepayment at Option of Holder Upon Triggering Event or a Notice(s) of Prepayment at Option of Holder Upon Major Transaction from any holder of the Notes, the Maker shall immediately notify each holder of the Notes by facsimile of the Maker’s receipt of such Notice(s) of Prepayment at Option of Holder Upon Triggering Event or Notice(s) of Prepayment at Option of Holder Upon Major Transaction and each holder which has sent such a notice shall promptly submit to the Maker such holder’s certificates representing the Notes which such holder has

-16-

elected to have prepaid. The Maker shall deliver the applicable Triggering Event Prepayment Price, in the case of a prepayment pursuant to Section 3.7(i), to such holder within five (5) business days after the Maker’s receipt of a Notice of Prepayment at Option of Holder Upon Triggering Event and, in the case of a prepayment pursuant to Section 3.7(k), the Maker shall deliver the applicable Major Transaction Prepayment Price immediately prior to the consummation of the Major Transaction; provided that a holder’s original Note shall have been so delivered to the Maker; provided further that if the Maker is unable to prepay all of the Notes to be prepaid, the Maker shall prepay an amount from each holder of the Notes being prepaid equal to such holder’s pro-rata amount (based on the number of Notes held by such holder relative to the number of Notes outstanding) of all Notes being prepaid. If the Maker shall fail to prepay all of the Notes submitted for prepayment (other than pursuant to a dispute as to the arithmetic calculation of the Prepayment Price), in addition to any remedy such holder of the Notes may have under this Note, the Security Agreement and the Purchase Agreement, the applicable Prepayment Price payable in respect of such Notes not prepaid shall bear interest at the rate of 2.0% per month (prorated for partial months) until paid in full. Until the Maker pays such unpaid applicable Prepayment Price in full to a holder of the Notes submitted for prepayment, such holder shall have the option (the “Void Optional Prepayment Option”) to, in lieu of prepayment, require the Maker to promptly return to such holder(s) all of the Notes that were submitted for prepayment by such holder(s) under this Section 3.7 and for which the applicable Prepayment Price has not been paid, by sending written notice thereof to the Maker via facsimile (the “Void Optional Prepayment Notice”). Upon the Maker’s receipt of such Void Optional Prepayment Notice(s) and prior to payment of the full applicable Prepayment Price to such holder, (i) the Notice(s) of Prepayment at Option of Holder Upon Triggering Event or the Notice(s) of Prepayment at Option of Holder Upon Major Transaction, as the case may be, shall be null and void with respect to those Notes submitted for prepayment and for which the applicable Prepayment Price has not been paid, (ii) the Maker shall immediately return any Notes submitted to the Maker by each holder for prepayment under this Section 3.7(h) and for which the applicable Prepayment Price has not been paid and (iii) the Conversion Price of such returned Notes shall be adjusted to the lesser of (A) the Conversion Price as in effect on the date on which the Void Optional Prepayment Notice(s) is delivered to the Maker and (B) the lowest Per Share Market Value during the period beginning on the date on which the Notice(s) of Prepayment of Option of Holder Upon Major Transaction or the Notice(s) of Prepayment at Option of Holder Upon Triggering Event, as the case may be, is delivered to the Maker and ending on the date on which the Void Optional Prepayment Notice(s) is delivered to the Maker; provided that no adjustment shall be made if such adjustment would result in an increase of the Conversion Price then in effect. A holder’s delivery of a Void Optional Prepayment Notice and exercise of its rights following such notice shall not effect the Maker’s obligations to make any payments which have accrued prior to the date of such notice. Payments provided for in this Section 3.7 shall have priority to payments to other stockholders in connection with a Major Transaction.

(l) Holder Prepayment Option. At the sole option of the Holder, the Holder may grant the Maker the option to prepay all or any portion of the outstanding principal amount of this Note together with all accrued and unpaid interest thereon within ten (10) days of the Holder granting the option to the Maker. If the Maker elects to exercise the prepayment option, the Maker shall upon five (5) days prior written notice to the Holder (the “Maker’s Prepayment

-17-

Notice”) prepay all or a portion of the outstanding Notes equal to 130% of the aggregate outstanding principal amount of this Note plus any accrued but unpaid interest (the “Maker’s Prepayment Price”); provided, however, that if a holder has delivered a Conversion Notice to the Maker or delivers a Conversion Notice after receipt of the Maker’s Prepayment Notice, the Notes designated to be converted may not be prepaid by the Maker; provided further that if during the period between delivery of the Maker’s Prepayment Notice and the Maker’s Prepayment Date (as defined below), a holder shall become entitled to deliver a Notice of Prepayment at Option of Holder Upon Major Transaction or Notice of Prepayment at Option of Holder upon Triggering Event, then the such rights of the holders shall take precedence over the previously delivered Maker Prepayment Notice. The Maker’s Prepayment Notice shall state the date of prepayment which date shall be the sixth (6th) day after the Maker has delivered the Maker’s Prepayment Notice (the “Maker’s Prepayment Date”), the Maker’s Prepayment Price and the amount of Notes to be prepaid by the Maker. The Maker shall deliver the Maker’s Prepayment Price to the Holder within five (5) business days after the Maker has delivered the Maker’s Prepayment Notice, provided, that if the holder(s) delivers a Conversion Notice before the Maker’s Prepayment Date, then the portion of the Maker’s Prepayment Price which would be paid to prepay the Notes covered by such Conversion Notice shall be returned to the Maker upon delivery of the Common Stock issuable in connection with such Conversion Notice to the holder(s). On the Maker’s Prepayment Date, the Maker shall pay the Maker’s Prepayment Price, subject to any adjustment pursuant to the immediately preceding sentence, to the holder(s) on a pro rata basis, provided, however, that upon receipt by Maker of the certificates representing the Notes to be prepaid pursuant to this Section 3.7(l), the Maker shall, on the next business day following the date of receipt by the Maker of the original Note, pay the Maker’s Prepayment Price to the holder(s) on a pro rata basis. If the Maker fails to pay the Maker’s Prepayment Price by the sixth (6th) business day after the Maker has delivered the Maker’s Prepayment Notice, the prepayment will be declared null and void and the Maker shall lose its right to serve a Maker ‘s Prepayment Notice pursuant to this Section 3.7(l) in the future.

Section 3.8 Inability to Fully Convert.

(a) Holder’s Option if Maker Cannot Fully Convert. If, upon the Maker’s receipt of a Conversion Notice or on the Mandatory Conversion Date, the Maker cannot issue shares of Common Stock registered for resale under the Registration Statement for any reason, including, without limitation, because the Maker (w) does not have a sufficient number of shares of Common Stock authorized and available, (x) is otherwise prohibited by applicable law or by the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Maker or any of its securities from issuing all of the Common Stock which is to be issued to the Holder pursuant to a Conversion Notice or (y) fails to have a sufficient number of shares of Common Stock registered for resale under the Registration Statement, then the Maker shall issue as many shares of Common Stock as it is able to issue in accordance with the Holder’s Conversion Notice and, with respect to the unconverted portion of this Note, the Holder, solely at Holder’s option, can elect to:

(i) require the Maker to prepay that portion of this Note for which the Maker is unable to issue Common Stock in accordance with the Holder’s Conversion Notice (the “Mandatory Prepayment”) at a price per share equal to the Prepayment Price as of such Conversion Date (the “Mandatory Prepayment Price”);

-18-

(ii) if the Maker’s inability to fully convert is pursuant to Section 3.8(a)(y) above, require the Maker to issue restricted shares of Common Stock equal to one hundred twenty percent (120%) of the number of shares of Common Stock the Maker is unable to deliver in accordance with such holder’s Conversion Notice;

(iii) void its Conversion Notice and retain or have returned, as the case may be, this Note that was to be converted pursuant to the Conversion Notice (provided that the Holder’s voiding its Conversion Notice shall not effect the Maker’s obligations to make any payments which have accrued prior to the date of such notice).

(b) Mechanics of Fulfilling Holder’s Election. The Maker shall immediately send via facsimile to the Holder, upon receipt of a facsimile copy of a Conversion Notice from the Holder which cannot be fully satisfied as described in Section 3.8(a) above, a notice of the Maker’s inability to fully satisfy the Conversion Notice (the “Inability to Fully Convert Notice”). Such Inability to Fully Convert Notice shall indicate (i) the reason why the Maker is unable to fully satisfy such holder’s Conversion Notice, (ii) the amount of this Note which cannot be converted and (iii) the applicable Mandatory Prepayment Price. The Holder shall notify the Maker of its election pursuant to Section 3.8(a) above by delivering written notice via facsimile to the Maker (“Notice in Response to Inability to Convert”).

(c) Payment of Prepayment Price. If the Holder shall elect to have its shares prepaid pursuant to Section 3.8(a)(i) above, the Maker shall pay the Mandatory Prepayment Price in cash to the Holder within five (5) days of the Maker’s receipt of the Holder’s Notice in Response to Inability to Convert, provided that prior to the Maker’s receipt of the Holder’s Notice in Response to Inability to Convert the Maker has not delivered a notice to the Holder stating, to the satisfaction of the Holder, that the event or condition resulting in the Mandatory Prepayment has been cured and all Conversion Shares issuable to the Holder can and will be delivered to the Holder in accordance with the terms of this Note. If the Maker shall fail to pay the applicable Mandatory Prepayment Price to the Holder on a timely basis as described in this Section 3.8(c) (other than pursuant to a dispute as to the determination of the arithmetic calculation of the Prepayment Price), in addition to any remedy the Holder may have under this Note and the Purchase Agreement, such unpaid amount shall bear interest at the rate of 2.0% per month (prorated for partial months) until paid in full. Until the full Mandatory Prepayment Price is paid in full to the Holder, the Holder may (i) void the Mandatory Prepayment with respect to that portion of the Note for which the full Mandatory Prepayment Price has not been paid, (ii) receive back such Note, and (iii) require that the Conversion Price of such returned Note be adjusted to the lesser of (A) the Conversion Price as in effect on the date on which the Holder voided the Mandatory Prepayment and (B) the lowest Per Share Market Value during the period beginning on the Conversion Date and ending on the date the Holder voided the Mandatory Prepayment.

Section 3.9 No Rights as Shareholder. Nothing contained in this Note shall be construed as conferring upon the Holder, prior to the conversion of this Note, the right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of shareholders for the election of directors of the Maker or of any other matter, or any other rights as a shareholder of the Maker.

-19-

ARTICLE IV

MISCELLANEOUS

Section 4.1 Notices. Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery by telex (with correct answer back received), telecopy or facsimile at the address or number designated in the Purchase Agreement (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The Maker will give written notice to the Holder at least ten (10) days prior to the date on which the Maker closes its books or takes a record (x) with respect to any dividend or distribution upon the Common Stock, (y) with respect to any pro rata subscription offer to holders of Common Stock or (z) for determining rights to vote with respect to any Organic Change, dissolution, liquidation or winding-up and in no event shall such notice be provided to such holder prior to such information being made known to the public. The Maker will also give written notice to the Holder at least ten (10) days prior to the date on which any Organic Change, dissolution, liquidation or winding-up will take place and in no event shall such notice be provided to the Holder prior to such information being made known to the public.

Section 4.2 Governing Law. This Note shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to the choice of law provisions. This Note shall not be interpreted or construed with any presumption against the party causing this Note to be drafted.

Section 4.3 Headings. Article and section headings in this Note are included herein for purposes of convenience of reference only and shall not constitute a part of this Note for any other purpose.

Section 4.4 Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, at law or in equity (including, without limitation, a decree of specific performance and/or other injunctive relief), no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit a holder’s right to pursue actual damages for any failure by the Maker to comply with the terms of this Note. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the holder thereof and shall not, except as expressly provided herein, be subject to any other obligation of the Maker (or the performance thereof). The Maker acknowledges that a breach by it of its obligations hereunder will cause irreparable and material harm to the Holder and that the remedy at law for any such breach may be inadequate. Therefore the Maker agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available rights and remedies, at law or in equity, to seek and obtain such equitable relief, including but not limited to an injunction restraining any such breach or threatened breach, without the necessity of showing economic loss and without any bond or other security being required.

-20-

Section 4.5 Enforcement Expenses. The Maker agrees to pay all costs and expenses of enforcement of this Note, including, without limitation, reasonable attorneys’ fees and expenses.

Section 4.6 Binding Effect. The obligations of the Maker and the Holder set forth herein shall be binding upon the successors and assigns of each such party, whether or not such successors or assigns are permitted by the terms hereof.

Section 4.7 Amendments. This Note may not be modified or amended in any manner except in writing executed by the Maker and the Holder.

Section 4.8 Compliance with Securities Laws. The Holder of this Note acknowledges that this Note is being acquired solely for the Holder’s own account and not as a nominee for any other party, and for investment, and that the Holder shall not offer, sell or otherwise dispose of this Note. This Note and any Note issued in substitution or replacement therefore shall be stamped or imprinted with a legend in substantially the following form:

“ THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE REASONABLY ACCEPTABLE TO THE MAKER) IN THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE MAKER THAT THIS NOTE MAY BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS.”

Section 4.9 Consent to Jurisdiction. Each of the Maker and the Holder (i) hereby irrevocably submits to the exclusive jurisdiction of the United States District Court sitting in the Southern District of New York and the courts of the State of New York located in New York county for the purposes of any suit, action or proceeding arising out of or relating to this Note and (ii) hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper. Each of the Maker and the Holder consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under the Purchase Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing in this Section 4.9 shall affect or limit any right to serve process in any other manner permitted by law.

Section 4.10 Parties in Interest. This Note shall be binding upon, inure to the benefit of and be enforceable by the Maker, the Holder and their respective successors and permitted assigns.

Section 4.11 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.

-21-

Section 4.12 Maker Waivers. Except as otherwise specifically provided herein, the Maker and all others that may become liable for all or any part of the obligations evidenced by this Note, hereby waive presentment, demand, notice of nonpayment, protest and all other demands’ and notices in connection with the delivery, acceptance, performance and enforcement of this Note, and do hereby consent to any number of renewals of extensions of the time or payment hereof and agree that any such renewals or extensions may be made without notice to any such persons and without affecting their liability herein and do further consent to the release of any person liable hereon, all without affecting the liability of the other persons, firms or Maker liable for the payment of this Note, AND DO HEREBY WAIVE TRIAL BY JURY.

(a) No delay or omission on the part of the Holder in exercising its rights under this Note, or course of conduct relating hereto, shall operate as a waiver of such rights or any other right of the Holder, nor shall any waiver by the Holder of any such right or rights on any one occasion be deemed a waiver of the same right or rights on any future occasion.

Section 4.13 Definitions. For the purposes hereof, the following terms shall have the following meanings:

“Independent Appraiser” means a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Issuer) that is regularly engaged in the business of appraising the Capital Stock or assets of corporations or other entities as going concerns, and which is not affiliated with either the Issuer or the Holder of any Warrant.

“Person” means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind.

“Trading Day” “ means (a) a day on which the Common Stock is traded on The Nasdaq SmallCap Market or other registered national stock exchange on which the Common Stock has been listed, or (b) if the Common Stock is not listed on The Nasdaq SmallCap Market or any registered national stock exchange, a day or which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); provided, however, that in the event that the Common Stock is not listed or quoted as set forth in (a), (b) and (c) hereof, then Trading Day shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close.

-22-

ANALYTICAL SURVEYS, INC.
By:
	Name:
	Title:

-23-

EXHIBIT A

WIRE INSTRUCTIONS.

Payee:

Bank:

Address:

Bank No.:

Account No.:

Account Name:

-24-

FORM OF

NOTICE OF CONVERSION

(To be Executed by the Registered Holder in order to Convert the Note)

The undersigned hereby irrevocably elects to convert $                              of the principal amount of the above Note No.     into shares of Common Stock of ANALYTICAL SURVEYS, INC. (the “Maker”) according to the conditions hereof, as of the date written below.

Date of Conversion                                                                                                                                        

Applicable Conversion Price                                                                                                                       

Signature                                                                                                                                                        

[Name]

Address:

-25-

EX-10.31

EXHIBIT 10.31

FIRST AMENDMENT TO

EMPLOYMENT AGREEMENT

(Chief Financial Officer)

This First Amendment to Employment Agreement (this “Amendment”) is entered into as of November 26, 2003, by and between Analytical Surveys, Inc., a Colorado corporation whose principal executive offices are located in San Antonio, Texas (“Employer”), and Lori A. Jones (“Officer”).

Recitals

A. Employer and Officer are parties to an Employment Agreement dated as of January 20, 2003 (the “Employment Agreement”).

B. Employer and Officer desire to make certain amendments to the Employment Agreement.

Agreement

Now, therefore, the parties agree as follows:

1. Bonuses. Employer will pay a bonus of $60,000 (the “Bonus”) to Officer within 30 days of the filing of the September 30, 2004, audited financial statements with the Securities and Exchange Commission and the NASDAQ; provided, however, that the Bonus shall not be earned or due to Officer unless Officer is employed by Employer on the date such bonus is to be paid and Officer is performing at a satisfactory level as determined by the Employer in its sole discretion. This Bonus will be paid on a lump sum, cash basis. This Bonus replaces any other bonus provisions for Officer, and specifically the bonus provisions outlined in the Employment Agreement. Officer expressly waives and releases any and all rights to bonus compensation under the terms of the Employment Agreement.

2. Miscellaneous. Except as modified by this Amendment, all provisions of the Employment Agreement will remain in full force and effect. This Amendment and the Employment Agreement constitute the entire agreement between the parties with respect to Officer’s employment and supersede all proposals, prior agreements and all other communications between the parties, whether oral or in writing, relating to the subject matter of this Amendment and the Employment Agreement. This Amendment may be amended or superseded only by an agreement in writing, signed by the Officer and an executive officer of Employer. This Amendment will be governed by and construed according to the internal laws of the State of Texas, without regard to conflict of law principles. Disputes arising out of this Amendment or the Employment Agreement will be resolved in the manner provided for in Section 19 of the Employment Agreement. This Amendment may be executed in counterparts.

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written.

Employer:	Analytical Surveys, Inc.
	By:
	Print Name: J. Norman Rokosh
	Title: Chief Executive Officer
Officer:
	Lori A. Jones

2

EX-14.1

EXHIBIT 14.1

Analytical Surveys, Inc.

Code of Ethics

Analytical Surveys, Inc., has adopted a code of ethics that provides principles to which its senior financial officers, executive officers, and general and project managers are expected to adhere and promote throughout the organization. This code embodies rules that specifically influence our conduct as an individual and to our peers, as well as responsibilities to other employees, the public and other stakeholders. Any violations of our Code of Professional Conduct may result in disciplinary action, up to and including immediate termination.

All senior financial officers and managers, executive officers, and general and project managers will:

• Exercise honesty and ethical conduct, including the ethical handling of actual or apparent conflicts of interest in personal and professional relationships,

• Avoid conflicts of interest and disclose to the Board of Directors any material transaction or relationship that reasonably could be expected to give rise to conflict, and not use confidential information acquired for personal advantage,

• Provide full, fair accurate, timely, complete, objective, and understandable disclosure in the reports and documents filed with the Security and Exchange Commission, and in all other public disclosures and communication,

• Comply with laws, rules and regulations of applicable governmental agencies, including federal, state, and local governments, and other appropriate private or public regulatory agencies,

• Act in good faith, responsibly, with due care, competence and diligence, without misrepresenting material facts or allowing one’s independent judgment to be subordinated, and

• Promote accountability for adherence to the Code and promptly report to the Board of Directors or any violation of the Code.

ASI officers, directors, and managers are prohibited from retaliating or taking any adverse action against anyone who inquires about, raises or helps to resolve any integrity concerns.

In the event that a situation arises which would cause the appearance of noncompliance with or prevent adherence to this code of ethics by any officer, director, or manager of ASI, said officer, director, or employee should attempt to remove himself from the situation. He or she may also seek counsel and guidance from ASI’s board of directors, or corporate officers, who may also advise counsel from ASI’s external counsel or auditors. Should an individual not be able to abstain from participation or the appearance of participation in such a situation, he or she should immediately notify both a corporate officer and the chairman of the Audit Committee.

Failure to adhere to any of the above-mentioned standards shall constitute wrongdoing or an error in judgement by any of the officers, director, or manager in the Company. If any of the above standards are breached, the offending officer, director, or manager will be advised in writing of the breach, and will have thirty (30) days to remedy the situation or disclose appropriately any wrongdoing. In the event that the offending officer, director or manager does not take reasonable steps to correct or disclose the wrongdoing, the officer, manager, or director shall be terminated immediately from his or her employment with the Company.

EX-23

EXHIBIT 23

Consent of Independent Auditors

The Board of Directors

Analytical Surveys, Inc.:

We consent to incorporation by reference in the registration statements (No. 33-53950, No. 33-59940 and No. 333-47365) on Form S-8 of Analytical Surveys, Inc. of our report dated December 22, 2003, relating to the 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, which report appears in the September 30, 2003 Annual Report on Form 10-K on Analytical Surveys, Inc.

Our report refers to a change in the Company’s method of accounting for goodwill in 2002.

Our report contains an explanatory paragraph that states that 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 raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

KPMG LLP

San Antonio, Texas

December 29, 2003

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, J. Norman Rokosh, certify that:

1. I have reviewed this annual report on Form 10-K of Analytical Surveys, 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 officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and the registrant’s have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this annual report based on such evaluation; and

c) Disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: December 23, 2003

/s/ J. Norman Rokosh

      J. Norman Rokosh

      President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Lori A. Jones, certify that:

1. I have reviewed this annual report on Form 10-K of Analytical Surveys, 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 officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and the registrant’s have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this annual report based on such evaluation; and

c) Disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: December 23, 2003

/s/ Lori A. Jones

      Lori A. Jones

      Chief Financial Officer

EX-32.1

EXHIBIT 32.1

Certification of Principal Executive Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18U.S.C. §1350)

I, J. Norman Rokosh, of Analytical Surveys, Inc., certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Annual Report on Form 10-K for the year ended September 30, 2003 (the “Report”) which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Analytical Surveys, Inc.

Dated: December 23, 2003

/s/ J. Norman Rokosh

J. Norman Rokosh

President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

Certification of Principal Financial Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18U.S.C §1350)

I, Lori A. Jones, of Analytical Surveys, Inc., certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Annual Report on Form 10-K for the year ended September 30, 2003 (the “Report”) which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Analytical Surveys, Inc.

Dated: December 23, 2003

/s/ Lori A. Jones

Lori A. Jones

Chief Financial Officer