-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V6FgKqiqVs2DesW1HQRxhSDcfbWhvDzCzuyDtTaFDDOZrV8mVLCNR3aqY8+UUl+v Ga/5izR7Z4r4jmB4hMcOyg== 0000753048-96-000030.txt : 19961217 0000753048-96-000030.hdr.sgml : 19961217 ACCESSION NUMBER: 0000753048-96-000030 CONFORMED SUBMISSION TYPE: 10KSB40 PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961216 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANALYTICAL SURVEYS INC CENTRAL INDEX KEY: 0000753048 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 840846389 STATE OF INCORPORATION: CO FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10KSB40 SEC ACT: 1934 Act SEC FILE NUMBER: 000-13111 FILM NUMBER: 96681168 BUSINESS ADDRESS: STREET 1: 1935 JAMBOREE DR STREET 2: SUITE 100 CITY: COLORADO SPRINGS STATE: CO ZIP: 80920 BUSINESS PHONE: 7195930093 MAIL ADDRESS: STREET 1: 1935 JAMBOREE DRIVE STREET 2: SUITE 100 CITY: COLORADO SPRINGS STATE: CO ZIP: 80920 10KSB40 1 ANNUAL REPORT FOR PERIOD ENDED 9/30/96 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 1O-KSB Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended September 30, 1996 Commission File Number 0-13111 ANALYTICAL SURVEYS, INC. (Name of small business issuer as specified in its charter) Colorado (State of incorporation) 84-0846389 (IRS Employer Identification No.) 1935 Jamboree Drive Colorado Springs, Colorado 80920 (Address of principal executive offices) (719) 593-0093 (Telephone number) Securities registered pursuant to Section 12(g) of the Act: No Par Value Common Stock (Title of each class) 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 twelve months and (2) has been subject to such filing requirements for the past ninety (90) days: Yes __X__ No_____ Check if there is no disclosure of delinquent filers in response to Items 405 of Regulation S-B in this form, and no disclosure will be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB: Yes __X__ No_____ Issuer's revenue for its most recent fiscal year was $22,668,878. The aggregate market value of the voting stock held by non-affiliates computed by reference to average bid and asked prices of such stock, as of December 4, 1996 was $43,980,000. The number of shares of common stock outstanding as of December 4, 1996 was 4,888,651. Item 13(a) on page 25 describes the exhibits filed with the Securities and Exchange Commission and those exhibits incorporated by reference to previously filed documents. Certain sections of the definitive Proxy Statement to be filed for the 1997 Annual Meeting of Shareholders are incorporated by reference into Part III. Transitional Small Business Disclosure Format: Yes ____ No___X__ Table of Contents PART I Item 1. Description of Business 3 Item 2. Description of Property 5 Item 3. Legal Proceedings 5 Item 4. Submission of Matters to a Vote of Security Holders 5 PART II Item 5. Market for Common Equity and Related Stockholder Matters 5 Item 6. Management's Discussion and Analysis or Plan of Operation 6 Item 7. Financial Statements 10 Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 25 Part III Item 9. Directors, Executive Officers, Promoters and Control Persons, Compliance with Section 1G(a) of the Exchange Act 25 Item 10. Executive Compensation 25 Item 11. Security Ownership of Certain Beneficial Owners and Management 25 Item 12. Certain Relationships and Related Transactions 25 Item 13. Exhibits and Reports on Form 8-K 25 Signatures 28 PART I Item 1. Description of Business General Analytical Surveys, Inc., ("ASI" or the "Company") is a Colorado corporation formed in 1981. ASI's primary business is the production of precision computerized maps and information files used in Geographic Information Systems (GIS). Federal, state and local government agencies, utilities and commercial companies use Geographic Information Systems to manage information about features such as utilities, natural resources, streets, land use and property taxation. The Company completed two acquisitions during 1996 to expand into the utilities facilities data conversion market and to increase capacity and the range of conversion services offered. A Geographic Information System consists of four components: computer hardware, applications software, computerized maps and computerized information (database) files. ASI produces the last two components of the GIS; ASI does not manufacture or sell the computer hardware or applications software required by GIS end users. ASI produces maps for use on GIS computers from aerial photography using analytical stereoplotters, computer equipment and internally developed proprietary software. The Company also converts existing printed maps and other information into computerized maps and computer information files. The Company's digital imaging department prepares digital orthophotographs by scanning aerial photographs into the computer using a high resolution scanner. The distortions inherent in all aerial photography are then removed using internally developed proprietary software and the resulting digital image is accurate to mapping standards. The final product can be delivered either as a computer data file or as a printed image. ASI employs subcontractors for tasks outside its expertise such as aerial photography and ground survey. The Company also may use subcontractors for work similar to that performed by ASI in order to expand capacity, to meet deadlines, to manage work load and to encourage businesses owned by women and minorities. The Company engages in research and development activities to develop new production process software and to improve existing process software. Research and development expenditures were $283,872 in fiscal year 1996 and $347,321 in fiscal year 1995. Certain activities, principally ongoing software refinement, previously performed by the research and development group were transferred to operations staff in 1996. The industry has grown over the last several years as technical and price improvements in GIS hardware and software have expanded the GIS market by making these systems more attractive to potential customers. Marketing and Sales Virtually all of ASI's revenues are earned under fixed price contracts which cover a specific scope of work and the Company is dependent upon its ability to secure new contracts from new as well as existing customers. From time to time, the revenues earned on specific contracts may exceed ten percent of total revenues earned in a year. Those contracts which contributed more than ten percent of revenue in 1996 and 1995 are summarized in the following table. Customer 1996 1995 Southern New England Telephone 10% * Montgomery County, AL * 12% * Less than ten percent Based on the backlog remaining on these existing contracts at September 30, 1996, none of the existing projects for these customers is expected to contribute more than ten percent of revenue in future years. Backlog represents the value of revenue not yet earned on contracts awarded to the Company; it increases when new contracts are awarded and decreases as revenue is earned. The Company's backlog was approximately $40,000,000 at September 30, 1996 up from $12,620,000 at the end of 1995. The backlog includes several large projects which will extend over one to four years. These larger projects are usually fixed price agreements which increase the Company's risk due to inflation; however, the Company receives the benefit of the improved availability of production work. The Company employs 7 sales representatives to market and sell its products and services throughout the United States and internationally. The Company maintains memberships in professional and trade associations and participates in industry conferences by presenting exhibits and technical papers. Contracts are awarded by customers through direct negotiation, competitive technical evaluation, competitive bid or a combination thereof. ASI has directed its marketing efforts towards clientele who require high-quality digital mapping. Historically, ASI's customers have included cities, counties, engineering companies, utility companies and federal government agencies. Approximately half of revenues have been historically derived from state and local government contracts. These contracts may contain termination provisions for the convenience of the customer, lack of appropriated funds or default by the Company. Contracts with the United States Government, which represent less than 10% of ASI's revenues, also may be subject to renegotiation or termination. Advances in GIS technologies and the decline in the costs of computers have attracted more industrial and municipal customers into the GIS marketplace. In addition, a significant portion of ASI's revenues are generated from utility clients, both commercial and municipal. The Company expects that an increasing share of its new customers will be industrial and municipal GIS users. ASI is required to furnish performance bonds to customers on some of its contracts. The percentage of the Company's work requiring bonds varies between 10% and 30% depending on the mix of work in progress. Performance bonds are issued by a limited number of insurance companies; the continued availability of bonds depends on the Company's ability to meet the underwriting standards of potential issuers and surety market conditions. Competition The Company's management believes approximately eight companies are of comparable size and capabilities as ASI. The Company's recent two acquisitions also brought exposure to competitors with whom the Company did not previously compete. Further, the Company's management believes there is a second tier of primarily regional competitors who may seek to expand their efforts to the national and international levels. Recently developed commercial satellite companies are becoming new entrants to the larger GIS market. These include Space Imaging Inc. and EarthWatch Inc. At present the announced but not yet available products of these companies do not appear to provide the same degree of resolution as is typically required by ASI's customers. The Company's management believes these new entrants may lead to new market opportunities as markets develop increasing awareness of the value of geographic information. On the other hand, there can be no assurance that new entrants and new products will not adversely affect the Company's future operations. ASI seeks to compete on the basis of the quality of its products and the efficiency with which it can provide digital mapping services to customers. The Company uses its internally-developed proprietary software as well as commercially available software to automate much of the production process. The Company believes its systematic approach enables it to achieve more consistent quality than it could using more manually-intensive methods. The Company will evaluate the suitability of its internally developed proprietary software to the production processes employed at the two recently acquired businesses. If and when such use of this proprietary software is implemented, the desired favorable results, if any, will become apparent only gradually as existing projects would likely be completed using existing techniques and new techniques applied to newly started projects. In general, management believes this industry is competitive and certain competitors may have more capital availability than does ASI. Employees At September 30, 1996 ASI had approximately 377 employees, virtually all of whom are full-time. ASI offers its employees a typical benefits package including health, life, disability, and dental insurance; a 401-K tax deferred retirement savings plan; vacations and holidays. The Company does not provide any other pension plan to its employees. ASI does not have a collective-bargaining agreement with any of its employees and generally considers relations with its employees to be good. Item 2. Description of Property The Company leases its office and production facilities. Location Square Footage Lease Termination Colorado Springs, CO 32,000 2004 Cary, North Carolina 23,400 1998-2000 Waukesha, Wisconsin 25,300 1999 These facilities are in generally good condition and adequate for the foreseeable needs of the Company. ASI also operates sales offices in Sterling, Virginia (near Washington,D.C.) and Chattanooga, Tennessee. Item 3. Legal Proceedings The Company is not the subject of any significant outstanding legal proceedings or significant known claims. Item 4. Submission of Matters to a Vote of Security Holders There were no matters submitted to a vote of the shareholders during the fourth quarter of the year ended September 30, 1996. PART II Item 5. Market for Common Equity and Related Stockholder Matters The Company's Common Stock is traded in the NASDAQ National Market System over-the-counter market under the symbol ANLT. The trading volume in ASI's Common stock has ranged from 255,000 shares per month to 3,780,000 shares per month in the year ended September 30, 1996. This range of trading volume may contribute to stock price volatility and limited trading liquidity. The Company's Board of Directors authorized a three for two stock split of Company's no par value common stock for all common shareholders of record on June 27, 1996. All share, option and per share amounts included in this Annual Report on Form 10-KSB have been adjusted for the effects of the stock split. The following table sets forth the range of high and low prices per share for each quarterly period for the fiscal years ended September 30, 1995 and 1996 as reported by the National Association of Securities Dealers Automated Quotations System (NASDAQ). On April 1, 1995 trading in the Company's Common Stock moved from NASDAQ's Small Cap Market to NASDAQ's National Market System. Price ranges reported in the following table represent the range of bid quotations prior to April 1, 1995 and the trading range after that date. These prices reflect inter-dealer quotations without adjustments for retail markup, markdown or commission and do not necessarily represent actual transactions. Fiscal Year Ended September 30, 1995 High Low First Quarter $ 3.50 $ 2.25 Second Quarter 4.17 3.00 Third Quarter 4.92 3.25 Fourth Quarter 5.83 4.33 Fiscal Year Ended September 30, 1996 First Quarter $ 6.83 $ 4.59 Second Quarter 10.33 6.00 Third Quarter 16.00 8.08 Fourth Quarter 17.50 8.75 American Securities Transfer, Inc., the transfer agent for the shares of ASI's Common Stock, has reported that there were approximately 400 shareholders of record as of September 30, 1996. This does not include an estimated 2,500 investors holding stock in "street name." On December 4, 1996, the closing bid and asked prices of the Company's Common Stock as reported by NASDAQ were $10.00 and $10.25 respectively. Holders of the Company's Common Stock are entitled to receive dividends as and when they may be declared by its Board of Directors. No such dividends have ever been paid with respect to the Company's Common Stock and none is anticipated to be paid in the foreseeable future. Under its present bank loan agreement, the Company must obtain the bank's prior written consent should the Company wish to pay a dividend. The bank has agreed to not unreasonably withhold such consent; however, there is no assurance that the Company would receive the bank's consent to pay a dividend. Item 6. Management's Discussion and Analysis or Plan of Operation This discussion contains forward looking statements, primarily those statements which are not statements of historical facts. There are important factors that could cause results to differ materially from those anticipated in the forward looking statements including factors which are beyond the control of the Company. These factors include the competitive environment such as entry of new competitors, improved technical capabilities by existing competitors and capacity utilization achieved by all competitors. Market conditions that may also affect future results include competitive environment in the utilities market, local tax collections by municipalities and federal government spending levels. The following table sets forth selected financial data for the Company and should be read in conjunction with the financial statements and related notes included elsewhere in this document and with the balance of this Management's Discussion and Analysis :
Year ended September 30, (000's except per share amounts) 1996 1995 ---- ---- Statement of Operations Data Sales $22,669 13,538 Costs and expenses 19,264 11,519 Other expenses, net 339 119 Income tax expense 1,153 716 ------- ------ Net earnings 1,913 1,184 ======= ====== Earnings per share $ .38 .27 ======= ====== Balance Sheet Data September 30, (000's) 1996 1995 ---- ---- Current assets $16,452 8,554 Current liabilities 6,466 2,816 ------- ------ Working capital 9,986 5,738 ======= ====== Total assets $21,988 10,048 Long-term debt less current portion 4,528 408 Stockholders' equity 10,926 6,654
Results of Operations The following table summarizes the changes in selected operating indicators. The percentages on the left show the relationship of various income and expense items to net revenues. The percentages on the right measure year to year changes.
Percentage of Net Revenues* Percentage Change Year Ended September 30 from Prior Year 1996 1996 1996 1995 --- ---- ---- ---- 100 100 Sales 67 21 Costs and expenses: Salaries, wages and 46 39 related benefits 100 17 17 24 Subcontractor costs 20 23 16 16 General and administrative 64 22 6 6 Depreciation and amortization 51 3 --- --- 85 85 Total costs and expenses 67 19 --- --- 15 15 Earnings from operations 69 36 (2) (1) Other income (expense) 185 (35) --- --- 13 14 Earnings before income taxes 61 47 5 5 Income tax expense 61 46 --- --- 8 9 Net earnings 62 47 === === === === *Totals may not be exact due to rounding.
1996 Compared to 1995 Results of Operations The Company implemented a strategy to enter the utilities facility data conversion market by the acquisition of Intelligraphics International (Intelligraphics) on December 22, 1995. This acquisition lead to a more rapid entry into this market at a lower cost than would a strategy of developing both the technology and market presence through internal technology development and marketing efforts. This utilities market is competitive and margins are generally lower than those earned by the Company in its traditional markets. The lower margins are usually mitigated by the larger contract size and term and the expected greater volume of conversion work to be done in this market. A second acquisition, Westinghouse Landmark GIS, also contributed to the growth strategy and provided the capability to perform deeds research tax mapping as opposed to the use of outside subcontractors to perform this work. This acquisition also provided additional capacity in the Company's traditional photogrammetry and cadastral markets as well as an enhanced regional presence in the east and southeast regions of the country. The acquisitions, combined with the Company's original Colorado-based business, caused net income from continuing operations (net earnings) to increase 62% over the previous year on a sales increase of 67%. Total costs and expenses remain at 85% of sales with a shift between salaries, wages and benefits increasing to 46% from 39% of sales while subcontractor costs decreased to 17% of sales from 24% last year. The combination of salaries plus subcontractor costs remained at 63% of sales. This shift towards a greater salaries component reflects the higher labor input required at the two acquired production facilities and lower use of outside subcontractors in those locations. The acquisitions will also allow the Company to complete a greater proportion of its production work using internal resources as opposed to outside subcontractors. Interest expense increased 195% over the previous year due to the increased debt undertaken to complete the two acquisitions. Earnings per share increased 41% over the previous year. This increase reflects the 62% increase in net earnings (all from operations) and the 14% increase in the average number of shares outstanding in 1996 over 1995. Approximately 40% of the increase in average shares outstanding is the result of the 345,000 shares issued in connection with the Intelligraphics acquisition and the balance is due to the issuance of shares for stock option exercises. Cash flows from operating activities increased 30% in 1996 over 1995. Net earnings plus depreciation and amortization increased 57% from $1,969,000 in 1995 to $3,097,000 in 1996. Cash flows from operations were also improved by the 103% increase in tax benefit relating to exercise of employee stock options. It is unlikely that tax benefits from the exercise of employee stock options will recur at the levels experienced in 1995 and 1996. Cash flows from operations were reduced by increased investment in the net current assets of the company, principally accounts receivable and revenues in excess of billings. These contract-related balances fluctuate due to the aggregate effect of the progress on specific projects and billing and payment terms of the contracts. Cash flows used in investing activities are comprised of the cost of the acquisitions discussed above plus routine capital equipment additions. Cash flows provided by financing activities are comprised of the borrowing of cash under long-term debt for the two acquisitions and the routine use of the line of credit, scheduled debt reductions and the proceeds of stock option exercises. The Company's backlog of signed contracts increased to approximately $40,000,000 up 217% from $12,620,000 in 1995. The Company's expansion strategy has enabled it to sign significant contracts with utilities customers as well as municipal customers and commercial companies. Some of these projects are large multiple-year contracts which offer the Company the benefit of increased work but also subject the Company to increased risk due to possible inflation and/or changing customer expectations. The Company continues to seek and perform both larger and smaller projects for future work. Liquidity and Capital Resources Short-term liquidity requirements are met primarily through operating receipts supplemented by a bank line of credit with a $1,850,000 limit. At September 30, 1996, the Company's balance on the line of credit was $500,000. The cost of capital equipment is usually financed through term debt and/or capitalized leases with terms of from three to five years. The Company has up to $436,000 available under its line of credit for equipment acquisitions through the end of February 1997. The Company has not committed to any material capital purchases. Management expects to meet long-term liquidity requirements through cash flows generated by operations supplemented from time to time by short-term borrowings on a bank line of credit. Routine capital expenditures will usually be financed with term debt and/or capital leases. Management believes the line of credit combined with cash flows from operations are adequate to finance ongoing operations. Management also believes the Company will be able to finance any required capital expenditures from a combination of operating cash flows and new term debt or lease arrangements. The Company is dependent, however, upon its ability to successfully deliver acceptable products in order to maintain adequate operating cash flows. Other Risk Factors The Company faces, as do all businesses, a wide range of increasingly complex legal, regulatory and compliance requirements. The Company is not aware of any substantial risk of loss from product liability litigation nor from noncompliance with environmental, labor or other laws and regulations. The Company has been awarded several projects with contract values in the range of $3,000,000 to $10,000,000, usually on a fixed-price basis. While these projects provide improved availability of work, the projects may extend over two to four years. The extended production period may increase the Company's exposure to the risk of inflation, changes in customer expectations and customer funding capabilities. The Company has not paid any dividends since its inception, and there is no intention to pay dividends in the foreseeable future. Under its present bank loan agreement, the Company must obtain the bank's prior written consent should the Company wish to pay a dividend. The bank has agreed to not unreasonably withhold such consent; however, there is no assurance that the Company would receive the bank's consent to pay a dividend. Recent Accounting Pronouncements Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets to Be Disposed Of (SFAS 121) was issued in March 1995 by the Financial Accounting Standards Board. It requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. SFAS 121 is required to be adopted for fiscal years beginning after December 15, 1995. Adoption of this statement by the Company as of October 1, 1996 did not have a significant effect on the consolidated financial statements. Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123), was issued by the Financial Accounting Standards Board in October 1995. SFAS 123 establishes financial accounting and reporting standards for stock-based employee compensation plans as well as transactions in which an entity issues its equity instruments to acquire goods or services from non-employees. This statement defines a fair value based method of accounting for employee stock option or similar equity instruments and encourages all entities to adopt that method of accounting for all of their employee stock compensation plans. However, it also allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method of accounting prescribed by APB opinion No. 25, Accounting for Stock Issued to Employees. Entities electing to remain with the accounting in Opinion 25 must make proforma disclosures of net income and, if presented, earnings per share, as if the fair value based method of accounting defined by SFAS 123 had been applied. SFAS 123 is applicable to fiscal years beginning after December 15, 1995. The Company does not currently expect to adopt the accounting prescribed by SFAS 123; however, the Company will include the disclosures required by SFAS 123 in future annual financial statements. Item 7. Financial Statements Page Independent Auditors' Report 11 Balance Sheets 12 Statements of Operations 14 Statements of Stockholders' Equity 15 Statements of Cash Flows 16 Notes to Financial Statements 17 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 subsidiary as of September 30, 1996 and 1995, and the related consolidated statements of operations, stockholders' equity, and cash flows for the years then ended. 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 generally accepted auditing standards. Those standards require that we plan and perform the audits 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 subsidiary as of September 30, 1996 and 1995, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Denver, Colorado November 1, 1996 ANALYTICAL SURVEYS, INC. AND SUBSIDIARY Consolidated Balance Sheets September 30, 1996 and 1995 (In Thousands) Assets 1996 1995 - ------ ---- ---- Current assets: Cash $ 1,022 665 Accounts receivable, net of allowance for doubtful accounts of $60 and $20 in 1996 and 1995, respectively (notes 3, 4 and 10) 5,781 2,925 Revenue in excess of billings (notes 3 and 4) 9,329 4,705 Deferred income taxes (note 6) 105 50 Prepaid expenses and other 215 209 ------ ------ Total current assets 16,452 8,554 ------ ------ Equipment and leasehold improvements, at cost (note 4): Equipment 7,544 5,657 Furniture and fixtures 957 735 Leasehold improvements 162 134 ------ ------ 8,663 6,526 Less accumulated depreciation and amortization (6,049) (5,046) ------ ------ 2,614 1,480 ------ ------ Goodwill, net of accumulated amortization of $141 and $12 in 1996 and 1995, respectively (note 2) 2,881 14 Other assets 41 -- ------ ------ $ 21,988 10,048 ====== ======
Continued) Consolidated Balance Sheets, Continued (In Thousands) Liabilities and Stockholders' Equity 1996 1995 - ------------------------------------ ---- ---- Current liabilities: Line-of-credit with bank (note 4) $ 500 -- Current portion of long-term debt (note 4) 1,247 417 Billings in excess of revenue (note 3) 1,091 177 Accounts payable and other accrued liabilities 2,268 1,560 Accrued payroll and benefits 1,340 662 Income taxes payable 20 -- ------ ------ Total current liabilities 6,466 2,816 ------ ------ Long-term debt, less current portion (note 4) 4,528 408 Deferred income taxes payable (note 6) 4 113 Deferred compensation payable 64 57 ------ ------ Total liabilities 11,062 3,394 ------ ------ Stockholders' equity (note 7): Preferred stock - 2,500 no par value shares authorized; none issued and outstanding -- -- Common stock - 100,000 no par value shares authorized; 4,922 and 4,282 shares issued in 1996 and 1995, respectively 5,820 3,461 Treasury stock - 35 shares, at cost (125) (125) Retained earnings 5,231 3,318 ------ ------ 10,926 6,654 ------ ------ Commitments and contingencies (notes 5 and 7) $ 21,988 10,048 ====== ======
See accompanying notes to consolidated financial statements. Consolidated Statements of Operations Years Ended September 30, 1996 and 1995 (In Thousands, Except Per Share Amounts) 1996 1995 ---- ---- $ 22,669 13,538 ------ ------ Costs and expenses: Salaries, wages and related benefits 10,501 5,247 Subcontractor costs 3,898 3,244 General and administrative 3,681 2,244 Depreciation and amortization 1,184 784 ------ ------ 19,264 11,519 ------ ------ Earnings from operations 3,405 2,019 Other income (expense): Interest expense, net (351) (119) Gain on sale of assets 12 -- ------ ------ (339) (119) ------ ------ Earnings before income taxes 3,066 1,900 Income tax expense (note 6) 1,153 716 ------ ------ Net earnings $ 1,913 1,184 ====== ====== Earnings per common and common equivalent share $ .38 .27 ====== ====== Weighted average outstanding common and common equivalent shares 5,033 4,408 ====== ======
See accompanying notes to consolidated financial statements. Consolidated Statements of Stockholders' Equity Years Ended September 30, 1996 and 1995 (In Thousands)
Common stock Treasury stock Retained Shares Amount Shares Amount earnings Total Balances at October 1, 1994 3,835 2,462 -- -- 2,134 4,596 Exercise of stock options 447 562 -- -- -- 562 Tax benefit relating to exercise of stock options -- 437 -- -- -- 437 Acquisition of treasury stock -- -- (35) (125) -- (125) Net earnings -- -- -- -- 1,184 1,184 ------ ------ ------ ------ ------ ------ Balances at September 30, 1995 4,282 3,461 (35) (125) 3,318 6,654 Common stock issued in connection with business combination (note 2) 345 891 -- -- -- 891 Exercise of stock options 295 583 -- -- -- 583 Tax benefit relating to exercise of stock options -- 885 -- -- -- 885 Net earnings -- -- -- -- 1,913 1,913 ------ ------ ------ ------ ------ ------ Balances at September 30, 1996 4,922 5,820 (35) $ (125) 5,231 10,926 ====== ====== ====== ====== ====== ======
See accompanying notes to consolidated financial statements. Consolidated Statements of Cash Flows Years Ended September 30, 1996 and 1995 (In Thousands) 1996 1995 ---- ---- Cash flows from operating activities: Net earnings $ 1,913 1,184 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 1,184 785 Gain on sale of assets (12) -- Deferred income tax benefit (163) (108) Tax benefit relating to exercise of employee stock options 885 437 Changes in operating assets and liabilities, net of effect of business combinations: Accounts receivable, net (481) (1,226) Revenue in excess of billings (2,820) (717) Prepaid expenses and other 18 (67) Other assets (36) -- Billings in excess of revenue 163 (243) Accounts payable and other accrued liabilities (36) 800 Accrued payroll and benefits 130 83 Income taxes payable 20 (342) Deferred compensation payable 7 8 ------ ------ Net cash provided by operating activities 772 594 ------ ------ Cash flows used by investing activities: Purchase of equipment and leasehold improvements (919) (704) Proceeds from sale of equipment 12 -- Net assets acquired in business combinations (5,541) -- ------ ------ Net cash used by investing activities (6,448) (704) ------ ------ Cash flows provided by financing activities: Net borrowings under line-of-credit with bank 500 -- Proceeds from issuance of long-term debt 5,765 521 Principal payments on long-term debt (815) (734) Proceeds from exercise of stock options 583 561 Purchase of treasury stock -- (125) ------ ------ Net cash provided by financing activities 6,033 223 ------ ------ Net increase in cash 357 113 Cash at beginning of year 665 552 ------ ------ Cash at end of year $ 1,022 665 ====== ====== Supplemental disclosures of cash flow information: Cash paid for interest $ 344 112 ====== ====== Cash paid for income taxes $ 376 765 ====== ====== Common stock issued in connection with business combination $ 891 -- ====== ====== See accompanying notes to consolidated financial statements
Notes to Consolidated Financial Statements September 30, 1996 and 1995 (1) Summary of Significant Accounting Policies (a) Business and Basis of Financial Statement Presentation Analytical Surveys, Inc. (ASI or the Company) is a Colorado corporation formed in 1981. ASI's primary business is the production of precision computerized maps and information files used in Geographic Information Systems (GIS). Federal, state and local government agencies and commercial companies use Geographic Information Systems to manage information relating to utilities, natural resources, streets, land use and property taxation. The consolidated financial statements include the accounts of the Company and ASI Landmark Inc., its wholly owned subsidiary, which was formed in July 1996 (see note 2). All significant intercompany balances and transactions have been eliminated in consolidation. The preparation of the financial statements in conformity with generally accepted accounting principles 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. (b) Revenue Recognition The Company recognizes revenue 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. Costs associated with obtaining contracts are expensed as incurred. The Company does not combine contracts for purposes of recognizing revenue and, generally, does not segment contracts. Revenue in excess of billings represents work completed but not billed. The Company bills customers based upon the terms included in the contract, which is generally upon delivery. When billed, such amounts are recorded as accounts receivable. Billings in excess of revenue represent billings in advance of work performed. The Company recognizes losses on contracts in the period such loss is determined. The Company does not believe warranty obligations on completed contracts are material. (c) Equipment and Leasehold Improvements Equipment and leasehold improvements are recorded at cost. Depreciation and amortization are provided using the straight-line method over the following estimated useful lives: Equipment 3 to 10 years Furniture and fixtures 5 to 10 years Leasehold improvements 5 years Maintenance, repairs, and renewals which neither add to the value of the asset or extend its useful life are charged to expense as incurred. (1) Summary of Significant Accounting Policies (continued) (d) Goodwill Goodwill represents the excess of the purchase price over net assets acquired (see note 2). Goodwill is being amortized over a 15-year period using the straight-line method. (e) Income Taxes The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109). SFAS 109 requires the use of the asset and liability method of accounting for income taxes. Under the asset and liability method of SFAS 109, deferred tax assets and liabilities are 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. Under SFAS 109, 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. (f) Research and Development Costs The Company expenses research and development costs as they are incurred. Research and development costs, which are included in general and administrative expenses in the statement of operations, totaled $283,872 and $347,321 in 1996 and 1995, respectively. (g) Earnings Per Share The computation of earnings per common share is based on the weighted average number of common shares outstanding plus the effect of common stock equivalents. (h) Reclassifications Certain prior year amounts have been reclassified to conform to the 1996 presentation. (2) Business Combinations In December 1995, the Company acquired substantially all of the assets and assumed certain liabilities of Intelligraphics, Inc. for $3,548,019 cash and issued 345,000 shares of restricted common stock valued at $891,250, for total consideration of $4,439,269. Intelligraphics provides data conversion services, primarily to the utilities market. In July 1996, the Company, through its wholly owned subsidiary ASI Landmark, Inc., acquired substantially all of the assets and assumed certain liabilities of Westinghouse Landmark GIS, Inc. for cash of $1,992,598. Landmark provides photogrammetic mapping and data conversion service to the municipal and county markets. (2) Business Combinations (continued) Both acquisitions were accounted for using the purchase method of accounting. The aggregate purchase price of the 1996 acquisitions was allocated based on fair values as follows (amounts in thousands): Current assets $ 4,286 Property and equipment 1,245 Other assets, including goodwill 3,022 Current liabilities (2,121) ------ $ 6,432 ====== The following unaudited proforma information presents the results of operations of the Company as if the acquisitions of Intelligraphics, Inc. and Westinghouse Landmark GIS, Inc. had occurred on October 1, 1994 (in thousands, except per share amounts): Years ended September 30, 1996 1995 Sales $ 27,729 $ 26,869 ====== ====== Net earnings $ 1,009 $ 900 ====== ====== Earnings per share $.20 $ .19 == === The proforma information is based on historical information and does not necessarily reflect the actual results that would have occurred nor is it necessarily indicative of future results of operations of the combined enterprises. (3) Accounts Receivable, Revenue in Excess of Billings, and Billings in Excess of Revenue At September 30, 1996, the estimated period to complete contracts in process ranges from one to thirty-nine months, and the Company expects to collect substantially all related accounts receivable and revenue in excess of billings within one year. The following summarizes contracts in process at September 30 (in thousands): 1996 1995 ---- ---- Costs incurred on uncompleted contracts $ 39,007 14,702 Estimated earnings 19,464 10,292 ------ ------ 58,471 24,994 Less billings to date (50,233) (20,466) ------ ------ $ 8,238 4,528 ====== ====== Included in the accompanying balance sheets as follows: Revenue in excess of billings $ 9,329 4,705 Billings in excess of revenue (1,091) (177) ------ ------ $ 8,238 4,528 ====== ====== Notes to Consolidated Financial Statements, Continued (4) Debt The Company has a $1,850,000 revolving line of credit with a bank bearing interest at .5% over the base rate (8.75% at September 30, 1996). The line of credit is collateralized by the assignment of accounts receivable and officers life insurance proceeds and expires February 28, 1997. Borrowings of $500,000 were outstanding under the line-of-credit as of September 30, 1996. Long-term debt consists of the following at September 30 (in thousands): 1996 1995 ---- ---- Notepayable to a bank in monthly installments ranging from $63,453 to $88,834 at .5% over the base rate (8.75% at September 30, 1996), final maturity in November 2001, secured by accounts receivable, work-in-process and officer life insurance proceeds $ 4,962 -- Notes payable to a bank under a $1,250,000 equipment draw-down term loan, bearing interest at effective rates ranging from 8.13% to 11.83% at September 30, 1996, monthly payments of $42,256, final maturity in August 1999, secured by certain equipment (a) 810 743 Term notes payable in monthly installments of $1,507, including interest ranging from 7.95% to 9.40%, final maturity in November 1996, secured by certain equipment 3 82 ------ ------ 5,775 825 Less current portion (1,247) (417) ------ ------ $ 4,528 408 ====== ======
Maturities of long-term debt as of September 30, 1996, are as follows (in thousands): Years ending September 30: 1997 $ 1,246 1998 1,292 1999 1,199 2000 1,066 2001 903 Thereafter 69 ----- $ 5,775 ====== (a) The equipment draw-down term loan agreement contains restrictive covenants which require, among other things, the maintenance of certain financial ratios and include certain limitations on capital expenditures and dividend payments. (5) Leases The Company leases its facilities under operating leases. Amounts due under noncancelable operating leases with terms of one year or more at September 30, 1996 are as follows (in thousands): (5) Leases (continued) Years ending September 30: 1997 $ 990 1998 774 1999 586 2000 412 2001 351 Thereafter 1,131 ----- Total minimum lease payments $ 4,244 ===== Rent expense totaled $535,203 and $302,303 for the years ended September 30, 1996 and 1995, respectively. (6) Income Taxes Income tax expense (benefit) for the years ended September 30 is as follows (in thousands): 1996 1995 ---- ---- Current: Federal $ 1,148 713 State and local 168 111 ----- --- 1,316 824 ----- --- Deferred: Federal (141) (94) State and local (22) (14) ----- --- (163) (108) ----- --- $ 1,153 716 ===== === The exercise of non-qualified stock options results in state and federal income tax benefit to the Company related to the difference between the market price at the date of exercise and the option price. Common stock was increased by $884,459 and $437,242 in 1996 and 1995, respectively, related to the tax benefit of the exercise of stock options. Actual income tax expense differs from the amount computed using the federal statutory rate of 34% for the years ended September 30 as follows (in thousands): 1996 1995 ---- ---- Computed "expected" income tax expense $ 1,042 646 State income taxes, net of federal tax effect 101 63 Other 10 7 ----- --- Actual income tax expense $ 1,153 716 ===== === (6) Income Taxes (continued) The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at September 30, are presented below (in thousands): 1996 1995 ---- ---- Current deferred tax assets and liabilities: Accounts receivable, primarily due to allowance for doubtful accounts $ 22 7 Accrued liabilities, primarily due to accrued compensated absences for financial statement purposes 99 62 Deferred compensation related to stock options issued under the 1988 ASI Stock Option Plan 5 8 Prepaid expenses, primarily due to marketing commissions expensed for income tax purposes (21) (27) ---- ---- Total net current deferred tax asset $ 105 50 ==== ==== Non-current deferred tax assets and liabilities: Deferred compensation accrued for financial statement purposes only $ 24 21 Equipment and leasehold improvements, primarily due to differences in depreciation (28) (134) ---- ---- Total net non-current deferred tax liability $ (4) (113) ==== ====
(7) Stockholders' Equity and Stock Options The Board of Directors may issue preferred stock with rates of dividends, voting rights, redemption prices, liquidation prices, liquidation premiums, conversion rights, and other requirements without a vote of the shareholders. In 1989, the Company entered into a stock redemption agreement with its founder, who is also its chairman, chief technical officer, and a major shareholder of the Company (the Shareholder). Under the terms of the agreement, the Company may be required upon the occurrence of certain events to purchase all or a portion of the common stock owned by the Shareholder. In these instances, the purchase price will be determined based upon the mean between the quoted bid and asked price of the Company's common stock. The future events that may require purchase, and the related terms, are summarized as follows: Minimum shares required Payment Event (a) to be purchased terms --------- ------------------------ ------- Death The number of shares based upon proceeds Cash from from $1,000,000 life insurance policy insurance maintained and owned by the Company (b) policy Disability The number of shares based upon proceeds Cash from from $1,000,000 disability insurance policy insurance maintained and owned by the Company (b) policy Involuntary Maximum of all shares owned by shareholder Cash termination, except for cause (a) In the event of voluntary termination or involuntary termination for cause, the Company is not required to purchase shares. In the event of voluntary termination, the Company will have the option to purchase up to all shares owned by the Shareholder through the issuance of promissory notes. (b) The Company would be required to purchase the minimum shares based upon a request from the Shareholder or his estate. In addition, the Company may be offered the option to purchase all additional shares of the Shareholder, which may be purchased by issuing promissory notes with a three year term. At September 30, 1996, the Shareholder owned 526,050 shares of the Company's common stock, which represented approximately 11% of the outstanding common stock. The Company currently has five nonqualified stock option plans. The Board of Directors may grant options to purchase up to 2,026,500 shares of the Company's common stock to officers, directors, and key employees. The exercise price of the options is established by the Board of Directors on the date of grant. Employees may vest in their options either 100% on date of grant or 25% on date of grant and 25% each year 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 Board of Directors authorized a three for two stock split of the Company's no par value common stock for all common shareholders of record on June 27, 1996. All share, option and per share amounts included in the accompanying consolidated financial statements have been adjusted for the effects of the stock split. The following summarizes stock option activity under the plans (in thousands, except per share amounts):
Shares Option price under option per share Outstanding at October 1, 1994 1,117 .67 to 2.09 Granted 426 3.50 to 4.92 Exercised (447) .67 to 2.09 Canceled (29) 1.59 to 4.00 ----- Outstanding at September 30, 1995 1,067 .67 to 4.92 Granted 238 5.25 to 14.33 Exercised (295) 1.12 to 4.00 Canceled (21) 1.58 to 11.08 ----- Outstanding at September 30, 1996 989 .67 to 14.33 ===== At September 30, 1996: Options exercisable 502 .67 to 5.333 ===== Options available for grant 45 =====
(8) Employee Benefit Plan The Company sponsors 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 15% of their compensation, subject to certain limitations. The Company matches 50% of the employee contributions up to 4% of their compensation. The Company contributed $65,756 and $60,494 to the Plan in 1996 and 1995, respectively. Notes to Consolidated Financial Statements, Continued (9) Major Customers Sales to individual customers amounting to more than 10% of total sales were as follows: Year ended September 30: 1996 Customer A 10% 1995 Customer B 12% (10) Concentrations of Credit Risk Financial instruments which potentially expose the Company to concentrations of credit risk, as defined by Financial Accounting Standards Board's Statement No. 105, Disclosure of Information about Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with Concentration of Credit Risk, consist primarily of accounts receivable with the Company's various customers. Historically, the Company's customers have included cities, counties, engineering companies, utility companies, and federal government agencies. Substantially more than 50% of revenues have historically been derived from state and local government contracts. In addition, a significant portion of the Company's revenues are generated from utility clients, both commercial and municipal. The Company's accounts receivable are due from a variety of organizations throughout the United States. The Company provides for uncollectible amounts upon recognition of revenue and when specific credit and collection issues arise. Management's estimates of uncollectible amounts have been adequate in prior years, and management believes that all significant credit and collection risks have been identified and adequately provided for at September 30, 1996. Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Part III Item 9. Directors, Executive Officers, Promoters and Control Persons, Compliance with Section 16(a) of the Exchange Act Information required by this item is contained in the registrant's definitive proxy statement for its 1997 Annual Meeting of Shareholders to be filed on or before January 20, 1997 and such information is incorporated herein by reference. Item 10. Executive Compensation Information required by this item is contained in the registrant's definitive proxy statement for its 1997 Annual Meeting of Shareholders to be filed on or before January 20, 1997 and such information is incorporated herein by reference. Item 11. Security Ownership of Certain Beneficial Owners and Management Information required by this item is contained in the registrant's definitive proxy statement for its 1997 Annual Meeting of Shareholders to be filed on or before January 20, 1997 and such information is incorporated herein by reference. Item 12. Certain Relationships and Related Transactions Information required by this item is contained in the registrant's definitive proxy statement for its 1997 Annual Meeting of Shareholders to be filed on or before January 20, 1997 and such information is incorporated herein by reference. Item 13. Exhibits and Reports on Form 8-K (a) Index of Exhibits (3) The Exhibits set forth in the following Index of Exhibits are filed as part of this report. 3. Articles of Incorporation and By-Laws 3.1 Articles of incorporation (as amended) are incorporated by reference to the Exhibit to the Company's Registration Statement on Form S-18, Registration No. 2-93108-D. 3.2 By-laws are incorporated by reference to the Exhibits to the Company's Registration Statement on Form S-18, Registration No. 2-93108-D. 4. Instruments defining the rights of Security Holders including Indentures Form of Stock Certificate (filed with Registration Statement No. 2-93108-D and hereby incorporated by reference). 10. Material Contracts 10.1 Stock Redemption and Repurchase Agreement dated February 14, 1989 between John A. Thorpe, Chairman and Chief Technical Officer, and the registrant, incorporated herein by reference to registrant's Annual Report on Form 10-K for Fiscal Year ended September 30, 1989. 10.2 Employment Agreement between John A. Thorpe, Chairman and Chief Technical Officer, and the registrant, dated June 27, 1994 incorporated herein by reference to registrant's Quarterly Report on Form 10-QSB for June 30, 1994. 10.3 Stock Option Agreement dated July 27, 1990 and amended November 19, 1990 between Sidney V. Corder, Chief Executive Officer and President, and the registrant incorporated herein by reference to registrant's Annual Report on Form 10-K for Fiscal Year ended September 30, 1990. 10.4 Employment agreement dated June 27, 1994 between ASI and Sidney V. Corder, Chief Executive Officer and President, incorporated herein by reference to registrant's Quarterly Report on Form 10-QSB for June 30, 1994. 10.5 Stock Option Plan dated December 17, 1987 and amended on August 31, 1992 incorporated herein by reference to registrant's Annual Report on Form 10-K for Fiscal Year ended September 30, 1992. 10.6 1990 Non-Qualified Stock Option Plan dated September 21, 1990 and amended and restated on December 17, 1990 and further amended on August 31, 1992 incorporated herein by reference to registrant's Annual Report on Form 10-K for Fiscal Year ended September 30, 1992. 10.7 1991 Non-Qualified Stock Option Plan dated December 17, 1990 and amended on August 31, 1992 incorporated herein by reference to registrant's Annual Report on Form 10-K for Fiscal Year ended September 30, 1992. 10.8 1993 Non-Qualified Stock Option Plan dated December 11, 1992 incorporated herein by reference to registrant's Proxy Statement dated January 11, 1993. 10.9 Analytical Surveys, Inc. 401-K Plan dated October 1, 1988 and amended and restated May 22, 1992 incorporated herein by reference to registrant's Annual Report on Form l0-K for Fiscal Year ended September 30, 1992. 10.10 Analytical Surveys, Inc. Incentive Bonus Plan incorporated herein by reference to registrant's Annual Report on Form 10-K for Fiscal Year ended September 30, 1992. 10.11 Building lease dated August 1, 1994 incorporated herein by reference to registrant's Annual Report on Form 10-KSB for the Fiscal Year ended September 39, 1994. 10.12 Employment agreement dated September 20, 1995 between ASI and Scott C. Benger, Senior Vice President, Finance and Secretary/Treasurer incorporated herein by reference to registrant's Annual Report on Form 10-KSB for the fiscal year ended September 30, 1995. 10.13 Employment agreement dated September 20, 1995 between ASI and Raymond R. Mann , Senior Vice President, Contracts and Business Development incorporated herein by reference to registrant's Annual Report on Form 10-KSB for the fiscal year ended September 30, 1995. 10.14 1995 Non-Qualified Stock Option Plan dated August 22, 1995 incorporated herein by reference to registrant's Annual Report on Form 10-KSB for the fiscal year ended September 30, 1995. 10.15 Employment agreement dated December 22, 1995 between ASI and William D. Nantell, Senior Vice President (included in the exhibits section). 23. Consent of Experts: Consent of KPMG Peat Marwick LLP (included in the exhibits section). Consent of Daniel P. Edwards, P.C. (included in the exhibits section). 27. Financial Data Schedule Item 13. Exhibits and Reports on Form 8-K (b) Reports on Form 8-K One report on Form 8-K was filed during the fourth quarter of fiscal year 1996, including items 2 and 7 regarding the acquisition of substantially all of the net assets of Westinghouse Landmark GIS, Inc. Signatures In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized as of the 11th day of December, 1996. Analytical Surveys, Inc. By /s/ John A. Thorpe John A. Thorpe, Chairman of the Board In accordance with the Securities Exchange Act of 1934 this report has been signed below by the following persons on behalf of the registrants and in the capacities indicated as of the 11th day of December, 1996. Signature Title /s/ John A. Thorpe John A. Thorpe Chairman and Chief Technical Officer /s/ Sidney V. Corder Sidney V. Corder Director, President and Chief Executive Officer /s/ Scott C. Benger Scott C. Benger Sr. Vice President Finance and Secretary/Treasurer (principal financial officer and principal accounting officer) /s/ Brian J. Yate Brian J. Yates Controller ____________________ Richard P. MacLeod Director /s/ James T. Rothe James T. Rothe Director ____________________ Robert H. Keeley Director /s/ Willem H. J. Andersen Willem H. J. Andersen Director EX-10 2 EMPLOYMENT AGREEMENT WITH SENIOR EXECUTIVE Employment Agreement THIS EMPLOYMENT AGREEMENT is signed as of the 22nd day of December, 1995, by and between ANALYTICAL SURVEYS, INC., a Colorado corporation (hereinafter referred to as the "Employer" or "ASI"), and WILLIAM NANTELL (hereinafter referred to as the "Employer"). WITNESSETH THAT: WHEREAS, Employee has been employed by Intelligraphics, Inc. ("Intelligraphics"): and that employment has now been terminated by reason of ASI's acquisition of substantially all of the assets of Intelligraphics; and WHEREAS, ASI wants to hire the employee, and ASI and Employee desire to state in writing the terms and conditions of their agreements and understandings, and to continue the term of Employee's employment hereunder; NOW, THEREFORE, in consideration of the foregoing, of the mutual promises herein contained, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending legally to be bound, agree as follows: 1. Term of Employment. The term shall commence on December 22, 1995, and shall continue through December 31, 1996, unless sooner terminated in accordance with the provisions of Paragraph 6 or unless extended by Employer under Paragraph 6.4. 2. Duties of Employee. 2.1 It is understood and agreed that Employee's principal duties on behalf of Employer are and shall be as President of the Intelligraphics Division of ASI, or such additional responsibilities as assigned by the President of ASI. In accepting employment by Employer, Employee shall undertake and assume the responsibility of performing for and on behalf of Employer whatever duties are reasonably necessary and required in his position as President of the Intelligraphics Division of ASI. Employer agrees that it will not relocate Employee from his current employment in Waukesha, Wisconsin to any other place of employment, without Employee's prior consent which Employee agrees to consider in good faith. Employer agrees that it will not change Employee's title as President of the Intelligraphics Division of ASI. 2.2 Employee covenants and agrees that at all times during the term of this Agreement, Employee shall devote his full-time efforts to his duties as an employee of the Employer. 3. Compensation. 3.1 Salary. As compensation for the services to be rendered by Employee for Employer under this Agreement, Employee shall be paid not less than the following base annual salary, on the same basis (biweekly) as ASI's payroll, during the term hereof: $130,000.00, plus annual increases and bonuses, if any, as directed by the President of ASI. 3.2 Bonus. Employee shall be a participant in the Intelligraphics Division of ASI Incentive Bonus Plan effective through September 30, 1996 (and, if the option is exercised under Paragraph 6.4, through September 30, 1997) ("Bonus Plan"). The Bonus Plan is attached hereto as Exhibit A. 3.3 Salary Review. Employee's salary will be reviewed annually for appropriate increases, if any, in January, commencing January, 1997. 4. Additional Benefits. In addition to, and not in limitation of, the compensation referred to in Paragraph 3, Employee shall be paid the following additional benefits during the term hereof: 4.1 Reimbursement. Reimbursement of all reasonable expenses incurred by him in connection with performance of his duties upon submission of vouchers. Reasonable expenses shall include, but not be limited to all reasonable out-of-pocket expenses for entertainment, automobile expenses, travel, meals, lodging, professional fees, professional dues and the like incurred by him in the interest of the Employer, subject to such guidelines and policies as may be promulgated by Employer for senior executives. 4.2 Vacations. Employee shall be entitled to vacations of not less than four (4) weeks per year, in accordance with the Employer's regular vacation policies established for senior executives; provided, that Employee may accrue any unused vacation time from year to year, and upon termination of employment will be compensated for any unused vacation time. 4.3 Death of Disability Payments. In the event of the Employee's disability or death prior to December 31, 1996 (or prior to December 31, 1997, if the option is exercised under Paragraph 6.4), Employee's salary in effect at the time of his death or disability shall continue to be paid to the Employee, or to his designee, for a period of six (6) calendar months from the date of death or from the date of Employee's termination by reason of disability. For the purposes of this Employment Agreement, the obligations of the Employer to make the payments upon the disability of Employee shall not become effective unless and until all of the following conditions are met, as determined by an independent physician selected by the President of ASI and agreed to by Employee: (1) Employee shall become physically or mentally incapable (excluding infrequent and temporary absences due to ordinary illnesses) of properly performing the services required of him in accordance with his obligations under paragraph 2 hereof or similar provisions of any renewal Agreement; (2) such incapacities shall exist or be reasonably expected to exist for more than ninety (90) days in the aggregate during the period of twelve (12) consecutive months; and (3) either Employee or Employer shall have given the other party thirty (30) days' written notice of his or its intention to terminate the active employment of Employee because of such disability. 4.4 Life Insurance. Employee shall be provided with a term life insurance policy in the amount of $150,000 (provided he can meet the medical conditions for such coverage without being "rated"), payable to such beneficiaries as he shall designate, with an additional $150,000 of accidental death coverage. 4.5 Comparable Benefits. Employee shall also be provided with additional comparable benefits, if any, to those Employee was receiving from Intelligraphics at the time of his termination of employment with Intelligraphics. 5. Disclosure of Information. Employee acknowledges that in and as a result of his employment hereunder, he will be making use of, acquiring, and/or adding to confidential information of a special and unique nature and value relating to such matters as Employer's trade secrets, systems, procedures, manuals, confidential reports, and lists of clients. As a material inducement to Employer to enter into this Agreement and to pay to Employee the compensation stated in Paragraph 3, as well as any additional benefits stated in Paragraph 4, Employee covenants and agrees that he shall not, other than in the ordinary course of business conducted for ASI, at any time during or following the term of his employment, directly or indirectly divulge or disclose for any purpose whatsoever or appropriate to his own use or to the use of others any confidential information that has been obtained by, or disclosed to him, as a result of his employment by Employer. 6. Termination. 6.1 Termination by Employer. (A) If Employer terminates Employee's employment without cause prior to December 31, 1996, Employer will continue to pay compensation and benefits to Employee (as if Employee still were employed), and Employee shall be subject to the non-compete provisions (the "Non-Compete") described in paragraph 7, for the period beginning on the date of termination and ending seven months there- after. (B) If Employer exercises the option described in paragraph 6.4 and then terminates Employee's employment without cause prior to December 31, 1997, Employer will continue to pay compensation and benefits to Employee (as if Employee still were employed), and the Non-Compete shall apply, each for a period beginning on the date of termination and ending seven months thereafter. (C) If Employer terminated Employee's employment with cause, at any time, the Non-Compete will apply for a period beginning on the date of termination and ending 12 months thereafter. 6.2 Termination by Employee. (A) If Employee terminates his employment without cause prior to December 31, 1996, or, if Employer exercises the option in paragraph 6.4 and Employee terminates his employment without cause prior to December 31, 1997, then the Non-Compete will apply for a period beginning on the date of termination and ending 12 months thereafter. (B) If Employee terminates his employment with cause prior to December 31, 1996, or, if Employer exercises its option in paragraph 6.4 and Employee terminates employment with cause prior to December 31, 1997, Employer will pay compensation and benefits to Employee (as if Employee still were employed), and the Non-Compete will apply, each for a period beginning on the date of termination and ending seven months thereafter. 6.3 Non-Renewal and Termination by Employee Without Cause. If Employer does not exercise its option in paragraph 6.4 or if Employer exercises its option in paragraph 6.4 but Employer and Employee do not enter a new agreement prior to January 1, 1998, and in either event Employee thereafter terminates employment without cause, then Employer, at its option (to be exercised within ten business days after such termination specifying the period during which the payments and Non-Compete shall apply), may pay Employee 75% of the compensation and 75% of the cost of benefits that Employee would have received under the terms of this Agreement in effect as of December 31, 1996 or December 31, 1997, as the case may be if Employee had remained employed, and the Non-Compete will apply to Employee for any period in which such payments are made, but such period may not extend beyond twelve months from the date of termination without the mutual written agreement of the parties. 6.4 Option to Extend. At Employer's option, and upon payment to Employee of an additional $10,000, on or before January 1, 1997, Employee agrees that the term of this Agreement will be extended through December 31, 1997 and that he will not voluntarily terminate his employment at any time prior to December 31, 1997. If the option in exercised, and if Employee has not terminated employment without cause prior January 1, 1998, Employer will pay to Employee an additional $10,000. 6.5 Except as provided in paragraphs 6.1(c) and 6.2(a), the provisions set forth above regarding compensation and applicability of the Non-Compete are the exclusive remedy for damages for a termination of employment (but not for any other breach), except that Employer shall be entitled to equitable relief for any breach of the Non-Compete. 6.6 "For Cause" Definition. For purposes hereof, the term "for cause," in the case of a breach by Employee, shall mean the failure of Employee for any reason, within thirty (30) days after receipt by Employee of written notice thereof from Employer, to correct, cease, or otherwise alter any action or omission to act that constitutes a material and willful breach of this Agreement likely to result in material damage to ASI, or willful gross misconduct likely to result in material damage to ASI (including but not limited to any such willful activities or participation in such willful activities, directly or indirectly, which are materially adverse to the Employer or violate Employee's duty of loyalty to the Employer); and, in the case of a breach by Employer, shall mean a material default by Employer which remains uncured 30 days after Employer gives Employer notice of such breach or any reduction of duties of Employee such that Employee ceases to have executive supervisory responsibilities. 6.7 Effective Date of Termination. (A) The effective date of termination with respect to termination "without cause," shall be the date of which Employee actually ceases to perform his duties hereunder. (B) The effective date of termination with respect to termination "for cause," shall be thirty (30) calendar days after the date on which Employee receives written notice of termination. 6.8 Limitation on Severance Compensation. Notwithstanding any other provision of this Agreement, the aggregate of the amount of severance compensation paid to the Employee under this Agreement or otherwise, shall not include any amount that the Employer is prohibited from deducting for federal income tax purposes by virtue of Section 280G of the Internal Revenue Code or any successor provision. 7. Covenant Not to Compete. During any applicable period specified in paragraph 6, the Employee shall not directly or indirectly own, control, operate, manage, consult, own shares in, be employed by, or otherwise participate in any sole proprietorship, corporation, partnership or other entity whose primary business is the same or similar to the business of ASI within the territory in which ASI does business. This covenant of non-competition has been negotiated and agreed to by and between the Employer and Employee with full knowledge of, and pursuant to the requirements of Section 8-2-113 (2) of Colorado Revised Statutes, as amended from time to time, and is deemed by both parties to be fair and reasonable under the terms of that statute. 8. Other Business Activities. During the period of his employment under this Agreement, the Employee shall not be employed by or otherwise engage or be interested in any business whether or not in competition with ASI, with the following exceptions: (A) Employee's investment in any business shall not be considered a violation of this paragraph, provided that such business is not in competition with ASI and so long as any services rendered to such business by Employee do not in any way interfere with Employee's duties under this Agreement. (B) Employee may consult with other businesses not in competition with ASI, if expressly considered and approved in advance by the President of ASI (in his or her sole discretion). 9. Indemnification. So long as Employee is not found by a court of law to be guilty of a willful and material breach of this Agreement, or to be guilty of gross misconduct, he shall be indemnified from and against any and all losses, liability, claims and expenses, damages, or causes of action, proceedings or investigations, or threats thereof (including reasonable attorney fees and expenses of counsel satisfactory to and approved by Employee) incurred by Employee, arising out of, in connection with, or based upon Employee's services and the performance of his duties pursuant to this Employment Agreement, or any other matter contemplated by this Employment Agreement, whether or not resulting in any such liability subject to such limitations as are provided by the Colorado Business Corporations Act; and Employee shall be reimbursed by Employer as and when incurred for any reasonable legal and other expenses incurred by Employee in connection with investigating or defending against any such loss, claim, damage, liability, action, proceeding, investigation or threat thereof, or producing evidence, producing documents or taking any other action in respect thereto (whether or not Employee is a defendant in or target of such action, proceeding or investigation), subject to such limitations as are provided by the Colorado Business Corporations Act. 10. [Intentionally Omitted.] 11. Burden of Benefit. This Agreement shall be binding upon, and shall inure to the benefit of, Employer and Employee, and their respective heirs, personal and legal representatives, successors, and assigns and shall be expressly binding upon and inure to the benefit of any person or entity acquiring ASI by merger, consolidation, purchase of all or substantially of its assets or 80% or more of its outstanding common stock; provided, however, that the interests of the Employee hereunder are not subject to the claims of his creditors, and may not be voluntarily or involuntarily assigned, alienated or encumbered. 12. Release. Employee, by signing this Agreement, hereby forever releases ASI against any claims or liabilities whatsoever arising out of his employment by Intelligraphics. 13. Governing Law. It is understood and agreed that the construction and interpretation of this Agreement shall at all times and in all respects be governed by the laws of the State of Colorado. 14. Severability. The provisions of this Agreement, including particularly but not solely, the provisions of Paragraphs 5 and 7, shall be deemed severable, and the invalidity or unenforceability of any one or more of the provisions of this Agreement shall not affect the validity and enforceability of the other provisions. 15. Notice. Any notice required to be given shall be sufficient if it is in writing and sent by certified or registered mail, return receipt requested, first-class postage prepaid, to his residence in the case of Employee, and to its principal office in the case of Employer. 16. Entire Agreement. This Agreement contains the entire Agreement and understanding by and between Employer and Employee with respect to the employment of Employee, and no representations, promises, agreements, or understandings, written or oral, not contained herein shall be of any force or effect. No change or modification of this Agreement shall be valid or binding unless it is in writing and signed by the party intended to be bound. No waiver of any provision of this Agreement shall be valid unless it is in writing and signed by the party against whom the waiver is sought to be enforced. No valid waiver of any provision of this Agreement at any time shall be deemed a waiver of any other provision of this Agreement at such time or at any other time. 17. Counterparts. The Agreement may be executed in two or more counterparts, any one of which shall be deemed the original without reference to the others. 18. Dispute Resolution. All disputes arising out of or related to this Agreement, including any claims that all or any part of this Agreement is invalid, illegal, voidable, or void, will be settled by arbitration, pursuant to an Arbitration Agreement between ASI, Intelligraphics, Inc., certain former employees of Intelligraphics, Inc., Joanne Huelsman, James Carpenter, the members of the board of directors of the Company who are voting trustees under the Voting Trust Agreement and Bank One, Colorado, NA dated December 22, 1995. IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement as of the day and year first above written. EMPLOYEE: EMPLOYER: ANALYTICAL SURVEYS, INC., a Colorado corporation /s/ William Nantell By: Sidney V. Corder WILLIAM NANTELL SIDNEY V. CORDER, President EX-23 3 CONSENT OF INDEPENDENT AUDITORS Consent of Independent Auditors The Board of Directors Analytical Surveys, Inc.: We consent to incorporation by reference in the registration statements (No. 33-24142, No. 33-33948, No. 33-53950, and No. 33-59940) on Form 10-KSB of Analytical Surveys, Inc. of our report dated November 1, 1996, relating to the balance sheets of Analytical Surveys, Inc. and subsidiary as of September 30, 1996 and 1995, and the related consolidated statements of operations, stockholders' equity, and cash flows for the years then ended which report appears in the September 30, 1996 Annual Report on Form 10-KSB of Analytical Surveys, Inc. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP Denver, Colorado December 11, 1996 EX-23 4 CONSENT OF LEGAL COUNSEL December 12, 1996 Securities and Exchange Commision Judicial Plaza 450 Fifth Street, NW Washington, DC 20549 Re: Analytical Surveys, Inc. CONSENT OF COUNSEL I hereby consent to the use of my name as legal counsel in the Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended September 30, 1996 filed by Analytical Surveys, Inc. on Form 10-KSB. DANIEL P. EDWARDS, P.C. /s/ Daniel P. Edwards DANIEL P. EDWARDS, President EX-27 5
5 The schedule contains summary financial information extracted from SEC Form 10-QSB and is qualified in its entirety by reference to such financial statements. 1,000 12-MOS SEP-30-1996 SEP-30-1996 1022 0 15170 60 0 16452 8663 6049 21988 6466 0 0 0 5695 5231 21988 0 22669 0 19264 (12) 0 351 3066 1153 1913 0 0 0 1913 .38 .38
-----END PRIVACY-ENHANCED MESSAGE-----