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 December 31, 2008.
                                       OR
         [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

             For the Transition Period From __________ to __________

                          Commission File Number 1-9720
                           PAR TECHNOLOGY CORPORATION
             (Exact name of registrant as specified in its charter)

           Delaware                                           16-1434688
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                           Identification Number)

      PAR Technology Park
      8383 Seneca Turnpike
      New Hartford, New York                                  13413-4991
(Address of principal executive offices)                      (Zip Code)

                                 (315) 738-0600
              (Registrant's telephone number, including area code)

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:

                                                    Name of Each Exchange on
  Title of Each Class                                   Which  Registered

Common Stock,  $.02 par value                       New York Stock Exchange

     Indicate by check mark if the registrant is a well-known  seasoned  issuer,
as defined in Rule 405 of the Securities Act.   Yes [  ]   No [ X ]

     Indicate by check mark if the  registrant  is not  required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [  ]  No [ X ]

     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. [ ]

     Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated  filer, a non-accelerated  filer, or a smaller reporting company.
See definitions of "large accelerated filer",  "accelerated filer", and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

     Large Accelerated Filer [ ] Accelerated Filer [X] Non-Accelerated Filer [ ]
Smaller reporting company [ ] (Do not check if a smaller reporting company)

     Indicate  by check mark  whether  the  registrant  is a shell  company  (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

     As of June  30,  2008,  the  last  business  day of the  registrant's  most
recently  completed  second fiscal  quarter,  the aggregate  market value of the
shares of voting  common  stock held by  non-affiliates  of the  registrant  was
approximately  $59,866,000  based upon the closing price of the Company's common
stock.

     The  number of shares  outstanding  of  registrant's  common  stock,  as of
February 28, 2009 - 14,536,963 shares.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the  registrant's  proxy  statement in connection with its 2009
annual meeting of stockholders are incorporated by reference into Part III.
<PAGE>



                           PAR TECHNOLOGY CORPORATION

                                TABLE OF CONTENTS
                                    FORM 10-K

-------------------------------------------------------------------------------
     Item Number
-------------------------------------------------------------------------------

                                     PART I

         Item 1.        Business
         Item 1A.       Risk Factors
         Item 2.        Properties
         Item 3.        Legal Proceedings

                                     PART II

         Item 5.        Market for the Registrant's Common Equity, Related
                        Stockholder Matters and Issuer Purchases of
                        Equity Securities
         Item 6.        Selected Financial Data
         Item 7.        Management's Discussion and Analysis of
                        Financial Condition and Results of Operations
         Item 7A.       Quantitative and Qualitative Disclosures
                        About Market Risk
         Item 8.        Financial Statements and Supplementary Data
         Item 9A.       Controls and Procedures
         Item 9B.       Other Information

                                    PART III

         Item 10.       Directors, Executive Officers and
                          Corporate Governance
         Item 11.       Executive Compensation
         Item 12.       Security Ownership of Certain Beneficial Owners
                          and Management and Related Stockholder Matters
         Item 13.       Certain Relationships and Related Transactions,
                          and Director Independence
         Item 14.       Principal Accounting Fees and Services

                                     PART IV

         Item 15.       Exhibits, Financial Statement Schedules

                        Signatures


<PAGE>
"Safe Harbor"  Statement under the Private  Securities  Litigation Reform Act of
1995


     This document contains  "forward-looking  statements" within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities  Exchange Act of 1934.  Any  statements  in this document that do not
describe  historical  facts  are  forward-looking  statements.   Forward-looking
statements in this document (including  forward-looking statements regarding the
continued  health of the hospitality  industry,  future  information  technology
outsourcing opportunities,  an expected increase in contract funding by the U.S.
Government, the impact of current world events on our results of operations, the
effects of  inflation  on our  margins,  and the  effects of  interest  rate and
foreign currency fluctuations on our results of operations) are made pursuant to
the safe harbor  provisions of the Private  Securities  Litigation Reform Act of
1995. When we use words such as "intend,"  "anticipate,"  "believe," "estimate,"
"plan,"  "will," or  "expect",  we are  making  forward-looking  statements.  We
believe that the assumptions and expectations  reflected in such forward-looking
statements  are  reasonable,  based on  information  available to us on the date
hereof,  but we cannot assure you that these  assumptions and expectations  will
prove to have been correct or that we will take any action that we presently may
be planning.  We have disclosed  certain  important factors that could cause our
actual  future  results  to  differ  materially  from our  current  expectation,
including  a decline  in the volume of  purchases  made by one or a group of our
major customers; risks in technology development and commercialization; risks of
downturns in economic conditions  generally,  and in the quick-service sector of
the hospitality market specifically; risks associated with government contracts;
risks associated with competition and competitive  pricing pressures;  and risks
related to foreign  operations.  Forward-looking  statements  made in connection
with  this  report  are  necessarily  qualified  by  these  factors.  We are not
undertaking  to update or revise  publicly any  forward-looking  statement if we
obtain new information or upon the occurrence of future events or otherwise.
<PAGE>


                           PAR TECHNOLOGY CORPORATION

                                     PART I


Item 1:  Business

     PAR Technology  Corporation (PAR or the Company)  conducts  business in two
distinct segments:  Hospitality and Government. PAR's core business is providing
technology solutions,  including hardware,  software and  professional/lifecycle
support  services to businesses in the global  hospitality and specialty  retail
industries.  The  Company  continues  to be a leading  supplier  of  hospitality
management  technology  systems to  quick-service  restaurants  with over 50,000
systems  installed  in more than 105  countries.  PAR's  hospitality  management
software applications are feature rich which allows for more efficient operation
of businesses and enterprises by managing  transaction and operational data from
end-to-end   and  helping  to  maximize   profitability   through  more  optimal
operations.  PAR's  professional  services  mission is to enable  businesses  to
achieve the full potential of their hospitality technology investment.

     As a leading  provider of  professional  services and  enterprise  business
intelligence  technology  to the  hospitality  sector,  PAR has solid  long-term
relationships  with  the  restaurant   industry's  two  largest  corporations  -
McDonald's Corporation and Yum! Brands, Inc. (Yum!).  McDonald's has over 32,000
restaurants  in more than 120 countries and PAR has been a selected  provider of
restaurant technology systems and lifecycle support services to McDonald's since
1980.  In 2007,  PAR was  selected by  McDonald's  as its  inaugural  Technology
Supplier of the Year.  Yum! (which includes Taco Bell, KFC, Pizza Hut, Long John
Silver's and A&W Restaurants) has been a loyal PAR customer since 1983. Yum! has
over  33,000  units  globally  and  PAR  continues  to be a  major  supplier  of
management  technology  systems to Taco Bell as well as the Point-of-Sale  (POS)
vendor of choice to KFC Corporate  Restaurants.  Other  significant  hospitality
chains  where PAR is the POS vendor of choice  are:  Subway  Restaurants,  Legal
Seafood,  Boston Market,  CKE  Restaurants  (including  Hardees and Carl's Jr.),
Catalina  Restaurant Group,  Carnival Cruise Lines, and large franchisees of the
above mentioned brands.

     PAR's Government  business provides technical  expertise in the development
of  advanced  technology  systems  for  the  Department  of  Defense  and  other
Governmental  agencies.  Additionally,  PAR provides information  technology and
communications  support services to the U.S. Navy, U.S. Air Force and U.S. Army.

<PAGE>

PAR focuses its computer-based  system design services on providing high quality
technical services,  ranging from experimental  studies to advanced  operational
systems,  within a variety  of areas of  research,  including  radar,  image and
signal processing,  logistics  management  systems,  and geospatial services and
products.  Through  Government-sponsored   research  and  development,  PAR  has
developed technologies with relevant commercial applications. A prime example of
this "technology transfer" is the Company's point-of-sale technology,  which was
derived from research and development  involving microchip processing technology
sponsored by the  Department of Defense.  Our most recent  example of technology
transfer  is the  Company's  logistics  management  tracking  systems.  This PAR
initiative   brings  tracking,   security  and  information   solutions  to  the
intermodal,  cold chain and land shipping  industry.  Through an integrated GPS,
RFID, cellular, Satellite Communications,  and internet PAR solution, owners and
operators of refrigeration,  tank, dry van, intermodal, and generator containers
have real time information on the status and location of assets and cargo around
the globe.

     Information  concerning the Company's industry segments for the three years
ended  December 31, 2008 is set forth in Note 11 to the  Consolidated  Financial
Statements included elsewhere herein.

     The Company's  common stock is traded on the New York Stock  Exchange under
the symbol "PTC". Our corporate headquarters are located at PAR Technology Park,
8383 Seneca Turnpike, New Hartford, New York 13413-4991;  telephone number (315)
738-0600. Our website address is http://www.partech.com.  Through PAR's website,
its Annual  Report on Form 10-K,  quarterly  reports on Form 10-Q,  and  current
reports on Form 8-K and amendments thereto are available to interested  parties,
free of charge.  Information contained on our website is not part of this Annual
Report on Form 10-K.

     Unless the context otherwise requires,  the term "PAR" or "Company" as used
herein, means PAR Technology Corporation and its wholly-owned subsidiaries.
<PAGE>


                               Hospitality Segment

     PAR provides  restaurant  management  technology  solutions  which  combine
software applications,  an Intel(R) based hardware platform and installation and
lifecycle support services.  PAR's restaurant management offering includes fixed
and  wireless  order-entry  terminals,   self-service  kiosks,  kitchen  systems
utilizing  printers and/or video monitors,  food safety  monitoring  tools, back
office  applications and enterprise  business  intelligence  software.  PAR also
provides  hospitality  management solutions that satisfy the property management
technology needs for an array of hospitality  enterprises,  including  five-star
city-center hotels,  destination spa and golf properties,  timeshare  properties
and five star resorts worldwide. PAR offers extensive service,  support, systems
integration and professional service  capabilities.  PAR's service professionals
design, tailor, implement and maintain solutions that enable customers to manage
all aspects of operational data collection and processing for single or multiple
site enterprises from a central location.

Products
--------

     The Company's integrated hospitality management software applications allow
its customers to configure their  technology  systems to meet their order entry,
food preparation,  inventory,  labor and property management coordination needs,
while capturing all pertinent data  concerning the  transactions at the specific
location  and  delivering  it  throughout  the  enterprise.   PAR's  hospitality
management  systems are based on more than 29 years of experience and knowledge,
and an in-depth understanding of the hospitality marketplace. This knowledge and
expertise is reflected in innovative product design,  implementation  capability
and systems integration skills.

         Software

     The Company's range of restaurant  software  products cover the hospitality
market  with   offerings  that  meet  the   requirements   of  large  and  small
operators/corporations  alike.  PAR has  three  major  point-of-sale  offerings.
First,  the Company's  enterprise-enabled  solution built on a  service-oriented
architecture.  This  streamlines  the order process for table  service,  counter
service,  and bar  operations,  while  simplifying  IT support with  centralized
application  management and real-time data transmission between restaurant sites
and the enterprise.

     Second,  for  franchisees  in the quick service  restaurant  (QSR) and fast
casual markets,  PAR offers a multi-brand  point of sale application  containing
features  and  functions  such as  real-time  mirror  imaging of critical  data,
on-line graphical help and interactive diagnostics, all presented with intuitive

<PAGE>

graphical user interfaces. This application contains an Enterprise Configuration
Manager  that  provides  business-wide  management  of the  point-of-sale  data,
including diverse concept menus, security settings and system parameters.

     Third,  is  PAR's  easy-to-use   solution  primarily  sold  to  independent
restaurants  through the Company's  business  partners  (dealer)  channel.  This
integrated software solution includes a point-of-sale  software  application,  a
wireless  ordering  software   capability,   an  on-line  ordering  feature,  an
enterprise  management  software function,  and an in-store and enterprise level
loyalty and gift card information sharing application.

     In addition to point-of-sale software, PAR offers a number of complementary
restaurant  technologies.  These  include a wireless  order-taking  and  payment
capability,  an above  store  reporting  software  application  that  utilizes a
web-based reporting platform with the latest technology from Microsoft's .Net(R)
platform.  Additionally,  the Company's back office software  allows  restaurant
owners to  control  critical  food and labor  costs  using  intuitive  tools for
forecasting, labor scheduling and inventory management.

     In addition,  PAR  continues to be a provider of software  solutions to the
hotel/resort industry. Today,  hospitality-oriented  businesses have the ability
to manage  information and leverage their  relationships  with customers through
integrated technology systems.  PAR's technology systems provide a seamless user
interface to manage all aspects of the guest experience as well as consolidating
customer  information  and  history  into  a  central,  single  database.  PAR's
SMS|Host(R)  Hospitality  Management  System provides a complete set of tools at
the  fingertips of hotel and spa staff for selling and  delivering  personalized
guest services.  All business functions are seamlessly integrated with the front
office, from guest room check-in, to spa appointments,  or retail purchases. The
SMS|Host product suite, including over 20 seamlessly  integrated,  guest-centric
modules, provides hotel and resort staff with the tools they need to personalize
service, anticipate guest needs, and consistently exceed guest expectations. The
SMS|Host  module,  SMS|Enterprise,  enables  a chain or  management  company  to
instantly create a real-time, single-image consolidation of all details from all
locations within a large organization for use as a central information system or
as  a  fully  integrated  Property  Management  System(PMS)/Central  Reservation
System(CRS).
<PAGE>

     PAR also  markets  SpaSoft(R) a  stand-alone  spa  management  application.
SpaSoft Spa Management  System is designed to satisfy the unique needs of resort
spas, day spas, and medi-spas. Validated by VISA(R) as compliant with CISP (Card
Information  Security  Program) Payment  Application  Best Practices,  SpaSoft's
unique booking engine,  advanced resource  inventory,  yield management  module,
scheduling,  management  and reporting  tools assist in the total  management of
sophisticated  hotel/resort spas and day spas.  Because SpaSoft was specifically
designed  for the  needs  of the spa  industry,  it  assists  the spa  staff  in
providing the individualized, impeccable guest service that their most important
clients desire and expect.

         Hardware

     PAR's  hardware   platforms  offer  customers   proven   performance  at  a
cost-conscious  price  point.  PAR  continues to offer  hardware  designed to be
durable,  scalable,  integrated and highly  functional.  PAR's  Pentium-designed
systems are developed to host the powerful  point-of-sale  software applications
in the hospitality industry with open architecture, industry standard components
which are compatible with most operating systems. The hardware platforms support
a distributed  processing  environment and  incorporate an advanced  hospitality
management  technology  system,  utilizing  Intel  microprocessors,  standard PC
expansion slots,  Ethernet LAN, standard Centronics printer ports as well as USB
ports.  The hardware  systems  supply their  industry-standard  components  with
features for  hospitality  applications  such as multiple  video ports.  The POS
systems utilize architecture that allows for the integration of a broad range of
PAR and third-party  peripherals  and is ultimately  designed to withstand harsh
hospitality   environments.   Both   hardware   platforms   have   a   favorable
price-to-performance  ratio  over the life of the system as a result of their PC
compatibility, ease of expansion and high reliability design.

     PAR  manufactures  and/or  sells  a  full  range  of  hardware  peripherals
including cash drawers,  coin changers,  receipt printers,  kitchen videos, bump
bars, kitchen printers and office printers.

     PAR also offers a kiosk solution,  which features both a touch screen and a
keyboard in a clean,  approachable design suitable for deployment of a number of
different  software  application types that include employee training and hiring
to promotional  content and nutrition  information.  This kiosk offering enables
restaurant operators to create a self-service  information hub for employees and
guests.
<PAGE>
Systems Installation and Professional Services
----------------------------------------------

     PAR's ability to offer installation,  maintenance,  and support services is
one of the Company's key  differentiators.  PAR continues to work in unison with
its  customers  to  identify  and  address  the  latest  hospitality  technology
requirements by creating interfaces to equipment,  including innovations such as
automated cooking and drink-dispensing devices, customer-activated terminals and
order display units located inside and outside of the customer's  business site.
The Company provides its systems integration  expertise to interface specialized
components,  such as video monitors, coin dispensers and non-volatile memory for
journalizing   transaction   data,   as  is  required   in  some   international
applications.

     PAR employs experienced individuals with diverse hospitality backgrounds in
both hotels/resorts and restaurants. PAR has the knowledge and expertise to help
its customers  structure  property  management  solutions which can be used most
effectively in restaurants and hotels,  with an emphasis on maximizing return on
investment.  In addition,  the Company has secured  strategic  partnerships with
third-party  organizations  to offer a variety  of  credit,  debit and gift card
payment  options  that allow  quick  service  restaurants,  convenience  stores,
gasoline  stations  and  drugstores  to process  cashless  payments  quickly and
efficiently.

         The Company's Professional Services organization continuously evaluates
new technologies and adopts those that allow PAR to provide significant
improvements in customer's day-to-day systems. From hand-held wireless devices
to advances in internet performance, the technical staff is available for
consultation on a wide variety of topics including network infrastructures,
system functionality, operating system platforms, and hardware expandability.

 Installation and Training
 -------------------------

     In the United  States,  Canada,  Europe,  South  Africa,  the Middle  East,
Australia, and Asia, PAR personnel provide software configuration, installation,
training and integration  services as a normal part of the software or equipment
purchase  agreement.  In certain areas of North and South America,  Europe,  and
Asia, the Company  provides these  installation  and training  services  through
third parties.  PAR is also staffed to provide complete application training for
a  site's  staff  as well  as  technical  instruction  for  Information  Systems
personnel.  The PAR training team is composed of  experienced  individuals  with
diverse hospitality and technical backgrounds.
<PAGE>

Maintenance and Service
-----------------------

     The Company offers a wide range of maintenance and support services as part
of its total solution for its hospitality markets. In the North American region,
the Company provides comprehensive maintenance and installation services for its
software,  hardware and systems, as well as those of third parties, through a 24
x 7 central telephone customer support and diagnostic service center in Boulder,
Colorado and Las Vegas,  Nevada.  In addition the Company has service centers in
Europe, South Africa, the Middle East, Australia, and Asia. The Company believes
that its  ability to address  all support  and  maintenance  requirements  for a
customer's  hospitality  technology network provides it with a clear competitive
advantage.

     The  Company  maintains  a field  service  network  consisting  of over 100
locations  offering  on-site  service  and  repair,  as  well as  depot  repair,
overnight unit  replacements  and spare unit rentals.  At the time a hospitality
technology  system is installed,  PAR trains customer  employees and managers to
ensure efficient and effective use of the system.  If an issue arises within the
Company's  products  (hardware and  software),  PAR's current  customer  service
management  software products allow a service technician to diagnose the problem
by telephone or by remotely entering the system,  thus greatly reducing the need
for on-site service calls.

     The   Company's   service   organization   utilizes  a  suite  of  software
applications that allows PAR to demonstrate compelling value and differentiation
to its customers  through the  utilization  of its  extensive  and  ever-growing
knowledge base to efficiently diagnose and resolve customer-service issues. This
also  enables  PAR to  compile  the  kind of  in-depth  information  it needs to
identify trends and opportunities.  A second software suite is a call center CRM
solution  and  knowledge  base that  allows  PAR to  maintain  a profile on each
customer,  their  background,  hardware and  software  details,  client  service
history,  and a  problem-resolution  database.  Analysis of this data allows the
Company to optimize customer service by identifying  trends in calls and to work
with customers to quickly resolve issues.

Sales & Marketing
-----------------

     Sales in the  hospitality  technology  market are often  made to  corporate
chains where PAR is an approved  vendor.  Upon achieving  such approved  status,
marketing  efforts are directed to the chain's  franchisees.  Sales  efforts are
also  directed  toward  franchisees  of chains  for which the  Company is not an
approved corporate vendor.
<PAGE>

     The Company  employs  direct sales  personnel in several  sales groups that
concentrate upon both large chain corporate customers and their franchisees. The
Company  also  utilizes  an  International  Sales  Group  that  markets to major
customers with global locations and to  international  chains that do not have a
presence in the United  States.  The Company's  Indirect  Sales Channel  targets
non-foodservice  markets such as retail,  convenience,  amusement  parks,  movie
theaters,  cruise lines, spas and other ticketing and entertainment venues. This
group also works with third-party dealers and value-added  resellers  throughout
the country.

     PAR also has a  distribution  channel,  both domestic and global,  that has
third party dealers and resellers penetrating the independent  restaurant sector
on behalf of the Company and extends PAR's market reaches.

     New sales in the  hotel/resort  technology  market are often  generated  by
leads,  be it by  referrals,  internet  searches,  media  coverage or trade show
presence.  Marketing  efforts are  conducted  in the form of email  newsletters,
direct  mail  campaigns,  trade  show  exhibitions,   advertising  and  targeted
telesales  calls.  The Company  employs direct sales  personnel in several sales
groups. The Domestic Sales Group targets independent,  business class and luxury
hotels and resorts and spas in the United States, Canada and the Caribbean.  The
International  Sales Group seeks sales to independent hotels and resorts outside
of the United States. The Corporate Accounts Sales Group works with high profile
corporate and chain clients such as Mandarin  Oriental Hotel Group,  Destination
Hotels and Resorts and West Paces Hotel Group. The Company's  Installed Accounts
Sales Group works solely with clients who have  already  installed  the SMS|Host
product   suite.   The   Business   Development   group   focuses  on  proactive
identification  of and initial  penetration  into new business  channels for the
SMS|Host and SpaSoft product lines worldwide.

Competition
-----------

     The competitive  landscape in the hospitality market is driven primarily by
functionality,  reliability,  quality, pricing, service and support. The Company
believes  that its  principal  competitive  advantages  include  its focus on an
integrated  technology  solution offering,  advanced  development  capabilities,
in-depth  industry  knowledge and expertise,  excellent product  reliability,  a
direct  sales  force  organization,  and world class  support and quick  service
response.  The  markets  in which the  Company  transacts  business  are  highly
competitive.  Most of our major  customers have approved  several  suppliers who
offer some form of sophisticated  hospitality  technology system similar to that
of the Company.  Major competitors include Panasonic,  IBM Corporation,  Radiant
Systems, NCR, and Micros Systems.
<PAGE>

Backlog
-------

     Due to the nature of the hospitality  business,  backlog is not significant
at any  point in  time.  The  Hospitality  segment  orders  are  generally  of a
short-term nature and are usually booked and shipped in the same fiscal year.

Research and Development
------------------------

     The highly technical nature of the Company's  hospitality products requires
a significant and continuous  research and development  effort.  Ongoing product
research and quality  development efforts are an integral part of all activities
within the Company.  Functional  and technical  enhancements  are actively being
made to our  products to increase  customer  satisfaction  and maintain the high
caliber of our software.  Research and development  expenses were  approximately
$15,036,000 in 2008,  $17,155,000  in 2007 and  $11,802,000 in 2006. The Company
capitalizes  certain  software  costs in accordance  with Statement of Financial
Accounting Standards No. 86, Accounting for the Costs of Computer Software to be
Sold,  Leased or Otherwise  Marketed.  See Note 1 to the Consolidated  Financial
Statements included in Item 15 for further discussion.

Manufacturing and Suppliers
---------------------------

     The  Company  assembles  its  products  from  standard  components  such as
integrated  circuits and fabricated parts such as printed circuit boards,  metal
parts and castings.  Most  components are  manufactured  by third parties to the
Company's  specifications.  The  Company  depends on outside  suppliers  for the
continued  availability  of its  components  and parts.  Although most items are
generally available from a number of different suppliers,  the Company purchases
certain components consistently from one supplier. Items purchased from only one
supplier include certain printers,  base castings and electronic components.  If
such a supplier  should cease to supply an item,  the Company  believes that new
sources  could be found to  provide  the  components.  However,  added  cost and
manufacturing  delays  could  result and  adversely  affect the  business of the
Company.  The Company has not experienced  significant  delays of this nature in
the past,  but there can be no  assurance  that delays in delivery due to supply
shortages will not occur in the future.
<PAGE>

Intellectual Property
---------------------

     The  Company  owns  or  has  rights  to  certain  patents,  copyrights  and
trademarks,  but believes none of these intellectual  property rights provides a
material   competitive   advantage.   The  Company  relies  upon  non-disclosure
agreements,  license  agreements  and  applicable  domestic and foreign  patent,
copyright and trademark laws for protection of its intellectual property. To the
extent such protective measures are unsuccessful,  or the Company needs to enter
into protracted  litigation to enforce such rights, the Company's business could
be  adversely  impacted.  Similarly  there is no  assurance  that the  Company's
products will not become the subject of a third-party  claim of  infringement or
misappropriation. To the extent such claims result in costly litigation or force
the Company to enter into royalty or license agreements,  rather than enter into
a prolonged  dispute,  the Company's business could be adversely  impacted.  The
Company also licenses certain third-party software with its products.  While the
Company has maintained a strong  relationship  with its  licensors,  there is no
assurance  that such  relationships  will  continue or that the licenses will be
continued under fees and terms acceptable to the Company.

<PAGE>
                               Government Segment

     PAR operates two wholly-owned  subsidiaries in the Government segment,  PAR
Government Systems Corporation (PGSC) and Rome Research Corporation (RRC). These
companies  provide  services to the U.S.  Department  of Defense (DoD) and other
federal  and  state  government  organizations  with a wide  range of  technical
capability  and scope.  Significant  areas in which the  Company's  services are
involved  include  providing  technical  expertise  related  to the  design  and
integration of  state-of-the-art  imagery  intelligence  systems for information
archive,  retrieval,  and  processing;  advanced  research and  development  for
imaging sensors; and engineering and support services for Government information
technology and communications facilities.

     The Company's  offerings cover the entire  development cycle for Government
systems,  including  requirements analysis,  design specification,  development,
implementation, installation, test and evaluation.

Signal and Image Processing
---------------------------

     The  Signal  and  Image  Processing  (SIP)  business  sector  supports  the
development  and   implementation   of  complex  sensor  systems  including  the
collection  and  analysis of sensor  data.  The SIP group has  developed  sensor
concepts, algorithms, and real-time systems to address the difficult problems of
finding  low-contrast  targets against clutter  background,  detecting  man-made
objects in dense foliage, and performing  humanitarian efforts in support of the
removal of land mines with ground  penetrating  radar. The Company also supports
numerous technology  demonstrations for the DoD, including a multi-national NATO
exercise  of  wireless   communications   interoperability.   As  part  of  this
demonstration, the Company designed and built systems for test and evaluation of
communications  waveforms.  The Company has extended this technology into public
safety and law  enforcement  via the  Dynamic  Open  Architecture  Radio  System
(DOARS) system,  a multi-channel  communications  gateway  intended to solve the
problem of wireless communications  interoperability.  The Company also supports
Navy airborne infrared  surveillance systems through the development of advanced
optical sensors.

Geospatial Software and Modeling
--------------------------------

     The Geospatial  Software and Modeling (GS&M) business sector performs water
resources modeling;  Geographic Information Systems (GIS) based data management,
and geospatial information technology development.  In particular, the Company's
Flood*Ware(TM) software tool and methodology is being utilized by New York State

<PAGE>

in  support of the  Federal  Emergency  Management  Agency's  Map  Modernization
Program.  Similar technologies are used in support of water quality modeling and
assessment applications for the NYC Watershed Protection Program.

Logistics Management Systems
----------------------------

     The   Logistics   Management   Systems  (LMS)   business   focuses  on  the
transportation  sector.  The LMS  solutions  provide  comprehensive,  end-to-end
monitoring,  control,  and  management of over the road trailers and  intermodal
assets.  Par  LMS  has a  particular  focus  on cold  chain  management  and the
monitoring  and  control  of  refrigerated  transport  assets  using  long range
wireless  technologies.   Utilizing  GPS,  cellular,  satellite,  wireless,  and
internet hosting technologies, Par LMS solutions include web based reporting for
stakeholders to improve asset utilization  while protecting  against cargo theft
and spoilage.

     Par  LMS  contracts  with  US  DOT  Maritime  Administration  Research  and
Development  (US DOT  MARAD)  to  advance  the  state  of the art in  technology
tracking,  monitoring,  and  management.  Also  NYSERDA  (New York State  Energy
Research  Development  Administration)  has contracted with Par LMS to develop a
real time tire pressure monitoring module called Pressure*Watch (TM).

Information Technology and Communications Support Services
----------------------------------------------------------

     The Company  provides a wide range of  technical  and  support  services to
sustain  mission  critical  components  of  the  Department  of  Defense  Global
Information Grid (GIG).  These services include  continuous  operations,  system
enhancements  and maintenance of very low frequency  (VLF),  high frequency (HF)
and  very  high  frequency  (VHF)  radio  transmitter/receiver  facilities,  and
extremely  high  frequency  (EHF)  and  super  high  frequency  (SHF)  satellite
communication heavy earth terminal facilities. In addition to the communications
support of the GIG,  the Company  provides  net-centric  information  technology
services  in  support  of DoD  customers.  The  Company  provides  a variety  of
information  technology  support  services,  including  systems  administration,
operations, trouble shooting, planning, coordination and maintenance of hardware
and  software  systems,  help desk  support,  and  network  security.  These DoD
communications  and  information  technology  services  are provided at customer
locations  in  and  outside  of  the  continental  United  States.  The  various
facilities,  operating  24 x 7, are  integral  to the command and control of the
nation's  air,  land and naval  forces,  and those of  United  States  coalition
allies.
<PAGE>

Test Laboratory and Range Operations
------------------------------------

     The Company provides management,  engineering, and technical services under
several  contracts  with the U.S. Air Force and the U.S.  Navy.  These  services
include the planning,  execution,  and evaluation of tests at government  ranges
and laboratories operated and maintained by the Company. Test activities include
unique  components,  specialized  equipment,  and  advanced  systems  for radar,
communications, electronic counter-measures, and integrated weapons systems. The
Company also develops  complex  measurement  systems in several  defense-related
areas of technology.

Government Contracts
--------------------

     The  Company  performs  work  for  U.S.   Government  agencies  under  firm
fixed-price,  cost-plus-fixed-fee and time-and-material  contracts. The majority
of its  contracts are for one-year to five-year  terms.  There are several risks
associated with Government contracts.  For example,  contracts may be terminated
for the  convenience of the Government at any time the Government  believes that
such  termination  would be in its best  interests.  In this  circumstance,  the
Company is entitled to receive payments for its allowable costs and, in general,
a proportionate share of its fee or profit for the work actually performed.  The
Company's  business  with the U.S.  Government  is also  subject to other  risks
unique to the defense industry,  such as reduction,  modification,  or delays of
contracts or subcontracts if the Government's requirements, budgets, policies or
regulations   change.  The  Company  may  also  perform  work  prior  to  formal
authorization  or prior to adjustment of the contract  price for increased  work
scope, change orders and other funding  adjustments.  Additionally,  the Defense
Contract  Audit  Agency on a regular  basis  audits the books and records of the
Company.  Such  audits can result in  adjustments  to  contract  costs and fees.
Audits have been completed  through the Company's  fiscal year 2006 and have not
resulted in any material adjustments.

Marketing and Competition
-------------------------

     Marketing  begins  with  collecting  information  from a variety of sources
concerning  the  present and future  requirements  of the  Government  and other
potential  customers  for the  types  of  technical  expertise  provided  by the
Company. Although the Company believes it is positioned well in its chosen areas
of  image  and  signal  processing,  information  technology/communications  and
engineering  services,  competition for Government contracts is intense. Many of
the Company's competitors are major corporations, or their subsidiaries, such as
Lockheed Martin,  Raytheon,  Northrop  Grumman,  BAE, Harris,  and SAIC that are
significantly larger and have substantially greater financial resources than the

<PAGE>


Company.  The Company  also  competes  with many smaller  companies  that target
particular segments of the Government market. Contracts are obtained principally
through  competitive  proposals  in response to  solicitations  from  Government
agencies  and prime  contractors.  The  principal  competitive  factors are past
performance,   the  ability  to  perform,  price,  technological   capabilities,
management  capabilities and service. In addition, the Company sometimes obtains
contracts  by  submitting  unsolicited  proposals.  Many  of the  Company's  DoD
customers are now migrating to commercial software standards,  applications, and
solutions.  In that manner,  the Company is utilizing its internal  research and
development to migrate existing  solutions into software product lines that will
support the DoD geospatial community (i.e., NGA, USAF, etc.).

Backlog
--------

     The dollar value of existing Government contracts at December 31, 2008, net
of  amounts   relating  to  work  performed  to  that  date  was   approximately
$120,437,000,  of which  $41,650,000  was funded.  At  December  31,  2007,  the
comparable  amount was  approximately  $152,451,000,  of which  $41,691,000  was
funded.  Funded  amounts  represent  those amounts  committed  under contract by
Government  agencies and prime  contractors.  The  December 31, 2008  Government
contract   backlog  of  $120,437,000   represents  firm,   existing   contracts.
Approximately $59,626,000 of this amount is expected to be completed in calendar
year 2009, as funding is committed.




<PAGE>


                                    Employees

     As of December 31, 2008, the Company had 1,769 employees, approximately 55%
of whom are engaged in the Company's Hospitality segment, 42% of whom are in the
Government segment, and the remainder are corporate employees.

     Due to the highly technical nature of the Company's business, the Company's
future can be significantly  influenced by its ability to attract and retain its
technical  staff.  The  Company  believes  that it will be able to  fulfill  its
near-term needs for technical staff.

     Approximately  21% of the  Company's  employees  are covered by  collective
bargaining agreements. The Company considers its employee relations to be good.

Exchange Certifications

     The  certification of the CEO of PAR required by Section  303A.12(a) of the
New  York  Stock  Exchange  (NYSE)  Listed  Company  Manual,  relating  to PAR's
compliance with the NYSE's corporate governance listing standards, was submitted
to the NYSE on June 18, 2008 with no qualifications.

Item 1A:  Risk Factors

     We operate in a dynamic  and rapidly  changing  environment  that  involves
numerous risks and uncertainties.  The following section describes some, but not
all, of the risks and uncertainties that could have a material adverse effect on
our business, financial condition, results of operations and the market price of
our common stock,  and could cause our actual results to differ  materially from
those expressed or implied in our forward-looking statements.

A DECLINE  IN THE VOLUME OF  PURCHASES  MADE BY ANY ONE OF THE  COMPANY'S  MAJOR
CUSTOMERS WOULD MATERIALLY ADVERSELY AFFECT OUR BUSINESS.

     A small  number of related  customers  have  historically  accounted  for a
majority of the Company's net revenues in any given fiscal  period.  For each of
the fiscal years ended December 31, 2008, 2007 and 2006,  aggregate sales to our
top two Hospitality segment customers,  McDonald's and Yum! Brands,  amounted to
40% of total  revenues.  Most of the  Company's  customers  are not obligated to
provide us with any minimum level of future purchases or with binding  forecasts
of product  purchases for any future period.  In addition,  major  customers may
elect to delay or  otherwise  change the timing of orders in a manner that could
adversely affect the Company's quarterly and annual results of operations. There
can be no assurance  that our current  customers  will  continue to place orders
with us, or that we will be able to obtain orders from new customers.
<PAGE>

AN  INABILITY  TO  PRODUCE  NEW  PRODUCTS  THAT  KEEP  PACE  WITH  TECHNOLOGICAL
DEVELOPMENTS  AND CHANGING  MARKET  CONDITIONS  COULD RESULT IN A LOSS OF MARKET
SHARE.

     The  products  we sell  are  subject  to rapid  and  continual  changes  in
technology. Our competitors offer products that have an increasingly wider range
of features and capabilities.  We believe that in order to compete  effectively,
we must provide systems  incorporating  new technologies at competitive  prices.
There can be no assurance that we will be able to continue  funding research and
development at levels  sufficient to enhance our current product  offerings,  or
that the Company will be able to develop and  introduce on a timely  basis,  new
products that keep pace with  technological  developments and emerging  industry
standards  and address the  evolving  needs of  customers.  There also can be no
assurance that we will not experience  difficulties that will result in delaying
or preventing  the  successful  development,  introduction  and marketing of new
products  in our  existing  markets,  or  that  our  new  products  and  product
enhancements will adequately meet the requirements of the marketplace or achieve
any significant degree of market acceptance. Likewise, there can be no assurance
as to the  acceptance  of our  products  in new  markets,  nor can  there be any
assurance  as to the success of our  penetration  of these  markets,  nor to the
revenue  or  profit  margins  realized  by the  Company  with  respect  to these
products. If any of our competitors were to introduce superior software products
at competitive  prices,  or if our software products no longer meet the needs of
the  marketplace  due  to  technological   developments  and  emerging  industry
standards,  our software  products may no longer retain any  significant  market
share.

WE GENERATE MUCH OF OUR REVENUE FROM THE HOSPITALITY  INDUSTRY AND THEREFORE ARE
SUBJECT TO DECREASED REVENUES IN THE EVENT OF A DOWNTURN IN THAT INDUSTRY.

     For the fiscal years ended  December 31,  2008,  2007 and 2006,  we derived
68%,  69% and 70%,  respectively,  of our total  revenues  from the  hospitality
industry, primarily the quick service restaurant marketplace.  Consequently, our
hospitality  technology  product sales are dependent in large part on the health
of the  hospitality  industry,  which in turn is  dependent  on the domestic and
international  economy,  as well as factors such as consumer buying  preferences

<PAGE>

and weather  conditions.  Instabilities  or downturns in the hospitality  market
could  disproportionately  impact our  revenues,  as clients may either exit the
industry  or delay,  cancel or reduce  planned  expenditures  for our  products.
Although we believe we can succeed in the quick service restaurant sector of the
hospitality industry in a competitive environment,  given the cyclical nature of
that industry there can be no assurance that our  profitability  and growth will
continue.

WE DERIVE A PORTION OF OUR REVENUE  FROM  GOVERNMENT  CONTRACTS,  WHICH  CONTAIN
PROVISIONS UNIQUE TO PUBLIC SECTOR CUSTOMERS,  INCLUDING THE GOVERNMENT'S  RIGHT
TO MODIFY OR TERMINATE THESE CONTRACTS AT ANY TIME.

     For the fiscal years ended  December 31,  2008,  2007 and 2006,  we derived
32%, 31% and 30%, respectively,  of our total revenues from contracts to provide
technical  expertise  to  U.S.  Government  agencies  and  defense  contractors.
Contracts with U.S.  Government  agencies  typically provide that such contracts
are terminable at the convenience of the U.S. Government. If the U.S. Government
terminated a contract on this basis, we would be entitled to receive payment for
our allowable costs and, in general, a proportionate  share of our fee or profit
for work actually performed.  Most U.S. Government contracts are also subject to
modification or termination in the event of changes in funding.  As such, we may
perform  work  prior to formal  authorization,  or the  contract  prices  may be
adjusted  for  changes  in scope  of  work.  Termination  or  modification  of a
substantial  number  of our U.S.  Government  contracts  could  have a  material
adverse effect on our business, financial condition and results of operations.

     We perform  work for  various  U.S.  Government  agencies  and  departments
pursuant  to  fixed-price,  cost-plus  fixed  fee and  time-and-material,  prime
contracts  and  subcontracts.  Approximately  70% of the revenue that we derived
from  Government  contracts  for the year  ended  December  31,  2008  came from
fixed-price or time-and-material  contracts.  The balance of the revenue that we
derived from  Government  contracts in 2008 primarily came from cost-plus  fixed
fee contracts. Most of our contracts are for one-year to five-year terms.

     While  fixed-price  contracts  allow us to benefit from cost savings,  they
also expose us to the risk of cost overruns. If the initial estimates we use for
calculating  the  contract  price are  incorrect,  we can incur  losses on those
contracts.  In addition,  some of our  governmental  contracts  have  provisions
relating  to cost  controls  and audit  rights and, if we fail to meet the terms
specified in those contracts, then we may not realize their full benefits. Lower
earnings  caused by cost overruns  would have an adverse effect on our financial
results.
<PAGE>

     Under  time-and-materials  contracts,  we are paid for labor at  negotiated
hourly  billing  rates  and for  certain  expenses.  Under  cost-plus  fixed fee
contracts,  we are reimbursed for allowable costs and paid a fixed fee. However,
if our costs under either of these types of contract exceed the contract ceiling
or are  not  allowable  under  the  provisions  of the  contract  or  applicable
regulations, we may not be able to obtain reimbursement for all of our costs.

     If we are unable to control costs incurred in performing under each type of
contract,  such inability to control costs could have a material  adverse effect
on our financial  condition  and  operating  results.  Cost  over-runs  also may
adversely  affect our ability to sustain  existing  programs  and obtain  future
contract awards.

WE FACE  EXTENSIVE  COMPETITION  IN THE  MARKETS  IN WHICH WE  OPERATE,  AND OUR
FAILURE TO COMPETE EFFECTIVELY COULD RESULT IN PRICE REDUCTIONS AND/OR DECREASED
DEMAND FOR OUR PRODUCTS AND SERVICES.

     There are  several  suppliers  who  offer  hospitality  management  systems
similar to ours.  Some of these  competitors are larger than PAR and have access
to substantially greater financial and other resources and, consequently, may be
able to obtain more favorable terms than we can for components and subassemblies
incorporated  into  these  hospitality  technology  products.  The rapid rate of
technological  change in the  Hospitality  industry makes it likely that we will
face competition from new products designed by companies not currently competing
with us.  These new products may have  features not  currently  available on our
Hospitality  products.  We believe that our  competitive  ability depends on our
total solution offering, our experience in the industry, our product development
and systems  integration  capability,  our direct  sales force and our  customer
service  organization.  There is no assurance,  however, that we will be able to
compete effectively in the hospitality technology market in the future.

     Our Government  contracting  business has been focused on niche  offerings,
primarily signal and image processing,  information  technology  outsourcing and
engineering  services.  Many of our  competitors  are, or are  subsidiaries  of,
companies such as Lockheed Martin,  Raytheon,  Northrop Grumman, BAE, Harris and
SAIC.  These  companies  are larger  and have  substantially  greater  financial
resources  than we do.  We also  compete  with  smaller  companies  that  target
particular  segments of the  Government  market.  These  companies may be better
positioned to obtain  contracts  through  competitive  proposals.  Consequently,
there are no assurances  that we will continue to win Government  contracts as a
prime contractor or subcontractor.
<PAGE>

WE MAY  NOT BE  ABLE  TO  MEET  THE  UNIQUE  OPERATIONAL,  LEGAL  AND  FINANCIAL
CHALLENGES  THAT  RELATE TO OUR  INTERNATIONAL  OPERATIONS,  WHICH MAY LIMIT THE
GROWTH OF OUR BUSINESS.

     For the fiscal  years  ended  December  31,  2008,  2007 and 2006,  our net
revenues   from  sales  outside  the  United  States  were  12%,  14%  and  13%,
respectively,  of the Company's total revenues. We anticipate that international
sales will continue to account for a significant  portion of sales. We intend to
continue  to expand  our  operations  outside  the  United  States  and to enter
additional  international  markets,  which will require  significant  management
attention and  financial  resources.  Our  operating  results are subject to the
risks inherent in international sales, including, but not limited to, regulatory
requirements,  political  and  economic  changes and  disruptions,  geopolitical
disputes and war,  transportation delays,  difficulties in staffing and managing
foreign sales operations, and potentially adverse tax consequences. In addition,
fluctuations in exchange rates may render our products less competitive relative
to local  product  offerings,  or  could  result  in  foreign  exchange  losses,
depending  upon the  currency  in which we sell our  products.  There  can be no
assurance  that these  factors  will not have a material  adverse  affect on our
future international sales and, consequently, on our operating results.

OUR  BUSINESS  DEPENDS  ON A  LARGE  NUMBER  OF  HIGHLY  QUALIFIED  PROFESSIONAL
EMPLOYEES  AND, IF WE ARE NOT ABLE TO RECRUIT AND RETAIN A SUFFICIENT  NUMBER OF
THESE  EMPLOYEES,  WE WOULD NOT BE ABLE TO PROVIDE HIGH QUALITY  SERVICES TO OUR
CURRENT AND FUTURE CUSTOMERS, WHICH WOULD HAVE AN ADVERSE EFFECT ON OUR REVENUES
AND OPERATING RESULTS.

     We actively compete for qualified  professional  staff. The availability or
lack thereof of qualified  professional  staff may affect our ability to develop
new products and to provide  services and meet the needs of our customers in the
future. An inability to fulfill customer requirements due to a lack of available
qualified  staff at agreed upon salary rates may adversely  impact our operating
results in the future.

A SIGNIFICANT  PORTION OF OUR TOTAL ASSETS CONSISTS OF GOODWILL AND IDENTIFIABLE
INTANGIBLE  ASSETS,  WHICH ARE SUBJECT TO A PERIODIC  IMPAIRMENT  ANALYSIS AND A
SIGNIFICANT IMPAIRMENT DETERMINATION IN ANY FUTURE PERIOD, COULD HAVE AN ADVERSE
EFFECT ON OUR RESULTS OF OPERATIONS  EVEN WITHOUT A SIGNIFICANT  LOSS OF REVENUE
OR INCREASE IN CASH EXPENSES ATTRIBUTABLE TO SUCH PERIOD.

     We have goodwill and  identifiable  intangible  assets at December 31, 2008
totaling approximately $25.7 million and $8.3 million,  respectively,  resulting
primarily  from several  business  acquisitions.  Pursuant to FASB Statement No.
142,  Goodwill  and Other  Intangible  Assets,  the Company  tests  goodwill for
impairment annually

<PAGE>

or more  frequently if an event occurs or  circumstances  change that would more
likely  than not reduce the fair value of a  reporting  unit below its  carrying
amount. We describe the impairment testing process more thoroughly in our Annual
Report on Form 10-K in Item 7 under the  heading  "Management's  Discussion  and
Analysis of Financial Condition and Results of Operations  -Critical  Accounting
Policies."  If we  determine  that the  impairment  has occurred at any point in
time,  we will be  required  to reduce  goodwill  on our  balance  sheet.  As of
December  31,  2008,   our  balance  sheet   reflected  a  carrying   amount  of
approximately $25.7 million in goodwill.

ECONOMIC  CONDITIONS  AND THE  VOLATILITY IN THE FINANCIAL  MARKETS COULD HAVE A
MATERIAL ADVERSE EFFECT ON THE COMPANY'S  BUSINESS,  FINANCIAL  CONDITION AND/OR
RESULTS  OF  OPERATIONS  OR ON THE  FINANCIAL  CONDITION  OF ITS  CUSTOMERS  AND
SUPPLIERS.

     The economic  conditions in late 2008 and early 2009 and the  volatility in
the financial  markets in late 2008 and early 2009, both in the U.S. and in many
other countries where the Company operates, have contributed and may continue to
contribute to higher unemployment levels,  decreased consumer spending,  reduced
credit  availability  and/or declining  business and consumer  confidence.  Such
conditions  could have an impact on consumer  purchases  and/or retail  customer
purchases of the Company's products, which could result in a reduction of sales,
operating  income and cash flows.  This could have a material  adverse effect on
the  Company's  business,  financial  condition  and/or  results of  operations.
Additionally, disruptions in the credit and other financial markets and economic
conditions could, among other things,  impair the financial  condition of one or
more of the Company's  customers or suppliers,  thereby  increasing  the risk of
customer bad debts or non-performance by suppliers.
<PAGE>

Item 2:  Properties

     The  following  are the  principal  facilities  (by square  footage) of the
Company:
<TABLE>
<CAPTION>

                                   Industry                        Floor Area                         Number of
      Location                     Segment                     Principal Operations                     Sq. Ft.
      --------                     -------                     --------------------                   ----------
<S>                                <C>                      <C>                                        <C>
New Hartford, NY                   Hospitality              Principal executive offices,               138,500
                                   Government                 manufacturing, research and
                                                              development laboratories,
                                                              computing facilities

Rome, NY                           Government               Research and development                    52,800

Stowe, VT                          Hospitality              Sales, service and research                 26,000
                                                              and development

Boulder, CO                        Hospitality              Service                                     22,500

Boca Raton, FL                     Hospitality              Research and development                    14,900

Sydney, Australia                  Hospitality              Sales and service                           14,000

Las Vegas, NV                      Hospitality              Service                                      8,800

Vaughn, Canada                     Hospitality              Sales, service and research and              8,000
                                                            development

Toronto, Canada                    Hospitality              Sales, service and research and              7,700
                                                            development
</TABLE>

     The Company's  headquarters and principal  business  facility is located in
New Hartford, New York, which is near Utica, located in Central New York State.

     The Company owns its principal facility and adjacent space in New Hartford,
N.Y. All of the other facilities are leased for varying terms. Substantially all
of the Company's  facilities are fully utilized,  well maintained,  and suitable
for use. The Company  believes its present and planned  facilities and equipment
are adequate to service its current and immediately foreseeable business needs.

Item 3:  Legal Proceedings

     The Company is subject to legal  proceedings  which  arise in the  ordinary
course of business.  In the opinion of management,  the ultimate  liability,  if
any,  with respect to these  actions will not  materially  affect the  financial
position, results of operations or cash flows of the Company.


<PAGE>

                                     PART II

Item 5: Market for the Registrant's  Common Equity,  Related Stockholder Matters
        and Issuer Purchases of Equity Securities

     The  Company's  Common Stock,  par value $.02 per share,  trades on the New
York Stock  Exchange  (NYSE  symbol - PTC).  At December  31,  2008,  there were
approximately  456 owners of record of the Company's  Common  Stock,  plus those
owners whose stock certificates are held by brokers.

     The  following  table shows the high and low stock prices for the two years
ended December 31, 2008 as reported by New York Stock Exchange:

                                 2008                          2007
                       -------------------------      ------------------------
   Period                 Low             High           Low            High
------------------     ---------       ---------      ---------      ---------

First Quarter          $   5.57        $   8.25       $   8.31       $   10.18
Second Quarter         $   6.18        $   9.79       $   8.26       $   10.87
Third Quarter          $   6.02        $   8.75       $   7.62       $    8.90
Fourth Quarter         $   2.75        $   7.44       $   6.81       $    8.99

     The Company has not paid cash dividends on its Common Stock,  and its Board
of Directors  presently  intends to continue to retain earnings for reinvestment
in growth opportunities.  Accordingly,  it is anticipated that no cash dividends
will be paid in the foreseeable future.

     On November 14, 2005, the Company's  Board of Directors  declared a 3 for 2
stock split in the form of a stock  dividend that was  distributed on January 6,
2006 to  shareholders  of record on December 12,  2005.  All share and per share
data  in  these  consolidated  financial  statements  and  footnotes  have  been
retroactively  restated  as if the stock split had  occurred as of the  earliest
period presented.

<PAGE>

Item 6:  Selected Financial Data


                 SELECTED CONSOLIDATED STATEMENT OF INCOME DATA
                    (In thousands, except per share amounts)

     The following  selected  historical  consolidated  financial data should be
read in conjunction with the Consolidated  Financial  Statements and the related
notes and  "Management's  Discussion  and  Analysis of Financial  Condition  and
Results of Operations" included elsewhere in this Annual Report on Form 10-K.

<TABLE>
<CAPTION>

                                                            Year ended December 31,
                                    -----------------------------------------------------------------------
                                          2008          2007           2006          2005         2004
                                    -----------------------------------------------------------------------
<S>                                 <C>            <C>            <C>            <C>            <C>
Net revenues ....................   $   232,687    $   209,484    $   208,667    $   205,639    $   174,884

Cost of sales ...................   $   175,237    $   157,576    $   153,158    $   150,053    $   137,738

Gross margin ....................   $    57,450    $    51,908    $    55,509    $    55,586    $    37,146

Selling, general & administrative   $    36,790    $    37,517    $    33,440    $    30,867    $    22,106

(Provision) benefit
  for income taxes ..............   $    (1,358)   $     1,497    $    (3,146)   $    (5,358)   $    (3,729)

Net income (loss) ...............   $     2,217    $    (2,708)   $     5,721    $     9,432    $     5,635

Basic earnings (loss) per share .   $       .15    $      (.19)   $       .40    $       .68    $       .43

Diluted earnings (loss) per share   $       .15    $      (.19)   $       .39    $       .64    $       .41

</TABLE>

     The selected  consolidated  financial  statement data  summarized  above is
reflective  of  certain  business  acquisitions,  as  discussed  in Note 2,  and
reflects the adoption of accounting  pronouncements,  as discussed in Note 1, to
the Consolidated Financial Statements.


                    SELECTED CONSOLIDATED BALANCE SHEET DATA
                                 (In thousands)

                                            December 31,
                        ----------------------------------------------------
                           2008       2007      2006       2005       2004
                        ----------------------------------------------------

Current assets ......   $110,038   $ 97,879   $ 95,453   $ 84,492   $ 77,696
Current liabilities .   $ 59,969   $ 52,284   $ 46,473   $ 43,661   $ 45,159
Total assets ........   $153,988   $146,518   $142,258   $125,149   $111,752
Long-term debt ......   $  5,852   $  6,932   $  7,708   $  1,948   $  2,005
Shareholders' equity    $ 86,257   $ 84,987   $ 86,083   $ 78,492   $ 63,574

<PAGE>

     The selected  consolidated  financial  statement data  summarized  above is
reflective  of certain  business  acquisitions,  as  discussed  in Note 2 to the
Consolidated Financial Statements.

     On November 14, 2005, the Company's  Board of Directors  declared a 3 for 2
stock split in the form of a stock  dividend that was  distributed on January 6,
2006 to  shareholders  of record on December 12,  2005.  All share and per share
data  in  these  consolidated  financial  statements  and  footnotes  have  been
retroactively  restated  as if the stock split had  occurred as of the  earliest
period presented.

Item 7: Management's  Discussion and Analysis of Financial Condition and Results
        of Operations

Forward-Looking Statements


     This document contains  "forward-looking  statements" within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities  Exchange Act of 1934.  Any  statements  in this document that do not
describe  historical  facts  are  forward-looking  statements.   Forward-looking
statements in this document (including  forward-looking statements regarding the
continued  health of the hospitality  industry,  future  information  technology
outsourcing opportunities,  an expected increase in contract funding by the U.S.
Government, the impact of current world events on our results of operations, the
effects of  inflation  on our  margins,  and the  effects of  interest  rate and
foreign currency fluctuations on our results of operations) are made pursuant to
the safe harbor  provisions of the Private  Securities  Litigation Reform Act of
1995. When we use words such as "intend,"  "anticipate,"  "believe," "estimate,"
"plan,"  "will," or  "expect",  we are  making  forward-looking  statements.  We
believe that the assumptions and expectations  reflected in such forward-looking
statements  are  reasonable,  based on  information  available to us on the date
hereof,  but we cannot assure you that these  assumptions and expectations  will
prove to have been correct or that we will take any action that we presently may
be planning.  We have disclosed  certain  important factors that could cause our
actual  future  results  to differ  materially  from our  current  expectations,
including  a decline  in the volume of  purchases  made by one or a group of our
major customers; risks in technology development and commercialization; risks of
downturns in economic conditions  generally,  and in the quick-service sector of
the hospitality market specifically; risks associated with government contracts;
<PAGE>


risks associated with competition and competitive  pricing pressures;  and risks
related to foreign  operations.  Forward-looking  statements  made in connection
with  this  report  are  necessarily  qualified  by  these  factors.  We are not
undertaking to update or revise  publicly any  forward-looking  statements if we
obtain new information or upon the occurrence of future events or otherwise.

Overview

     PAR continues to be a leading provider of hospitality  technology solutions
that feature software,  hardware and professional/lifecycle  support services to
several industries including:  restaurants,  hotels/resorts/spas,  cruise lines,
movie theatres,  theme parks and specialty retailers.  The Company also provides
the Federal  Government,  and its  agencies,  applied  technology  and technical
outsourcing services primarily with the Department of Defense.

     The  Company's  hospitality  technology  products  are used in a variety of
applications by thousands of customers.  The Company faces competition in all of
its markets  (restaurants,  hotels, etc.) and competes primarily on the basis of
product design/features/functions,  product quality/reliability, price, customer
service,  and  delivery  capability.  Recently,  the  trend  in the  hospitality
industry has been to reduce the number of approved vendors in a specific concept
to companies that have global capabilities in sales, service and deployment, can
achieve quality and delivery  standards,  have multiple product  offerings,  R&D
capability,  and can be competitive with their pricing.  PAR's global reach as a
technology  provider  to  hospitality  customers  is  an  important  competitive
advantage  as it allows  the  Company  to  provide  innovative  solutions,  with
significant global deployment  capability,  to its multinational  customers like
McDonald's,  Yum! Brands, CKE Restaurants and the Mandarin Oriental Hotel Group.
PAR's strategy is to provide totally integrated  technology systems and services
with a high level of customer  service in the markets in which it competes.  The
Company  conducts  its  research and  development  efforts to create  innovative
technology that meets and exceeds our customers'  requirements and also has high
probability for broader market appeal and success.  PAR's business model focuses
upon operating  efficiencies  and controlling  costs.  This is achieved  through
investment  in  modern  production  technologies,  and  by  managing  purchasing
processes and functions.

     The  Company  executes an internal  investment  strategy in three  distinct
areas  of  its  Hospitality  segment.   First,  the  Company  makes  significant
investments in its development of next generation software.  Second, the Company
concentrates on building a more robust,  further reaching  distribution channel.
Third, as the Company's customers expand in international  markets, PAR has been
<PAGE>

creating an international infrastructure, initially focusing on the Asia/Pacific
rim due to the new restaurant  growth and  concentration  of PAR's  customers in
that region.

     Approximately 32% of the Company's revenues are generated in our Government
Business segment. This segment is comprised of two subsidiaries:  PAR Government
Systems  Corporation  and Rome Research  Corporation.  Through these  government
contractors,  the Company provides IT and communications support services to the
U.S.  Navy,  Air  Force  and Army.  PAR also  offers  its  services  to  several
non-military  U.S.  federal,  state  and local  agencies  by  providing  applied
technology  services  including radar,  image and signal  processing,  logistics
management  systems,  and  geospatial  services  and  products.   The  Company's
Government  performance rating allows the Company to consistently win add-on and
renewal  business,  and build  long-term  client-vendor  relationships.  PAR can
provide its clients the  technical  expertise  necessary to operate and maintain
complex technology systems utilized by government agencies.

     The Company will continue to leverage its core technical  capabilities  and
performance  into related  technical  areas and an expanding  customer base. The
Company will seek to accelerate  this growth through  strategic  acquisitions of
businesses that broaden the Company's technology and/or business base.

Summary

     The Company  believes it is and can  continue to be  successful  in its two
core business segments  -Hospitality and Government- due to its capabilities and
industry expertise. The majority of the Company's business is in the quick-serve
restaurant sector of the hospitality  market. In regards to the current economic
landscape,  PAR believes  that this sector will remain strong during this period
of uncertainty.  This is a direct  reflection of the value and convenience PAR's
large quick-service customers can and do provide.

     The smaller  sectors of the  Company's  Hospitality  segment are its hotel,
resort and spa  customers  as well as its  distribution  channel  which  targets
smaller independent restaurants. These sectors are being impacted by the current
economic uncertainty and, as a result, are experiencing a smaller rate of growth
than the Company's quick-service restaurant sector.
<PAGE>

     It has been the Company's  experience that their Government I/T business is
resistant  to  economic  cycles  including  reductions  in the  Federal  defense
budgets.  Clearly  PAR's I/T  outsourcing  business  focuses  on  cost-effective
operations of technology and  telecommunication  facilities  which must function
independent of economic  cycles.  Additionally,  it is the Company's  experience
that its  Government  research  and  development  spending  has only  fluctuated
modestly during times of military cutbacks.

Results of Operations  --  2008 Compared to 2007

     The Company reported revenues of $232.7 million for the year ended December
31, 2008, an increase of 11% from the $209.5 million reported for the year ended
December 31, 2007. The Company's net income for the year ended December 31, 2008
was $2.2 million, or $.15 diluted net earnings per share, compared to a net loss
of $2.7 million and $.19 diluted net loss per share for the same period in 2007.

     Product revenues from the Company's  Hospitality segment were $81.8 million
for the year ended  December 31, 2008,  an increase of 6% from the $77.1 million
recorded in 2007. This was primarily due to a $7.2 million  increase in domestic
product sales. The Company recorded increased revenues to several major accounts
including Yum! Brands, Catalina, CKE and McDonald's. This increase was partially
offset by a $2.5 million  decline in  international  revenue.  This decrease was
primarily due to the timing of sales to McDonald's in certain regions.

         Customer service revenues are also generated by the Company's
Hospitality segment. The Company's service offerings include installation,
software maintenance, training, twenty-four hour help desk support and various
depot and on-site service options. Customer service revenues were $75.4 million
for the year ended December 31, 2008, a 12% increase from $67.4 million reported
for the same period in 2007. Approximately $3.3 million of this growth was
related to a major service initiative with a large restaurant customer. Also
contributing to the growth was an increase in professional service and software
maintenance contracts.

     Contract revenues from the Company's  Government segment were $75.5 million
for the year ended  December 31, 2008,  an increase of 16% when  compared to the
$65 million recorded in the same period in 2007. The primary factor contributing
to the  growth  was a $7.4  million  increase  in  revenue  from  the  Company's

<PAGE>

information technology outsourcing contracts for facility operations at critical
U.S.  Department  of Defense  telecommunication  sites  across the globe.  These
outsourcing  operations  provided by the Company directly support U.S. Navy, Air
Force and Army  operations  as they seek to convert their  military  information
technology  communications facilities into contractor-run operations and to meet
new requirements with contractor support.

     Product margins for the year ended December 31, 2008 were 39.5%, a decrease
of 130 basis points from the 40.8% for the year ended  December  31, 2007.  This
decline is primarily due to lower margins realized on a special  initiative with
a major  restaurant  customer  involving third party peripheral  devices.  Also,
contributing to the decrease was a shift in product mix, and a stronger dollar.

     Customer  Service  margins were 27.9% for the year ended  December 31, 2008
compared to 24.2% for the same period in 2007.  This  increase was primarily due
to increases in  professional  services and  software  maintenance  revenues,  a
special initiative with a major customer and costs reductions made during 2008.

     Contract margins were 5.5% for the year ended December 31, 2008 versus 6.4%
for the same period in 2007.  The  decrease was  attributable  to start up costs
incurred in 2008 on a new Information  Technology  outsourcing contract with the
Department of Defense. The most significant components of contract costs in 2008
and 2007 were labor and fringe  benefits.  For 2008,  labor and fringe  benefits
were $53.7 million or 75% of contract  costs compared to $48.4 million or 79% of
contract costs for the same period in 2007.

     Selling,  general and administrative  expenses are virtually all related to
the Company's Hospitality segment.  Selling, general and administrative expenses
for the year ended December 31, 2008 were $36.8  million,  a decrease of 2% from
the  $37.5  million  expense  for the same  period  in 2007.  The  decrease  was
primarily due to a decline in bad debt expense and certain cost reductions. This
was partially  offset by the Company's  continued  investment into expanding its
distribution channels.

     Research  and  development  expenses  relate  primarily  to  the  Company's
Hospitality  segment.  Research and development  expenses were $15.3 million for
the year ended  December  31,  2008,  a decrease  of 11% from the $17.2  million
recorded in 2007.  This decline was primarily  attributable  to cost  reductions
achieved in outsourcing through strategic relationships.
<PAGE>

     Amortization  of  identifiable  intangible  assets was $1.5 million for the
year ended  December 31, 2008  compared to $1.6 million for 2007.  This decrease
was due to certain intangible assets becoming fully amortized in 2008.

     Other  income,  net,  was  $921,000  for the year ended  December  31, 2008
compared to $1.2  million for the same period in 2007.  Other  income  primarily
includes  rental income and foreign  currency gains and losses.  The decrease is
primarily due to a decline in foreign currency gains in 2008 compared to 2007.

     Interest expense  represents  interest charged on the Company's  short-term
borrowing  requirements from banks and from long-term debt. Interest expense was
$1.2 million for the year ended December 31, 2008 as compared to $1.1 million in
2007. The Company experienced higher average borrowings in 2008 when compared to
2007. The Company also recognized an increase in interest expense related to its
interest rate swap agreement that was entered into in September  2007.  This was
partially offset by a lower borrowing interest rate in 2008 compared to 2007.

     For the year ended  December 31, 2008, the Company's  effective  income tax
rate was 38%,  compared  to a benefit of 35.6% in 2007.  The  variance  from the
federal  statutory  rate in 2008 was primarily due to the state income taxes and
various nondeductible expenses partially offset by the research and experimental
tax credit.  The variance from the federal  statutory rate in 2007 was primarily
due to the state income tax benefits  resulting from the pretax loss and certain
tax credits,  offset by various  nondeductible  expenses which decreased the tax
benefit.

Results of Operations  --  2007 Compared to 2006

     The Company reported revenues of $209.5 million for the year ended December
31, 2007,  virtually  unchanged  from the $208.7  million  reported for the year
ended  December 31, 2006. The Company's net loss for the year ended December 31,
2007 was $2.7  million,  or $.19  diluted  net loss per share,  compared  to net
income of $5.7 million and $.39 diluted net income per share for the same period
in 2006.

     Product revenues from the Company's  Hospitality segment were $77.1 million
for the year ended  December 31,  2007, a decrease of 7% from the $83.2  million
recorded in 2006.  This decrease was due to an $8.3 million  decline in domestic

<PAGE>

product sales primarily due to a continued delay in hardware orders from a major
customer  pending the release of that customer's new third party  software.  The
decline was also due to the Company's  delay in replacing  hardware and software
business associated with last year's orders from two new customers. This drop in
domestic   revenue  was  partially   offset  by  a  $2.2  million   increase  in
international product sales. Approximately $900,000 of the international revenue
increase  was due to  currency  fluctuations.  This  increase  was the result of
growth in sales to the  Company's  restaurant  customers  in Asia and Canada and
property management systems in Europe and Latin America.

     Customer service  revenues are also generated by the Company's  Hospitality
segment.  The  Company's  service  offerings  include   installation,   software
maintenance,  training, twenty-four hour help desk support and various depot and
on-site service  options.  Customer  service revenues were $67.4 million for the
year ended  December 31, 2007, a 9% increase  from $62 million  reported for the
same period in 2006.  Approximately $3 million of this growth was related to the
award of a new service  contract with a major customer in October of 2006.  Also
contributing  to the growth was an increase in software  maintenance  contracts.
This was partially offset by a decline in installation  revenue due to the lower
product revenue.

     Contract  revenues from the Company's  Government  segment were $65 million
for the year ended  December  31, 2007,  an increase of 2% when  compared to the
$63.5  million  recorded  in  the  same  period  in  2006.  The  primary  factor
contributing  to the  growth was a $1.9  million  increase  in revenue  from the
Company's information  technology  outsourcing contracts for facility operations
at critical U.S. Department of Defense telecommunication sites across the globe.
These outsourcing operations provided by the Company directly support U.S. Navy,
Air Force and Army operations as they seek to convert their military information
technology  communications facilities into contractor-run operations and to meet
new requirements with contractor support.

     Product margins for the year ended December 31, 2007 were 40.8%, a decrease
of 160 basis points from the 42.4% for the year ended  December  31, 2006.  This
decline in margins was primarily  attributable to a decrease in software revenue
in 2007 when compared to 2006. The Company has not replaced the software revenue
associated with two new customers in 2006.
<PAGE>

     Customer  Service  margins were 24.2% for the year ended  December 31, 2007
compared to 25.2% for the same period in 2006.  This  decrease was primarily due
to the  obsolescence  of service  parts for a  discontinued  product  line.  The
decline was also due to lower than planned installation revenue directly related
to the decrease in product revenue.  This adversely  impacted the utilization of
installation personnel.

     Contract margins were 6.4% for the year ended December 31, 2007 versus 7.2%
for the same period in 2006.  The decrease was due, in part, to a favorable cost
share  adjustment on the Company's  Logistics  Management  Program in 2006.  The
decrease  was also  attributable  to start  up costs  incurred  in 2007 on a new
Information  Technology outsourcing contract with the Navy. The most significant
components  of contract  costs in 2007 and 2006 were labor and fringe  benefits.
For 2007,  labor and fringe benefits were $48.4 million or 79% of contract costs
compared to $45.9 million or 78% of contract costs for the same period in 2006.

     Selling,  general and administrative  expenses are virtually all related to
the Company's Hospitality segment.  Selling, general and administrative expenses
for the year ended December 31, 2007 were $37.5 million, an increase of 12% from
the $33.4 million  expense for the same period in 2006. This increase was due to
growth in sales and marketing  expenses  associated with restaurant  products as
the  Company  is  investing  in  its  international  infrastructure  and  in the
expansion of its dealer channel. The increase was also due to a rise in bad debt
expense due to an increase in write-offs related to various customers.

     Research  and  development  expenses  relate  primarily  to  the  Company's
Hospitality  segment.  Research and development  expenses were $17.2 million for
the year ended  December  31,  2007,  an increase of 45% from the $11.8  million
recorded in 2006.  This  increase was  primarily  attributable  to the Company's
continued research and development in its next generation  software products for
its restaurant customers.  The platform for this next generation of products was
acquired from SIVA Corporation in the fourth quarter of 2006.

     Amortization  of  identifiable  intangible  assets was $1.6 million for the
year ended  December 31, 2007 compared to $1.3 million for 2006. The increase is
primarily due to amortization of intangible assets of SIVA Corporation which was
acquired on November 2, 2006.
<PAGE>


     Other  income,  net, was $1.2 million for the year ended  December 31, 2007
compared  to  $617,000  for the same  period  in 2006.  Other  income  primarily
includes  rental income and foreign  currency gains and losses.  The increase is
primarily due to an increase in foreign currency gains in 2007 compared to 2006.

     Interest expense  represents  interest charged on the Company's  short-term
borrowing  requirements from banks and from long-term debt. Interest expense was
$1.1  million  for the year ended  December  31, 2007 as compared to $734,000 in
2006.  The Company  experienced  a higher  borrowing  interest rate in 2007 when
compared to 2006. The Company also  recognized  interest  expense related to its
interest rate swap agreement that was entered into in September  2007.  This was
partially offset by lower than average borrowings during 2007 versus 2006.

     For the year ended  December 31, 2007, the Company's  effective  income tax
rate was a benefit  of 35.6%,  compared  to a  provision  of 35.5% in 2006.  The
variance from the federal  statutory rate in 2007 was primarily due to the state
income tax  benefits  resulting  from the pretax loss and  certain tax  credits,
offset by various  nondeductible  expenses which decreased the tax benefit.  The
variance  from the federal  statutory  rate in 2006 was  primarily  due to state
income taxes, offset by benefits related to export sales as well as tax benefits
related to domestic production activities.


Liquidity and Capital Resources

     The  Company's  primary  sources  of  liquidity  have  been  cash flow from
operations and lines of credit with various  banks.  Cash used in operations was
$2.3 million for the year ended  December 31, 2008  compared to cash provided by
operations of $8.7 million for 2007. In 2008, cash was impacted primarily by the
growth in accounts  receivable  and inventory.  This was partially  offset by an
increase in customer deposits. In 2007, cash was generated through the timing of
payments  to  vendors  and the timing of  customer  payments  on annual  service
contracts. This was partially offset by a growth in inventory.

     Cash used in investing  activities was $424,000 for the year ended December
31,  2008 versus $3.5  million  for the same  period in 2007.  In 2008,  capital
expenditures  were $1 million and were primarily for  manufacturing and computer
equipment.  Capitalized  software  costs  relating  to software  development  of
Hospitality  segment  products were $797,000 in 2008. In 2008,  the Company also

<PAGE>

received $1.6 million from the  voluntary  conversion  of a  Company-owned  life
insurance  policy.  The amount paid as a contingent  purchase  price under prior
years' acquisitions totaled $156,000 in 2008. In 2007, capital expenditures were
$2 million and were principally for  manufacturing  and research and development
equipment.  Capitalized  software  costs  relating  to software  development  of
Hospitality  segment  products  were $1.2 million in 2007.  The amount paid as a
contingent  purchase price under prior years'  acquisitions  totaled $278,000 in
2007.

     Cash provided by financing  activities  was $6.1 million for the year ended
December 31, 2008 versus cash used of $5.3 million in 2007. In 2008, the Company
increased its short-term  borrowings by $6.3 million and decreased its long-term
debt by  $773,000.  The Company  also  benefited  $529,000  from the exercise of
employee  stock  options.  In 2007,  the  Company  reduced its  short-term  bank
borrowings by $5.2 million and decreased  its  long-term  debt by $244,000.  The
Company also benefited $203,000 from the exercise of employee stock options.

     In June 2008,  the  Company  executed a new  credit  agreement  with a bank
replacing  its  existing  agreement.  Under this  agreement,  the  Company has a
borrowing  availability up to $20,000,000 in the form of a line of credit.  This
agreement allows the Company,  at its option,  to borrow funds at the LIBOR rate
plus the applicable  interest rate spread (2.4% to 2.9% at December 31, 2008) or
at the bank's prime lending rate plus the applicable interest rate spread (3.25%
at December 31,  2008).  This  agreement  expires in June 2011.  At December 31,
2008,  there was  $8,800,000  outstanding  under this  agreement.  The  weighted
average  interest rate paid by the Company was 4.9% during 2008.  This agreement
contains  certain loan covenants  including  leverage and fixed charge  coverage
ratios.  The Company is in compliance with these covenants at December 31, 2008.
This credit facility is secured by certain assets of the Company.

     In 2006,  the Company  borrowed  $6,000,000  under an  unsecured  term loan
agreement,  executed  as an  amendment  to one of its then  bank  line of credit
agreements,  in connection with the asset acquisition of SIVA  Corporation.  The
loan  provides  for  interest  only  payments  in the first year and  escalating
principal  payments through 2012. The loan bears interest at the LIBOR rate plus
the applicable interest rate spread or at the bank's prime lending rate plus the
applicable  interest  rate spread  (2.4% at December  31,  2008).  The terms and
conditions of the line of credit agreement  described in the preceding paragraph
also apply to the term loan.
<PAGE>

     In September 2007, the Company entered into an interest rate swap agreement
associated with the above $6,000,000 loan, with principal and interest  payments
due through  August 2012. At December 31, 2008,  the notional  principal  amount
totaled  $5,175,000.  This  instrument  was  utilized by the Company to minimize
significant unplanned fluctuations in earnings and cash flows caused by interest
rate volatility.  The Company did not adopt hedge accounting under the provision
of FASB  Statement No 133,  Accounting for  Derivative  Instruments  and Hedging
Activities,  but rather  records the fair market value  adjustments  through the
consolidated  statements of operations  each period.  The associated  fair value
adjustment within the consolidated  statements of operations for the years ended
December  31, 2008 and 2007,  was $234,000 and  $154,000,  respectively,  and is
recorded as additional interest expense.

     The  Company  has a  $1,757,000  mortgage  collateralized  by certain  real
estate.  The annual mortgage payment  including  interest totals  $226,000.  The
mortgage  bears  interest at a fixed rate of 7% and matures in 2010. The Company
also leases office space in several locations for varying terms.

     The Company's future principal  payments under its term loan,  mortgage and
office leases are as follows (in thousands):


                            Less Than             3 - 5   More than
                    Total     1 Year  1-3 Years   Years   5 Years
                  --------  --------  --------  --------- --------


Long-term debt    $ 6,931   $ 1,079   $ 4,503   $ 1,349   $  --
obligations


Operating lease     6,224     2,158     2,054       902     1,110
                  -------   -------   -------   -------   -------


Total .........   $13,155   $ 3,237   $ 6,557   $ 2,251   $ 1,110
                  =======   =======   =======   =======   =======


     During  fiscal  year  2009,  the  Company   anticipates  that  its  capital
requirements will be approximately $1 to 2 million. The Company does not usually
enter into long term contracts with its major Hospitality segment customers. The
Company  commits  to  purchasing   inventory  from  its  suppliers  based  on  a
combination  of internal  forecasts and the actual orders from  customers.  This
process, along with good relations with suppliers, minimizes the working capital
investment  required  by the  Company.  Although  the  Company  lists  two major
customers,  McDonald's  and Yum!  Brands,  it sells to  hundreds  of  individual

<PAGE>

franchisees of these corporations, each of which is individually responsible for
its own debts. These broadly made sales  substantially  reduce the impact on the
Company's  liquidity  if one  individual  franchisee  reduces  the volume of its
purchases  from the  Company in a given  year.  The  Company,  based on internal
forecasts,  believes  its  existing  cash,  line of  credit  facilities  and its
anticipated operating cash flow will be sufficient to meet its cash requirements
through at least the next twelve months.  However,  the Company may be required,
or could elect,  to seek  additional  funding prior to that time.  The Company's
future capital  requirements  will depend on many factors  including its rate of
revenue growth, the timing and extent of spending to support product development
efforts,  expansion of sales and marketing,  the timing of  introductions of new
products and  enhancements to existing  products,  and market  acceptance of its
products.  The Company  cannot assure that  additional  equity or debt financing
will be  available  on  acceptable  terms or at all.  The  Company's  sources of
liquidity  beyond  twelve  months,  in  management's  opinion,  will be its cash
balances on hand at that time,  funds  provided by operations,  funds  available
through  its lines of credit and the  long-term  credit  facilities  that it can
arrange.

Critical Accounting Policies

     The  Company's   consolidated   financial   statements  are  based  on  the
application  of U.S.  generally  accepted  accounting  principles  (GAAP).  GAAP
requires  the  use  of  estimates,   assumptions,   judgments   and   subjective
interpretations  of  accounting  principles  that have an impact on the  assets,
liabilities,  revenue and expense amounts reported. The Company believes its use
of  estimates  and  underlying  accounting  assumptions  adhere  to GAAP and are
consistently   applied.   Valuations   based  on  estimates   are  reviewed  for
reasonableness  and  adequacy on a  consistent  basis  throughout  the  Company.
Primary areas where  financial  information of the Company is subject to the use
of  estimates,  assumptions  and the  application  of judgment  include  revenue
recognition,  accounts receivable,  inventories, goodwill and intangible assets,
and taxes.

Revenue Recognition Policy

     The Company recognizes  revenue generated by the Hospitality  segment using
the  guidance  from SEC  Staff  Accounting  Bulletin  (SAB)  No.  104,  "Revenue
Recognition" and the AICPA Statement of Position (SOP) 97-2,  "Software  Revenue
Recognition."  Product  revenues  consist  of  sales of the  Company's  standard
point-of-sale  and  property  management  systems  of the  Hospitality  segment.
Product  revenues  include both  hardware and software  sales.  The Company also

<PAGE>

records service  revenues  relating to its standard  point-of-sale  and property
management systems of the Hospitality segment.

         Hardware

     Revenue  recognition on hardware sales occurs upon delivery to the customer
site (or when  shipped for systems  that are not  installed  by the  Company) as
under SAB No. 104, persuasive  evidence of an arrangement  exists,  delivery has
occurred,  the price is fixed or determinable,  and collectibility is reasonably
assured.

         Software

     Revenue recognition on software sales generally occurs upon delivery to the
customer  site (or when  shipped  for  systems  that  are not  installed  by the
Company)  as under SOP  97-2,  persuasive  evidence  of an  arrangement  exists,
delivery has occurred, the price is fixed or determinable, and collectibility is
reasonably assured.  For software sales where the Company is the sole party that
has the  proprietary  knowledge to install the  software,  revenue is recognized
upon installation and when the system is ready to go live.

         Service

     Service revenue  consists of installation  and training  services,  support
maintenance,  and field and depot  repair.  Installation  and  training  service
revenue are based upon standard  hourly/daily rates and revenue is recognized as
the services are performed.  Support  maintenance and field and depot repair are
provided  to  customers  either  on a  time  and  materials  basis  or  under  a
maintenance  contract.  Services  provided  on a time and  materials  basis  are
recognized as the services are  performed.  Service  revenues  from  maintenance
contracts are recognized ratably over the underlying contract period.

     The  individual   product  and  service  offerings  that  are  included  in
arrangements  with our customers  are  identified  and priced  separately to the
customer based upon the stand alone price for each individual product or service
sold in the arrangement irrespective of the combination of products and services
which are included in a particular arrangement. As such, the units of accounting
are based on each individual  product and service sold, and revenue is allocated
to each  element  based on vendor  specific  objective  evidence  (VSOE) of fair
value.  VSOE of fair value for each  individual  product and service is based on
separate individual prices of these products and services.  The sales price used
to  establish  fair  value is the  sales  price of the  element  when it is sold
individually  in a  separate  arrangement  and not as a  separate  element  in a
multiple element arrangement.
<PAGE>

         Contracts

     The Company recognizes revenue in its Government segment using the guidance
from SEC SAB No. 104,  Revenue  Recognition.  The  Company's  contract  revenues
generated by the  Government  segment result  primarily  from contract  services
performed  for the U.S.  Government  under a variety  of  cost-plus  fixed  fee,
time-and-material,  and  fixed-price  contracts.  Revenue on cost-plus fixed fee
contracts is recognized based on allowable costs for labor hours  delivered,  as
well as other  allowable  costs  plus the  applicable  fee.  Revenue on time and
material contracts is recognized by multiplying the number of direct labor hours
delivered in the  performance of the contract by the contract  billing rates and
adding other direct costs as  incurred.  Revenue from  fixed-price  contracts is
recognized as labor hours are delivered  which  approximates  the  straight-line
basis  of the  life  of the  contract.  The  Company's  obligation  under  these
contracts is to provide labor hours to conduct  research or to staff  facilities
with no other deliverables or performance obligations. Anticipated losses on all
contracts are recorded in full when identified. Unbilled accounts receivable are
stated in the Company's  consolidated  financial  statements at their  estimated
realizable value.  Contract costs,  including indirect expenses,  are subject to
audit  and  adjustment  through   negotiations  between  the  Company  and  U.S.
Government representatives.

Accounts Receivable-Allowance for Doubtful Accounts

     Allowances for doubtful  accounts are based on estimates of probable losses
related  to  accounts  receivable  balances.  The  establishment  of  allowances
requires  the use of  judgment  and  assumptions  regarding  probable  losses on
receivable  balances.  We continuously monitor collections and payments from our
customers  and maintain a provision  for  estimated  credit  losses based on our
historical  experience and any specific customer  collection issues that we have
identified.   While  such  credit  losses  have  historically  been  within  our
expectations and appropriate reserves have been established, we cannot guarantee
that we will  continue  to  experience  the same  credit loss rates that we have
experienced in the past. Thus, if the financial  condition of our customers were
to  deteriorate,  our actual  losses may exceed our  estimates,  and  additional
allowances would be required.
<PAGE>

Inventories

     The Company's  inventories are valued at the lower of cost or market,  with
cost determined using the first-in,  first-out  (FIFO) method.  The Company uses
certain  estimates and judgments and considers several factors including product
demand and changes in technology to provide for excess and obsolescence reserves
to properly value inventory.

Capitalized Software Development Costs

     The  Company  capitalizes  certain  costs  related  to the  development  of
computer  software used in its  Hospitality  segment under the  requirements  of
Statement of Financial  Accounting Standards No. 86, Accounting for the Costs of
Computer  Software  to  be  Sold,  Leased,  or  Otherwise   Marketed.   Software
development costs incurred prior to establishing  technological  feasibility are
charged to operations and included in research and development  costs.  Software
development  costs incurred after  establishing  technological  feasibility  are
capitalized  and amortized over the estimated  economic life when the product is
available for general release to customers.

Goodwill

     The Company tests goodwill for impairment on an annual basis, or more often
if  events  or  circumstances  indicate  there may be  impairment.  The  Company
operates in two core business  segments,  Hospitality and  Government.  Goodwill
impairment  testing is  performed  at the  sub-segment  level  (referred to as a
reporting  unit).  The  three  reporting  units  utilized  by the  Company  are:
Restaurant,  Hotel/Spa, and Government.  Goodwill is assigned to reporting units
at the date the goodwill is initially recorded.  Once goodwill has been assigned
to  reporting  units,  it no longer  retains its  association  with a particular
acquisition, and all of the activities within a reporting unit, whether acquired
or organically grown, are available to support the value of the goodwill.

     Pursuant to FASB Statement No. 142,  Goodwill and Other Intangible  Assets,
goodwill  impairment  analysis  is a  two-step  test.  The first  step,  used to
identify  potential  impairment,  involves  comparing each reporting unit's fair
value to its carrying value including goodwill. If the fair value of a reporting
unit exceeds its carrying  value,  applicable  goodwill is considered  not to be
impaired.  If the carrying  value exceeds fair value,  there is an indication of
impairment  at which time a second step would be performed to measure the amount
of  impairment.  The second step involves  calculating  an implied fair value of
goodwill for each reporting unit for which the first step indicated impairment.

     The Company  utilizes  three  methodologies  in performing  their  goodwill
impairment test for each reporting  unit.  These  methodologies  include both an
income  approach,   namely  a  discounted  cash  flow  method,  and  two  market
approaches,  namely the guideline public company method and quoted price method.
The discounted cash flow method was weighted 80% in the fair value  calculation,
while the public  company  method and quoted price method were weighted each 10%
of the fair value calculation.
<PAGE>

     The discounted  cash flow method derives a value by determining the present
value of a projected level of income stream,  including a terminal  value.  This
method  involves the present value of a series of estimated  future  benefits at
the valuation  date by the  application  of a discount rate, one which a prudent
investor would require before making an investment in the equity of the company.
The  Company   considered  this  method  to  be  most  reflective  of  a  market
participant's  view of fair value given the current  market  conditions as it is
based on the  Company's  forecasted  results  and,  therefore,  established  its
weighting at 80% of the fair value calculation.

     Key  assumptions  within the Company's  discounted  cash flow model include
financial projections, long term growth rate ranging from 5% to 10% depending on
the reporting  unit, and a discount rate of 18%. As stated above, as this method
derives value from the present value of a projected  level of income  stream,  a
modification to the projected  operating  results could impact the fair value. A
change to the long term  growth rate could  impact the fair  value.  The present
value of the cash flows is  determined  using a discount  rate that was based on
the capital  structure  and capital  costs of  comparable  public  companies  as
identified  by the Company.  A change to the discount rate could impact the fair
value determination.

     The market approach is a general way of determining a value indication of a
business, business ownership interest, security or intangible asset by using one
or more  methods  that  compare  the  subject  to similar  businesses,  business
ownership interests,  securities or intangible assets that have been sold. There
are two methodologies  considered under the market approach:  the public company
method and the quoted price method.

     The public  company  method and quoted price methods of appraisal are based
on the premise that pricing  multiples of publicly traded  companies can be used
as a tool to be applied in valuing closely held companies.  The mechanics of the
method require the use of the stock price in  conjunction  with other factors to
create a pricing multiple that can be used, with certain  adjustments,  to apply
against the subject's  similar  factor to determine an estimate of value for the
subject  company.  The Company  considered  these  methods  appropriate  as they
provide an indication of fair value as supported by current  market  conditions.
The Company  established its weighting at 10% of the fair value  calculation for
each method.

     The most critical  assumption  underlying the market approaches utilized by
the  Company  are  the  comparable  companies  utilized.  Each  market  approach
described above estimates  revenue and earnings  multiples for the Company based
on its comparables.  As such, a change to the comparable companies could have an
impact on the fair value determination.
<PAGE>

     The valuation  methodologies used in the current year are substantially the
same as those used in the prior year with the  exception of the  utilization  of
the quoted price method in fiscal 2008 and concurrent  elimination of the merger
and acquisition method,  which was used in fiscal 2007. As part of the Company's
determination of appropriate valuation methods to be used, the Company concluded
that there was not sufficient data including  current and relevant  transactions
to  appropriately  serve as a basis for  utilizing  the merger  and  acquisition
method.  However,  the  Company  determined  it prudent to continue to utilize a
market  approach as part of their  valuation and  therefore  selected the quoted
price  method  as  the  more  appropriate  method  to  replace  the  merger  and
acquisition  method.  The  weightings  applied to each method are unchanged from
those utilized in fiscal year 2007 except that 10% of the fair value calculation
was applied to the quoted  price  method in fiscal 2008 and no value was derived
from the merger and acquisition method.

     Although the Company's market  capitalization  was less than its book value
at December 31, 2008 indicating a potential devaluation of the Company's assets,
the Company has determined that no triggering  event occurred as of December 31,
2008 after considering the following factors:

     o    Although  in general  the economy  was  experiencing  a downturn,  the
          primary  markets in which the Company does  business did not appear to
          be experiencing a downturn commensurate with the overall economy

     o    The Company's operating results have improved throughout 2008:

          o    Actual operating  performance of its major customers,  as well as
               the business  outlook that such customers were providing to their
               investors;

          o    Current  overall  order volume was in excess of order volume over
               the same period of the previous fiscal quarter;

          o    The Company has been involved in negotiations  with new customers
               relative to  potential  hardware  upgrades  to a large  number of
               their restaurants;

     The Company has qualitatively reconciled the aggregate estimated fair value
of the reporting units to the market  capitalization of the consolidated Company
including a traditional control premium.

     The economic  conditions in late 2008 and early 2009 and the  volatility in
the financial  markets in late 2008 and early 2009, both in the U.S. and in many
other countries where the Company operates, have contributed and may continue to
contribute to higher unemployment levels,  decreased consumer spending,  reduced
credit  availability  and/or declining  business and consumer  confidence.  Such
conditions could have an impact on the markets in which the Company's  customers
operate,  which could result in a reduction of sales,  operating income and cash
flows.  Reductions in these  results or changes in the factors  described in the
preceding  paragraph  could have a  material  adverse  impact on the  underlying
estimates used in deriving the fair value of the Company's  reporting units used
in  support  of its  annual  goodwill  impairment  test  or  could  result  in a
triggering event requiring a fair value  remeasurement.  This  remeasurement may
result in an impairment charge in future periods.

<PAGE>

Taxes

     The  Company  has  significant  amounts of  deferred  tax  assets  that are
reviewed for recoverability and valued  accordingly.  These assets are evaluated
by using  estimates  of future  taxable  income and the  impact of tax  planning
strategies.  Valuations  related to tax  accruals  and assets can be impacted by
changes to tax codes, changes in statutory tax rates and the Company's estimates
of its future taxable income levels.

New Accounting Pronouncements Not Yet Adopted

     See Note 1 to the Consolidated  Financial  Statements included in, Part IV,
Item 15 of this  Report for  details of New  Accounting  Pronouncements  Not Yet
Adopted.

Off-Balance Sheet Arrangements

     The Company did not have any off-balance sheet arrangements.


Item 7A. Quantitative and Qualitative Disclosures about Market Risk

INFLATION

     Inflation  had little  effect on revenues  and related  costs  during 2008.
Management  anticipates that margins will be maintained at acceptable  levels to
minimize the affects of inflation, if any.

INTEREST RATES

     As of December 31, 2008, the Company has $4.2 million in variable long-term
debt and $9.8 million in variable  short-term debt. The Company believes that an
adverse  change in interest  rates of 100 basis points would not have a material
impact on our  business,  financial  condition,  results of  operations  or cash
flows.

FOREIGN CURRENCY

     The Company's  primary exposures relate to certain  non-dollar  denominated
sales and operating  expenses in Europe and Asia.  These primary  currencies are
the Euro, the Australian  dollar and the Singapore dollar.  Management  believes

<PAGE>

that foreign currency  fluctuations  should not have a significant impact on our
business,  financial conditions,  and results of operations or cash flows due to
the low volume of business affected by foreign currencies.

Item 8: Financial Statements and Supplementary Data

     The Company's 2008  consolidated  financial  statements,  together with the
reports thereon of KPMG LLP dated March 16, 2009, are included elsewhere herein.
See Item 15 for a list of Financial Statements.

Item 9A: Controls and Procedures

     1. Evaluation of Disclosure Controls and Procedures.

     Based on an evaluation of the Company's  disclosure controls and procedures
(as defined in Rule 13a-15(e)  under the Securities  Exchange Act of 1934) as of
December 31, 2008,  the end of the period  covered by this Annual Report on Form
10-K (the  "Evaluation  Date"),  conducted under the supervision of and with the
participation  of the  Company's  chief  executive  officer and chief  financial
officer, such officers have concluded that the Company's disclosure controls and
procedures,  which  are  designed  to ensure  that  information  required  to be
disclosed  by the  Company in the  reports  that it files or  submits  under the
Exchange Act is recorded,  processed,  summarized  and reported  within the time
periods  specified  in the  SEC's  rules  and  forms,  are  effective  as of the
Evaluation Date.

     2. Management's Report on Internal Control over Financial Reporting.

     PAR's management is responsible for  establishing and maintaining  adequate
internal  control  over  financial  reporting  as such term is  defined  in Rule
13a-15(f) under the Securities  Exchange Act of 1934, as amended.  The Company's
internal  control  system has been designed to provide  reasonable  assurance to
management  and the  Board  of  Directors  regarding  the  preparation  and fair
presentation of published financial statements in accordance with U.S. generally
accepted accounting principles.

     A company's  internal  control  over  financial  reporting  includes  those
policies and procedures  that (a) pertain to the maintenance of records that, in
reasonable   detail,   accurately  and  fairly  reflect  the   transactions  and
dispositions of the assets of the company; (b) provide reasonable assurance that
transactions  are  recorded as  necessary  to permit  preparation  of  financial
statements in accordance with generally accepted accounting principles, and that
receipts and  expenditures of the company are being made only in accordance with
authorizations  of  management  and  directors of the  company;  and (c) provide
reasonable  assurance  regarding  prevention or timely detection of unauthorized

<PAGE>

acquisition,  use or  disposition  of the  company's  assets  that  could have a
material effect on the financial statements.

     All internal  control systems,  no matter how well designed,  have inherent
limitations.  Therefore,  even those  systems  determined  to be  effective  can
provide  only   reasonable   assurance  with  respect  to  financial   statement
preparation  and  presentation.  Because  of  inherent  limitations  due to, for
example,  the potential for human error or circumvention  of controls,  internal
controls over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of  effectiveness to future periods are subject to
the risk that controls may become  inadequate  because of changes in conditions,
or  that  the  degree  of  compliance   with  the  policies  or  procedures  may
deteriorate.

     PAR's  management,  under the supervision of and with the  participation of
the Company's chief executive officer and chief financial officer,  assessed the
effectiveness of the Company's  internal control over financial  reporting as of
December 31, 2008. In making this  assessment,  management used the criteria set
forth by the Committee of Sponsoring  Organizations  of the Treadway  Commission
(COSO) based on the framework in Internal Control - Integrated Framework.  Based
on its  assessment,  based on those  criteria,  management  believes  that as of
December 31, 2008, the Company's  internal control over financial  reporting was
effective.

     3. Attestation Report of Independent Registered Public Accounting Firm.

     The  effectiveness of our internal  control over financial  reporting as of
December  31,  2008 has been  audited by KPMG LLP,  our  independent  registered
public  accounting firm. KPMG LLP's related report is included within Item 15 of
this Form 10-K.


     4. Changes in Internal Controls over Financial Reporting

     During the period covered by this Annual Report on Form 10-K, there were no
changes in the Company's  internal control over financial  reporting (as defined
in Rule 13 a-15(f)) that have materially  affected,  or are reasonably likely to
materially affect, the Company's internal control over financial reporting.

<PAGE>


                                    PART III

Item 10:  Directors, Executive Officers and Corporate Governance

     The  information  required  by this item  will  appear  under  the  caption
"Directors,  Executive Officers and Corporate Governance" in our 2009 definitive
proxy  statement  for the  annual  meeting  of  stockholders  in May 2009 and is
incorporated herein by reference.

Item 11: Executive Compensation

     The  information  required  by this item  will  appear  under  the  caption
"Executive  Compensation"  in our 2009 definitive proxy statement for the annual
meeting of stockholders in May 2009 and is incorporated herein by reference.

Item 12:  Security  Ownership of Certain  Beneficial  Owners and  Management and
           Related Stockholder Matters

     The  information  required  by this item  will  appear  under  the  caption
"Security  Ownership of Management  and Certain  Beneficial  Owners" in our 2009
definitive  proxy  statement for the annual meeting of  stockholders in May 2009
and is incorporated herein by reference.

Item 13:  Certain   Relationships   and  Related   Transactions,   and  Director
           Independence

     The  information  required  by this item  will  appear  under  the  caption
"Executive  Compensation"  in our 2009 definitive proxy statement for the annual
meeting of stockholders in May 2009 and is incorporated herein by reference.

Item 14: Principal Accounting Fees and Services

     The  response  to this  item  will  appear  under  the  caption  "Principal
Accounting  Fees and Services" in our 2009  definitive  proxy  statement for the
annual  meeting  of  stockholders  in May 2009  and is  incorporated  herein  by
reference.

<PAGE>


                                     PART IV

Item 15:  Exhibits, Financial Statement Schedules

(a)  Documents filed as a part of the Form 10-K

              Financial Statements:
              ---------------------

              Report of Independent Registered Public Accounting Firm

              Consolidated Balance Sheets at December 31, 2008 and 2007

              Consolidated Statements of Operations for the three
              years ended December 31, 2008

              Consolidated Statements of Comprehensive Income (Loss) for the
              three years ended December 31, 2008

              Consolidated Statements of Changes in Shareholders' Equity for the
              three years ended December 31, 2008

              Consolidated Statements of Cash Flows for the three years ended
              December 31, 2008

              Notes to Consolidated Financial Statements


(b)    Exhibits
       See list of exhibits.



<PAGE>
             Report of Independent Registered Public Accounting Firm


The Board of Directors and Shareholders
PAR Technology Corporation:


We  have  audited  the  consolidated  financial  statements  of  PAR  Technology
Corporation  as of  December  31, 2008 and 2007 and for each of the years in the
three-year period ended December 31, 2008, as listed in the accompanying  index.
We  also  have  audited  PAR  Technology  Corporation's  internal  control  over
financial  reporting as of December 31, 2008,  based on criteria  established in
Internal  Control - Integrated  Framework  issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). PAR Technology's  management is
responsible  for  these  consolidated  financial  statements,   for  maintaining
effective internal control over financial  reporting,  and for its assessment of
the effectiveness of internal control over financial reporting,  included in the
accompanying  Management's Report on Internal Control over Financial  Reporting.
Our  responsibility  is to express an  opinion on these  consolidated  financial
statements  and an opinion on the  Company's  internal  control  over  financial
reporting based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audits to  obtain  reasonable  assurance  about  whether  the
financial  statements are free of material  misstatement  and whether  effective
internal  control  over  financial  reporting  was  maintained  in all  material
respects.   Our  audits  of  the  consolidated   financial  statements  included
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial   statements,   assessing  the  accounting  principles  used  and
significant  estimates made by management,  and evaluating the overall financial
statement  presentation.  Our audit of internal control over financial reporting
included   obtaining  an   understanding  of  internal  control  over  financial
reporting,  assessing the risk that a material weakness exists,  and testing and
evaluating the design and operating  effectiveness  of internal control based on
the assessed risk. Our audits also included  performing such other procedures as
we considered necessary in the circumstances. We believe that our audits provide
a reasonable basis for our opinions.

A company's  internal control over financial  reporting is a process designed to
provide reasonable  assurance  regarding the reliability of financial  reporting
and the preparation of financial  statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial  reporting  includes those policies and procedures that (1) pertain to
the  maintenance  of records that, in reasonable  detail,  accurately and fairly
reflect the  transactions  and  dispositions  of the assets of the company;  (2)
provide  reasonable  assurance  that  transactions  are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting  principles,  and that receipts and  expenditures  of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of  unauthorized  acquisition,  use, or  disposition  of the company's
assets that could have a material effect on the financial statements.

Because of its inherent  limitations,  internal control over financial reporting
may not prevent or detect misstatements.  Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate  because of changes in  conditions,  or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the  financial  position of PAR  Technology
Corporation  as of December 31, 2008 and 2007, and the results of its operations
and its cash flows for each of the years in the three-year period ended December
31, 2008, in conformity with U.S. generally accepted accounting principles. Also
in our opinion, PAR Technology Corporation maintained, in all material respects,
effective  internal  control over  financial  reporting as of December 31, 2008,
based on criteria  established in Internal Control - Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission.



KPMG LLP

Syracuse, New York
March 16, 2009
<PAGE>



                           PAR TECHNOLOGY CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                      (in thousands, except share amounts)

                                                               December 31,
                                                         ----------------------
                                                            2008          2007
                                                         ---------    ---------
Assets
Current assets:
     Cash and cash equivalents .......................   $   6,227    $   4,431
     Accounts receivable-net .........................      53,582       43,608
     Inventories-net .................................      41,132       40,319
     Income tax refunds ..............................         208          521
     Deferred income taxes ...........................       5,301        5,630
     Other current assets ............................       3,588        3,370
                                                         ---------    ---------
         Total current assets ........................     110,038       97,879
Property, plant and equipment - net ..................       6,879        7,669
Deferred income taxes ................................       1,525          503
Goodwill .............................................      25,684       26,998
Intangible assets - net ..............................       8,251        9,899
Other assets .........................................       1,611        3,570
                                                         ---------    ---------
           Total Assets ..............................   $ 153,988    $ 146,518
                                                         =========    =========
Liabilities and Shareholders' Equity
Current liabilities:
     Current portion of long-term debt ...............   $   1,079    $     772
     Borrowings under lines of credit ................       8,800        2,500
     Accounts payable ................................      15,293       16,978
     Accrued salaries and benefits ...................       8,360        9,919
     Accrued expenses ................................       3,962        3,860
     Customer deposits ...............................       6,157        3,898
     Deferred service revenue ........................      16,318       14,357
                                                         ---------    ---------
         Total current liabilities ...................      59,969       52,284
                                                         ---------    ---------
Long-term debt .......................................       5,852        6,932
                                                         ---------    ---------
Other long-term liabilities ..........................       1,910        2,315
                                                         ---------    ---------
Shareholders' Equity:
     Preferred stock, $.02 par value,
       1,000,000 shares authorized ...................        --            --
     Common stock, $.02 par value,
       29,000,000 shares authorized;
       16,189,718 and 16,047,818 shares issued;
       14,536,963 and 14,395,063 outstanding .........         324          321
     Capital in excess of par value ..................      40,173       39,252
     Retained earnings ...............................      52,668       50,451
     Accumulated other comprehensive income (loss) ...      (1,399)         472
     Treasury stock, at cost, 1,652,755 shares .......      (5,509)      (5,509)
                                                         ---------    ---------
         Total shareholders' equity ..................      86,257       84,987
                                                         ---------    ---------
          Total Liabilities and Shareholders' Equity .   $ 153,988    $ 146,518
                                                         =========    =========

See accompanying notes to consolidated financial statements
<PAGE>

<TABLE>
<CAPTION>

                           PAR TECHNOLOGY CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per share amounts)


                                                                         Year ended December 31,
                                                        -------------------------------------------------------
                                                               2008               2007                 2006
                                                        ----------------    ---------------     ---------------
<S>                                                     <C>                 <C>                 <C>
Net revenues:
     Product ......................................     $       81,763      $       77,116      $       83,237
     Service ......................................             75,430              67,370              61,979
     Contract .....................................             75,494              64,998              63,451
                                                        --------------      --------------      --------------

                                                               232,687             209,484             208,667
                                                        --------------      --------------      --------------
Costs of sales:
     Product ......................................             49,440              45,635              47,925
     Service ......................................             54,421              51,078              46,338
     Contract .....................................             71,376              60,863              58,895
                                                        --------------      --------------      --------------

                                                               175,237             157,576             153,158
                                                        --------------      --------------      --------------

           Gross margin ...........................             57,450              51,908              55,509
                                                        --------------      --------------      --------------
 Operating expenses:
     Selling, general and administrative ..........             36,790              37,517              33,440
     Research and development .....................             15,295              17,155              11,802
     Amortization of identifiable intangible assets              1,535               1,572               1,283
                                                        --------------      --------------      --------------

                                                                53,620              56,244              46,525
                                                        --------------      --------------      --------------

Operating income (loss) ...........................              3,830              (4,336)              8,984
Other income, net .................................                921               1,227                 617
Interest expense ..................................             (1,176)             (1,096)               (734)
                                                        --------------      --------------      --------------

Income (loss) before provision for income taxes ...              3,575              (4,205)              8,867
(Provision) benefit for income taxes ..............             (1,358)              1,497              (3,146)
                                                        --------------      --------------      --------------
Net income (loss)
                                                        $        2,217      $       (2,708)     $        5,721
                                                        ==============      ==============      ==============
Earnings (loss) per share

     Basic ........................................     $          .15      $         (.19)     $          .40
     Diluted ......................................     $          .15      $         (.19)     $          .39

Weighted average shares outstanding

     Basic ........................................             14,421              14,345              14,193
                                                        ==============      ==============      ==============
     Diluted ......................................             14,761              14,345              14,752
                                                        ==============      ==============      ==============
</TABLE>






See accompanying notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>


                           PAR TECHNOLOGY CORPORATION
             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                                 (in thousands)


                                                                         Year ended December 31,
                                                        -------------------------------------------------------
                                                               2008               2007                 2006
                                                        ----------------    ---------------     ---------------
<S>                                                     <C>                 <C>                 <C>
Net income (loss) .................................     $        2,217      $       (2,708)     $        5,721
Other comprehensive income (loss), net of tax:
     Foreign currency translation adjustments .....             (1,871)                961                 122
                                                        --------------      --------------      --------------

Comprehensive income (loss) .......................     $          346      $       (1,747)     $        5,843
                                                        ==============      ==============      ==============





</TABLE>




























See accompanying notes to consolidated financial statements


<PAGE>
<TABLE>
<CAPTION>


                           PAR TECHNOLOGY CORPORATION
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                                                                                     Accumulated
                                                            Capital in                  Other                              Total
                                         Common Stock        excess of    Retained    Comprehensive  Treasury Stock   Shareholders'
                                         ------------                                                ---------------  -------------
(in thousands)                      Shares        Amount     Par Value    Earnings   Income (Loss)   Shares    Amount     Equity
                                    ------        ------     ---------    --------   ------------    ------    ------     ------
<S>                                   <C>       <C>          <C>         <C>         <C>              <C>     <C>        <C>

Balances at
   December 31, 2005                  15,915    $   318      $  37,271   $  47,442   $      (611)     (1,778) $ (5,928)  $  78,492

Net income                                                                   5,721                                           5,721
Issuance of common stock upon the
  exercise of stock options,
  net of tax benefit of $173              47          2            350                                                         352
Issuance of treasury stock for
    business acquisition                                           647                                   125       419       1,066
Issuance of restricted stock awards       18
Cash in lieu of fractional shares on
  stock split                                                                   (4)                                             (4)
Equity based compensation                                          334                                                         334
Translation adjustments, net of tax
  benefit of $86                                                                             122                               122
                                    --------    -------      ---------   ---------   -----------   ---------  --------   ---------
Balances at
   December 31, 2006                  15,980        320         38,602      53,159          (489)     (1,653)   (5,509)     86,083

Net loss                                                                    (2,708)                                         (2,708)
Issuance of common stock upon the
  exercise of stock options               58          1            202                                                         203
Issuance of restricted stock awards       10
Equity based compensation                                          448                                                         448
Translation adjustments, net of tax
  benefit of $564                                                                            961                               961
                                    --------    -------      ---------   ---------   -----------   ---------  --------   ---------
Balances at
   December 31, 2007                  16,048        321         39,252      50,451           472      (1,653)   (5,509)     84,987

Net income                                                                   2,217                                           2,217
Issuance of common stock upon the
  exercise of stock options               92          2            526                                                         528
Issuance of restricted stock awards       50          1                                                                          1
Equity based compensation                                          395                                                         395
Translation adjustments, net of tax
  benefit of $1,239                                                                       (1,871)                           (1,871)
                                    --------    -------      ---------   ---------   -----------   ---------  --------   ---------
Balances at
   December 31, 2008                  16,190    $   324      $  40,173   $  52,668   $    (1,399)     (1,653) $ (5,509)  $  86,257
                                    ========    =======      =========   =========   ===========   =========  ========   =========

</TABLE>








See accompanying notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>

                           PAR TECHNOLOGY CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                                                                          Year ended December 31,
                                                                             ----------------------------------------------------
                                                                                   2008               2007              2006
                                                                             -------------     ---------------    --------------
<S>                                                                              <C>              <C>                <C>
Cash flows from operating activities:
    Net income (loss)                                                             $    2,217        $   (2,708)         $   5,721
    Adjustments to reconcile net income (loss) to net cash
         provided by (used in) operating activities:
         Depreciation and amortization                                                 4,029             4,079              3,884
         Provision for bad debts                                                       1,052             3,034                849
         Provision for obsolete inventory                                              2,625             3,001              1,922
         Equity based compensation                                                       395               448                334
         Deferred income tax                                                             546            (2,211)               916
         Changes in operating assets and liabilities:
             Accounts receivable                                                     (11,026)              149             (6,846)
             Inventories                                                              (3,438)           (7,372)            (8,308)
             Income tax refunds                                                          313               582               (224)
             Other current assets                                                       (218)             (633)              (139)
             Other assets                                                                388              (729)              (754)
             Accounts payable                                                         (1,685)            4,603               (496)
             Accrued salaries and benefits                                            (1,559)            1,640             (1,446)
             Accrued expenses                                                            204             1,999               (491)
             Customer deposits                                                         2,259               242               (317)
             Deferred service revenue                                                  1,961             2,103                813
             Other long-term liabilities                                                (405)              436              1,032
                                                                                  ----------        ----------          ---------
               Net cash provided by (used in) operating activities                    (2,342)            8,663             (3,550)
                                                                                  ----------        ----------          ---------
Cash flows from investing activities:
    Capital expenditures                                                              (1,042)           (2,017)            (1,189)
    Capitalization of software costs                                                    (797)           (1,158)              (822)
    Business acquisitions, net of cash acquired                                            -                 -             (5,827)
    Contingent purchase price paid on prior year acquisitions                           (156)             (278)                 -
    Cash received from voluntary conversion of long-lived other assets                 1,571                 -                  -
                                                                                  ----------        ----------          ---------
                Net cash used in investing activities                                   (424)           (3,453)            (7,838)
                                                                                  ----------        ----------          ---------
Cash flows from financing activities:
    Net borrowings (payments) under line-of-credit agreements                          6,300            (5,213)             4,213
    Proceeds from long-term debt                                                           -                 -              6,000
    Payments of long-term debt                                                          (773)             (244)               (76)
    Proceeds from the exercise of stock options                                          488               203                179
    Excess tax benefit of stock option exercises                                          41                 -                173
    Cash dividend in lieu of fractional shares on stock split                              -                 -                 (4)
                                                                                  ----------        ----------          ---------
               Net cash provided by (used in) financing activities                     6,056            (5,254)            10,485
                                                                                  ----------        ----------          ---------
Effect of exchange rate changes on cash and cash equivalents                          (1,494)              202                194
                                                                                  ----------        ----------          ---------
Net increase (decrease) in cash and cash equivalents                                   1,796               158               (709)
Cash and cash equivalents at beginning of period                                       4,431             4,273              4,982
                                                                                  ----------        ----------          ---------
Cash and cash equivalents at end of period                                        $    6,227        $    4,431          $   4,273
                                                                                  ==========        ==========          =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
    Interest                                                                      $      873        $      963          $     687
    Income taxes, net of refunds                                                         508               104              2,237
</TABLE>

See accompanying notes to consolidated financial statements


<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 -- Summary of Significant Accounting Policies

Basis of consolidation

     The  consolidated   financial   statements  include  the  accounts  of  PAR
Technology Corporation and its subsidiaries (ParTech,  Inc., PAR Springer-Miller
Systems,  Inc.,  PixelPoint ULC, Par-Siva  Corporation,  PAR Government  Systems
Corporation,   Rome  Research   Corporation,   and  Ausable  Solutions,   Inc.),
collectively  referred  to  as  the  "Company."  All  significant   intercompany
transactions have been eliminated in consolidation.

Revenue recognition

     The Company recognizes  revenue generated by the Hospitality  segment using
the  guidance  from SEC  Staff  Accounting  Bulletin  (SAB)  No.  104,  "Revenue
Recognition" and the AICPA Statement of Position (SOP) 97-2,  "Software  Revenue
Recognition".  Product  revenues  consist  of  sales of the  Company's  standard
point-of-sale  and  property  management  systems  of the  Hospitality  segment.
Product  revenues  include both  hardware and software  sales.  The Company also
records service  revenues  relating to its standard  point-of-sale  and property
management systems of the Hospitality segment.

     Hardware

     Revenue  recognition on hardware sales occurs upon delivery to the customer
site (or when  shipped for systems  that are not  installed  by the  Company) as
under SAB No. 104, persuasive  evidence of an arrangement  exists,  delivery has
occurred,  the price is fixed or determinable,  and collectibility is reasonably
assured.

     Software

     Revenue recognition on software sales generally occurs upon delivery to the
customer  site (or when  shipped  for  systems  that  are not  installed  by the
Company)  as under SOP  97-2,  persuasive  evidence  of an  arrangement  exists,
delivery has occurred, the price is fixed or determinable, and collectibility is
reasonably assured.  For software sales where the Company is the sole party that
has the  proprietary  knowledge to install the  software,  revenue is recognized
upon installation and when the system is ready to go live.
<PAGE>

     Service

     Service revenue  consists of installation  and training  services,  support
maintenance,  and field and depot  repair.  Installation  and  training  service
revenue are based upon standard  hourly/daily rates and revenue is recognized as
the services are performed.  Support  maintenance and field and depot repair are
provided  to  customers  either  on a  time  and  materials  basis  or  under  a
maintenance  contract.  Services  provided  on a time and  materials  basis  are
recognized as the services are  performed.  Service  revenues  from  maintenance
contracts are recognized ratably over the underlying contract period.

     The  individual   product  and  service  offerings  that  are  included  in
arrangements  with our customers  are  identified  and priced  separately to the
customer based upon the stand alone price for each individual product or service
sold in the arrangement irrespective of the combination of products and services
which are included in a particular arrangement. As such, the units of accounting
are based on each individual  product and service sold, and revenue is allocated
to each  element  based on vendor  specific  objective  evidence  (VSOE) of fair
value.  VSOE of fair value for each  individual  product and service is based on
separate individual prices of these products and services.  The sales price used
to  establish  fair  value is the  sales  price of the  element  when it is sold
individually  in a  separate  arrangement  and not as a  separate  element  in a
multiple element arrangement.

     Contracts

     The Company recognizes revenue in its Government segment using the guidance
from SEC Staff Accounting Bulletin No. 104, Revenue  Recognition.  The Company's
contract  revenues  generated by the Government  segment  result  primarily from
contract services performed for the U.S. Government under a variety of cost-plus
fixed fee,  time-and-material,  and fixed-price contracts.  Revenue on cost-plus
fixed fee  contracts  is  recognized  based on  allowable  costs for labor hours
delivered,  as well as other allowable costs plus the applicable fee. Revenue on
time and material  contracts is recognized by  multiplying  the number of direct
labor hours delivered in the performance of the contract by the contract billing
rates and  adding  other  direct  costs as  incurred.  Revenue  for  fixed-price
contracts is  recognized  as labor hours are delivered  which  approximates  the
straight-line basis of the life of the contract.  The Company's obligation under
these  contracts  is to  provide  labor  hours to conduct  research  or to staff
facilities with no other  deliverables or performance  obligations.  Anticipated
losses on all contracts are recorded in full when identified.  Unbilled accounts

<PAGE>

receivable  are stated in the  Company's  consolidated  financial  statements at
their estimated realizable value.  Contract costs,  including indirect expenses,
are subject to audit and adjustment through negotiations between the Company and
U.S. Government representatives.

Statement of cash flows

     For  purposes of reporting  cash flows,  the Company  considers  all highly
liquid investments, purchased with a remaining maturity of three months or less,
to be cash equivalents.

Accounts receivable - Allowance for doubtful accounts

     Allowances for doubtful  accounts are based on estimates of probable losses
related  to  accounts  receivable  balances.  The  establishment  of  allowances
requires  the use of  judgment  and  assumptions  regarding  probable  losses on
receivable balances.

Inventories

     The Company's  inventories are valued at the lower of cost or market,  with
cost determined using the first-in,  first-out  (FIFO) method.  The Company uses
certain  estimates and judgments and considers several factors including product
demand and changes in technology to provide for excess and obsolescence reserves
to properly value inventory.

 Property, plant and equipment

     Property,  plant and equipment are recorded at cost and  depreciated  using
the  straight-line  method over the estimated useful lives of the assets,  which
range from three to twenty-five years.  Expenditures for maintenance and repairs
are expensed as incurred.

Other assets

     Other assets consist of cash surrender  value of life insurance  related to
the Company's Deferred Compensation Plan.

Income taxes

     The provision for income taxes is based upon pretax  earnings with deferred
income  taxes  provided  for the  temporary  differences  between the  financial
reporting basis and the tax basis of the Company's assets and  liabilities.  The
Company  records a valuation  allowance  when  necessary to reduce  deferred tax
<PAGE>
assets to their net  realizable  amounts.  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.

Other long-term liabilities

     Other long-term liabilities represent amounts owed to certain employees who
are participants in the Company's Deferred Compensation Plan.

 Foreign currency

     The assets and liabilities for the Company's  international  operations are
translated into U.S.  dollars using year-end  exchange rates.  Income  statement
items are translated at average exchange rates  prevailing  during the year. The
resulting  translation  adjustments  are  recorded  as a separate  component  of
shareholders'  equity under the heading  Accumulated Other  Comprehensive  Loss.
Exchange  gains and losses on  intercompany  balances of a long-term  investment
nature  are also  recorded  as a  translation  adjustment  and are  included  in
Accumulated  Other  Comprehensive  Income (Loss).  Foreign currency  transaction
gains and losses are recorded in other income in the accompanying  statements of
operations.

Other income

     The  components of other income for the three years ending  December 31 are
as follows:


                                                     Year ended December 31
                                                         (in thousands)
                                             -----------------------------------
                                                2008        2007           2006
                                             --------     ---------     --------
Foreign currency gains ...............        $  314        $  605        $   76
Rental income-net ....................           410           444           320
Other ................................           197           178           221
                                              ------        ------        ------
                                              $  921        $1,227        $  617
                                              ======        ======        ======


Identifiable intangible assets

     The  Company  capitalizes  certain  costs  related  to the  development  of
computer  software used in its  Hospitality  segment under the  requirements  of
Statement of Financial  Accounting  Standards (SFAS) No. 86,  Accounting for the
Costs of Computer Software to be Sold, Leased, or Otherwise  Marketed.  Software
development costs incurred prior to establishing  technological  feasibility are
charged to operations and included in research and development  costs.  Software

<PAGE>

development  costs incurred after  establishing  feasibility are capitalized and
amortized  on a  product-by-product  basis  when the  product is  available  for
general release to customers. Annual amortization,  charged to cost of sales, is
computed using the straight-line  method over the remaining  estimated  economic
life of the product, generally three years. Amortization of capitalized software
costs  amounted to  $662,000,  $624,000 and  $680,000 in 2008,  2007,  and 2006,
respectively.

     The Company acquired identifiable  intangible assets in connection with its
acquisitions  in prior years.  Amortization of  identifiable  intangible  assets
amounted to $1,535,000 in 2008,  $1,572,000 in 2007 and  $1,283,000 in 2006. See
Note 2 for additional details.

     The components of identifiable intangible assets are:

                                                             December 31,
                                                            (in thousands)
                                                     ---------------------------
                                                        2008              2007
                                                     ---------         --------
Software costs .............................         $  6,843          $  7,475
Customer relationships .....................            4,401             4,506
Trademarks (non-amortizable) ...............            2,677             2,758
Other ......................................              577               613
                                                     --------          --------
                                                       14,498            15,352
Less accumulated amortization ..............           (6,247)           (5,453)
                                                     --------          --------
                                                     $  8,251          $  9,899
                                                     ========          ========


     The  future  amortization  of these  intangible  assets is as  follows  (in
thousands):


                        2009                 $  2,158
                        2010                    1,571
                        2011                    1,153
                        2012                      684
                        2013                        8
                                             --------
                                             $  5,574
                                             ========

     The Company has elected to test for impairment of  identifiable  intangible
assets during the fourth quarter of its fiscal year.  There was no impairment of
identifiable intangible assets in 2008, 2007 and 2006.

<PAGE>

Stock split

     On November 14, 2005, the Company's  Board of Directors  declared a 3 for 2
stock split in the form of a stock  dividend that was  distributed on January 6,
2006 to  shareholders  of record on December 12,  2005.  All share and per share
data  in  these  consolidated  financial  statements  and  footnotes  have  been
retroactively  restated  as if the stock split had  occurred as of the  earliest
period presented.

Stock-based compensation

     Effective  January 1, 2006, the Company adopted the fair value  recognition
provisions of Statement of Financial  Accounting  Standards No. 123R Share-Based
Payment (SFAS 123R) on a modified  prospective basis. This standard requires the
Company to measure the cost of employee services received in exchange for equity
awards based on the grant date fair value of the awards.  The cost is recognized
as  compensation   expense  over  the  vesting  period  of  the  awards.   Total
compensation  expense included in operating expenses for 2008, 2007 and 2006 was
$395,000,  $448,000 and $334,000,  respectively.  Prior to adopting SFAS 123R on
January 1, 2006, the Company's  equity based employee  compensation  awards were
accounted for under the recognition  and  measurement  principles of APB Opinion
No. 25, Accounting for Stock Issued to Employees, and related interpretations.

 Earnings per share

     Earnings per share are calculated in accordance with Statement of Financial
Accounting   Standards  No.  128  Earnings  per  Share,   which   specifies  the
computation,  presentation,  and disclosure  requirements for earnings per share
(EPS). It requires the presentation of basic and diluted EPS. Basic EPS excludes
all  dilution  and is based upon the weighted  average  number of common  shares
outstanding during the period.  Diluted EPS reflects the potential dilution that
would  occur  if  securities  or other  contracts  to issue  common  stock  were
exercised or converted into common stock.


<PAGE>

     The  following  is  a   reconciliation   of  the  weighted  average  shares
outstanding  for the basic and diluted EPS  computations  (in thousands,  except
share and per share data):

                                                       2008     2007      2006
                                                    --------  --------  -------

Net income (loss) ...............................   $  2,217  $ (2,708) $ 5,721
                                                    ========  ========  =======
Basic:
     Shares outstanding at beginning of year ....     14,372    14,310   14,137
     Weighted shares issued during the year .....         49        35       56
                                                    --------  --------  -------
     Weighted average common shares, basic ......     14,421    14,345   14,193
                                                    ========  ========  =======
          Earnings (loss) per common share, basic   $    .15  $   (.19) $   .40
                                                    ========  ========  =======
Diluted:
     Weighted average common shares, basic ......     14,421    14,345   14,193
     Weighted average shares issued
       during the year ..........................         65       --        --
     Dilutive impact of stock options and
       restricted stock awards ..................        275       --       559
                                                    --------  --------  -------
     Weighted average common shares, diluted ....     14,761    14,345   14,752
                                                    ========  ========  =======
     Earnings (loss) per common share, diluted ..   $    .15  $   (.19) $   .39
                                                    ========  ========  =======

     At December  31,  2008,  there were  442,000  anti-dilutive  stock  options
outstanding. For the year ended December 31, 2007, 436,000 of incremental shares
from the assumed  exercise of stock options and 22,749  restricted  stock awards
are not included in the computation of diluted earnings per share because of the
anti-dilutive  effect on earnings per share.  At December  31, 2006,  there were
70,500 anti-dilutive stock options outstanding.

Goodwill

     Goodwill held by the Company  represents the excess purchase price over the
fair  value of  assets  acquired.  The  Company  accounts  for its  goodwill  in
accordance with SFAS No. 142, "Goodwill and Other Intangible  Assets",  and does
not amortize its goodwill.  The Company  reviews its goodwill for  impairment at
least annually,  or whenever events or changes in  circumstances  would indicate
possible impairment in accordance with SFAS No. 142. The Company operates in two
core business segments, Hospitality and Government.  Goodwill impairment testing
is performed at the  sub-segment  level (referred to as a reporting  unit).  The
three reporting units utilized by the Company are:  Restaurant,  Hotel/Spa,  and
Government.  Goodwill is assigned to reporting units at the date the goodwill is
initially recorded. The amount outstanding for goodwill was $25.7 million, $27.0
million and $25.7 million at December 31, 2008, 2007 and 2006, respectively. The
Company  performs  its annual  impairment  test of goodwill  as of October 1 and
performed  the annual test as of October 1, 2008,  2007,  and 2006 and concluded
that no impairment existed at any of the aforementioned dates.
<PAGE>

     The following  table  reflects the changes in goodwill  during the year (in
thousands):

                                                 Year ended December 31,
                                            -------------------------------
                                               2008        2007       2006
                                            --------    --------   --------

Balance at beginning of year ............   $ 26,998    $ 25,734   $ 20,622
Acquisition of businesses during the year       --          --        4,843
Purchase accounting adjustment related to
  prior year acquisition ................       --            27        (15)
Contingent purchase price earned on prior
  year acquisitions .....................         54         156        278
Change in foreign exchange rates during
  the period ............................     (1,368)      1,081          6
                                            --------    --------   --------
Balance at end of year ..................   $ 25,684    $ 26,998   $ 25,734
                                            ========    ========   ========


Accounting for impairment or disposal of long-lived assets

     In accordance with SFAS 144,  "Accounting for the Impairment or Disposal of
Long-Lived  Assets," we evaluate the accounting and reporting for the impairment
of long-lived assets and for long-lived assets to be disposed. SFAS 144 requires
recognition  of impairment of long-lived  assets or asset groups if the net book
value of such  assets  exceeds  the  estimated  future  undiscounted  cash flows
attributable  to such  assets.  If the carrying  value of a long-lived  asset or
asset group is considered  impaired, a loss is recognized based on the amount by
which the carrying value exceeds the fair market value of the  long-lived  asset
or asset  group  for  assets  to be held and  used,  or the  amount by which the
carrying  value exceeds the fair market value less cost to dispose for assets to
be disposed. No impairment was identified during 2008, 2007 or 2006.

Reclassifications

     Amounts in prior years' consolidated  financial statements are reclassified
whenever necessary to conform with the current year's presentation.


<PAGE>

Use of estimates

     The  preparation  of  the  consolidated   financial   statements   requires
management of the Company to make a number of estimates and assumptions relating
to the  reported  amount  of  assets  and  liabilities  and  the  disclosure  of
contingent  assets and  liabilities  at the date of the  consolidated  financial
statements and the reported  amounts of revenues and expenses during the period.
Significant  items  subject  to such  estimates  and  assumptions  include:  the
carrying amount of property, plant and equipment, identifiable intangible assets
and goodwill,  valuation  allowances for  receivables,  inventories and deferred
income tax assets. Actual results could differ from those estimates.

     The economic  conditions in late 2008 and early 2009 and the  volatility in
the financial  markets in late 2008 and early 2009, both in the U.S. and in many
other countries where the Company operates, have contributed and may continue to
contribute to higher unemployment levels,  decreased consumer spending,  reduced
credit  availability  and/or declining  business and consumer  confidence.  Such
conditions could have an impact on the markets in which the Company's  customers
operate,  which could result in a reduction of sales,  operating income and cash
flows and could  have a material  adverse  impact on the  Company's  significant
estimates  discussed  above,  specifically  the  fair  value  of  the  Company's
reporting units used in support of its annual goodwill impairment test.

New Accounting Pronouncements Not Yet Adopted

     In February 2008,  the FASB issued FASB Staff  Position  ("FSP") No. 157-2,
"Effective Date of FASB Statement No. 157" which permits a one-year deferral for
the  implementation  of  SFAS  157  with  regard  to  non-financial  assets  and
liabilities  that are not recognized or disclosed at fair value in the financial
statements  on a  recurring  basis  (at least  annually).  We  elected  to defer
adoption of SFAS 157 for such non-financial  assets and liabilities,  which, for
the Company,  primarily includes long-lived assets, goodwill and intangibles for
which fair value would be determined as part of related impairment tests, and we
do not currently  anticipate that full adoption in 2009 will  materially  impact
the Company's results of operations or financial condition.

     In December  2007, the FASB issued SFAS No. 141 (revised  2007),  "Business
Combinations" ("SFAS 141R"). SFAS 141R, which is broader in scope than SFAS 141,
<PAGE>

applies to all  transactions  or other events in which an entity obtains control
of one or more businesses,  and requires that the acquisition method be used for
such transactions or events. SFAS 141R, with limited exceptions, will require an
acquirer to recognize the assets  acquired,  the  liabilities  assumed,  and any
noncontrolling  interest in the acquiree at the  acquisition  date,  measured at
their fair values as of that date. This will result in acquisition related costs
and anticipated  restructuring costs related to the acquisition being recognized
separately  from the  business  combination.  SFAS 141R is  effective  as of the
beginning of an entity's  first fiscal year  beginning  after  December 15, 2008
(the Company's 2009 fiscal year). The impact of SFAS 141R on the Company will be
dependent upon the extent to which we have transactions or events occur that are
within its scope.

     In December 2007, the FASB issued SFAS No. 160,  "Noncontrolling  Interests
in Consolidated  Financial  Statements" ("SFAS 160"). SFAS 160 amends Accounting
Research Bulletin No. 51, "Consolidated  Financial  Statements," and will change
the accounting and reporting for noncontrolling interests, which are the portion
of equity in a subsidiary not attributable, directly or indirectly, to a parent.
SFAS 160 is effective for fiscal years and interim periods beginning on or after
December 15, 2008 (the  Company's  2009 fiscal  year) and  requires  retroactive
adoption of its presentation and disclosure  requirements.  We do not anticipate
that the adoption of SFAS 160 will materially impact the Company.

Note 2 -- Business Acquisitions

     On November 2, 2006, PAR  Technology  Corporation  (the  "Company") and its
wholly  owned  subsidiary,   Par-Siva  Corporation  (f/k/a  PAR  Vision  Systems
Corporation)  (the  "Subsidiary")  acquired  substantially all of the assets and
assumed certain liabilities of SIVA Corporation ("SIVA").  The purchase price of
the assets was approximately $6.9 million including estimated  acquisition costs
of approximately $204,000. The purchase price consisted of $1.1 million worth of
PAR common stock  (125,549  shares of PAR  Technology  Corporation  common stock
issued out of treasury)  and the remainder in cash.  The agreement  provides for
additional  contingent  purchase  price  payments  based on certain  sales based
milestones  and  other  conditions.  In 2008 and 2007,  there was no  contingent
payment earned. SIVA, based in Delray Beach, Florida, is a developer of software
solutions  for  multi-unit  restaurant  operations.  In 2008,  the Company  paid
$156,000 in contingent  purchase price payments  pertaining to acquisitions made
by the  Company  prior to 2006.
<PAGE>

     The purchase  price of this  acquisition  was  allocated  based on the fair
value  of  the  tangible  and  identifiable   intangible   assets  acquired  and
liabilities  assumed by the Company as of the closing  date of the  acquisition.
Management was responsible for determining the fair value of the assets acquired
and liabilities assumed using certain assumptions and assessments  including the
income approach. Identifiable intangible assets recorded in the acquisitions are
tested  for  impairment  in  accordance  with the  provisions  of SFAS 142.  The
following  table  presents the estimated  fair value of the assets  acquired and
liabilities assumed at the date of acquisition:

                          (in thousands)                        SIVA
                           ------------                      ----------

               Other current assets ..................          $   13
               Property, plant and equipment .........             223
               Intangible assets .....................           1,924
               Goodwill ..............................           4,843
                                                                ------
               Total assets acquired .................          $7,003
                                                                ======

               Deferred revenues and customer deposits             110
                                                                ------
               Total liabilities assumed .............             110
                                                                ------
               Purchase price, including
                 acquisition related costs ...........          $6,893
                                                                ======

     The  identifiable  intangible  assets acquired and their  estimated  useful
lives are as follows:

               (in thousands)                    SIVA          Useful Life
                ------------                  ---------        -----------

               Software costs                 $  1,025           5 Years

               Customer relationships              649           5 Years

               Trademarks                          250           Indefinite
                                              --------
                                              $  1,924
                                              ========

     On an unaudited proforma basis, assuming the acquisition had occurred as of
the beginning of the periods presented,  the consolidated results of the Company
would have been as follows (in thousands, except per share amounts):

                                       Year ended December 31,
                                       -----------------------
                                              2006
                                              ----

            Revenues                       $  209,723
                                           ==========
            Net income                     $    2,743
                                           ==========
            Earnings per share:
               Basic                       $      .19
                                           ==========
               Diluted                     $      .18
                                           ==========
<PAGE>

     The unaudited proforma financial  information  presented above gives effect
to purchase accounting adjustments which have resulted or are expected to result
from the acquisition. This proforma information is not necessarily indicative of
the results  that would  actually  have been  obtained  had the  companies  been
combined for the periods presented.

Note 3 -- Accounts Receivable

     The Company's net accounts receivable consist of:

                                                 December 31,
                                               (in thousands)
                                          -------------------------
                                            2008             2007
                                          --------        ---------
          Government segment:
               Billed .............       $ 13,260        $ 13,153
               Advanced billings ..         (2,096)         (2,687)
                                          --------        --------
                                            11,164          10,466
                                          --------        --------
          Hospitality segment:
          Accounts receivable - net         42,418          33,142
                                          --------        --------
                                          $ 53,582        $ 43,608
                                          ========        ========


     At December 31, 2008,  2007 and 2006,  the Company had recorded  allowances
for doubtful  accounts of $2,306,000,  $2,447,000 and $1,850,000,  respectively,
against  Hospitality  segment  accounts   receivable.   Write-offs  of  accounts
receivable  during fiscal years 2008, 2007 and 2006 were $1,193,000,  $2,437,000
and $747,000,  respectively. The provision for doubtful accounts recorded in the
consolidated statements of operations was $1,052,000, $3,034,000 and $849,000 in
2008, 2007 and 2006, respectively.

Note 4 -- Inventories

     Inventories are used primarily in the manufacture, maintenance, and service
of the Hospitality segment systems. Inventories are net of related reserves. The
components of inventories-net are:


                                     December 31,
                                    (in thousands)
                                ----------------------
                                  2008          2007
                                -------      ---------

          Finished goods        $ 7,761       $ 9,965
          Work in process         1,425         1,722
          Component parts        13,661        10,408
          Service parts .        18,285        18,224
                                -------       -------
                                $41,132       $40,319
                                =======       =======
<PAGE>


     The  Company  records  reserves  for  shrinkage  and  excess  and  obsolete
inventory.  At December 31, 2008, 2007 and 2006,  these amounts were $3,267,000,
$3,951,000 and $3,658,000, respectively. Write-offs of inventories during fiscal
years  2008,  2007  and  2006  were   $3,309,000,   $2,708,000  and  $2,453,000,
respectively.  The provision  for  shrinkage  and excess and obsolete  inventory
recorded in the consolidated statements of operations was $2,625,000, $3,001,000
and $1,922,000, in 2008, 2007 and 2006, respectively.

Note 5 -- Property, Plant and Equipment

     The components of property, plant and equipment are:

                                                    December 31,
                                                   (in thousands)
                                             -------------------------
                                                2008            2007
                                             ----------      ---------

          Land ........................       $    253        $    253
          Buildings and improvements ..          5,857           5,895
          Rental property .............          5,490           5,490
          Furniture and equipment .....         20,787          20,215
                                              --------        --------
                                                32,387          31,853
          Less accumulated depreciation
           and amortization ...........        (25,508)        (24,184)
                                              --------        --------
                                              $  6,879        $  7,669
                                              ========        ========


     The  estimated  useful  lives of  buildings  and  improvements  and  rental
property  are  twenty  to  twenty-five  years.  The  estimated  useful  lives of
furniture and equipment range from three to eight years.  Depreciation  expense
recorded was  $1,832,000,  $1,882,000 and  $1,921,000  for 2008,  2007 and 2006,
respectively.

     The  Company  leases a portion  of its  headquarters  facility  to  various
tenants.  Rent received from these leases  totaled  $1,051,000,  $1,132,000  and
$1,129,000 for 2008, 2007 and 2006,  respectively.  Future minimum rent payments
due to the Company under these lease arrangements are as follows (in thousands):

                     2009               $   406
                     2010                   289
                     2011                   228
                     2012                    46
                     2013                    46
                     Thereafter               4
                                        -------
                                        $ 1,019
                                        =======


<PAGE>


     The Company  leases office space under  various  operating  leases.  Rental
expense on these operating leases was approximately  $2,778,000,  $2,706,000 and
$2,559,000 for 2008, 2007, and 2006, respectively. Future minimum lease payments
under all noncancelable operating leases are (in thousands):


                         2009                      $2,158
                         2010                       1,208
                         2011                         846
                         2012                         528
                         2013                         374
                         Thereafter                 1,110
                                                   ------
                                                   $6,224
                                                   ======

Note 6 -- Debt

     At December  31, 2007 and through  June 2008,  the Company had an aggregate
availability of $20,000,000 in unsecured bank lines of credit. One line totaling
$12,500,000  bore  interest at the bank  borrowing  rate (6.75% at December  31,
2007).  The second line of  $7,500,000  allowed the Company,  at its option,  to
borrow funds at the LIBOR rate plus the  applicable  interest  rate spread or at
the bank's  prime  lending rate (6.85% at December  31,  2007).  At December 31,
2007, there was $2,500,000  outstanding  under these lines. The weighted average
interest rate paid by the Company during 2007 was 6.6%.

     In June 2008,  the  Company  executed a new  credit  agreement  with a bank
replacing  its  existing  agreement.  Under this  agreement,  the  Company has a
borrowing  availability up to $20,000,000 in the form of a line of credit.  This
agreement allows the Company,  at its option,  to borrow funds at the LIBOR rate
plus the applicable  interest rate spread (2.4% to 2.9% at December 31, 2008) or
at the bank's prime lending rate plus the applicable interest rate spread (3.25%
at December 31,  2008).  This  agreement  expires in June 2011.  At December 31,
2008,  there was  $8,800,000  outstanding  under this  agreement.  The  weighted
average  interest rate paid by the Company was 4.9% during 2008.  This agreement
contains  certain loan covenants  including  leverage and fixed charge  coverage
ratios.  The Company is in compliance with these covenants at December 31, 2008.
This credit facility is secured by certain assets of the Company.

     In 2006,  the Company  borrowed  $6,000,000  under an  unsecured  term loan
agreement,  executed  as an  amendment  to one of its then  bank  line of credit
agreements,  in connection with the asset acquisition of SIVA  Corporation.  The
loan  provides  for  interest  only  payments  in the first year and  escalating
principal  payments through 2012. The loan bears interest at the LIBOR rate plus
the applicable interest rate spread or at the bank's prime lending rate plus the
applicable  interest  rate spread  (2.4% at December  31,  2008).  The terms and
conditions of the line of credit agreement  described in the preceding paragraph
also apply to the term loan.
<PAGE>

     In September 2007, the Company entered into an interest rate swap agreement
associated with the above $6,000,000 loan, with principal and interest  payments
due through  August 2012. At December 31, 2008,  the notional  principal  amount
totaled  $5,175,000.  This  instrument  was  utilized by the Company to minimize
significant unplanned fluctuations in earnings and cash flows caused by interest
rate volatility.  The Company did not adopt hedge accounting under the provision
of FASB  Statement No 133,  Accounting for  Derivative  Instruments  and Hedging
Activities,  but rather  records the fair market value  adjustments  through the
consolidated  statements of operations  each period.  The associated  fair value
adjustment  included  within the  consolidated  statements of operations for the
years ended December 31, 2008 and 2007 was $234,000 and $154,000,  respectively,
and is recorded as additional interest expense.

     The  Company  has a  $1,757,000  mortgage  collateralized  by certain  real
estate.  The annual mortgage payment  including  interest totals  $226,000.  The
mortgage bears interest at a fixed rate of 7% and matures in 2010.

     The Company's  future  principal  payments under its term loan and mortgage
are as follows (in thousands):

                       2009            $  1,079
                       2010               2,928
                       2011               1,575
                       2012               1,349
                                       --------
                                       $  6,931
                                       ========


Note 7 -- Stock based compensation

     Effective  January 1, 2006, the Company adopted the fair value  recognition
provisions of Statement of Financial  Accounting  Standards No. 123R Share-Based
Payment (SFAS 123R) on a modified  prospective basis. This standard requires the
Company to measure the cost of employee services received in exchange for equity
awards based on the grant date fair value of the awards.  The cost is recognized
as compensation expense over the vesting period of the awards. Total stock-based
compensation expense included in selling,  general and administrative expense in
2008, 2007, and 2006 was $395,000,  $448,000, and $334,000,  respectively.  This
amount  includes  $115,000,  $78,000,  and  $20,000  in 2008,  2007,  and  2006,
respectively,  relating to restricted stock awards. No compensation  expense has
been capitalized during fiscal years 2008, 2007 and 2006.
<PAGE>

     In 2005,  the  Company's  1995 Stock Option plan  expired.  The 2005 Equity
Incentive  Plan was approved by the  shareholders  at the Company's  2006 Annual
Meeting.  The  Company  has  reserved  1,000,000  shares  under its 2005  Equity
Incentive Plan.  Stock options under this Plan may be incentive stock options or
nonqualified stock options.  The Plan also provides for restricted stock awards.
Stock options are nontransferable other than upon death. Option grants generally
vest over a one to five year  period  after the grant and  typically  expire ten
years after the date of the grant.

     Information with respect to this plan is as follows:



                                                                       Aggregate
                                                          Weighted     Intrinsic
                                                           Average       Value
                                       No. of Shares      Exercise       (in
                                      (in thousands)       Price      thousands)
                                       -----------------------------------------

Outstanding at December 31, 2007           1,083           $  4.75        $3,206
                                                                          ======
  Options granted ..............              31              6.94
  Exercised ....................             (92)             5.29
  Forfeited and cancelled ......             (42)             7.83
                                           -----           -------

Outstanding at December 31, 2008             980           $  4.63        $  897
                                          ======           =======        ======
Vested and expected to vest
  at December 31, 2008 .........             968           $  4.58        $  939
                                          ======           =======        ======
Total shares exercisable
  as of December 31, 2008 ......             817           $  3.78        $1,446
                                          ======           =======        ======
Shares remaining
  available for grant ..........             740
                                          ======


     The weighted  average grant date fair value of options  granted  during the
years 2008, 2007 and 2006 was $3.90,  $4.39 and $3.69,  respectively.  The total
intrinsic value of options  exercised  during the years ended December 31, 2008,
2007 and 2006 was $234,000, $289,000 and $670,000,  respectively. The fair value
of options at the date of the grant was estimated using the Black-Scholes  model
with the following assumptions for the respective period ending December 31:

                                              2008         2007        2006
                                            -------     ---------    -------

Expected option life ...................    6.2 years    4.5 years    4.5 years
Weighted average risk-free interest rate    3.4%         4.7%         4.6%
Weighted average expected volatility ...    46%          48%          50%
Expected dividend yield ................    0%           0%           0%
<PAGE>

     For the years ended December 31, 2008,  2007 and 2006, the expected  option
life was based on the Company's historical experience with similar type options.
Expected  volatility is based on historical  volatility  levels of the Company's
common  stock over the  preceding  period of time  consistent  with the expected
life.  The  risk-free  interest  rate is based on the  implied  yield  currently
available on U.S. Treasury zero coupon issues with a remaining term equal to the
expected life.

     Stock options outstanding at December 31, 2008 are summarized as follows:

   Range of           Number Outstanding     Weighted Average  Weighted Average
Exercise Prices         (in thousands)        Remaining Life     Exercise Price
---------------          ------------         --------------     --------------

$1.25  -   $3.17              519               1.9   Years         $  2.20
$3.22  -   $8.18              254               5.4   Years         $  5.59
$8.47  -  $11.40              207               7.5   Years         $  9.58
----------------            -----               -----------         -------
$1.25  -  $11.40              980               4.0   Years         $  4.63
================            =====               ===========         =======

     At  December  31,  2008 the  aggregate  unrecognized  compensation  cost of
unvested  options,  as determined using a Black-Scholes  option valuation model,
was $623,000 (net of estimated  forfeitures)  which is expected to be recognized
as compensation expense in fiscal years 2008 through 2013.

     Current year activity with respect to the Company's nonvested stock options
is as follows:

                                                            Weighted Average
Nonvested shares (in thousands)            Shares         grant-date fair value
-------------------------------         -----------       ---------------------

Balance at January 1, 2008                   246                 $   3.97
      Granted                                 31                     3.89
      Vested                                 (72)                    3.99
      Forfeited and cancelled                (42)                    3.57
                                          ------                 --------
Balance at December 31, 2008                 163                 $   3.95
                                          ======                 ========

     During 2008,  2007 and 2006, the Company  issued  50,000,  9,600 and 17,800
restricted  stock  awards,  respectively,  at a per share  price of $.02.  These
awards vest over various periods ranging from 6 to 60 months.

<PAGE>

Note 8-- Income Taxes

     The provision (benefit) for income taxes consists of:

                                                Year ended December 31,
                                                   (in thousands)
                                          ------------------------------------
                                            2008         2007          2006
                                          -------       -------      --------
Current income tax:
     Federal .......................      $    49       $   206       $ 1,565
     State .........................          379            86           346
     Foreign .......................          384           422           319
                                          -------       -------       -------
                                              812           714         2,230
                                          -------       -------       -------
Deferred income tax:
     Federal .......................          487        (1,872)          802
     State .........................           59          (339)          114
                                          -------       -------       -------
                                              546        (2,211)          916
                                          -------       -------       -------
Provision (benefit) for income taxes      $ 1,358       $(1,497)      $ 3,146
                                          =======       =======       =======

     Deferred tax liabilities (assets) are comprised of the following at:

                                                  December 31,
                                                 (in thousands)
                                             ----------------------
                                                2008         2007
                                             ---------    ---------

Software development expense ..........      $   836       $   778
Intangible assets .....................        1,241           864
Foreign currency ......................         --             277
                                             -------       -------
Gross deferred tax liabilities ........        2,077         1,919
                                             -------       -------

Allowances for bad debts and inventory        (3,523)       (3,738)
Capitalized inventory costs ...........         (108)         (115)
Employee benefit accruals .............       (1,313)       (1,566)
Federal net operating loss carryforward         (130)         (672)
State net operating loss carryforward .         (333)         (405)
Tax credit carryforwards ..............       (2,378)       (1,345)
Foreign currency ......................         (962)           --
Other .................................         (156)         (211)
                                             -------       -------
Gross deferred tax assets .............       (8,903)       (8,052)
                                             -------       -------
Net deferred tax assets ...............      $(6,826)      $(6,133)
                                             =======       =======


     The Company has Federal tax credit  carryforwards of $1,597,000 that expire
in various tax years from 2013 to 2018. The Company has a Federal operating loss
carryforward   of  $382,000  that  expires  in  2027.  Of  the  operating   loss
carryforward,  $241,000  will  result in a  benefit  within  additional  paid in
capital when realized.  The Company also has state tax credit  carryforwards  of
$195,000 and state net operating loss  carryforwards  of $8,474,000 which expire
in various tax years through 2027.  In assessing the  realizability  of deferred
tax assets,  management  considers  whether it is more likely than not that some
<PAGE>


portion or all of the  deferred  tax assets will not be  realized.  The ultimate
realization  of deferred tax assets is dependent  upon the  generation of future
taxable  income  during the periods in which the  temporary  differences  become
deductible.   Management  considers  the  scheduled  reversal  of  deferred  tax
liabilities,  projected  future taxable income,  and tax planning  strategies in
making this  assessment.  Based upon the historical  level of taxable income and
projections  for future taxable  income,  management  believes it is more likely
than not the  Company  will  realize  the  benefit of the  deferred  tax assets.
Accordingly,  no deferred tax  valuation  allowance was recorded at December 31,
2008 and 2007.

     The Company has adopted the  provisions of Financial  Accounting  Standards
Board  Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN48)
effective January 1, 2007. The Company's  adoption of FIN 48 on January 1, 2007,
did not have a material impact on the Company's consolidated financial position,
results of operations or cash flows.  The Company is no longer subject to United
States federal income tax examinations for years before 2002.

     The  provision  (benefit)  for income  taxes  differed  from the  provision
computed by applying the Federal  statutory  rate to income  before taxes due to
the following:

                                               Year ended December 31,
                                         ------------------------------------
                                           2008          2007          2006
                                         ------------------------------------

Federal statutory tax rate ......          35.0%        (35.0)%        35.0%
State taxes .....................           5.3          (6.6)          3.9
Extraterritorial income exclusion            --            --          (2.4)
Non deductible expenses .........           9.3           6.8           1.9
Tax credits .....................         (10.9)         (3.6)         (1.0)
Foreign income taxes ............           0.5           1.7           --
Others ..........................          (1.2)          1.1          (1.9)
                                         ------        ------        ------
                                           38.0%        (35.6)%        35.5%
                                         ======        ======        ======


Note 9 -- Employee Benefit Plans

     The  Company  has a deferred  profit-sharing  retirement  plan that  covers
substantially  all employees.  The Company's annual  contribution to the plan is
discretionary.  The Company contributed $200,000,  $800,000, and $880,000 to the

<PAGE>


plan in 2008,  2007,  and 2006,  respectively.  The plan also  contains a 401(k)
provision that allows employees to contribute a percentage of their salary up to
the statutory limitation.  These contributions are matched at the rate of 10% by
the Company.  The Company's  matching  contributions  under the 401(k) component
were $408,000, $396,000 and $348,000 in 2008, 2007, and 2006, respectively.

     The Company also maintains an incentive-compensation  plan. Participants in
the plan are key employees as determined by the Board of Directors and executive
management.  Compensation  under  the  plan  is  based  on  the  achievement  of
predetermined  financial  performance goals of the Company and its subsidiaries.
Awards  under  the plan are  payable  in cash.  Awards  under  the plan  totaled
$461,000, $632,000, and $707,000 in 2008, 2007, and 2006, respectively.

     The Company also sponsors a Deferred  Compensation  Plan for a select group
of highly  compensated  employees  that  includes the  Executive  Officers.  The
Deferred Compensation Plan was adopted effective March 4, 2004. Participants may
make  elective  deferrals  of their  salary  to the plan in  excess  of tax code
limitations that apply to the Company's  qualified plan. The Company invests the
participants  deferred amounts to fund these  obligations.  The Company also has
the sole discretion to make employer  contributions to the plan on the behalf of
the  participants,  though it did not make any employer  contributions  in 2008,
2007, and 2006.

Note 10 -- Contingencies

     The Company is subject to legal  proceedings,  which arise in the  ordinary
course of business.  Additionally, U.S. Government contract costs are subject to
periodic  audit and  adjustment.  In the  opinion of  management,  the  ultimate
liability,  if any, with respect to these actions will not materially affect the
financial position, results of operations, or cash flows of the Company.

Note 11 -- Segment and Related Information

     The Company's  reportable  segments are strategic  business units that have
separate management teams and infrastructures  that offer different products and
services.

     The Company has two reportable  segments,  Hospitality and Government.  The
Hospitality  segment offers  integrated  solutions to the hospitality  industry.
These offerings  include  industry  leading  hardware and software  applications
utilized at the point-of-sale,  back of store and corporate office. This segment
also offers customer support including field service, installation,  twenty-four
hour  telephone  support  and depot  repair.  The  Government  segment  provides
technical expertise in the development of advanced technology  prototype systems
primarily  for the U.S.  Department  of  Defense  and  other  U.S.  Governmental
agencies.  It provides  services  for  operating  and  maintaining  certain U.S.
Government-owned  communication and test sites, and for planning,  executing and
evaluating  experiments  involving  new or advanced  radar  systems.  It is also
involved in developing  technology to track mobile chassis.  Intersegment  sales
and transfers are not significant.



<PAGE>
     Information as to the Company's segments is set forth below:

                                            Year ended December 31,
                                               (in thousands)
                                    -----------------------------------------
                                       2008           2007            2006
                                    -----------------------------------------
Revenues:
     Hospitality .............      $ 157,193       $ 144,486       $ 145,216
     Government ..............         75,494          64,998          63,451
                                    ---------       ---------       ---------
           Total .............      $ 232,687       $ 209,484       $ 208,667
                                    =========       =========       =========
Operating income (loss):
     Hospitality .............      $     819       $  (7,701)      $   5,051
     Government ..............          3,314           3,814           4,267
     Other ...................           (303)           (449)           (334)
                                    ---------       ---------       ---------
                                        3,830          (4,336)          8,984
Other income, net ............            921           1,227             617
Interest expense .............         (1,176)         (1,096)           (734)
                                    ---------       ---------       ---------
Income (loss) before provision
  for income taxes ...........      $   3,575       $  (4,205)      $   8,867
                                    =========       =========       =========
Identifiable assets:
     Hospitality .............      $ 127,678       $ 122,442       $ 123,958
     Government ..............         13,532          14,429          10,898
     Other ...................         12,778           9,647           7,402
                                    ---------       ---------       ---------
           Total .............      $ 153,988       $ 146,518       $ 142,258
                                    =========       =========       =========
Goodwill:
     Hospitality .............      $  24,981       $  26,349       $  25,138
     Government ..............            703             649             596
                                    ---------       ---------       ---------
           Total .............      $  25,684       $  26,998       $  25,734
                                    =========       =========       =========

Depreciation and amortization:
     Hospitality .............      $   3,567       $   3,622       $   3,453
     Government ..............             88              81              42
     Other ...................            374             376             389
                                    ---------       ---------       ---------
           Total .............      $   4,029       $   4,079       $   3,884
                                    =========       =========       =========

Capital expenditures:
     Hospitality .............      $     779       $   1,788       $     903
     Government ..............             22              57              14
     Other ...................            241             172             272
                                    ---------       ---------       ---------
           Total .............      $   1,042       $   2,017       $   1,189
                                    =========       =========       =========

<PAGE>

     The following  table presents  revenues by country based on the location of
the use of the product or services.

                                       2008            2007           2006
                                    ---------       ---------       ---------

United States ................      $ 205,202       $ 179,323       $ 181,482
Other Countries ..............         27,485          30,161          27,185
                                    ---------       ---------       ---------
  Total ......................      $ 232,687       $ 209,484       $ 208,667
                                    =========       =========       =========


     The following table presents assets by country based on the location of the
asset.

                                        2008            2007           2006
                                    ---------       ---------       ---------

United States ................       $ 142,461       $ 134,766       $ 134,799
Other Countries ..............          11,527          11,752           7,459
                                     ---------       ---------       ---------

  Total ......................       $ 153,988       $ 146,518       $ 143,258
                                     =========       =========       =========

     Customers  comprising  10% or  more of the  Company's  total  revenues  are
summarized as follows:

                                  2008      2007      2006
                                -------   -------   -------
Hospitality segment:
  McDonald's Corporation ...       24%       25%       26%
  Yum! Brands, Inc. ........       16%       15%       14%
Government segment:
  U.S. Department of Defense       32%       31%       30%
All Others .................       28%       29%       30%
                                  ---       ---       ---
                                  100%      100%      100%
                                  ===       ===       ===

Note 12 -- Fair Value of Financial Instruments

     As of January 1, 2008, the Company adopted SFAS No. 157, which defines fair
value,  establishes a framework  for  measuring  fair value as required by other
accounting pronouncements and expands disclosure requirements. In February 2008,
the FASB issued FSP No. FAS 157-2,  which delays the effective  date of SFAS No.
157 as it applies to non-financial  assets and liabilities that are not required
to  be  measured  at  fair  value  on  a  recurring  (at  least  annual)  basis.
Non-recurring nonfinancial assets and nonfinancial liabilities for which we have
not applied the  provisions of SFAS 157 include those  measured at fair value in
goodwill impairment testing, indefinite lived intangible assets measured at fair
value for impairment testing, asset retirement obligations initially measured at
fair  value,  and  those  initially   measured  at  fair  value  in  a  business
combination.  As a result of the  delay,  SFAS No.  157 will be  applied  to the
Company's non-financial assets and liabilities as of January 1, 2009.
<PAGE>

     SFAS 157 establishes a valuation  hierarchy for disclosure of the inputs to
valuation used to measure fair value. This hierarchy prioritizes the inputs into
three broad levels as follows.  Level 1 inputs are quoted prices (unadjusted) in
active markets for identical  assets or  liabilities.  Level 2 inputs are quoted
prices for similar  assets and  liabilities in active markets or inputs that are
observable  for the asset or liability,  either  directly or indirectly  through
market  corroboration,   for  substantially  the  full  term  of  the  financial
instrument.  Level 3 inputs are unobservable inputs based on our own assumptions
used to measure  assets and  liabilities  at fair value.  A  financial  asset or
liability's  classification  within the  hierarchy  is  determined  based on the
lowest level input that is significant to the fair value measurement.

     The  Company's  financial  instruments  consist  primarily of cash and cash
equivalents,  trade  receivables,  trade  payables,  debt  instruments,  and  an
interest rate swap agreement.  For cash and cash equivalents,  trade receivables
and trade payables,  the carrying  amounts of these financial  instruments as of
December 31, 2008 and 2007 were considered  representative of their fair values.
The estimated  fair values of the Company's  long-term debt at December 31, 2008
and 2007 were based on variable  and fixed  interest  rates at December 31, 2008
and 2007,  respectively,  for new issues with similar  remaining  maturities and
approximates respective carrying values at December 31, 2008 and 2007.

     The  Company's  interest  rate swap  agreement  is valued at the amount the
Company would have expected to pay to terminate  the  agreement.  The fair value
determination  was based upon the present  value of  expected  future cash flows
using the LIBOR rate,  plus an  applicable  interest  rate  spread,  a technique
classified  within  Level  2 of the  valuation  hierarchy  described  above.  At
December 31, 2008 and 2007 the fair market value of the Company's  interest rate
swap included a realized loss of $388,000 and $154,000,  respectively,  which is
recorded as a component of interest expense within the  consolidated  statements
of operations  and as a component of accrued  expenses  within the  consolidated
balance sheets.

<PAGE>


Note 13 -- Related Party Transactions

     The Company leases its corporate  wellness facility to related parties at a
current  rate  of  $9,775  per  month.  The  Company  receives  a  complimentary
membership to this  facility  which is provided to all  employees.  During 2008,
2007, and 2006 the Company  received rental income amounting to $117,300 for the
lease of the facility in each year.  All lease  payments are current at December
31, 2008.

     The  Company  also  leases  office  space  from  an  officer  of one of its
subsidiaries.  The lease is for a period of five years  beginning  on October 1,
2004 at an annual rate of $360,000.  In 2008,  2007,  and 2006, the Company paid
$360,000 to the officer under this lease.

Note 14 -- Selected Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>

                                                                     Quarter ended
                                                        (in thousands except per share amounts)
                                        ----------------------------------------------------------------------
          2008                           March 31             June 30          September 30        December 31
          ----                          ----------           ---------         ------------        -----------

<S>                                        <C>                <C>                <C>                  <C>
Net revenues                               $ 52,107           $  57,234          $  57,967            $ 65,379
Gross margin                                 12,359              14,032             14,561              16,498
Net income (loss)                              (744)                674                828               1,459
Basic earnings (loss) per share                (.05)                .05                .06                 .10
Diluted earnings (loss) per share              (.05)                .05                .06                 .10

<CAPTION>
                                                                   Quarter ended
                                                        (in thousands except per share amounts)
                                      --------------------------------------------------------------------------
          2007                           March 31             June 30          September 30        December 31
          ----                           --------             -------          ------------        -----------

<S>                                        <C>                <C>                <C>                  <C>
Net revenues                               $ 47,836           $  49,872          $  51,577            $ 60,199
Gross margin                                 10,808              12,635             12,402              16,063
Net income (loss)                            (1,308)             (1,021)              (862)                483
Basic earnings (loss) per share                (.09)               (.07)              (.06)                .03
Diluted earnings (loss) per share              (.09)               (.07)              (.06)                .03

</TABLE>

<PAGE>


                                   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.


                                           PAR  TECHNOLOGY CORPORATION

March 16, 2009                             John W. Sammon, Jr.
                                           ------------------------------------
                                           John W. Sammon, Jr.
                                           Chairman of Board and President


                            -------------------------


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

-------------------------------------------------------------------------------
    Signatures                       Title                           Date
-------------------------------------------------------------------------------


John W. Sammon, Jr.
-------------------
John W. Sammon, Jr.           Chairman of the Board and         March 16, 2009
                              President (Principal
                              Executive Officer)
                              and Director

Charles A. Constantino
----------------------
Charles A. Constantino        Executive Vice President          March 16, 2009
                              and Director

Sangwoo Ahn
----------------------
Sangwoo Ahn                   Director                          March 16, 2009

James A. Simms
----------------------
James A. Simms                Director                          March 16, 2009

Paul D. Nielsen
----------------------
Paul D. Nielsen               Director                          March 16, 2009

Kevin R. Jost
----------------------
Kevin R. Jost                 Director                          March 16, 2009

Ronald J. Casciano
------------------
Ronald J. Casciano            Vice President, Chief Financial   March 16, 2009
                              Officer and Treasurer


<PAGE>
<TABLE>
<CAPTION>


                                List of Exhibits

Exhibit No.       Description of Instrument
-----------       -------------------------

   <S>        <C>                                                      <C>
   3.1        Certificate of Incorporation, as amended                 Filed as Exhibit 3(i) to the quarterly
                                                                       report on Form 10Q for the period ended
                                                                       June 30, 2006, of PAR Technology
                                                                       Corporation and incorporated herein by
                                                                       reference.

   3.3        By-laws, as amended.                                     Filed as Exhibit 3.1 to Registration
                                                                       Statement on Form S-2 (Registration
                                                                       No. 333-04077)of PAR Technology
                                                                       Corporation incorporated herein by
                                                                       reference.

   4          Specimen Certificate representing the                    Filed as Exhibit 3.1 to Registration
              Common Stock.                                            Statement on Form S-2 (Registration
                                                                       No. 333-04077) of PAR Technology
                                                                       Corporation incorporated herein by
                                                                       reference.

  10.1        Letter of Agreement with Sandman                         Filed as Exhibit 10.1 to Form S-3/A
              - SCI Corporation                                        (Registration No. 333-102197) of
                                                                       PAR Technology Corporation incor-
                                                                       porated herein by reference.

  10.2        Asset Purchase Agreement dated October 27,               Filed as Exhibit 10.1 to the current
              2006. By and among PAR Technology                        report on Form 8K dated November 8,
              Corporation, Par-Siva Corporation and                    2006 of PAR Technology Corporation
              SIVA Corporation.                                        and incorporated herein by
                                                                       reference.

  10.3        JP Morgan term loan.                                     Filed as Exhibit 10.3 to Form 10-K
                                                                       for the year ended December 31, 2006
                                                                       and herein by reference.

  10.4        2005 Equity Incentive Plan of PAR                        Filed as Exhibit 4.2 to Form S-8
              Technology Corporation                                   (Registration No. 333-137647) of
                                                                       PAR Technology Corporation and
                                                                       incorporated herein by reference.

  10.5        Form of Stock Option Award Agreement                     Filed as Exhibit 4.3 to Form S-8
                                                                       (Registration No. 333-137647) of
                                                                       PAR Technology Corporation and
                                                                       incorporated herein by reference.

  10.6        Form of Restricted Stock Award Agreement                 Filed as Exhibit 4.4 to Form S-8
                                                                       (Registration No. 333-137647) of
                                                                       PAR Technology Corporation and
                                                                       incorporated herein by reference.

</TABLE>


<PAGE>

<TABLE>
<CAPTION>


                                List of Exhibits
                                   (Continued)


Exhibit No.       Description of Instrument
-----------       -------------------------

<S>           <C>                                                      <C>
10.7          June 2007 amendment to bank line of credit               Filed as Exhibit 10.7 to Form 10-K
              agreement - JP Morgan Chase                              for the year ended December 31, 2007
                                                                       incorporated herein by reference.

10.8          February 2008 amendment to bank line of                  Filed as Exhibit 10.7 to Form 10-K
              credit agreement - JP Morgan Chase                       for the year ended December 31, 2007
                                                                       incorporated herein by reference.

10.9          June 2007 amendment to bank line of                      Filed as Exhibit 10.7 to Form 10-K
              credit agreement - NBT Bank                              for the year ended December 31, 2007
                                                                       incorporated herein by reference.

10.10         January 2008 amendment to bank line of                   Filed as Exhibit 10.7 to Form 10-K
              credit agreement - NBT Bank                              for the year ended December 31, 2007
                                                                       incorporated herein by reference.

10.11         January 2008 amendment to bank line of                   Filed as Exhibit 10.7 to Form 10-K
              credit agreement - NBT Bank                              for the year ended December 31, 2007
                                                                       herein by reference.

10.12         Credit Agreement with JP Morgan Chase                    Filed as Exhibit 10.1 to Form 8-K
                                                                       dated June 16, 2008 of PAR Technology
                                                                       Corporation and incorporated herein by
                                                                       reference.

10.13         Pledge and Security Agreement with JP Morgan Chase       Filed as Exhibit 10.2 to Form 8-K
                                                                       dated June 16, 2008 of PAR Technology
                                                                       Corporation and incorporated herein by
                                                                       reference.
  22          Subsidiaries of the registrant

  23          Consent of Independent Registered Public
              Accounting Firm

  31.1        Certification of Chairman of the Board
              and Chief Executive Officer Pursuant
              to Section 302 of the Sarbanes-Oxley Act
              of 2002.

  31.2        Certification of Vice President, Chief
              Financial Officer and Treasurer Pursuant
              to Section 302 of the Sarbanes-Oxley Act
              of 2002.

  32.1        Certification of Chairman of the Board
              and Chief Executive Officer and
              Vice President, Chief Financial Officer
              and Treasurer Pursuant to 18 U.S.C.
              Section 1350, as Adopted Pursuant to
              Section 906 of the Sarbanes-Oxley Act of 2002
</TABLE>