UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION




Washington,
D.C. 20549




FORM 10-KSB




[X]  Annual Report under
Section 13 or 15(d)
of the Securities Exchange Act of 1934




For the year endedDecember31, 2007




[  ]Transitional Report
under Section13or15(d)of the Securities
Exchange Act of 1934


For the transition period
from   _______ to _______




Commission
file number 000-08356




XEDAR
CORPORATION


(Name of
small business issuer as specified in its charter)






COLORADO
            84-0684753(State or
      other jurisdiction of incorporation or organization)
            (IRS Employer
      Identification No.)




8310
South Valley Highway, Suite 220


Englewood,
CO 80112


(Address
of principal executive offices)





(303)
377-0033


(Issuer’s
telephone number)





Securities
registered under Section 12(b) of the Exchange Act:


None


Securities
registered under Section 12(g) of the Exchange Act:


Common
Stock, no par value





Check whether the issuer is not
required to file reports pursuant to Section 13 or 15(d) of the Exchange
Act.[ ]




Check
whether the issuer: (1) filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act during past 12 months, and (2) has been
subject to such filing requirements for the past 90 days. Yes  [X]     No  [
]




Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will 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-KSB or any
amendment to this Form 10-KSB. [X]





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





State the
issuer’s revenue for its most recent fiscal year: $11,142,193




As of
March 24, 2008, there were 26,186,646 shares of the issuer’s no par value common
stock outstanding.  On that date the aggregate market value of the
common stock (based upon the average bid and asked prices on such date) of the
issuer held by non-affiliates was approximately $41,816,000.




Transitional
Small Business Disclosure Format. Yes  [ ]   No  [X]





Documents
Incorporated by Reference





The
information required by Part III of this report, to the extent not included
herein, is incorporated by reference from the registrant’s definitive proxy
statement relating to the annual meeting of stockholders anticipated to be held
on April 23, 2008, which definitive proxy statement will be filed with the
Securities and Exchange Commission within 120 days after the end of the
year to which this report relates.








A
Note About Forward-Looking Statements





The
statements included in this report, other than statements of historical fact,
are forward-looking statements. Forward-looking statements generally can be
identified by the use of forward-looking terminology such as “may,” “will,”
“expect,” “intend,” “estimate,” “anticipate,” “plan,” “seek,” or
“believe.”  These forward-looking statements, which are subject to
risks, uncertainties, and assumptions, may include projections of our future
financial performance based on our growth strategies and anticipated trends in
our business. These statements are only predictions based on our current
expectations about future events. There are important factors that could cause
our actual results, level of activity, performance, or achievements to differ
materially from the results, level of activity, performance, or achievements
expressed or implied by the forward looking statements. In particular, you
should consider the risks outlined under "Risk Factors."  Although we
believe the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, level of activity, performance,
or achievements. You should not rely upon forward-looking statements as
predictions of future events. These forward-looking statements apply only as of
the date of this report; as such, they should not be unduly relied upon as
circumstances change.  Except as required by law, we are not
obligated, and we undertake no obligation, to release publicly any revisions to
these forward-looking statements that might reflect events or circumstances
occurring after the date of this report or those that might reflect the
occurrence of unanticipated events.


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2 -


Part
I





Item
1.  Description of Business





Company History





We are a
Colorado corporation, incorporated in 1974 for the purpose of designing,
developing, fabricating and selling high technology electro-optical equipment
and related electrical equipment, including devices such as cameras, video
systems, video amplifiers, image systems, electro-optical transmissions and
electrical test equipment.  We were quoted for trading on the
Electronic Bulletin Board from 1975 until November 28, 2001, when we filed
a Form 15, Certification and Notice of Termination of Registration with the
Securities and Exchange Commission and terminated our quotation on the Bulletin
Board.  We engaged in minimal operations until October 1, 2004 (the
date of our new development stage), when we commenced activities to become
current in reporting with the SEC as a shell company.




Effective
December 31, 2006, through a wholly owned subsidiary formed specifically for
that purpose, we merged with Premier Data Services, Inc., a Delaware
corporation.  Before the merger there was no material relationship
between us, our affiliates, and Premier.  In accordance with the terms
of the merger agreement, we issued 14,082,871 shares of our common stock in
exchange for (i) 13,685,018 shares of the common stock of Premier, and (ii)
2,685,253 shares of the Series A preferred stock of Premier. Immediately after
the merger transaction, the former stockholders of Premier owned approximately
85% of the issued and outstanding shares of our common stock, and the management
and board of directors designated by Premier were appointed as our officers and
directors.  The acquisition price was determined pursuant to arm’s
length negotiation between Hugh H. Williamson, III, as the President and CEO of
Premier, and Earnest Mathis, Jr., our President and CEO prior to the
merger.  The purchase price paid in the merger was determined with
reference to and based upon the expected value to Premier of merging with and
becoming a wholly owned operating subsidiary of a public company.  As
a result of the merger, Hugh H. Williamson, III, became one of our directors and
our President and CEO and Earnest Mathis, Jr., resigned as an officer and
director. No compensation was paid to the persons negotiating the merger, nor
did such persons or their affiliates enter into any employment agreements or
arrangements in connection with or as part of the merger.  No finders
fees were paid or consulting agreements entered into as part of the
merger.  The conversion of Premier shares into our shares of common
stock has been accounted for as a reverse acquisition, since the stockholders of
Premier obtained control of us.  The below discussion includes the
historical book values and results of operations of Premier.




Premier
was formed in 1994 by four partners, Robert Johnson, Brad Taggart, Mark Chase,
and Gary Kerr, three of whom remain with us today (Robert Johnson, Brad Taggart,
and Mark Chase).  We issued a series of land database and mapping
products, including ClaimFinder® in 1995, LeaseFinder® in 1996, LotFinder® and
CartéView® in 1997, Lease Sale System in 1998, Land Link® in 1999, PDS Studio®
in 2001, Launch Pad in 2002, Map Layout Express in 2003, Map Server in 2004 and
the Historical Lease Sale database in 2006.  Also, we developed a
number of custom applications for selected Federal Government clients, such as
the BLM Lease Sale System, Mining Claim ADP, and OG Map II software. These
custom applications expanded our base of development experience, allowing us to
transfer technology from our custom design work into packaged software
products.




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Approximately
five years prior to our merger with Premier, in early 2002, Premier acquired
FuGEN, Inc., a Maryland-based software development and systems consulting
company.  This gave Premier an expanded foothold in the federal
government marketplace, which has led to major information technology systems
and enterprise security consulting projects with the Department of State, the
Veterans Administration, and the Bureau of Land Management.  FuGEN,
like Premier, was also founded in 1994.  The founder, Martin
Terwilliger, and the initial two members of FuGEN’s executive staff, Michelle
Beiga and Mitchell Gross, are still active in our day-to-day
operations.  Mr. Terwilliger serves as the President of our
wholly-owned FuGEN subsidiary, is an employee at will, and receives an annual
salary of $194,000.  Ms. Beiga serves as the Vice President – Human
Resources of our wholly owned FuGEN subsidiary, is an employee at will, and
receives an annual salary of $119,000.  Mr. Gross serves as the Vice
President – Consulting Services of our wholly owned FuGEN subsidiary, is an
employee at will, and receives an annual salary of $152,000. Premier acquired
FuGEN for a purchase price of (i) 2,239,652 shares of Premier's common stock and
(ii) a cash payment of $100,000 and delivery of a contingent promissory note
payable to Jack Baum or his affiliates in a principal amount not to exceed
$700,000 (Mr. Baum was a controlling shareholder of FuGEN at the time of the
acquisition).  The acquisition of FuGEN was negotiated by our
President and CEO, Hugh H. Williamson, III, who, at the time of the acquisition,
served as chairman of the board of directors of Premier, Mr. Terwilliger, then
President of FuGEN, and Mr. Baum, a controlling shareholder of FuGEN. Premier
had no material relationship with FuGEN or its shareholders prior to its
acquisition of FuGEN.  No finders fees were paid or consulting
agreements entered into as part of the acquisition of FuGEN.





In
November 2006 we sold the Customer Relationship Management ("CRM") segment of
our information technologies consulting business to CustomerSoft, LLC, a
Colorado limited liability company.  This segment was sold in a
negotiated transaction in exchange for contingent consideration in the amount of
$800,000.  The sale was negotiated by Hugh H. Williamson, III, on
behalf of Premier and Don Brower on behalf of CustomerSoft.  A year
prior to the sale of the CRM segment, Don Brower had served as a Vice President
of Business Development for Premier, and at the time of the sale of the CRM
segment, Mr. Brower served as an independent, commission-only reseller with
respect to certain Premier products.  The negotiated sales price
represented the approximate anticipated profit from what was at the time the CRM
segment’s only identified prospective sale (Starscape Communications Private
Limited), and was contingent upon consummation of that sale.  The time
period for consummation of the Starscape sale was 12 months from the date
of the sale of the CRM segment to CustomerSoft, or until October 31, 2007,
after which no consideration would be due or payable by
CustomerSoft.  Because the Starscape sale did not close on or prior to
October 31, 2007, no consideration for the sale of our CRM segment was paid by
CustomerSoft or will become due or payable.  No compensation was paid
to the persons negotiating the sale of the CRM segment, nor did such persons or
their affiliates enter into any employment agreements or arrangements in
connection with or as part of the sale.  No finders fees were
paid or consulting agreements entered into as part of the sale of the CRM
segment.




On
January 1, 2007, we, through our subsidiary PDS GIS/LIS, Inc., a Delaware
corporation, acquired Land Links Company Ltd., a New Mexico limited liability
company.  We purchased Land Links from its two members for a purchase
price of 360,000 shares of our common stock, 180,000 shares paid to David M.
King and 180,000 shares paid to Glen W. Thurow.  The terms of the Land
Links acquisition were negotiated by the then President and CEO of our Premier
and PDS GIS/LIS subsidiaries, Richard V. Souders, and the two members of Land
Links, Glen W. Thurow and David M. King. The purchase price paid in the purchase
of Land Links was determined with reference to and based upon a multiple of
approximately one times Land Links’ trailing twelve
months’ revenue.  Subsequent to the acquisition, Mr. Thurow
became a co-manager of our wholly owned Land Links subsidiary, with an annual
salary of $100,000 and Mr. King became a co-manager of our wholly owned Land
Links subsidiary, with an annual salary of $100,000.  Both Mr. Thurow
and Mr. King are employees at will.  We had no material relationship
with Land Links or its members prior to our acquisition of Land
Links.  No finders fees were paid or consulting agreements entered
into as part of the Land Links acquisition.  The acquisition of Land
Links expanded our foothold in the geographic information systems
arena.




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In
February 2007, pursuant to the terms of the JIS Purchase Agreement, we sold our
Justice Information Systems ("JIS") division to Justice Systems, Inc., a New
Mexico corporation.  Pursuant to the terms of the JIS Purchase
Agreement, our Premier subsidiary (i)  sold all of its right, title,
and interest in and to that certain software, source code, and documentation
comprising the software package commonly referred to as Equal Justice; (ii)
subleased to Justice Systems, Inc., at a rate of $1,300 per month, for a term of
2 months, certain office space and equipment located at 6001 Montrose Road,
Rockville, MD 20852; (iii) released certain employees who elected to become
employees of Justice Systems, Inc. from any non-competition agreements to which
such employees may have been a party, and (iv) assigned to Justice Systems, Inc.
all of Premier’s rights and obligations arising out of and under that certain
Software Services and Maintenance Agreement relating to the Equal Justice
software and entered into between Premier and the City of Greeley, Colorado,
dated October 6, 2006.  The purchase price paid by Justice Systems,
Inc., pursuant to the terms of the JIS Purchase Agreement was
$75,000.  The terms of the JIS division sale were negotiated by the
then President and CEO of our Premier subsidiary, Richard V. Souders, and the
CEO of Justice Systems, Inc., Ernie L. Sego.  In addition, in
connection with the JIS Purchase Agreement, Premier and Justice Systems, Inc.
entered into a Consulting Services Agreement.  Subject to the terms of
the Consulting Services Agreement, Premier provided certain consulting services
to Justice Systems, Inc., from March 1, 2007 through August 31, 2007, as an
independent contractor, in connection with customer support and related services
for the Equal Justice software.  The compensation paid Premier, in
advance, pursuant to the terms of the Consulting Services Agreement was
$65,000.  No compensation was paid to the persons negotiating the sale
of the JIS division.  No finders fees were paid as part of the sale of
the JIS division.




On March
22, 2007 we acquired all of the outstanding stock of Atlantic Systems
Corporation (“Atlantic”), a Virginia corporation.  Atlantic develops
software for the defense and intelligence agencies of the federal government,
and provides technical assistance and training for other software systems
implemented by the federal government. Additionally, Atlantic provides strategy
consulting services to those same agencies.  Further, Atlantic assists
its clients in selling their products and services to the federal
government.  Pursuant to the Stock Purchase Agreement between us,
Atlantic, and Don W. Rakestraw, Jeffrey R. Grime, and J. O. McFalls, III (who
together owned all of the outstanding stock of Atlantic prior to the
transaction), dated March 22, 2007, as amended by the First Amendment to Stock
Purchase Agreement, dated July 26, 2007, we purchased all of the outstanding
Atlantic stock from the shareholders for (i) an initial payment of 1,380,802
shares of our common stock, (ii) a closing payment of 3,000,000 shares of our
common stock, and (iii) a contingent payment not to exceed 2,000,000 shares of
our common stock, to be made at our discretion, in the event Atlantic or
its subsidiary receives one or more significant RFPs (Requests For Proposal),
RFQs (Requests for Quotation) or SOWs (Statements of Work) from the federal
government, or a significant industry participant, and responds to such requests
with one or more proposals by December 31, 2007.  The terms of the
Atlantic acquisition were negotiated at arm’s length by our President and CEO,
Hugh H. Williamson, III, and the three shareholders of Atlantic, Don W.
Rakestraw, Jeffrey R. Grime, and J.O. McFalls.  The purchase price paid in
the acquisition of Atlantic was determined with reference to and based upon a
multiple of approximately 1.2 times its trailing twelve months’ revenue. We
had no material relationship with Atlantic or its shareholders prior to the
purchase.  Subsequent to the acquisition, Don W. Rakestraw,
Jeffrey R. Grime, and J.O. McFalls became employees at will with certain
severance related rights.  Specifically, Mr. Rakestraw became the CEO
of our wholly owned Atlantic subsidiary, with an annual salary of $230,000
per year.  If Mr. Rakestraw is terminated without cause in his first
year of employment, he is entitled to a payment of $820,000, if he is terminated
without cause at any time thereafter, he is entitled to a payment of $500,000,
and if he is terminated for cause at any time, he is not entitled to any
severance. Mr. Grime became the President of our wholly owned Atlantic
subsidiary, with an annual salary of $230,000 per year.  If Mr. Grime
is terminated without cause in his first year of employment, he is entitled to a
payment of $690,000, if he is terminated without cause at any time thereafter,
he is entitled to a payment of $460,000 and if he is terminated for cause at any
time, he is not entitled to any severance.  Mr. McFalls became the
President of the NSA business unit of our wholly owned Atlantic subsidiary, with
an annual salary of $210,000 per year.  If Mr. McFalls is terminated
without cause, he is entitled to a payment of $420,000, and if he is terminated
for cause at any time he is not entitled to any severance.  No finders
fees were paid or consulting agreements entered into as part of the Atlantic
acquisition.  With the acquisition of Atlantic, we now provide
strategic planning, business development services and program management to the
federal government.


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On
October 1, 2007 we acquired Pixxures, Inc., a Delaware corporation, in a
stock-for-stock transaction.  We acquired Pixxures Inc. in order to
expand our geospatial production and sales capabilities.  Pixxures
employs a much larger number of geospatial production personnel than we did
prior to the acquisition.  Thus, the acquisition allows us to bid on
larger geospatial projects that we would previously have needed to outsource to
subcontractors.  Also, Pixxures operates in a lower-cost facility than
we did, so the overhead cost applied to our bids will be
reduced.  Further, Pixxures has three sales staff specializing in
county-level and commercial customers, which complements our two sales staff who
specialize primarily in federal government sales.  To facilitate the
Pixxures acquisition, we formed Pixx Acquisition Corp., a Delaware
corporation.  By the terms of the Agreement and Plan of Merger, dated
September 26, 2007, among us, Pixxures and Pixx Acquisition Corp. we purchased
all of the issued and outstanding capital stock of Pixxures for a closing
payment of 1,734,780 shares of our common stock having a negotiated value
of $5,115,000, based on the average daily closing price of our common stock for
the 20 trading days ending two days prior to the closing.  Subject to
the terms of the agreement, additional shares would have become payable by us if
the negotiated price of our common stock, for the 60 trading days following the
date upon which the purchase payment shares were registered with the SEC, was
less than the average closing price.  However, we no longer intend to
register the shares with the SEC, since share recipients can now register on an
accelerated basis under the SEC’s Rule 144. Instead, additional shares may
become payable by us if the negotiated price of our common stock for the 60
trading days following the Trigger Date is less than the average closing
price.  The Trigger Date is established by a majority of the Pixxures
shareholders, but shall be no later than March 23, 2009, subject to certain
conditions that may delay the Trigger Date by no more than 10 additional days.
If the subsequent market price is less than the average closing price,
additional shares will be issued, such that the total consideration received for
the Pixxures capital stock in the transaction equals $5,115,000, calculated
based on the subsequent market price.  The terms of the Pixxures
acquisition were negotiated at arm’s length by our President and CEO, Hugh H.
Williamson, III, Charles Killpack, the CEO of Pixxures, and Timothy Connor, lead
director of Pixxures.  The purchase price paid in the acquisition of
Pixxures was determined with reference to and based upon a multiple of
approximately eight times its trailing twelve months’ EBITDA.  We had
no material relationship with Pixxures or its shareholders prior to the
acquisition.  Subsequent to the acquisition Charles Killpack (the CEO
of Pixxures) and Dawn Patterson (the Controller of Pixxures), became employees
at will.  Specifically, Mr. Killpack became the CEO of our wholly
owned Pixxures subsidiary, with an annual salary of $215,000 per year and
entitled to a bonus payable in units of our restricted common stock based on the
revenue of any entities we acquire where Mr. Killpack assists in negotiating and
closing such acquisition during his employment, initially at the rate of one
restricted stock unit per $100 of revenue of the entities acquired, and moving
to one restricted stock unit per $80 of revenue of the entities acquired if the
combined revenue of acquired entities exceed fifteen million
dollars.  In addition Mr. Killpack was issued 111,921 shares of our
restricted common stock and is entitled to receive a cash payment necessary to
offset any federal income tax due and payable in connection with such stock
issuance.  Ms. Patterson became the Controller of our wholly owned
Pixxures subsidiary, with an annual salary of $103,000 per year.  In
addition Ms. Patterson was issued 18,654 shares of our restricted common stock
and is entitled to receive a cash payment necessary to offset any federal income
tax due and payable in connection with such stock
issuance.    No finder’s fees were paid or consulting
agreements entered into as part of the Pixxures acquisition.





In April,
2007, prior to our acquisition of Pixxures, Pixxures and an unrelated entity
formed a joint venture, LandPixx, LLC, for the purpose of acquiring, operating,
and leasing a digital sensor and aircraft.  LandPixx was a 50%
owned subsidiary of Pixxures.  LandPixx entered into a term loan
agreement with Silicon Valley Bank for up to $1,400,000 to acquire a digital
sensor.  On September 28, 2007, we entered into an Unconditional
Guaranty with Silicon Valley of the above loan for a maximum of $1,400,000,
plus interest and expenses.  We guaranteed full payment and
performance of all obligations of LandPixx pursuant to the original loan
agreement dated April 23, 2007.





The
December 31, 2007, balance of the Silicon Valley loan was $1,122,139, of which
$396,049 was a current liability and $726,090 was long term.


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On July
13, 2007, we, LandPixx and the other LandPixx owner entered into a term loan
with Biltmore Bank of Arizona for $452,355, the funding for the acquisition by
LandPixx of a Cessna 402C airplane.  The three companies were all
co-borrowers.  The loan had a maturity date of July 13, 2012. 
Beginning in August 2007, the loan required monthly payments of $8,044 with one
final payment of $100,259 on July 13, 2012. The December 31,
2007, balance of the Biltmore loan was $426,374, of which $62,540 was a current
liability and $363,834 was long term.





Our
Pixxures subsidiary owns a 50% interest in LandPixx, LLC, which is a joint
venture with an unrelated party.  We consolidate LandPixx and the
consolidated financial statements are prepared in accordance with generally
accepted accounting principles in the United States of America (US
GAAP).





On March
3, 2008, LandPixx borrowed $1,352,612 from Bank of the West, Evergreen, CO
(BOW), which LandPixx used to pay off the above Silicon Valley and Biltmore
loans.  The BOW loan bears 6.19% interest, has 60 monthly payments of
$15,434 beginning March 2008, followed by a balloon payment of $794,714 and is
secured by the aircraft and related sensor equipment owned by
LandPixx.  Mr. Hugh H. Williamson, III, our President and CEO, is a
co-borrower on the loan, and we have guaranteed prompt payment and performance
of the obligations arising under the loan.





Also on
March 3, 2008, LandPixx borrowed $183,777 from Bank of the West, Evergreen,
CO, which it used to pay off the remainder of the loans from Silicon Valley Bank
and Biltmore Bank of Arizona.  The BOW loan bears 5.385% interest, has 59
monthly payments of $2,655, and a final payment of $62,900 that is due and
payable on February 25, 2013.  The loan is secured by a $185,000 deposit
account at BOW.  Mr. Hugh H. Williamson III, our President and CEO,
owns the deposit account.  He is also a co-borrower on the
loan.





The loan
documents are exhibits to this Annual Report. The above description of the loan
is qualified in its entirety by the full text of the exhibits.





Business
Segments




Geographical Information
Systems Segment


Our GIS
segment, which includes our wholly owned Land Links, Premier and Pixxures
subsidiaries, and our 50% owned LandPixx subsidiary, provides government and oil
and gas customers with a combination of land database products and production
services related to the creation or enhancement of land records.  In
2006, our GIS segment’s client base included the Bureau of Land Management
("BLM"), the Bureau of Reclamation, the National Park Service, and more than 200
commercial oil and gas customers.  Approximately 50% of our GIS
segment’s revenues come from subscriptions to its database products, and 50%
from its GIS production services.  There is typically a modest decline
in revenue related to GIS production services during the fourth quarter of each
year, due to reduced client activity levels and a smaller number of business
days than in other quarters.





Customers
who use the land database products can access information through an internet
site or by compact disc.  The database products provide database
queries, reports, and digital maps for over 13,000,000 BLM and state land
records in the Rocky Mountain area of the United States.  Users can
investigate such land information as competitor activity, federal and state
lease ownership, lot and tract survey data, open federal acres (i.e., land
available for lease), and split estate lands (i.e., land in which surface
ownership is not by the federal government, but the underlying mineral ownership
is reserved to the federal government).





In the
area of production services, our GIS segment provides data editing and
enhancement, scanning, data conversion, data integration, and custom
mapping.  The typical customer uses these services to convert existing
GIS data into a digital format, or to integrate disparate data
sets.




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Information Technology
Consulting
Segment


Our
consulting segment, which includes our wholly owned FuGEN and Atlantic
subsidiaries, provides information assurance and consulting services to several
federal agencies.  In fiscal year 2007, our consulting segment’s
client base included the military and intelligence agencies as a prime
contractor, and the Internal Revenue Service, USAID and the Department of State
as a subcontractor.  The military and intelligence contracts represent
70% of the segment’s revenue.  There is typically a modest decline in
consulting revenue during the fourth quarter of each year, due to a smaller
number of business days than in other quarters that is driven by a high
concentration of mandatory federal government holidays.





Other
Segments


Our CRM
segment provided software maintenance support, and was sold in November 2006.
Our JIS segment created and installed court case management systems, and was
sold to Justice Systems, Inc., in February 2007.


Product
Development and Technology





In our
GIS segment, our product development efforts and use of technology focus on the
collection, management, and delivery of critical information to our customers
through our database offerings.  The management and expansion of our
databases are central to our product development efforts.  We
continuously update and refine our databases through proprietary methods and the
use of technology encompassing the below steps:





·
            Gathering
      content from outside sources;


·
            Authenticating
      the content based on error-checking
routines;


·
            Translating
      this information into useable
formats;


·
            Tagging
      the information for multiple attributes and indexing for retrieval
      purposes;


·
            Posting
      to our Internet site for access by customers, or writing the information
      to compact discs for delivery to
customers.




It is our
ability to gather data from disparate sources, and the use of our proprietary
software and data management capabilities, which allow improved access to this
data, coupled with our authentication and error-checking routines, that
differentiates the services we offer.





We use a
variety of software routines that were developed in-house to index critical
information in a variety of ways, such as broad field categories, document type,
and document title.  We base some of our products and databases on the
software products of ESRI, Inc., for which we pay approximately $35,000 in
annual maintenance.  There is no contract associated with the invoice
for the ESRI maintenance fees. We employ a group of networked computer servers
that are housed in one location, referred to as a server farm.  A
server farm streamlines internal processes by distributing the workload between
the individual components of the farm and expedites computing processes by
harnessing the power of multiple servers.  Our server farm uses
uninterruptible power supplies to ensure that critical information is highly
available to our customers.  Our processes allow for updating as soon
as new information becomes available.




We do not
consider any of our data collection or data management design efforts to be
research and development activities.  Consequently, we incurred no
research and development expense during the last two fiscal years.




Governmental
Approval





No
government approval is required for any of our products or
services.





Government
Regulations





We are
not aware of any current or prospective government regulations, nor of any
changes to existing regulations, that will impact our business.





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Customers





We have a
diverse customer base that includes many of the largest companies or government
entities in the industries we serve.  Our government customers include
counties, states, and the federal government.  The majority of our GIS
customers are comprised of large multi-national and national oil and gas
exploration companies.





In 2007,
our largest customer was BearingPoint, Inc., through whom we acted as a
subcontractor to the Department of State and various national intelligence
agencies.  The various BearingPoint contracts generated 25% of
our total revenue. BearingPoint, Inc. bills the government on our behalf
and disburses funds to us on net 45 day terms.  Our government
contracts are subject to terms that would allow for termination at the election
of the government.  With the exception of the Department of State and
national intelligence agency contracts, we believe that no termination of any
contract or subcontract at the election of the government would have a material
adverse impact on our financial results.




In
addition to the BearingPoint arrangement, our FuGEN subsidiary subcontracts
through IBM for a project with the Internal Revenue Service, through both
ManTech, Inc. and General Dynamics for projects with the Department of State,
and also through Open System Sciences for a project with
USAID.   None of these prime contractors are
affiliates.





Suppliers





We obtain
periodic updates to the case recordation database and various lease sale
databases from the BLM under the Freedom of Information Act.  We also
obtain lease sale and land ownership information from the state governments of
Colorado, Wyoming, Utah, North Dakota, South Dakota, Montana, Nevada, New
Mexico, Oregon, Washington, and California, as well as from several Wyoming
county governments.  We pay no fees to any of these government
entities.  Instead, data is either given to us under no obligation, or
under a data sharing arrangement where the state governments obtain free access
to our databases for their internal use.





Sales and
Marketing





We have
two full time sales people and eight employees with a large portion of their
focus and responsibilities connected to sales.





Our
marketing efforts include a well maintained web site, a quarterly e-news letter
to all clients, attendance at selected trade shows, participation in selected
trade associations and an assortment of collateral materials.





The
federal land data customers of our GIS segment are easy to identify, because any
government agency involved with land use in the western United States must have
access to information such as that available through our products.  In
most cases, such as the BLM, there is already an in-house staff that is
reviewing land data and creates maps, but it does so mostly by
hand.  The value proposition presented in these instances focuses on
labor savings, improved customer service, time reduction and the improved
accuracy to be realized by implementing our products.  The main
obstacles in closing government sales involve the allocation of funds (which
frequently lengthens the sales cycle into the following fiscal year), the
lengthy approval process to which most government purchases are subjected and
the tendency for internal development versus outsourcing.





The
commercial oil and gas customers of our GIS segment are easily identified,
because they appear in the databases provided by the BLM as current federal land
leaseholders or bidders for land that is being made available.  Our
commercial sales staff contacts potential customers based on this information,
which is prioritized by the number of lease holdings per
customer.  One-on-one meetings, which include product demonstrations,
follow initial contacts with potential customers. Customers are also identified
at trade shows, which are attended by our sales staff on a regular
basis.  The full sales cycle for oil and gas customers is in the range
of three to four months.


-
9 -








The
federal systems security projects of our consulting segment require considerable
face-to-face discussion with the senior information technology managers of a
federal department, agency, or bureau.  The emphasis in these meetings
is on the technical approach to be taken by us, which calls for in-depth
discussions of client needs.  After initial approval, these projects
are given to a contracting manager, who determines the pre-approved government
schedule of products, services and fees to be used (such as a specific GSA
(General Services Administration) schedule or MOBIS (Mission Oriented Business
Integrated Services) pricing), reviews the proposals, and assigns
contracts.  In some cases, we do not have access to a particular
pre-approved government schedule of products, services and fees, so we have
managed projects from the position of a subcontractor to another entity who has
obtained the appropriate pre-approved schedule of products, services and
fees.  Our strategy to expand by acquisition, as discussed further
below, should give us sufficient mass to bid directly on a larger proportion of
major government systems security projects, thereby allowing us to act as the
prime contractor and potentially garner a larger share of the revenue from each
project.




The sales
cycle for systems security projects ranges from a quarter to a year, with very
large projects occasionally requiring a longer sales cycle.




Customer
Support




The
customer support program of our GIS segment includes customer service, training,
and surveys:




·
            Customer
      service.  We maintain a customer service desk at our
      Colorado location, which is open during regular business hours to assist
      customers using our land databases.


·
            Customer
      training.  We have posted our training manuals on our
      Internet site, and also periodically release training tips to all
      registered users of our products.


·
            Customer
      surveys.  We periodically issue an Internet-based survey
      to our customers to determine what types of land databases they would like
      to see us produce, and the priority in which those databases should be
      released.




All
customer contacts handled through the customer service desk are tracked using a
customer relationship management database.  This database is
periodically reviewed and summarized on a monthly basis, with key issues being
brought to the attention of managers for further action.




Competition





The
dominant player in the GIS marketplace is Environmental Systems Research
Institute (ESRI), which is the largest GIS company in the world.  ESRI
is a privately held company.  ESRI’s target market is top-level major
GIS systems.  We are an ESRI Business Partner that builds extensions
to ESRI products to integrate with our clients’ specific business
processes.  Under the Business Partner arrangement, we are entitled to
the use of developer licenses for ESRI software, and can also sublicense ESRI
software to third parties.  We rarely compete with ESRI; rather, our
product offerings are complementary.  Our land database
products and related production services compete with offerings from
InfoPipe Inc., Divestco Inc., Geographic Technologies Group, LandWorks, Inc.,
and WhiteStar, Inc.  In addition, the Federal government itself can be
considered a competitor, since it is making an increasing amount of land data
available to the public via the Internet and other means.  It is our
opinion that the competitive threat posed by the Federal government has not been
significant, due to the primitive format in which the government provides data,
as well as the lack of any tools to browse or easily search such
data.




-
10 -


Our
consulting segment competes against a large number of companies, and has
subcontracted with several of them.  Competitors include CACI, SCS,
SAIC, STG, Inc., ITS Services, NCI Information Services and Stanley
Associates.    These companies all compete by retaining the
services of people having a combination of various levels of security clearances
and technical skills, and bidding their services to the federal government in
response to specific requests for proposals.  The company offering a
combination of the required level of security clearances and technical skills,
combined with a competitive price, will generally be awarded a contract by the
government.  In some cases, a company will subcontract selected work
to a competitor whose employees may have a specific combination of security
clearances and technical skills, in order to improve its chances of winning a
contract.  We differentiate ourselves by delivering high quality
service.  Our staff has a high level of expertise in the areas in
which we consult.  We are highly responsive to problems encountered by
our clients on which they request our consultation.





Intellectual
Property





Our GIS
segment relies heavily on intellectual property, including intellectual property
we own and intellectual property licensed from third parties. We regard our
trademarks, copyrights, licenses, and other intellectual property as valuable
assets and use intellectual property laws, as well as license and
confidentiality agreements with our employees and others to protect our rights.
In addition, we exercise reasonable measures to protect our intellectual
property rights and enforce these rights when we become aware of any potential
or actual violation or misuse.





Intellectual
property licensed from Applied Geologic Studies, Inc. (AGS) constitutes a core
component of our ClaimFinder product, which generated $19,000 in revenue in
fiscal 2007.  We have paid an annual fee of approximately $500 to AGS
in each of the past three years, which was based on sales of the ClaimFinder
product during each of those years.  If AGS were to cancel the
agreement, we might no longer be able to offer the ClaimFinder product for
sale.  This is not a material contract, based on the history of
minimal royalty payments and the insignificant sales decline that might occur if
the royalty agreement were to be cancelled.





We have
trademarked, or applied for trademarks, on the names of many of our products,
and we have exercised reasonable measures to protect our intellectual property
rights and enforce these rights when we become aware of any potential or actual
violations or misuse.  Our products having current trademarks are
ClaimFinder, CarteView, LeaseFinder, Land Link, PDS Studio, and
LotFinder.  In addition, we have filed for trademark registration for
our Map Layout Express product.  On October 17, 2007, we received from
the U.S. Patent and Trademark Office official Notice of Acceptance of Statement
of Use for our Map Layout Express product.




Employees




As of
December 31, 2007, we had approximately 100 total employees, of which 4 were
part time employees, and all of whom are located within the United
States.  None of the employees are represented by a collective
bargaining agreement and we consider our employee relations to be
good.






Item
1A.  Risk Factors





You
should carefully consider the following risks and all of the other information
set forth in this report. If any of the events or developments described below
actually occurs, our business, financial condition, and results of operations
may suffer. In that case, the trading price of our common stock may decline and
you could lose all or part of your investment.





Risk
Related to Our Business





Our
operations have generated significant losses, which may
continue.


-
11 -





Our
operations generated a loss of $4,367,000 and $610,000 in the years ended
December 31, 2007 and 2006, respectively.  We may not be able to
reverse this trend, increase revenue, or cut cost to a sufficient extent to
avoid losses in future periods.  This is because:





·
            We
      depend on database content obtained through agreements with third parties,
      and the failure to maintain these agreements could result in the
      elimination of some products, or more expensive data collection
      alternatives.


·
            Our
      financial results could weaken if we cannot consistently obtain customer
      renewal of database subscriptions or product maintenance
      agreements.


·
            In
      2007, 36% of our total revenue was generated by sales to our two largest
      customers pursuant to contracts that may be terminated or are subject to
      renewal at the election of such customers.  Termination of such
      contracts would eliminate a substantial portion of the revenue generated
      by our consulting segment.


·
            Our
      growth strategy may prove
unsuccessful.


·
            We
      may be unable to identify potential acquirees, complete acquisitions, or
      integrate acquisitions into our
operations.


·
            We
      are affected by conditions and trends in our targeted industries, which
      may inhibit our ability to grow or otherwise adversely affect our
      business.


·
            The
      federal government has substantially reduced its spending in order to
      channel funding into various war efforts, resulting in funding reductions
      on several system security
projects.


·
            The
      loss of key personnel could impair our future
  success.


·
            We
      operate in competitive markets, which may adversely affect our market
      share and financial results.


·
            We
      expect to continue amortizing intangible assets associated with
      existing acquisitions for the next five to eight
  years.


·
            We
      could experience system failures, which could interrupt customer access to
      our Internet site, shut down various databases linked to our Internet
      site, or prevent us from distributing information to our customers by
      other means.


·
              Shares
      eligible for future sale could depress the price of our
      shares.
 ·
              The
      price of our common stock may be volatile and may be affected by market
      conditions beyond our control.
 ·
              Our
      directors, executive officers and affiliates will continue to exert
      significant control over our future direction, which could reduce our sale
      value.
 ·
              Investors
      should not anticipate receiving cash dividends on our common
      stock.




We
discuss each of the above matters in more depth below.





We depend
on database content obtained through agreements with third parties, and the
failure to maintain these agreements could result in the elimination of some
products, or more expensive data collection alternatives.





A
significant proportion of the content we use in our database products is
obtained from either commercial or government entities under licensing
agreements or requests under the Freedom of Information Act.  In
particular, information obtained from government entities cannot be obtained
elsewhere.  If the government entities restrict or withdraw their
content from us, some of our products would be cancelled, which would result in
the elimination of up to $586,000 of recurring revenue.





Our
financial results could weaken if we cannot consistently obtain customer renewal
of database subscriptions or product maintenance agreements.





In 2007,
we obtained approximately 12% of our revenue from subscriptions to our database
products.  Our results depend on our ability to achieve and sustain
high annual renewal rates on existing subscriptions and to enter into new
subscription arrangements on commercially acceptable terms.  A 1%
decline in subscription renewal rates equates to an annual profit reduction of
about $14,000.





In 2007,
we generated 36% of our total revenue by sales to our two largest customers
pursuant to contracts that may be terminated or are subject to renewal at the
election of such customers.  Termination of such contracts would
eliminate a substantial portion of the revenue generated by our consulting
segment.


-
12 -





While we
have a diverse customer base that includes many large companies and government
entities, our two largest customers generated 36% of our total revenue in
2007.   These customers are BearingPoint and one of the
intelligence agencies.  Our contracts with them are subject to an
annual renewal provision.





The
following risks are inherent in government contracts:




·
            Because
      federal laws permit government agencies to terminate a contract for
      convenience, our government clients may terminate or decide not to renew
      our contracts with little or no prior
notice.


·
            Government
      clients may audit contract payments we receive for several years after
      these payments are made. Based on these audits, the clients may adjust or
      demand repayment of payments we have previously received.  None
      of the audits performed to date on our government contracts have resulted
      in any significant adjustments to our financial statements.  It
      is possible, however, that an audit in the future could have an adverse
      effect on our consolidated financial
statements.


·
            Government
      contract regulations provide that any company convicted of a crime or
      indicted on a violation of statutes related to federal contracting may
      lose its right to receive future contract awards or
      extensions.


·
            Our
      ability to earn revenue from our existing and future U.S. federal
      government projects will depend upon the availability of funding from U.S.
      federal government agencies. We cannot control whether those clients will
      fund or continue funding our outstanding
  projects.


·
            Our
      ability to secure new government contracts and our revenue from existing
      government contracts could be adversely affected by any one or a
      combination of the factors listed
above.




Our
growth strategy may prove unsuccessful.





Our
growth strategy involves broadening our database product line, as well as
expanding the range of geographic information systems services offerings, and
increasing our penetration into the federal government system security
market.  Land databases are difficult to acquire and make commercially
viable, while the addition of new geographical information systems services are
highly dependent on our ability to acquire other companies.  Further,
increased penetration into the systems security market requires the addition of
experienced sales employees, who are difficult to acquire and
retain.  If we are unable to surmount these issues, our operating
performance, including our ability to generate additional revenue on a
profitable basis, may be adversely affected.





We may be
unable to identify potential acquirees, complete acquisitions, or integrate
acquisitions into our operations.





We intend
to selectively pursue acquisitions to complement our internal
growth.  There can be no assurance that we will be able to identify
suitable candidates for successful acquisitions at acceptable
prices.  In addition, our ability to achieve the expected returns and
synergies from our past and future acquisitions depends substantially on our
ability to integrate the offerings, technology, administrative functions, and
personnel of these businesses into our business in an efficient and effective
manner.  We can provide no assurance that we will be successful in
integrating acquired businesses or that acquired businesses will perform at
anticipated levels.  In addition, our past and future acquisitions may
subject us to unanticipated risks or liabilities or disrupt our operations and
divert management’s attention from day-to-day operations.





We are
affected by conditions and trends in our targeted industries, which may inhibit
our ability to grow or otherwise adversely affect our business.





-
13 -


We derive
substantially all of our revenue from customers in the oil and gas industry and
the federal government.  As a result, our business, financial
condition, and results of operations depend upon conditions and trends affecting
these industries generally.  For example, there is an ongoing
consolidation trend in the oil and gas industry that has resulted in a reduction
of many database subscriptions as our subscribers combine their
operations.  Also, the federal government has substantially reduced
its spending in order to channel funding into various war efforts, resulting in
funding reductions on several system security projects.  Thus, if
continued, these trends could have a material adverse effect on our
business.  A failure to maintain revenue and margins would have a
material adverse effect on our business, financial condition, and operating
results.





The
federal government has substantially reduced its spending in order to channel
funding into various war efforts, resulting in funding reductions on several
system security projects.





The
federal government has repeatedly shifted funding out of its established
programs to fund its various war efforts.  These funding reductions
have repeatedly reduced the budgets of several system security projects in which
our staff were involved.  If the war effort continues, we can expect
to see reduced staffing levels on many federal projects in which we are
involved, as well as the risk of outright program
cancellation.  Continued funding reductions may reduce or eliminate
the revenue generated by our FuGEN and Atlantic subsidiaries, which derive much
of their business from the federal government





The loss
of key personnel could impair our future success.





Our
future success depends in part on the continued service of our executive
officers and other key management, sales, consulting, and operations personnel
and on our ability to continue to attract, motivate, and retain additional
highly qualified employees.  The loss of the services of one or more
of our key personnel, officers or directors, or our inability to recruit
replacements for such personnel or to otherwise attract, motivate, or retain
qualified personnel could have an adverse effect on our business, operating
results, and financial condition.





We
operate in competitive markets, which may adversely affect our market share and
financial results.





Our
competitors have significant financial and information-gathering resources,
recognized brands, technological expertise, and market
experience.  These competitors are continuously enhancing their
products and services, developing new products and services, and investing in
technology to better serve the needs of their existing customers and to attract
new customers.





Our land
database products compete with offerings from InfoPipe Inc., Divestco Inc. and
WhiteStar, Inc.  In addition, the federal government itself can be
considered a competitor, since it is making an increasing amount of land data
available to the public via the Internet and other means.  Our
consulting segment competes against a number of companies, and has subcontracted
with several of them.  Competitors include CACI, CSC, SAIC, STG, Inc.,
ITS Services, NCI Information Services and Stanley Associates.





We may
also face competition from organizations and businesses that have not
traditionally competed with us but that could adapt their products and services
to meet the demands of our customers.  Increased competition may
require that we reduce the prices of our offerings or make additional capital
investments, which could adversely affect our margins.  If we are
unable or unwilling to do so, we may lose market share in our target markets and
our financial results may be adversely affected.




We expect
to continue amortizing intangible assets associated with existing acquisitions
for the next five to eight years.
 
 As part
of our acquisition activities, we have allocated a significant proportion of the
acquisition purchase prices to such intangible assets as customer relationships,
non-compete agreements, trade names, and customer contracts.  We are
amortizing the bulk of these assets over the next five to eight
years.  During that time, the amortization expense will be enough to
offset our probable operating profits.





We could
experience system failures, which could interrupt customer access to our
Internet site, shut down various databases linked to our Internet site, or
prevent us from distributing information to our customers by other
means.


-
14 -


Our
ability to protect our data center against damage from fire, power loss,
telecommunications failure, or other disasters is critical.  Any
delays or failures in our systems or errors in the technology that we use to
store and deliver content to our customers would harm our
business.  The growth of our customer base may also strain our systems
in the future.  In addition, our products could be affected by
failures of third-party technology used in our products and internet site, and
we may have no control over remedying such failures.  Any failures or
problems with our systems could force us to incur significant costs to remedy
such failures or problems, decrease customer demand for our products, tarnish
our reputation, and harm our business.





Shares
eligible for future sale could depress the price of our shares.





Sales of
substantial amounts of our common stock in the public market, or the perception
that such sales could occur, could adversely affect the market price of our
shares.  As of March 24, 2008, we had 26,186,646 shares of common
stock outstanding.   Any sales of common stock by us or our
principal stockholders, or the perception that such sales might occur, could
have a material adverse effect on the price of our shares.





The price
of our common stock may be volatile and may be affected by market conditions
beyond our control.





Our share
price is likely to fluctuate in the future because of the volatility of the
stock market in general and a variety of factors, many of which are beyond the
our control, including:





·
            Quarterly
      variations in actual or anticipated results of
  operations;


·
            Changes
      in financial estimates by securities
analysts;


·
            Actions
      or announcements by us or our
competitors;


·
            Regulatory
      actions;


·
            Litigation;


·
            Loss
      or gain of major customers or content
providers;


·
            Additions
      or departures of key personnel; and


·
            Future
      sales of our common stock.




Market
fluctuations could result in volatility in the price of our common stock, which
could cause a decline in the value of your investment.  In addition,
if our operating results fail to meet the expectations of stock analysts or
investors, we may experience an immediate and significant decline in the trading
price of our common stock.





Our
directors, executive officers and affiliates will continue to exert significant
control over our future direction, which could reduce our sale
value.




Members
of our Board of Directors and our executive officers, together with their
affiliates, own a significant number of shares of our outstanding common stock.
Accordingly, these stockholders, if they act together, will be able to control
all matters requiring approval of our stockholders, including the election of
directors and approval of significant corporate transactions. The concentration
of ownership, which could result in a continued concentration of representation
on our Board of Directors, may delay, prevent or deter a change in control and
could deprive our stockholders of an opportunity to receive a premium for their
common stock as part of a sale of our assets.





Investors
should not anticipate receiving cash dividends on our common stock.




We have
never declared or paid any cash dividends or distributions on our common stock
and intend to retain future earnings, if any, to support our operations and to
finance expansion. Therefore, we do not anticipate paying any cash dividends on
the common stock in the foreseeable future.




-
15 -


Item
2.  Description of Property





We lease
approximately 8,200 square feet of office space in Englewood, Colorado, our
headquarters.  We lease approximately 20,700 square feet of office
space in Arvada, Colorado, approximately 1,500 square feet in Denver, Colorado,
approximately 3,500 square feet of office space in Rockville, Maryland and
approximately 3,900 square feet of office space in Arlington,
Virginia.  Our lease in Englewood, Colorado, requires monthly payments
of $13,623 and expires in June 2013.  Our Arvada, Colorado lease
requires monthly rental payments of $20,000 through July 2009 when the
lease expires.  Our lease in Denver, Colorado, requires monthly
payments of $2,602 through April 2009, $2,726 from May 2009 through April 2010
and $2,850 from May 2010 through April 2011 when the lease
expires.   Our lease in Rockville, Maryland, requires monthly
payments of $8,083 and expires in May 2009, while our lease in Arlington,
Virginia, requires monthly payments of $11,181 and expires on June 30,
2008.  We believe that our properties, taken as a whole, are in good
operating condition and are suitable and adequate for our current business
operations, and that additional or alternative space will be available on
commercially reasonable terms for future use and expansion.





LandPixx
owns a 1980 Cessna 402C Businessliner aircraft and related sensor
equipment.








Item
3.  Legal Proceedings





On August
8, 2007, in the District Court for Douglas County, Nebraska, Vital Learning
Corporation filed a complaint naming our wholly owned subsidiaries Point One,
L.L.C. and Atlantic as defendants.  Plaintiff, Vital Learning, alleges
that it brought certain business opportunities concerning contracts with the
United State Air Force (USAF) to the attention of defendants, and pursuant to an
oral agreement, was entitled to receive twenty percent (20%) of any contract
price awarded in connection with such business
opportunities.  Plaintiff alleges that it has suffered damages and is
entitled to relief in an amount not less than $614,332 based on the award by the
USAF to defendants of certain contracts.  We believe the suit is
without merit.  We have responded, denying all claims of the
plaintiff.  We are not aware of any other pending or threatened
litigation that could have a material adverse effect upon our business,
operating results, or financial condition.








Item
4. Submission of Matters to a Vote of Security Holders





None.








Item
5. Market for Common Equity and Related Stockholder Matters and Small Business
Issuer Purchases of Equity Securities





Our
common stock trades in the NASDAQ over-the-counter bulletin board (OTCBB) under
the ticker symbol XDRC.OB.  As of February 22, 2008, there were
approximately 410 holders of record of our common stock.




The
following table reports, for the periods indicated, the high and low closing bid
prices per share for our common stock as reported by Pink Sheets
LLC.  The quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transaction
prices. Our shares were not traded publicly in Fiscal 2005.


-
16 -




Period
            High
            Low2007First
      Quarter
            $3.25
            $0.90Second
      Quarter
            $4.85
            $1.85Third
      Quarter
            $4.85
            $2.07Fourth
      Quarter
            $3.60
            $2.152006First
      Quarter
            $0.02
            $0.02Second
      Quarter
            $0.02
            $0.02Third
      Quarter
            $0.10
            $0.02Fourth
      Quarter
            $0.30
            $0.10





Dividends





We have
never declared or paid dividends on our common stock. We currently intend to
retain future earnings, if any, for use in our business, and, therefore, we do
not anticipate declaring or paying any dividends in the foreseeable future.
Payments of future dividends, if any, will be at the discretion of our board of
directors after taking into account various factors, including our financial
condition, operating results, current and anticipated cash needs and plans for
expansion.





Securities
Authorized for Issuance Under Equity Compensation Plans


Plan
      category
              Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights
                (a)
              Weighted–average
      exercise price of outstanding options warrants and rights
                (b)
              Number
      of securities remaining available for future issuance under equity
      compensation plans (excluding securities reflected in column
      (a))
                (c)(1)Equity
      compensation plans approved by security holders
              0
              $0
              0Equity
      compensation plans not approved by security holders
              39,996(2)
              $0(3)
              1,500,000Total
              39,996
              $0
              1,500,000
  --------------------------------------------
 (1)
              As
      of December 31, 2007, the end of our last completed fiscal
      year, the aggregate 1,500,000 shares remaining available for issuance
      under our equity compensation plans are all available under our 2007
      Equity Incentive Plan.
 
 (2)
              By
      resolution of the Board of Directors dated February 9, 2007, we have
      entered into an equity compensation arrangement or plan with each of our
      six non-employee directors which provides that each such non-employee
      director will receive 10,000 shares of our restricted common stock, vested
      in thirds annually, commencing December 31, 2007 (i.e., 3334 shares vested
      on December 31, 2007, 3333 shares will vest on December 31, 2008, and 3333
      shares will vest on December 31, 2009). This equity compensation
      arrangement or plan has not been approved or ratified by our
      shareholders.
 
 (3)
              Subsequent
      to the end of our last completed fiscal year, on January 2, 2008, we
      issued restricted stock unit awards to a group of employees and
      contractors, pursuant to our 2007 Equity Incentive Plan.  Our
      2007 Equity Incentive Plan has not been approved or ratified by our
      shareholders, but will be submitted for ratification by our shareholders
      at our annual meeting, expected to be held April 23, 2008. Specifically,
      we issued restricted stock units for 97,000 shares to thirteen employees,
      vesting between July 1, 2008 and March 1, 2009.  We issued units
      for 21,000 shares to eight contractors, vesting on July 1,
      2008.  A restricted stock unit award is a grant valued in terms
      of our common stock, but stock is not issued at the time of the
      grant.  After the vesting period has been satisfied, we
      distribute shares to the recipient. We measure the employee grants at
      the fair value of the unit on the grant date, when the stock price was
      $2.17, and recognize this expense ratably over the vesting
      periods.  Due to the short vesting periods, we assumed a zero
      forfeiture rate.  If there are forfeitures, we will adjust the
      expense recognition downward as those forfeitures occur. Because the
      contractor grants have cliff vesting provisions, we will finalize
      recognition of the fair value of the stock issued as of the vesting
      date.  We will also conduct a provisional calculation at the end
      of each quarter preceding the final calculation, and adjust based on the
      stock fair value on those
dates.


-
17 -




We will
record $210,490 compensation expense (and offset to Additional Paid-in Capital)
for the employee awards ratably over the employee vesting periods.  We
will make an initial charge to expense for the contractor-related grants using
the fair value on March 31, 2008, re-price the grants on June 30, 2008, and will
finalize the contractor compensation expense as of the July 1, 2008 vesting
date.





As of
December 31, 2007, and as of now, we maintained and maintain no other
equity compensation plan or arrangements.





Unregistered
Sales of Securities





On
October 1, 2007 we acquired Pixxures, Inc., a Delaware corporation, in a
stock-for-stock transaction.  We purchased all of the issued and
outstanding capital stock of Pixxures for a closing payment of 1,734,780 shares
of our common stock having a negotiated value of $5,115,000, based on the
average daily closing price of our common stock for the 20 trading days
ending two days prior to the closing.  Subject to the terms of the
agreement, additional shares would have become payable by us if the negotiated
price of our common stock, for the 60 trading days following the date upon which
the purchase payment shares were registered with the SEC, was less than the
average closing price.  However, we no longer intend to register the
shares with the SEC, since share recipients can now register on an accelerated
basis under the SEC’s Rule 144. Instead, additional shares may become payable by
us if the negotiated price of our common stock for the 60 trading days following
the Trigger Date are less than the average closing price.  The Trigger
Date is established by a majority of the Pixxures shareholders, but shall be no
later than March 23, 2009, subject to certain conditions that may delay the
Trigger Date by no more than 10 additional days. If the subsequent market price
is less than the average closing price, additional shares will be issued, such
that the total consideration received for the Pixxures capital stock in the
transaction equals $5,115,000, calculated based on the subsequent market
price.   This transaction is discussed further in Item 1.
Description of Business—Company History, of this Report.





Item
6.  Management’s Discussion and Analysis




The
following information includes certain forward-looking statements. 
Forward-looking statements are statements that estimate the happening of future
events and are not based on historical fact.  Forward-looking statements
may be identified by the use of forward-looking terminology such as, “may,”
“shall,” “could,” “expect,” “estimate,” “anticipate,” “predict,” “probable,”
“possible,” “should,” “continue,” or similar terms, variations of those terms or
the negative of those terms.  The forward-looking statements specified
in the following information have been compiled by us and considered us to be
reasonable.  Our future operating results, however, are impossible to
predict; the reader should infer no representation, guaranty or warranty from
those forward-looking statements.


-
18 -








The
assumptions we used for purposes of the forward-looking statements specified in
the following information represent estimates of future events and are subject
to uncertainty as to possible changes in economic, legislative, industry and
other circumstances.  As a result, our identification and interpretation of
data and other information and their use in developing and selecting assumptions
from and among reasonable alternatives require us to exercise judgment.  To
the extent that the assumed events do not occur, the outcome may vary
substantially from anticipated or projected results, and accordingly, we express
no opinion on the achievability of these forward-looking statements.  We
can not assure that any of the assumptions relating to the forward-looking
statements specified in the following information are accurate, and we assume no
obligation to update any such forward-looking statements.  You should read
the following discussion and analysis in conjunction with our financial
statements and the related notes included elsewhere in this
report.  The following discussion and analysis is qualified in its
entirety by reference to such financial statements and related
notes.





Overview





We
operate in two segments.





First,
our GIS segment obtains federal geographical and land information ownership
data from the BLM and various states and counties and converts this information
into databases which we sell to oil and gas companies, as well as several
agencies of the federal government, along with browser software that allows
users to easily access ownership information about specific parcels of
land.  We offer this service both on compact disc and through an
Internet site.  Nearly all sales are on an annual or quarterly
subscription basis.  We also offer production mapping services to a
number of clients.




Second,
our consulting segment provides enterprise assurance and analysis services to
various federal government agencies.  We use an internally-developed
systems security analysis tool to improve the efficiency of our consultants,
which allows us to bid more competitively for new work.




We have
over 200 commercial and government customers.  Approximately 80% of
our revenue is derived from government customers, which include the U.S. State
Department, the Internal Revenue Service, the Department of Defense, various
intelligence agencies, and the BLM.  Our commercial customers include
most of the major domestic petroleum companies including: Anadarko Petroleum, BP
America, ConocoPhillips, Devon Energy, EnCana, Shell, Williams Production, and
Yates Petroleum.





Our
principal executive offices are located at 8310 South Valley Highway, Suite 220,
Englewood, Colorado 80112.   Our telephone number is
303-377-0033.  We operate from offices in Colorado, Maryland, New
Mexico, and Virginia.  We also maintain an Internet site at www.xedarinc.com.  Our
common stock trades in the NASDAQ over-the-counter bulletin board (OTCBB) under
the ticker symbol “XDRC.OB.”





Opportunities,
challenges and risks





Key
opportunities include our:




·
            Use
      of recent and prospective acquisitions to qualify for bidding on larger
      government contracts;


·
            Use
      of additional employee skills gained from recent and prospective
      acquisitions to gain a higher review rating on more government
      contracts.


·
            To
      take advantage of these opportunities, our Land Links, Premier and
      Pixxures subsidiaries are now jointly bidding on all GIS contract
      proposals,


·
            Similarly,
      our FuGEN and Atlantic subsidiaries have jointly bid on several contracts,
      and routinely swap sales lead
information.





Material
challenges and risks include:


-
19 -





·
            The
      acquisition of a number of acquirees sufficient to create a cash flow
      neutral or positive position, which we estimate will be at a total revenue
      level of approximately $30  million, depending on the cash flow
      of individual acquirees.


·
            If
      we do not reach this revenue level by the end of April 2008, we will use
      all cash available to us under our existing line of credit, and will then
      need additional sources of
funding.


·
            To
      overcome these issues, we are focusing on acquiring companies whose
      shareholders require the highest proportion of our stock as payment and
      the least amount of cash, combined with the highest possible level of cash
      flow.


·
            Conversely,
      we are delaying acquisitions where acquiree shareholders insist on a large
      percentage of cash as part of the closing price, or where their cash flow
      is too low to offset our current cash
  requirements.


·
            An
      additional challenge and risk relates to the decline in our FuGEN
      subsidiary’s revenue due to decreases in contracts and
      customers.   Revenue from our FuGEN subsidiary declined in 2007
      compared to 2006 by 1,135,000, or 34%.  This decline was due to
      our State Department contract being scaled down to three employees by late
      2007, which we consider to be a sustainable number of
      consultants.  We do not expect any significant changes in our
      other government consulting contracts in
2008.


·
            Our
      financial results could weaken if we cannot consistently obtain customer
      renewal of database subscriptions or product maintenance
      agreements.  In 2007, we generated 36% of our total revenue by
      sales to our two largest customers pursuant to contracts that may be
      terminated or are subject to renewal at the election of such
      customers.  Termination of such contracts would eliminate a
      substantial portion of the revenue generated by our consulting
      segment.


·
            In
      2007, we obtained approximately 12% of our revenue from annual
      subscriptions to our database products.  Our results depend on
      our ability to achieve and sustain high annual renewal rates on existing
      subscriptions and to enter into new subscription arrangements on
      commercially acceptable terms.  A 1% decline in subscription
      renewal rates equates to an annual profit reduction of about
      $14,000.


·
            The
      federal government has substantially reduced its spending in order to
      channel funding into various war efforts, resulting in funding reductions
      on several system security projects.  The federal government has
      repeatedly shifted funding out of its established programs to fund its
      various war efforts.  These funding reductions have repeatedly
      reduced the budgets of several system security projects in which our staff
      was involved.  If the war effort continues, we can expect to see
      reduced staffing levels on many federal projects in which we are involved,
      as well as the risk of outright program cancellation.  Continued
      funding reductions may reduce or eliminate the revenue generated by our
      FuGEN and Atlantic subsidiaries, which derive much of their business from
      the federal government.


·
            We
      expect to continue amortizing intangible assets associated with existing
      acquisitions for the next five to eight
  years.





Known
Trends, Events, Demands, Commitments and Uncertainties





Our
business plan is contingent upon the completion of several acquisitions during
2008 in order to achieve a cash flow neutral or positive
situation.  Our ability to attract cash-flow positive acquisitions is
dependent upon being listed on a national stock exchange, because this allows us
to pay acquiree shareholders with stock, which they can
sell.  Accordingly, we have applied for listing on the American Stock
Exchange (AmEx).  The AmEx is currently reviewing our
application.





Within
our GIS segment, the number of database subscriptions sold each year is now
holding steady.  It is uncertain if this trend will continue, because
it depends on the availability of new databases to sell to our customers, their
price sensitivity in buying additional databases or renewing current ones, and
the presence of competing databases from competitors.  Trends are
highly variable within our IT security segment, where sales levels can change
dramatically, based on the supply of federal funding for security projects in
which we are involved.  For example, the funded staff level for our
State Department project has varied between three and 25 employees over the past
four years.  Thus, we find that the level of uncertainty is
significantly greater in our IT security segment than in our GIS
segment.


-
20 -


Key
Performance Indicators





In
addition to the data in our financial statements, we carefully track and monitor
certain other key performance indicators.  These include:





12/31/07
              
              
              9/30/07
              
              
              6/30/07
              
              
              3/31/07
              
              
              12/31/06GeneralTotal
      headcount
              
              
              104
              
              
              
              65
              
              
              
              64
              
              
              
              68
              
              
              
              40FuGENTotal
      backlog (000s) (1)
              
              $
              560
              
              
              $
              875
              
              
              $
              1,318
              
              
              $
              1,631
              
              
              $
              2,136Sales
      per person, annualized (000s)
              
              $
              155
              
              
              $
              151
              
              
              $
              148
              
              
              $
              146
              
              
              $
              139%
      Consulting hours billed
              
              
              77
              %
              
              
              85
              %
              
              
              77
              %
              
              
              77
              %
              
              
              73
              %Atlantic%
      Consulting hours billed (2)
              
              
              73
              %
              
              
              91
              %
              
              
              83
              %
              
              
              N/A
              
              
              
              N/APremier/Land LinksBacklog
      (000s)
              
              $
              645
              
              
              $
              1,007
              
              
              $
              422
              
              
              $
              399
              
              
              $
              360Sales
      per person, annualized (000s)
              
              $
              98
              
              
              $
              101
              
              
              $
              105
              
              
              $
              102
              
              
              $
              134Annual
      subscriptions (000s)
              
              $
              1,364
              
              
              $
              1,390
              
              
              $
              1,472
              
              
              $
              1,384
              
              
              $
              1,344Subscription
      loss rate (3)
              
              
              8
              %
              
              
              5
              %
              
              
              5
              %
              
              
              6
              %
              
              
              6
              %PixxuresHeadcount
              
              
              38
              
              
              
              N/A
              
              
              
              N/A
              
              
              
              N/A
              
              
              
              N/A


(1)
            The
      FuGEN backlog decreased because we have gradually drawn down a multi-year
      funding commitment on the State Department project, while replacing it
      with a larger number of short-term funding commitments, generally of about
      three months duration, for other
contracts.


(2)
            The
      Atlantic consulting hours billed dropped because employees took vacation
      time during December.


(3)
            Our
      subscription loss rate increased to 8% in December 2007, because we wrote
      off a delayed subscription payment by an oil & gas customer. 
      That customer subsequently paid for the
  subscription.





We
particularly focus on backlog, percentage utilization, total annual
subscriptions, and the subscription loss rate.




We are
currently developing key performance indicators for Pixxures.





Acquisitions





In
December 2006 Premier entered into a reverse acquisition of us.  In
March 2007, we acquired Atlantic and in October 2007, we acquired
Pixxures.  These acquisitions are part of an ongoing strategy to build a
significant proportion of our revenue, profit, and cash flow by acquiring
companies that will fit into our existing geospatial and consulting
segments.  See Notes 2 through 6 to our financial statements in this
report for further detail about these acquisitions.  We have engaged in
acquisition discussions with multiple companies, and periodically conduct due
diligence reviews of candidate acquirees, using both financial and operational
criteria.  We have also discussed purchase terms with a number of companies
that passed our due diligence reviews.  However, we can rarely determine
which candidate acquirees will accept our purchase offers, as well as the dates
on which such transactions are likely to close.




-
21 -


Critical
Accounting Policies and Estimates





This
Management’s Discussion and Analysis discusses our financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States.  Our preparation of the financial statements
requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements and the
reported amounts of revenue and expense during the reporting
period.  On an on-going basis, we evaluate our estimates and
judgments, including those related to revenue recognition, recoverability of
intangible assets, and contingencies and litigation.  We base our
estimates and judgments on historical experience and on various other factors
that we believe to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources.  Actual
results may differ from these estimates under different assumptions or
conditions.  The most significant accounting estimates inherent in the
preparation of our financial statements include estimates as to the appropriate
carrying value of certain assets and liabilities which are not readily apparent
from other sources, primarily the valuation of intangible assets.  The
methods, estimates and judgments used by us in applying these critical
accounting policies have a significant impact on the results we report in our
financial statements.





Revenue
Recognition





We
recognize revenue when all of the following criteria have been met: (a)
persuasive evidence of an arrangement exists, (b) delivery has occurred or
services have been rendered, (c) the price to the customer is fixed or
determinable, and (d) collectability is reasonably assured. We base our revenue
recognition policies on the guidance in Staff Accounting Bulletin (SAB) No. 104,
Revenue Recognition,
and Statement of Position (SOP) 97-2, Software Revenue
Recognition.





Revenues
from Proportional Performance Contracts





Our sales
revenue related to fixed price GIS production contracts are specific to services
performed for government agencies and commercial customers.  Our
services typically involve using its airplane and technology to map geographic
areas.  We develop and edit those geographic images to provide to our
customers.  We receive signed contracts with fixed fees for all sales
revenues.  The contracts span a period from several months to several
years and can include various geographical areas within one
contract.  We  recognize revenue under the proportional
performance model as the customer is receiving value as services are performed,
and there is no final act that is of significance to the service as a
whole.




Based
upon the proportional contract model, the following factors were considered in
determining our revenue recognition: (a) The services we perform under the fixed
price contract are cumulative in nature and therefore, if our contract was to be
terminated at an interim point, the customer would not be required to “start
over.”  Our contracts state that any digital images are the property
of the customer if the contract is terminated at any time and that the customer
will pay us in full for all costs incurred up to that time.  (b)
Payment for our services are billed as time is incurred and we collect based
upon this periodic billing.  As our customers are paying invoices as
they are billed, we believe that the customer must perceive value or payment
would not be made. (c) Our services under contracts are cumulative in that we
capture the digital images and then edit them. Therefore, there is no “final
act” that is significantly different in nature from the general services
performed.  The unedited images hold significant value to the
customer. (d) Our contracts generally discuss the nature of services to be
performed as a process, not a deliverable product. (e) There is no uncertainty
as to whether we can complete all of the acts in the
contract.  Revenue from fixed price GIS production contracts was
approximately $1.5 million for the year ended December 31,
2007.  There was no such revenue in 2006.




-
22 -




Subscription
Revenues





We derive
a portion of our revenue from the sale of subscriptions to our oil and gas
database.  Additionally, revenues are earned from our sale of
subscriptions, which allow customers to view and download various ortho images
contained in our on-line database.  Subscriptions are generally
available for a specific period of time or number of accesses by a
customer.  Revenues from the sale of such subscription services are
deferred at the time of sale and are recognized ratably as delivered over the
subscription period.  Revenues from the sale of subscriptions were
nearly all related to subscriptions to our oil and gas database and were
approximately $1.4 million and $1.3 million for the years ended December 31,
2007 and 2006, respectively.  We recorded $639,000 of deferred revenue
related to subscription revenues at December 31, 2007.





Revenues
for Time and Material Contracts


We
provide consulting and GIS production services primarily on a time and materials
basis.  We recognize revenue related to services performed under time
and materials contracts in the period performed, at standard billing
rates.  Revenue from time and materials contracts was approximately $6.8
million and $4.4 million for the years ended December 31, 2007 and 2006,
respectively.





Fixed
Price Consulting Contracts





We
recognized revenue associated with fixed price contracts upon completion of each
specified performance obligation under the terms of the contract.  If
the contract includes acceptance contingencies, we recognize revenue in the
period in which we receive documentation of acceptance from the
customer.  We do not sell bundled products.  We sell
software and databases, and each package has a maintenance contract associated
with it.  Therefore, there are no bundled services, other than the
maintenance aspect related to the software and database.  We also sell
maintenance separately on existing software and database
contracts.  Accordingly, there are no bundled services that would have
to be accounted for under Emerging Issues Task Force Issue No. 00-21, Revenue Arrangements with Multiple
Deliverables (EITF 00-21).  Under SOP 97-2, because we sell
maintenance on a separate basis, not just with the sale of software and
databases, we break out the maintenance aspect of the sale and recognize that
revenue separately and ratably over the maintenance period.  Unbilled
revenues of $182,000 at December 31, 2007 relate to any contract where revenue
has been recognized, but the customer has not yet been invoiced.


Share-Based
Payment


During
2006 we adopted the provisions of SFAS 123R, Accounting forShare-basedPayment.  Under the
fair value recognition provisions of this statement, we measure stock-based
compensation cost at the grant date based on the fair value of the
award.  We recognize the cost as expense on a straight-line basis over
the requisite service period, which is the vesting period.  We elected
the modified-prospective method, under which we did not revise prior periods for
comparative purposes.  The valuation provisions of SFAS 123R apply to
new grants and to grants that were outstanding as of the effective date and are
subsequently modified.  We recognize estimated compensation for grants
that were outstanding as of the effective date over the remaining service
periods using the compensation cost estimated for the SFAS 123R pro forma
disclosures.  We have determined compensation expense for warrants
granted to non-employees in accordance with SFAS No. 123R as the fair value of
the consideration received or the fair value of the equity instruments issued,
whichever is more reliably measured.





The
adoption of SFAS 123R resulted in the recognition of $30,883 of compensation
cost during 2006. The amount of unrecognized compensation cost relating to
options issued but not yet vested amounted to $13,729 as of December 31, 2006,
all of which we expended during 2007.  See Note 18 for further information
regarding share-based compensation assumptions and expense.


-
23 -


Identifiable
Intangible Assets and Goodwill


We
account for our business acquisitions using the purchase method of accounting.
It allocates the total cost of an acquisition to the underlying net assets based
on their respective estimated fair values. As part of this allocation process,
we identify and attribute values and estimated lives to the intangible assets
acquired.  In determining the estimated fair value of certain acquired
assets and liabilities, we make assumptions based upon many different factors,
such as historical and other relevant information and analysis performed by
independent parties.  Assumptions may be incomplete, and unanticipated
events and circumstances may occur that could affect the validity of such
assumptions, estimates, and actual results.  We amortize identifiable
intangible assets with finite lives on a straight-line basis over their
respective lives.





Goodwill
is the result of our acquisition of Atlantic and Pixxures in 2007 and our
acquisition of FuGEN, Inc. in 2002.





We review
the carrying values of identifiable intangible assets with indefinite lives and
goodwill at least annually to assess impairment because these assets are not
amortized.  Additionally, we review the carrying value of any
intangible asset or goodwill whenever events or changes in circumstances
indicate that its carrying amount may not be recoverable.  We assess
impairment by comparing the fair value of an identifiable intangible asset or
goodwill with its carrying value.  One part of this assessment is to
review the prospects for continuation of existing customer contracts, as well as
our likelihood of obtaining projected new business.  We expense impairments
when incurred. We completed annual impairment tests of goodwill and other
intangible assets and found no impairment for 2007 or 2006.





Recent
Accounting Pronouncements





SFAS No. 141R


In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations” (“SFAS 141R”), which replaces FASB Statement No. 141.
SFAS 141R establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, any non controlling interest in the acquiree
and the goodwill acquired, and a establishes that acquisition costs will be
generally expensed as incurred. This statement also establishes disclosure
requirements which will enable users to evaluate the nature and financial
effects of the business combination. SFAS 141R is effective as of the
beginning of an entity’s fiscal year that begins after December 15, 2008,
which will be the Company’s year beginning January 1, 2009. We believe that SFAS
141(R) is applicable to us, but cannot yet reasonably estimate the impact of the
statement.





SFAS
No. 160


In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests
in Consolidated Financial Statement—amendments of ARB No. 51” (“SFAS 160”).
SFAS 160 states that accounting and reporting for minority interests will be
recharacterized as noncontrolling interests and classified as a component of
equity.  The SFAS 160 also establishes reporting requirements that provide
sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the noncontrolling owners. This
statement is effective as of the beginning of an entity’s first fiscal year
beginning after December 15, 2008, which corresponds to our year beginning
January 1, 2009. We believe SFAS 160 will be applicable to us in that
minority interest will be listed separately in shareholders’ equity, but we
cannot yet reasonably estimate the other impacts to our consolidated financial
statements.


-
24 -


Liquidity
and Capital Resources





Lines of
Credit: Loans


On June
8, 2007, we signed a business loan agreement, effective June 7, 2007, with
KeyBank National Association (“KeyBank”), pursuant to which we obtained a
$500,000 revolving line of credit.  The line of credit is evidenced by
a loan agreement and promissory note bearing interest a variable rate equal to
the prime rate of KeyBank, with an initial interest rate equal to
8.25%.  On September 28, 2007, we increased the line of credit to
$1,000,000.  The increased Line of Credit is evidenced by a loan
agreement and promissory note bearing interest at a variable rate equal to the
prime rate of Lender, with an initial interest rate equal to 7.5%.  On
December 10, 2007, we increased the line of credit a second time to
$1,500,000.  This additional line of credit is evidenced by a
promissory note bearing interest at a variable rate equal to the prime rate of
KeyBank, with an initial interest rate equal to 7.5%.





As
security for the line of credit, we executed commercial security agreements in
favor of KeyBank.  Hugh H. Williamson, III, our President and CEO, has
entered into a commercial guaranty, personally guarantying full and punctual
payment of all of our obligations arising under the line of
credit.  At December 31, 2007, the principal outstanding on the loan
was $1,321,000.





There was
no material relationship between us and KeyBank prior to entering into the line
of credit.





On March
3, 2008, we borrowed $1,000,000 from our President and CEO, Hugh H. Williamson,
III. We used $478,000 of the loan to pay down our line of credit
with KeyBank. We are using the remainder of the loan for working capital.
The loan bears interest at a variable rate, which is equal to the prime
rate charged by KeyBank, which rate was 6.0% as of the loan closing date.
 The loan is secured by substantially all of our assets, although
the security interest is subordinate to the KeyBank line of credit. The
loan is to be repaid on the earlier of the receipt of $10 million in new
funding, or December 31, 2008.  The audit committee of our board of
directors, whose members are independent, reviewed the terms of the proposed
loan prior to its consummation and determined that it is fair to us, and as
such does not constitute a conflict of interest. The loan documents are
exhibits to this Annual Report. The above description of the loan is qualified
in its entirety by the full text of the exhibits.





Investment
in Joint Venture: Loan guarantee


In April,
2007, prior to our acquisition of Pixxures, Pixxures and an unrelated entity
formed a joint venture, LandPixx, LLC (“LandPixx”), for the purpose of
acquiring, operating, and leasing a digital sensor and aircraft.  Each
of the two parties contributed cash of $133,743, and LandPixx became a 50% owned
subsidiary of Pixxures.  LandPixx entered into a term loan agreement
with Silicon Valley Bank (“Silicon Valley”) for up to $1,400,000 to acquire a
digital sensor.  On September 28, 2007, we entered into an
Unconditional Guaranty with Silicon Valley of the above loan for a maximum
of $1,400,000, plus interest and expenses.  We guaranteed full
payment and performance of all obligations of LandPixx pursuant to the
original loan agreement dated April 23, 2007.  The December 31, 2007,
balance of the Silicon Valley loan was $1,122,139, of which $396,049 was a
current liability and $726,090 was long term.





On July
13, 2007, LandPixx entered into a term loan with Biltmore Bank of Arizona
(“Biltmore”) for $452,355, which was the funding for the acquisition by LandPixx
of a Cessna 402C.  The three companies are all co-borrowers.  The loan
matures on July 13, 2012.  Beginning in August 2007, the loan requires
monthly payments of $8,044 with one final payment of $100,259 on July
13, 2012.  The December 31, 2007, balance of the Biltmore loan was
$426,374, of which $62,540 was a current liability and $363,834 was long
term.





On March
3, 2008, LandPixx borrowed $1,352,612 from Bank of the West, Evergreen, CO
(BOW), which LandPixx used to pay off the above Silicon Valley and Biltmore
loans.  The BOW loan bears 6.19% interest, has 60 monthly payments of
$15,434 beginning March 2008, followed by a balloon payment of $794,714 and is
secured by the aircraft and related sensor equipment owned by
LandPixx.  Hugh H. Williamson, III, our President and CEO, is a
co-borrower on the loan, and we have guaranteed prompt payment and performance
of the obligations arising under the loan.


-
25 -




Also on
March 3, 2008, LandPixx borrowed $183,777 from Bank of the West, Evergreen,
CO, which it used to pay off the remainder of the loans from Silicon Valley and
Biltmore.  The BOW loan bears 5.385% interest, has 59 monthly payments of
$2,655, and a final payment of $62,900 that is due and payable on February 25,
2013.  The loan is secured by a $185,000 deposit account at
BOW.  Hugh H. Williamson III, our President and CEO, owns the deposit
account.  He is also a co-borrower on the loan.





We had
cash and cash equivalents of $432,000 at December 31, 2007.  Our total
current assets at December 31, 2007, were $3,793,000.





Our total
current liabilities were $4,183,000 at December 31, 2007, which primarily
included $601,000 of unrecognized subscription revenue, the bank notes payable
of $459,000, outstanding lines of credit of $1,321,000, accounts payable of
$1,126,000, $51,000 current obligations under a capital lease and other accrued
liabilities of $625,000.  We had $1,094,000 of long term notes payable
(LandPixx and Pixxures) at December 31, 2007.


Net Cash
from Continuing Operations – Operating Activity


During
the year ended December 31, 2007, we used $1,879,000 of cash in operating
activity.  We incurred a $4,367,000 net loss, offset by non-cash items
of $1,155,000 of stock issued for services, $244,000 of depreciation and
amortization expense and $1,291,000 of amortization of
intangibles.  We also used $211,000 of cash in changes in current
assets and liabilities.  During 2006, our operating activity used
$40,000 of cash.  We incurred a $610,000 net loss, offset by $292,000
of depreciation and amortization and a $232,000 change in current assets and
liabilities.





Net Cash
from Continuing Operations – Investing Activity


In 2007,
we received $256,000 from investments and in 2006 invested $55,000 of
cash.  In 2007, we received $48,000 and $476,000 of cash as a part of
the Atlantic and Pixxures acquisitions, respectively.  In addition, we
consolidated $151,000 of cash as a result of our consolidation of
LandPixx.  We invested $419,000 to acquire property and equipment,
mainly due to $209,000 of computer hardware and software for our GIS segment and
$54,000 of computer equipment and software for our corporate
office.  The 2006 investment was primarily in computer hardware and
software for our GIS segment.





Net Cash
from Continuing Operations – Financing Activity


In 2007
we received $700,000 from financing activity.  We borrowed $1,321,000
on the line of credit.   We used $400,000 as partial
consideration for the purchase of the Xedar shell corporation.  We made
$104,000 of loan repayments to related parties, and $117,000 of payments on the
Pixxures long term lease..





In 2006
we received $1,253,000 from financing activity.  In 2006, prior to our
merger with Premier, Premier obtained $82,000 of short-term financing from our
then GIS segment president, Richard V. Souders, and paid it back, including $752
of interest.  Also, see the above discussion of Battersea Capital and
Underwood Family Partners.  During 2006 we paid down $78,000 of debt
(all of which was principal) to Jack Baum and Sagebrook Technology
Partners.





Evaluation
of amount and certainty of cash flow





Our cash
flow from operations has been negative for the last two years. We have budgeted
for positive cash flow from operations by July 2008, which represents a revenue
level of approximately $25 million. We expect to use all cash available to us
under our existing line of credit, and will then need additional sources of
funding. We are working to obtain additional sources of outside funding. Mr.
Hugh H. Williamson III, our Chairman and CEO, provided $1 million of additional
funding in March 2008. We believe we can obtain the necessary funding to support
our 2008 budget requirements.




Management
believes that  its current operational plans are sufficient to fund
the future operations of the Company through the end of
2008.


-
26 -


$1.4
million of our cash flow originates from database subscriptions that we bill
primarily to large oil and gas exploration and production
companies.  We consider this cash flow to be very reliable, given that
93% of all subscriptions are renewed each year.  Nearly all of our
remaining cash flow is from the federal government or large prime contractors
through whom we do business with the federal government.  The cash
inflow associated with the federal government is generally paid within 30 to 60
days of the original invoice dates, with immaterial amounts of bad
debts.  The primary uncertainty surrounding governmental cash flow is
that projects are not renewed for additional option years, usually due to
funding shortfalls within the federal government.


Results
of Operations





Revenue


Revenue
increased from $5,733,000 in 2006 to $11,142,000 in 2007, which was an increase
of $5,409,000, or 94%.  This increase was due to revenue produced by
new subsidiaries acquired in 2007 – Land Links, Atlantic, and
Pixxures.  Together these three produced $6,668,000 of total 2007
revenue, compared to $0 in 2006.  Revenue from our FuGEN and Premier
subsidiaries declined in 2007 compared to 2006 by $1,207,000 as a result of
reduced funding on government contracts and continuous consolidation among
commercial oil and gas customers.




Our
Geographic Information Systems (GIS) segment revenue increased from $2,434,000
in 2006 to $4,466,000 in 2007, an increase of 84%.  This increase was
primarily due to revenue produced by our Land Links subsidiary, acquired in
January 2007, and our Pixxures subsidiary, acquired in October
2007.  They produced 5% and 15% of total 2007 revenue,
respectively.  On the other hand, revenue of Premier decreased by
$124,000, or 5%, in 2007 compared to 2006.  This decrease was largely
due to continuing consolidation among commercial oil and gas
customers.





Our
consulting segment experienced a revenue increase from $3,299,000 in 2006 to
$6,676,000 in 2007, which was an increase of 102%.  This increase was
primarily due to revenue produced by our Atlantic subsidiary acquired in March
2007.  It produced 40% of total 2007 revenue.  On the other
hand, revenue from our FuGEN subsidiary decreased by $1,135,000, or 34%, in 2007
compared to 2006.  This decrease was due to our State Department
contract being scaled down to three employees by late 2007, which we consider to
be a sustainable number of consultants.  We do not expect any
significant changes in our other government consulting contracts in
2008.





We
consolidated our Justice Information Systems (JIS) segment into our consulting
segment as of the end of 2006, and subsequently sold it in February
2007.  In 2006 this segment generated $322,000 of
revenue.  Revenue from this segment for 2007 was
negligible.





Our
Customer Relationship Management (CRM) segment generated $182,000 of revenue in
2006.  The number of customers to whom the segment provided
maintenance support was declining, so we sold the segment in November
2006.





Cost of
Sales


Cost of
sales increased from 2006 to 2007 by $4,934,000, or 178%.  This
increase is explained below.





The
margin of our consulting segment increased to $789,000 from $770,000 for 2007
and 2006.  Percentage margin of our consulting segment declined to 12%
in 2007 from 23% in 2006.  This was a result of a 2% increase in the
share of consulting services revenues that require higher compensation expense
and therefore produce lower gross profit. Cost
of sales for the consulting segment increased by $3,358,000, of which $4,023,000
was compensation costs of our Atlantic subsidiary, which were zero in
2006.  Cost of sales of our FuGEN subsidiary decreased in 2007
compared to 2006 by $666,000, or 26%, which was in line with revenue reduction
in this segment caused by a reduced number of consulting contracts with the
State Department.


-
27 -





The
margin of our GIS segment increased to $2,640,000 in 2007 from $2,184,000 in
2006.  This increase was largely due to revenue produced by our
Land Links and Pixxures divisions that were acquired in January and October
2007, respectively.  Land Links produced 5% and Pixxures produced
15% of total gross profit in 2007.  The percentage margin of our GIS
segment decreased to 59% in 2007 from 89% in 2006.  This decrease was
due to the lower margin on GIS production contracts compared to subscription
services.  We expect our margins to continue to decrease as Pixxures’
results will be included for a full twelve months in 2008 instead of only three
months in 2007.  Cost of sales for the GIS segment increased by
$1,576,000, of which $1,555,000 was compensation expense of the Land Links
and Pixxures divisions, which were zero in 2006.





We
consolidated our JIS segment into our consulting segment as of the end of 2006,
and subsequently sold it in February 2007.  In 2007 the JIS segment
had net income of $75,000 resulted from the sale of its assets.  In
2006 the margin of our JIS segment was $(261,000).





We sold
our CRM segment in November 2006.  The 2006 margin of the CRM segment
was $(87,000).





Selling
and Administrative Expense


Our
selling and administrative expense was $7,910,000 and $3,178,000 for 2007 and
2006, respectively.  This $4,731,000 increase was partially caused by
$1,080,000 in non-cash expense related to the issuance of our stock to
three investor relations firms in exchange for their marketing
services.  In January 2007, we engaged the services of three investor
relations firms (Capital Group Communications, Inc., Livestrong Venture Capital,
Inc., and C.C.R.I. Corporation) in exchange for 1,200,000 shares of our
common stock.  These firms were retained to disseminate information
about us to shareholders, brokers, dealers, analysts, and other investment
professionals.  In addition, C.C.R.I. Corporation has agreed to
prepare corporate research reports for distribution to brokers and investors,
and to give presentations to broker and investor groups.  We valued
these shares at the market price of our stock on the date the agreements were
signed, resulting in a total share valuation of $1,080,000.  Because
of the contract terms, we charged the entire value of the three agreements to
expense in the first quarter of 2007.




We also
began amortization of intangible assets acquired through the acquisition of Land
Links, Atlantic and Pixxures.  We incurred $1,291,000 of amortization
expense in 2007, with none in 2006.





Our
Atlantic, Land Links and Pixxures subsidiaries incurred $391,000, $82,000
and $165,000 of selling and administrative expense in the 2007 period, with none
in the 2006 period, because they were acquired in 2007.  Together
these new subsidiaries’ incurred 9% of total selling and administrative expense
in 2007.  These expenses included benefits, insurance, marketing,
consulting, rent, supplies, and similar expense.





We
maintained selling and administrative personnel at the same levels as prior to
acquisitions. Sales and administrative compensation increased by only 8% in 2007
compared to 2006.





During
2007 we also incurred $991,000 of expense associated with our acquisition
activity and cost of being a public company.  This included $437,000
of auditing and outside accounting fees, $236,000 of legal expenses, $35,000 in
SEC filing fees, $124,000 in Board fees, and $37,000 for acquisition valuation
services.  Director and officer insurance was $36,000.





In
February 2007, we granted 60,000 shares to non-employee directors, to be vested
over three years.  Based on the market price of our stock on the grant
date, the total share valuation is $147,000.  We are charging this
amount to expense over the 36 month vesting period.  We recorded
$49,000 of the expense during 2007.





In
December 2007 we issued 100 shares to each employee for which we recorded
$26,000 of corporate compensation expense.


-
28 -


We expect
our operating expense to increase further in the future as we execute our
business plan.





Interest
expense was $42,000 and $66,000 in 2007 and 2006, respectively.  This
expense consisted of interest accrued on notes payable to related parties and
line of credit with KeyBank.





Net
loss


In the
year ended December 31, 2007, we incurred a net loss of $4,367,000, compared to
a net loss of $610,000 in 2006, an increase of $3,757,000, or
616%.  Our revenue increased in 2007 from 2006 by $5,409,000, or
94%.  The main reasons our revenue grew but our net loss increased
were:




·
            Intangibles
      amortization of $1,291,000 ($0 in
2006);


·
            Investor
      relations expense of $1,080,000 ($0 in
2006);


·
            An
      increase in legal, accounting and other professional services related to
      legal filings, stock registration and acquisitions of
      $1,054,000;


·
            An
      increase in our gross profit of $475,000, due to increased volume of
      activity from acquisitions offset by lower margin
  sales.


·
            An
      increase of other selling and administrative expenses of $946,000,
      primarily due to rent expense.





Other
factors increasing the net loss were an increase in administrative payroll by
$187,000, or 8%. This increase was offset by a decrease in interest expense of
$39,000, or 70%, and the sale in February 2007 of the Justice Information
Systems division that incurred a $261,000 loss in 2007 compared to a gain of
$75,000 on the sale of its assets in 2007.  We discuss these changes
in more detail above.





Future
Plans





Our
expansion will be driven by a combination of organic growth and acquisitions in
both our GIS segment and our consulting segment.  We expect that
growth in our GIS segment will be founded upon the acquisition of other
companies that provide either related databases that can be combined with our
GIS segment’s existing database products, or companies that provide related
production services.  This should result in an expansion of the GIS
segment’s customer base into additional federal and state agencies, most
remaining large regional oil and gas production companies to which the segment
does not already sell, and more product penetration into the existing customer
base.





We expect
that growth in the consulting segment will be founded upon the acquisition of
other companies, so that we can use the acquired companies’ sales personnel to
cross-sell services into existing customers, while also expanding the
specialized skill base of all consultants to provide a greater range of services
to customers.  This should result in both greater sales penetration
into existing federal customers and an expansion into additional federal
agencies.





Off-Balance
Sheet Transactions





We have
no off balance sheet arrangements that have or are reasonably likely to have a
current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to investors.







Item
7.  Financial Statements.





-
29 -




INDEPENDENT
AUDITORS’ REPORT
    To
the Board of Directors and Stockholders
 Xedar
Corporation
 Denver,
Colorado
   We
have audited the accompanying balance sheets of Xedar Corporation (the
“Company”) as of December 31, 2007, and the related statements of operations,
stockholders’ equity and cash flows for the years ended December 31, 2007 and
2006. These financial statements are the responsibility of the Company’s
management.  Our responsibility is to express an opinion on these
financial statements based on our audits.
  We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting.  Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances but not for
the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such
opinion. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
  In
our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Xedar Corporation as
of December 31, 2007, and the results of their operations and their cash flows
for the years ended December 31, 2007 and 2006 in conformity with generally
accepted accounting principles in the United States of America.
  /s/
Ehrhardt Keefe Steiner & Hottman PC
 Ehrhardt
Keefe Steiner & Hottman PC
  March
27, 2008
 Denver,
Colorado


F
- 1
  Xedar
Corporation
 Consolidated
Balance Sheet
 
 
 December
      31,2007AssetsCurrent
      AssetsCash
      and cash equivalents
              
              $
              432,225Trade
      accounts receivable, net of allowance for doubtful accounts of
      $10,473
              
              
              2,749,693Unbilled
      revenues
              
              
              182,024Related
      party receivable
              
              
              272,125Other
      current assets
              
              
              165,302Total
      Current Assets
              
              
              3,801,369Property
      and equipment, net
              
              
              1,925,526Intangible
      assets, net
              
              
              10,727,598Goodwill
              
              
              7,953,942Total
      Assets
              
              $
              24,408,435Liabilities
      and Stockholders' EquityCurrent
      LiabilitiesAccounts
      payable
              
              $
              1,125,768Deferred
      revenue
              
              
              639,411Accrued
      compensation
              
              
              240,467Accrued
      liabilities and other
              
              
              397,370Line
      of credit
              
              
              1,321,000Current
      portion of notes payable
              
              
              458,589Total
      Current Liabilities
              
              
              4,182,605Long-Term
      LiabilitiesNotes
      payable - less current portion
              
              
              1,094,409Total
      Liabilities
              
              
              5,277,014Stockholders'
      EquityCommon
      stock, no par value, 50,000,000 shares authorized;  26,186,646
      shares issued and outstanding
              
              
              25,263,506Unearned
      Compensation
              
              
              (98,000
              )Stockholder
      note receivable
              
              
              (202,026
              )Accumulated
      deficit
              
              
              (5,832,059
              )Total
      Stockholders' Equity
              
              
              19,131,421Total
      Liabilities and Stockholders' Equity
              
              $
              24,408,435
 
 See
Financial Statement Notes
  F
- 2
  Xedar
Corporation
 Consolidated
Statement of Operations
 
 
 Year
      EndedDecember 312007
              
              
              2006Sales
              
              $
              11,142,193
              
              
              $
              5,733,229Cost
      of sales (principally consulting compensation)
              
              
              7,712,831
              
              
              
              2,779,086Gross
      profit
              
              
              3,429,362
              
              
              
              2,954,143Selling
      and Administrative ExpenseCompensation
      and payroll taxes
              
              
              2,526,350
              
              
              
              2,339,204Amortization
      of intangibles
              
              
              1,291,429
              
              
              
              -Investor
      relations expense
              
              
              1,252,750
              
              
              
              -Legal,
      accounting and outside services
              
              
              1,174,815
              
              
              
              121,095Other
      expense
              
              
              1,664,259
              
              
              
              718,139Total
      Selling and Administrative Expense
              
              
              7,909,603
              
              
              
              3,178,438Net
      Operating Loss
              
              
              (4,480,241
              )
              
              
              (224,295
              )Other
      ExpenseInterest
      expense
              
              
              (16,448
              )
              
              
              (54,982
              )Loss
      from continuing operations before income tax and minority
      interest
              
              
              (4,496,689
              )
              
              
              (279,277
              )Income
      tax benefit (expense)
              
              
              (17,010
              )
              
              
              16,621Minority
      interest in net loss of consolidated subsidiary
              
              
              72,227
              
              
              
              -Loss
      from continuing operations
              
              
              (4,441,472
              )
              
              
              (262,656
              )Discontinued
      operations, net of income tax effect:Loss
      from discontinued Customer RelationshipManagement
      segment
              
              
              -
              
              
              
              (86,574
              )Income
      (Loss) from discontinued Justice InformationSystems
      segment
              
              
              74,662
              
              
              
              (260,735
              )Net
      Loss
              
              $
              (4,366,810
              )
              
              $
              (609,965
              )Net
      Loss per Share - Basic:Loss
      per share Continuing Operations
              
              $
              (0.19
              )
              
              $
              (0.02
              )Income
      (Loss) per share Discontinued Operations
              
              $
              0.00
              
              
              $
              (0.03
              )Net
      loss per share
              
              $
              (0.19
              )
              
              $
              (0.04
              )Net
      Loss per Share - Diluted:Loss
      per share Continuing Operations
              
              $
              (0.19
              )
              
              $
              (0.02
              )Income
      (Loss) per share Discontinued Operations
              
              $
              0.00
              
              
              $
              (0.03
              )Net
      loss per share
              
              $
              (0.19
              )
              
              $
              (0.04
              )Shares
      Used in Computing Net Loss per Share:Basic
              
              
              23,357,153
              
              
              
              13,804,696Diluted
              
              
              23,357,153
              
              
              
              13,804,696
  See
Financial Statement Notes
  F
- 3
  Xedar
Corporation
 Consolidated
Statement of Changes in Stockholders' Equity
 Years
Ended December 31, 2007 and December 31, 2006
 
 Series
      A ConvertiblePreferred
      Stock
              
              
              Common Stock
              
              
              StockholderNote
              
              
              Unearned
              
              
              AdditionalPaid-In
              
              
              AccumulatedShares
              
              
              Amount
              
              
              Shares
              
              
              Amount
              
              
              Receivable
              
              
              Compensation
              
              
              Capital
              
              
              Deficit
              
              
              TotalBalance
      January 1, 2006
              
              
              3,162,941
              
              
              $
              3,163
              
              
              
              12,068,813
              
              
              $
              12,069
              
              
              $
              -
              
              
              $
              -
              
              
              $
              2,155,694
              
              
              $
              (855,284
              )
              
              $
              1,315,642Sales
      of common stock
              
              
              -
              
              
              
              -
              
              
              
              1,700,788
              
              
              
              1,701
              
              
              
              -
              
              
              
              -
              
              
              
              1,328,299
              
              
              
              -
              
              
              
              1,330,000Issuance of common stock with
                stock optionexercise
              
              
              -
              
              
              
              -
              
              
              
              6,667
              
              
              
              7
              
              
              
              -
              
              
              
              -
              
              
              
              1,619
              
              
              
              -
              
              
              
              1,626Effect of issuance of common
                stock andrecapitalization
      in
                reverse acquisitiontransaction
              
              
              (3,162,941
              )
              
              
              (3,163
              )
              
              
              3,479,575
              
              
              
              3,488,775
              
              
              
              -
              
              
              
              -
              
              
              
              (3,485,612
              )
              
              
              -
              
              
              
              -Issuance of 409,090 shares with
                conversion ofconvertible
      debt
              
              
              -
              
              
              
              -
              
              
              
              409,090
              
              
              
              409,090
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              
              409,090Distribution to controlling
                shareholders in reverse
                acquisition
              
              
              -
              
              
              
              -
              
              
              
              (463
              )
              
              
              (400,000
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (400,000
              )Stock options and warrants
                exercised andexchanged
              
              
              -
              
              
              
              -
              
              
              
              366,048
              
              
              
              30,883
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              30,883Net
      Loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (609,965
              )
              
              
              (609,965
              )Balance
      - December 31, 2006
              
              
              -
              
              
              
              -
              
              
              
              18,030,518
              
              
              
              3,542,525
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,465,249
              )
              
              
              2,077,276Issuance of 6,475,584 shares to
                buy Land Links Company,
                Atlantic Systems, Inc., and
                Pixxures, Inc.
              
              
              -
              
              
              
              -
              
              
              
              6,475,584
              
              
              
              19,849,007
              
              
              
              (195,480
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              19,653,527Issuance of 1,260,000 shares for
                professional services, director
                fees, and to employees
              
              
              -
              
              
              
              -
              
              
              
              1,270,300
              
              
              
              1,252,750
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,252,750Recognition
      of stock option
                expense for exchange of
                options
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              13,729
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              13,729Unamortized
      balance of share-
                based compensation
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (98,000
              )
              
              
              -
              
              
              
              -
              
              
              
              (98,000
              )Conversion
      of Baum/Sagebrook
                debt to stock
              
              
              -
              
              
              
              -
              
              
              
              279,669
              
              
              
              279,669
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              279,669Settlement
      of Pixxures acquisition
                liability
              
              
              -
              
              
              
              -
              
              
              
              130,575
              
              
              
              325,826
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              325,826Interest
      accrued on shareholder
                note receivable
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (6,546
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (6,546
              )Net
      Loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (4,366,810
              )
              
              
              (4,366,810
              )Balance - December 31, 2007
              
              
              -
              
              
              
              -
              
              
              
              26,186,646
              
              
              $
              25,263,506
              
              
              $
              (202,026
              )
              
              $
              (98,000
              )
              
              $
              -
              
              
              $
              (5,832,059
              )
              
              $
              19,131,421
  See
Financial Statement Notes
  F
- 4
  Xedar
Corporation
 Consolidated
Cash Flow Statement
 
 Year
      EndedDecember
      31,2007
              
              
              2006Cash
      flow From Operating Activity:Net
      Loss
              
              $
              (4,366,810
              )
              
              $
              (609,965
              )Adjustments
      to reconcile net loss to net cash provided by operating
      activityIssuance
      of 1,200,000 shares for professional services
              
              
              1,080,000Issuance
      of 10,300 Shares (100 to each employee)
              
              
              25,750Stock-based
      compensation for director fees
              
              
              49,000Stock
      option expense for exchange of options
              
              
              13,729
              
              
              
              32,509Depreciation
      and amortization
              
              
              243,707
              
              
              
              292,028Amortization
      of intangibles
              
              
              1,291,429Loss
      on disposition of property and equipment
              
              
              2,338
              
              
              
              13,504Accrued
      interest on note receivable from stockholder
              
              
              (6,546
              )
              
              
              -Changes
      in current assets and liabilities:(Increase)
      decrease in:Trade
      accounts receivable
              
              
              (198,000
              )
              
              
              278,226Receivable
      from a related party
              
              
              (280,942
              )Unearned
      revenue
              
              
              (63,067
              )Other
      current assets
              
              
              143,394
              
              
              
              (22,456
              )Increase
      (decrease) in:Accounts
      payable
              
              
              320,714
              
              
              
              16,880Accrued
      liabilities and other
              
              
              32,284
              
              
              
              (53,217
              )Deferred
      revenue
              
              
              (164,657
              )
              
              
              12,446Net
      Cash (Used) by Operating Activity
              
              
              (1,877,677
              )
              
              
              (40,045
              )Cash
      Flow from Investing ActivityAcquisition
      of property and equipment
              
              
              (418,912
              )
              
              
              (54,795
              )Acquired
      cash from Atlantic and Pixxures
              
              
              523,592
              
              
              
              -Cash
      from consolidation of LandPixx
              
              
              150,932
              
              
              
              -Net
      Cash Provided (Used) by Investing Activity
              
              
              255,612
              
              
              
              (54,795
              )Cash
      Flow from Financing ActivityProceeds
      from short-term notes payable
              
              
              1,321,000
              
              
              
              82,000Payments
      on short-term notes payable
              
              
              (400,000
              )
              
              
              (159,500
              )Payments
      on long-term notes payable
              
              
              (221,362
              )
              
              
              -Proceeds
      from sale of common stock
              
              
              -
              
              
              
              1,330,000Net
      Cash Provided by Financing Activity
              
              
              699,638
              
              
              
              1,252,500Net
      (Decrease) Increase in Cash
              
              
              (922,427
              )
              
              
              1,157,660Cash
      and Cash Equivalents - Beginning of year
              
              
              1,354,652
              
              
              
              196,992Cash
      and Cash Equivalents - End of year
              
              $
              432,225
              
              
              $
              1,354,652Supplemental
      Cash Flow DisclosureNon-Cash
      TransactionsIssuance
      of 360,000 shares to buy Land Links
              
              
              360,000
              
              
              
              -Issuance
      of 3,000,000 shares to buy Atlantic Systems, Inc.
              
              
              13,359,451
              
              
              
              -Issuance
      of 1,734,782 shares to buy Pixxures, Inc.
              
              
              6,129,556
              
              
              
              -Conversion
      of debt to stock
              
              
              279,669
              
              
              
              409,090Bonus
      to Pixxures' officers
              
              
              325,826
              
              
              
              -Stock
      issued for exercise of stock options
              
              
              -
              
              
              
              5,214Interest
      payments
              
              
              15,771
              
              
              
              752
  See
Financial Statement Notes
  F
- 5


Xedar
Corporation


Notes
to Consolidated Financial Statements










Note
1.  Description of Business and Summary of Significant Accounting
Policies





Nature of
Business





Premier
Data Services, Inc. (“Premier”) began operation in 1994 as a Colorado
partnership.  On January 19, 2001, Premier reorganized as a Delaware
corporation.  In December 2006, it acquired Xedar Corporation, a Colorado
corporation, in a reverse merger ("Xedar, we or us").  We have
accounted for the transaction as a reverse acquisition of Xedar by
Premier.   Premier is deemed to be the purchaser and surviving
company for accounting purposes.  Accordingly, its assets and liabilities
are included in the consolidated balance sheet at their historical book values
and the results of operations of Premier have been presented for the comparative
prior period.  The historical cost of the net assets of Xedar that were
acquired was $0.  We do not present pro forma information as the
financial statements of Xedar are insignificant.





We
operate in two segments.  The geographical information systems (GIS)
segment obtains federal land ownership data from the BLM and converts this into
a database that is sold to oil and gas companies, as well as several agencies of
the federal government, along with browser software that allows users to easily
access ownership information about specific parcels of land.  We offer
this service both on compact disc and through an Internet site.  Nearly all
sales are on an annual or quarterly subscription basis.  We also offer
production mapping services to a number of clients.





The
consulting segment provides contract computer programming and security analysis
services to various governmental agencies.  These services involve the
analysis, design, and implementation of computer systems for federal and local
governmental units.





Principles
of Consolidation and Basis of Presentation





The
accompanying consolidated financial statements include the accounts of Xedar and
its wholly owned subsidiaries, FuGEN, Inc.(“FuGEN”), Land Links Company Ltd.
(“Land Links”), Pixxures, Inc. (“Pixxures”), Atlantic Systems Corporation
(“Atlantic”), and Premier.  Pixxures owns a 50% interest in LandPixx, LLC
(“LandPixx”), a joint venture with an unrelated party.  The consolidated
financial statements are prepared in accordance with generally accepted
accounting principles in the United States of America (US GAAP).  All
material inter-company accounts and transaction balances have been eliminated in
consolidation.





Cash and
Cash Equivalents





We
consider all highly liquid instruments purchased with an original maturity of
three months or less to be cash equivalents.  We continually monitor our
positions with, and the credit quality of, the financial institutions with which
we invest.  As of the balance sheet dates, and periodically throughout the
year, we have maintained balances in various operating accounts in excess of
federally insured limits.





Concentrations
of Credit Risk





We grant
credit in the normal course of business, primarily consisting of accounts
receivable and subscriptions receivable.  We periodically perform credit
analyses and monitor the financial condition of our major customers to reduce
credit risk.


F
- 6





Xedar
Corporation


Notes
to Consolidated Financial Statements










We
received 36% of our 2007 sales from two customers who each comprised more than
10% of our sales, totaling $2,767,000 and $1,245,000,
respectively.  One customer comprised 25% of our accounts receivable
at December 31, 2007.  We received 37% of our 2006 sales from two
customers who each comprised more than 10% of our sales, totaling $1,528,000 and
$796,000, respectively.  The revenue from all of these customers
was in the consulting segment.




Trade
Accounts Receivable





At the
time accounts receivable originate, we consider an allowance for doubtful
accounts.  We continually review the provision for uncollectible
amounts; we adjust it to maintain the allowance at a level considered adequate
to cover future losses.  The allowance is our best estimate of
uncollectible amounts; we determine it based on historical performance which we
track on an ongoing basis.  The losses we ultimately incur may differ
materially in the near term from the amounts estimated in determining the
allowance.




Property
and Equipment





We state
property and equipment at cost.  For all property and equipment except our
airplane engines, we calculate depreciation utilizing the straight-line method
over the estimated useful lives for owned assets or to the estimated salvage
value, where appropriate, or over the related lease terms for leasehold
improvements. Useful lives range from 2 to 10 years. We calculate depreciation
for our airplane engines based on the number of hours flown.




Identifiable
Intangible Assets and Goodwill





We
account for our business acquisitions using the purchase method of accounting,
which allocates the total cost of an acquisition to the underlying net assets
based on their respective estimated fair values.  As part of this
allocation process, we identify and attribute values and estimated lives to the
intangible assets acquired.  We amortize identifiable intangible
assets with finite lives on a straight-line basis over their respective
lives.





Goodwill
is the result of our acquisition of Atlantic and Pixxures in 2007 and our
acquisition of FuGEN in 2002.





We review
the carrying values of identifiable intangible assets with indefinite lives and
goodwill at least annually to assess impairment because these assets are not
amortized. Additionally, we review the carrying value of any intangible asset or
goodwill whenever events or changes in circumstances indicate that its carrying
amount may not be recoverable. We assess impairment by comparing the fair value
of an identifiable intangible asset or goodwill with its carrying
value.  Parts of this assessment include review of the prospects for
continuation of existing customer contracts, and the likelihood of obtaining
projected new business. We expense impairments when incurred.  We
completed annual impairment tests of goodwill and other intangible assets and
found no impairment for 2007 or 2006.





Long-Lived
Assets





We review
our long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be recovered.  We
look primarily to undiscounted future cash flow in our assessment of whether or
not long-lived assets have been impaired.


F
- 7


Xedar
Corporation


Notes
to Consolidated Financial Statements










Revenue
Recognition





We
recognize revenue when all of the following criteria have been met: (a)
persuasive evidence of an arrangement exists, (b) delivery has occurred or
services have been rendered, (c) the price to the customer is fixed or
determinable, and (d) collectability is reasonably assured. We base our revenue
recognition policies on the guidance in Staff Accounting Bulletin (SAB) No. 104,
Revenue Recognition,
and Statement of Position (SOP) 97-2, Software Revenue
Recognition.





Revenue
from Proportional Performance Contracts





Our sales
revenue related to fixed price GIS production contracts are specific to services
performed for government agencies and commercial customers.  Our
services typically involve using its airplane and technology to map geographic
areas.  We develop and edit those geographic images to provide to our
customers.  We receive signed contracts with fixed fees for all sales
revenues.  The contracts span a period from several months to several
years and can include various geographical areas within one
contract.  We believe it is appropriate to recognize revenue under the
proportional performance model as the customer is receiving value as services
are performed, and there is no final act that is of significance to the service
as a whole.




Based
upon the proportional contract model, the following factors were considered in
determining our revenue recognition: (a) The services we perform under the fixed
price contract are cumulative in nature and therefore, if our contract was to be
terminated at an interim point, the customer would not be required to “start
over.”  Our contracts state that any digital images are the property
of the customer if the contract is terminated at any time and that the customer
will pay us in full for all costs incurred up to that time.  (b)
Payment for our services are billed as time is incurred and we collect based
upon this periodic billing.  As our customers are paying invoices as
they are billed, we believe that the customer must perceive value or payment
would not be made. (c) Our services under contracts are cumulative in that we
capture the digital images and then edit them. Therefore, there is no “final
act” that is significantly different in nature from the general services
performed.  The unedited images hold significant value to the
customer. (d) Our contracts generally discuss the nature of services to be
performed as a process, not a deliverable product. (e) There is no uncertainty
as to whether we can complete all of the acts in the
contract.  Revenue from fixed price GIS production contracts was
approximately $1.5 million for the year ended December 31,
2007.  There was no such revenue in 2006.




Subscription
Revenues





We derive
a portion of our revenue from the sale of subscriptions to our oil and gas
database.  Additionally, revenues are earned from our sale of
subscriptions, which allow customers to view and download various ortho images
contained in our on-line database.  Subscriptions are generally
available for a specific period of time or number of accesses by a
customer.  Revenues from the sale of such subscription services are
deferred at the time of sale and are recognized ratably as delivered over the
subscription period.  Revenues from the sale of subscriptions were
nearly all related to subscriptions to our oil and gas database and were
approximately $1.4 million and $1.3 million for the years ended December 31,
2007 and 2006, respectively.  We recorded $639,000 of deferred revenue
related to subscription revenues at December 31, 2007.


F
- 8





Xedar
Corporation


Notes
to Consolidated Financial Statements










Revenues
for Time and Material Contracts





We
provide consulting and GIS production services primarily on a time and materials
basis.    We recognize revenue related to services performed
under time and materials contracts in the period performed, at standard billing
rates.Revenue from time and materials contracts was approximately $6.8 million
and $3.3 million for the years ended December 31, 2007 and 2006,
respectively.





Fixed
Price Consulting Contracts





We do not
sell bundled products.  We sell software and databases, and each
package has a maintenance contract associated with it.  Therefore,
there are no bundled services, other than the maintenance aspect related to the
software and database.  We also sell maintenance separately on
existing software and database contracts.  Accordingly, there are no
bundled services that would have to be accounted for under Emerging Issues Task
Force  Issue No. 00-21, Revenue Arrangements with Multiple
Deliverables (EITF 00-21).  Under SOP 97-2, because we sell
maintenance on a separate basis, not just with the sale of software and
databases, we break out the maintenance aspect of the sale and recognize that
revenue separately and ratably over the maintenance period.  Unbilled
revenues of $182,000 at December 31, 2007 relate to any contract where revenue
has been recognized, but the customer has not yet been invoiced.





Advertising





We
expense advertising cost as we incur it.  We incurred $11,000
advertising expense in 2007 and none in 2006.





Income
Taxes





We
account for income tax in accordance with Statement of Financial Accounting
Standards No. 109, Accounting
for Income Taxes(SFAS
109).  Under FAS 109 provisions, a deferred tax liability or asset
(net of a valuation allowance) is recorded by applying the provisions of
applicable laws to measure the deferred tax consequences of temporary
differences that will result in net taxable or deductible amounts in future
years as a result of events recognized in the financial statements in the
current or preceding years.




Loss per
Share





Because
we incurred losses for each of the periods reported we did not include
outstanding options and warrants in the calculation of diluted weighted average
shares outstanding, because the effect of such securities would have been
anti-dilutive. We excluded 239,006 and 1,771,930 common equivalent shares from
the computation of diluted earnings per share for 2007 and 2006, respectively,
because their effect is anti-dilutive.  The 2006 income (loss) per share is
shown pro forma, as though the reverse acquisition took place on January 1,
2006.


F
- 9


Xedar
Corporation


Notes
to Consolidated Financial Statements










Use of
Estimates





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





Share-Based
Payment





During
2006 we adopted the provisions of SFAS 123R, Share-based Payment.
 Under the fair value recognition provisions of this statement, we measure
stock-based compensation cost at the grant date based on the fair value of the
award.  We recognize the cost as expense on a straight-line basis over
the requisite service period, which is the vesting period.  We elected
the modified-prospective method, under which we did not revise prior periods for
comparative purposes.  The valuation provisions of SFAS 123R apply to new
grants and to grants that were outstanding as of the effective date and are
subsequently modified.  We recognize estimated compensation for grants
that were outstanding as of the effective date over the remaining service
periods using the compensation cost estimated for the SFAS 123R pro forma
disclosures.  We have determined compensation expense for warrants
granted to non-employees in accordance with SFAS No. 123R as the fair value of
the consideration received or the fair value of the equity instruments issued,
whichever is more reliably measured.





The
adoption of SFAS 123R resulted in the recognition of $30,883 of compensation
cost during 2006. The amount of unrecognized compensation cost relating to
options issued but not yet vested amounted to $13,729 as of December 31, 2006,
all of which we expended during 2007.  See Note 8 for further information
regarding stock-based compensation assumptions and expense.





Reclassifications





We have
reclassified certain data in the financial statements of the prior period to
conform to the current period presentation.





Recent
Accounting Pronouncements





SFAS
No. 157




In
September 2006, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements,which establishes a fair value hierarchy to measure assts and
liabilities, and expands disclosures about fair value measurements. SFAS
No. 157 does not require any new fair value measurements, but provides
guidance on how to measure fair value by providing a fair value hierarchy used
to classify the source of the information. This statement is effective for
fiscal years beginning after November 15, 2007. We are currently evaluating the
potential impact of the adoption of SFAS 157 on our financial statements,
but do not expect that it will have a significant impact.


F
- 10


Xedar
Corporation


Notes
to Consolidated Financial Statements









SFAS No. 141R




In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations” (“SFAS 141R”), which replaces FASB Statement No. 141.
SFAS 141R establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, any non controlling interest in the acquiree
and the goodwill acquired, and establishes that acquisition costs will be
generally expensed as incurred. This statement also establishes disclosure
requirements which will enable users to evaluate the nature and financial
effects of the business combination. SFAS 141R is effective as of the
beginning of an entity’s fiscal year that begins after December 15, 2008,
which will be the Company’s year beginning January 1, 2009. We believe that SFAS
141(R) is applicable to us, but cannot yet reasonably estimate the impact of the
statement.




SFAS
No. 160




In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests
in Consolidated Financial Statement—amendments of ARB No. 51” (“SFAS 160”).
SFAS 160 states that accounting and reporting for minority interests will be
recharacterized as noncontrolling interests and classified as a component of
equity.  The SFAS 160 also establishes reporting requirements that provide
sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the noncontrolling owners. This
statement is effective as of the beginning of an entity’s first fiscal year
beginning after December 15, 2008, which corresponds to our year beginning
January 1, 2009. We believe SFAS 160 will be applicable to us in that
minority interest will be listed separately in shareholders’ equity, but we
cannot yet reasonably estimate the other impacts to our consolidated financial
statements.







Note
2.  Reverse Acquisition of Xedar





Effective
December 31, 2006, Premier agreed to acquire Xedar (a public shell) for $400,000
cash, with the shareholders of Xedar prior to the acquisition retaining 10%
ownership in the surviving entity.  The parties consummated this
transaction, simultaneously entering into the below two contracts.





Merger
Agreement





Effective
December 31, 2006, Premier entered into a merger agreement with
Xedar.  Before the merger agreement there was no material relationship
between Xedar and Premier.  Prior to the merger Xedar had 2,500,072
shares of common stock outstanding.  Effective December 31, 2006,
Xedar issued, pursuant to the merger agreement with Premier, 14,082,871 shares
of its common stock for 13,685,018 shares of the common stock and 2,685,253
shares of the Series A preferred stock of Premier, based upon a conversion ratio
of 0.78199 shares of Xedar common stock for 1 share of Premier common stock, and
1.25922 shares of Xedar common stock for 1 share of the Series A preferred stock
of Premier.  Also 34 Xedar shares were issued for rounding up of the
fractional shares.  Immediately following the closing of the Merger
Agreement there were 16,582,977 shares of Xedar common stock outstanding and
Premier became a subsidiary of Xedar.


F
- 11


Xedar
Corporation


Notes
to Consolidated Financial Statements







We
subsequently converted the remaining 91,244 shares of Premier common stock and
477,688 shares of Premier Series A preferred stock to Xedar common stock using
the same conversion ratios, resulting in additional 672,866 Xedar shares,
bringing the total number of shares issued to effect the merger to 14,755,771
shares and the number of Xedar shares outstanding post-merger to 17,255,843
shares.





Further,
options to purchase 30,500 Premier common shares were outstanding at December
31, 2007.  These options expire in 2015.    If the
options are exercised, the owners of the resulting common stock would become
minority owners in Premier.





Controlling
Shareholder Agreement





Simultaneously
with entering into, and as a condition of, the above merger agreement, Premier
entered into an agreement with the controlling shareholders of
Xedar.  The terms of the agreement were that Premier paid the
controlling shareholders of Xedar $400,000 in exchange for 463 shares of Xedar
common stock, and all of the shareholders of Xedar retained 10% ownership in the
surviving entity.





The
entire transaction has been accounted for as a reverse acquisition of Xedar by
Premier, in accordance with the provisions of FASB Statement No. 141, Business Combinations (SFAS
141).  Premier is deemed to be the purchaser and surviving company for
accounting purposes.  Accordingly, its assets and liabilities are
included in the consolidated balance sheet at their historical book values and
the results of operations of Premier have been presented for the comparative
prior period.  The historical cost of the net assets of Xedar that
were acquired was $0.  The $400,000 paid to the controlling
shareholders of Xedar has been reported as a distribution in the consolidated
statement of changes in stockholders’ equity.  Pro forma information
is not presented as the financial statements of Xedar are
insignificant.








Note
3.  Acquisition of Land Links





On
January 1, 2007, we acquired Land Links Company Ltd., a New Mexico limited
liability company that specializes in the geographic coordinate database
(GCDB).  We purchased 100% of the outstanding shares of Land Links
from its two members for a purchase price of 360,000 shares of our common
stock.   The purchase price paid in the purchase of Land Links
was determined with reference to and based upon a multiple of approximately one
times Land Links’ trailing twelve months’ revenue.  Our common stock
was valued at $1.00 per share, based on the market price two days before and
after the measurement date.   We allocated the full $360,000
purchase price to non-compete agreements.  We recorded no liabilities
and no other assets in the acquisition.   This acquisition
expanded our services in the GIS arena to the federal government, especially the
BLM, which is the prime user of GCDB information.  We include results from
operations of acquired companies in our consolidated financial statements from
their respective effective acquisition dates.


F
- 12


Xedar
Corporation


Notes
to Consolidated Financial Statements










Note
4.  Acquisition of Atlantic Systems





On March
22, 2007 we acquired all of the outstanding stock of Atlantic, a Virginia
corporation.  Atlantic develops software for the defense and
intelligence agencies of the federal government, and provides technical
assistance and training for other software systems implemented by the federal
government. Additionally Atlantic provides strategy consulting services to those
same agencies.  Further, Atlantic assists its clients in selling their
products and services to the federal government.  Pursuant to the
Stock Purchase Agreement between us and the previous Atlantic shareholders,
dated March 22, 2007, as amended by the First Amendment to Stock Purchase
Agreement, dated July 26, 2007, we purchased all of the outstanding Atlantic
stock from the shareholders for a purchase price of $13,359,451, with an initial
payment of 1,380,802 shares of our common stock, valued at $5,108,696, and a
closing payment of 3,000,000 shares of our common stock, valued at
$8,250,755.  We, at our discretion, also agreed to issue up to an
additional 2,000,000 shares of our common stock to the Shareholders if Atlantic
or its subsidiary receives one or more significant RFPs, RFQs or SOWs from the
federal government, or a significant industry participant, and responds to such
requests with one or more proposals by December 31, 2007.  The
contingency related to the additional 2,000,000 shares has been expanded, at our
discretion, to include additional performance criteria related to closing
certain contracts.   We expect this will be measured during
2008.  We have not yet determined the amount of additional shares, if
any, that will be issued.  Therefore, we have not accrued any
compensation cost related to these shares.  There are no material
changes to the purchase price as a result of this amendment.  The
Company acquired Atlantic because the Company believes Atlantic’s consulting
services are synergistic with the business of the Company’s consulting segment,
and because the Company believes Atlantic’s customer relationships with the
federal government are synergistic with the federal government relationships the
Company has in its operations.  The Company believes these benefits
are sufficiently strong to warrant the purchase price the Company paid,
resulting in an allocation of a significant proportion of the purchase price to
goodwill.  Our common stock was valued at $2.75 per share based on the
market price two days before and after the measurement date.  The
purchase price paid in the acquisition of Atlantic was based upon a multiple of
approximately 1.2 times its trailing twelve months’ revenue.  With the
acquisition of Atlantic, we now provide strategic planning, business development
services and program management to the federal government.  We have
allocated the $13,359,451 purchase price.  We recorded all current
assets and current liabilities at book value, all of which we determined
approximated fair value, approximately $1,189,000 and $686,000,
respectively.  We valued intangible assets in accordance with standard
valuation procedures, recording customer contracts of $1,435,000, customer
relationships of $1,003,000 and non-compete agreements of
$5,611,000.  We estimated the useful lives of customer contracts and
non-compete agreements to be 5 years, and customer relationships to be 8
years.  We allocated the rest of the purchase price, approximately
$4,823,000, to goodwill.  One of the shareholders from whom we
purchased Atlantic, who is an employee of Atlantic, acquired his 438,080 shares
in Atlantic prior to our purchase, and paid for the shares with a
$195,480 note payable to Atlantic.  We acquired the note, which
bears 4.73% interest, as part of the acquisition of Atlantic.  As of
December 31, 2007, we have accrued $6,546 interest to the note.  We
classify the note as a contra to equity.  We include results from
operations of acquired companies in our consolidated financial statements from
their respective effective acquisition dates.





See also
Note 9 for additional detail regarding how the Atlantic purchase price was
allocated to intangible assets.


F
- 13


Xedar
Corporation


Notes
to Consolidated Financial Statements










Note
5.  Acquisition of Pixxures





On
October 1, 2007 we acquired Pixxures, Inc., a Delaware corporation, in a
stock-for-stock transaction.  We acquired Pixxures in order to expand
our geospatial production and sales capabilities.  Pixxures employs a
much larger number of geospatial production personnel than we do, allowing us to
bid on larger geospatial projects that we would previously have needed to
outsource to subcontractors.  Also, Pixxures operates in a lower-cost
facility than we do, so the overhead cost applied to our bids will be
reduced.  Further, Pixxures has three sales staff specializing in
county-level and commercial customers, which complements our two sales staff who
specialize primarily in federal government sales. By the terms of the
Agreement and Plan of Merger, dated September 26, 2007, among us and Pixxures we
acquired all of the issued and outstanding capital stock of Pixxures for a
closing payment of 1,734,780 shares of our common stock having a negotiated
value of $5,115,000.  In accordance with SFAS 141 we determined the
market value of the 1,734,780 shares to be $6,129,556, based on the average
closing price of our common stock of $3.533 per share.  We
determined the price based on the price of our stock three trading days
before and after the acquisition closed.  Subject to the terms of the
agreement, additional shares would have become payable by us if the negotiated
price of our common stock, for the 60 trading days following the date upon which
the purchase payment shares were registered with the SEC, was less than the
average closing price.  However, we no longer intend to register the
shares with the SEC, since share recipients can now register on an accelerated
basis under the SEC’s Rule 144. Instead, additional shares may become payable by
us if the negotiated price of our common stock for the 60 trading days following
the Trigger Date are less than the average closing price.  The Trigger
Date is established by a majority of the Pixxures shareholders, but shall be no
later than March 23, 2009, subject to certain conditions that may delay the
Trigger Date by no more than 10 additional days. If the subsequent market price
is less than the average closing price, additional shares will be issued, such
that the total consideration received for the Pixxures capital stock in the
transaction equals $5,115,000, calculated based on the subsequent market
price.





The
former CEO of Pixxures continues as its CEO and is entitled to a bonus payable
in units of our restricted common stock based on the revenue of any entities we
acquire where he assists in negotiating and closing such acquisition during his
employment, initially at the rate of one restricted stock unit per $100 of
revenue of the entities acquired, and moving to one restricted stock unit per
$80 of revenue of the entities acquired if the combined revenue of acquired
entities exceed $15,000,000.  No amounts have been accrued related to
this bonus, as the criteria were not met at December 31, 2007.   In
connection with the acquisition of Pixxures, we issued the former CEO and
controller of Pixxures 111,921 and 18,654 shares of our restricted stock in
satisfaction of bonuses that were due to them as a result of the sale of
Pixxures.  A total of $326,438 additional purchase price was recorded
related to the issuance of stock to the former CEO and controller of
Pixxures.  The share value was based on the value discussed
above.  To allocate the $6,455,994 purchase price, we
recorded all current assets and current liabilities at book value (which we
determined approximated fair value), of approximately $1,550,000 and
$679,000, respectively.  We recorded approximately $60,000 and $18,000 of
fixed assets and a long-term lease obligation, respectively.  We
recorded approximately $44,000 related to their investment in the joint venture
at book value. We recorded intangible assets of customer contracts and
relationships in the amount of $3,610,000.  We estimated the useful
lives of these customer contracts and relationships to be 5 years.  We
allocated the rest of the purchase price, approximately $1,884,000, to
goodwill.  We include results from operations of acquired companies in
our consolidated financial statements from their respective effective
acquisition dates.


F
- 14


Xedar
Corporation


Notes
to Consolidated Financial Statements










See also
Note 9 for additional detail of how the Pixxures purchase price was allocated to
intangible assets.








Note 6.  Investment in Joint Venture: Loan
Guarantee





We
consolidated LandPixx at the time we acquired Pixxures due to our ability to
control the entity.





At
December 31, 2007, we had related party revenues of $99,523 from our joint
venture partner, related to their use of the aircraft and
equipment.







Note
7.  Discontinued Operations





Sale of
CustomerSoft





In
November 2006 the Company sold CustomerSoft, the Company’s CRM segment, which
provided software maintenance support.  The Company decided to sell
CustomerSoft in order to reduce the number of the Company’s operating segments,
thereby allowing us to concentrate the Company’s monetary and management
resources on developing the GIS and consulting segments.  This segment
was sold in a negotiated transaction in exchange for contingent consideration in
the amount of $800,000.  Because the required sale did not close by
the deadline, no consideration for the sale of our CRM segment was paid by
CustomerSoft or will become due or payable.





Sale of
Justice Information Systems Division





On March
1, 2007, the Company completed the sale of the Company’s JIS segment to Justice
Systems, Inc., for approximately $140,000 in cash, of which $75,000 was for the
underlying business assets and $65,000 was for a six-month service contract to
support the transition of the JIS segment to Justice Systems,
Inc.  The $65,000 contract is being recognized over the period
services are provided.  The JIS segment had no material current assets
or current liabilities as of December 31, 2006.  The Company sold the
JIS segment in order to concentrate the Company’s resources on developing the
GIS and consulting segments.








Note
8.  Property and Equipment





Property
and equipment include:





December
      31,2007Computer
      Equipment
              
              $
              529,940Software
              
              
              429,359Airplane
      and Equipment
              
              
              1,566,522Furniture
      and Fixtures
              
              
              63,494Office
      Equipment
              
              
              66,306Leasehold
      Improvements
              
              
              12,795Less
      accumulated depreciation
              
              
              (742,888
              )Total
              
              $
              1,925,526


F
- 15


Xedar
Corporation


Notes
to Consolidated Financial Statements










Depreciation
and amortization expense (other than amortization of intangibles) for the years
ended December 31, 2007 and 2006 was $243,735 and $292,028, respectively, and is
included in other selling and administrative expenses of the statement of
operations.








Note
9.  Intangibles





As of
December 31, 2007, we had $10,727,598 of intangible assets, net of
$1,291,429 of amortization.  We had no intangibles as of December 31,
2006.  We acquired our intangibles in connection with our purchases of
Land Links, Atlantic and Pixxures.  See Notes 3, 4 and
5.





Intangibles
include:




Estimated
            
            
            Value
      as ofUseful
      Life
            
            
            December
      31,(years)
            
            
            2007Non-compete
      agreements acquired with purchase of Land Links
            
            
            5
            
            
            $
            360,000Customer
      contracts acquired with purchase of Atlantic
            
            
            5
            
            
            
            1,434,820Non-compete
      agreements acquired with purchase of Atlantic
            
            
            5
            
            
            
            1,003,157Customer
      relationships acquired with purchase of Atlantic
            
            
            8
            
            
            
            5,610,850Trademark
      and trade name acquired with purchase of Pixxures
            
            
            15
            
            
            
            350,400Web
      hosting and related technology acquired with purchase of
      Pixxures
            
            
            1.5
            
            
            
            893,000Customer
      relationships acquired with purchase of Pixxures
            
            
            8
            
            
            
            2,366,800Less
      accumulated amortization
            
            
            
            
            
            
            (1,291,429
            )Total
            
            
            
            
            
            $
            10,727,598





We
estimate that the aggregate amortization expense in each of the five succeeding
years, from 2008 through 2012, shall be $2,175,000, $1,729,000, $1,580,000,
$1,580,000, and $1,102,000.






Note
10.  Accrued Liabilities




Accrued
      liabilities include the following approximate amounts:
            
            December
      31,2007Accrued
      commissions and severance pay
            
            $
            226,000Accrued
      professional services
            
            
            70,000Accrued
      taxes
            
            
            33,000Other
      accrued liabilities
            
            
            68,000Totals
            
            $
            397,000




F
- 16


Xedar Corporation


Notes
to Consolidated Financial Statements










Note
11.  Other Related Party Transactions




During
2006, we borrowed $82,000 from our chairman and chief executive
officer.  We paid in full all amounts borrowed by December 31,
2006.  Interest expense incurred on debt was $752 in 2006. Also see Note
14.  During 2007, we borrowed an additional $140,835.  All
amounts were paid in full by December 31, 2007, except for accrued interest at
8.25% of $6,024.





As
discussed in Note 6, we have certain revenues in 2007 from our joint venture
partner related to their use of the LandPixx aircraft.  Pixxures
provides certain services to our joint venture partner.  Consolidated
revenues for the year ended December 31, 2007 includes $112,152 of revenue with
corresponding accounts receivable of $272,125.  The accounts
receivable include amounts due prior to our acquisition of
Pixxures.








Note
12.  Convertible Notes Payable to Related Parties





We had
outstanding two notes payable, whose principal and interest totaled $383,338 as
of December 31, 2006.  The notes accrued interest at 8.5% per
annum.  The notes were secured by substantially all of Premier's
assets.  The notes were issued to Jack Baum and Sagebrook Technology
Partners in March 2002, as partial payment for their earlier investment in the
FuGEN subsidiary. The remainder of their compensation was 391,253 and
459,696 shares, respectively, of our common stock.  We paid a total of
$10,000 per month on these notes, as well as the net proceeds of any asset
sales. In December 2006, the holders of these notes converted a total of
$309,927 of interest payable and $99,163 of principal into 409,090 shares of
common stock at $1.00 per share.  This conversion rate was based on the
fair value of the stock after the recapitalization, in accordance with the
original agreement.  Immediately after the conversion, we issued a new
note payable for the remaining balance of the old note.  The holders
surrendered the old note, which we cancelled.  On October 1, 2007, the
note holders converted $279,669 of the notes (which was the entire remaining
balance) at the stated conversion rate of $1.00 per share into 279,669
shares of our common stock.  All amounts related to these convertible
notes have been repaid or converted as of December 31, 2007.








Note
13.  Lines of Credit





On June
8, 2007, we signed a loan agreement, effective June 7, 2007, with KeyBank
National Association (“KeyBank”), pursuant to which we obtained a $500,000
revolving line of credit.  On September 28, 2007, we increased the
line of credit to $1,000,000.  This line of credit had an outstanding
balance of $843,000 at December 31, 2007.  The line calls for monthly
interest payments and expires on October 10, 2008.  We had a $157,000
letter of credit outstanding on this line at December 31, 2007.  The
letter of credit guarantees our performance on certain contracts and decreases
the credit available on the line of credit.





On
December 10, 2007, we obtained a second line of credit with Keybank for
$500,000, which requires a one-time payment upon its expiration on March 10,
2008.  The second line of credit had an outstanding balance of
$478,000 at December 31, 2007.




F
- 17


Xedar
Corporation


Notes
to Consolidated Financial Statements










Both
lines of credit are collateralized by substantially all assets of Xedar
Corporation and bear interest at a variable rate equal to the prime rate of
KeyBank, which was 7.25% at December 31, 2007.  This rate represents
the weighted average interest rate on short-term debt at December 31,
2007.  The lines are subject to restrictive covenants with which we
were in compliance at December 31, 2007. As security for the lines of credit, we
executed commercial security agreements in favor of KeyBank.  Hugh H.
Williamson, III, our President and CEO, has entered into a commercial guaranty,
personally guarantying full and punctual payment of all of our obligations
arising under the lines of credit.








Note
14.  Notes Payable and Loan Guarantee





In April,
2007, prior to our acquisition of Pixxures, Pixxures and an unrelated entity
formed a joint venture, LandPixx, LLC, for the purpose of acquiring, operating,
and leasing a digital sensor and aircraft.  Each of the two parties
contributed cash of $133,743, and LandPixx became a 50% owned subsidiary of
Pixxures.  LandPixx entered into a term loan agreement with Silicon
Valley Bank for up to $1,400,000 to acquire a digital sensor.  On
September 28, 2007, we entered into an Unconditional Guaranty with Silicon
Valley of the above loan for a maximum of $1,400,000, plus interest and
expenses.  We guaranteed full payment and performance of all
obligations of LandPixx pursuant to the original loan agreement dated April 23,
2007.  This loan is due in November 2020 and bears interest at the
prime rate plus 1.5% (8.75% at December 31, 2007). The December 31, 2007,
balance of the Silicon Valley loan was $1,126,624, of which $396,049 was current
and $730,575 was long term.





On July
13, 2007, Pixxures, LandPixx and the other LandPixx owner entered into a term
loan with Biltmore Bank of Arizona for $452,355, to fund the acquisition by
LandPixx of a Cessna 402C airplane.  The three companies were all
co-borrowers.  The loan had a maturity date of July 13, 2012. 
Beginning in August 2007, the loan required monthly payments of $8,044 with one
final payment of $100,259 on July 13, 2012. This loan is due in
July 2012 and bears interest at 8.5%. The December 31, 2007, balance of the
Biltmore loan was $426,374, of which $62,540 was current and $363,834 was long
term.





The loans
were in default on all covenants at December 31, 2007.





See also,
Note 23 for subsequent events and refinancing of the LandPixx notes
payable.  No debt maturity table was provided, due to the subsequent
refinancing of this note.








Note
15.  Consulting Agreement





On
January 9, 2007, we entered into consulting arrangements with Livestrong
Venture Capital Partners, Inc., C.C.R.I. Corporation, and Capital Group
Communications for a term of twelve months, pursuant to which we issued 500,000
shares of common stock to Livestrong Venture Capital Partners, Inc., 200,000
shares of common stock to C.C.R.I. Corporation, and 500,000 shares of common
stock to Capital Group Communications as consideration for investor relations
and financial consulting services to be provided.





These
shares were valued at $0.90, the stock price at date of issuance, totaling
$1,080,000.  We recorded the $1,080,000 as consulting expense, a
component of selling and administrative expense, as of January 9, 2007, the date
of the contracts.


F
- 18





Xedar
Corporation


Notes
to Consolidated Financial Statements







Note
16.  Income Tax





Our
      income tax provision is:12/31/2007
            
            
            12/31/2006Current
      provision:Federal
            
            $
            -
            
            
            $
            -State
      and local
            
            
            17,010
            
            
            
            (16,621
            )Total
      current provision
            
            
            17,010
            
            
            
            (16,621
            )Deferred
      tax expense (benefit):Federal
            
            
            -
            
            
            
            -State
      and local
            
            
            -
            
            
            
            -Total
      deferred tax (benefit)
            
            
            -
            
            
            
            -Income
      tax (benefit)
            
            $
            17,010
            
            
            $
            (16,621
            )







The
income tax provision differs from that which would have resulted from the use of
the federal statutory income tax rate as:


12/31/2007
            
            
            12/31/2006Federal
      income tax provision at statutory rate of 34%
            
            $
            (1,478,932
            )
            
            $
            (213,089
            )State
      income tax, net of federal benefit
            
            
            (179,767
            )
            
            
            (16,621
            )Permanent
      items
            
            
            83,117
            
            
            
            5,873Change
      in valuation allowance
            
            
            1,592,592
            
            
            
            207,166$
            17,010
            
            
            $
            (16,671
            )







F
- 19


Xedar
Corporation


Notes
to Consolidated Financial Statements









The
significant items of our deferred tax assets and liabilities as of December 31,
2007, and December 31, 2006 are:




12/31/2007
            
            
            12/31/2006Deferred
      tax assets-current:Accrued
      liabilities
            
            $
            44,862
            
            
            $
            27,124Allowance
      for doubtful accounts
            
            
            3,976
            
            
            
            2,276Net
      deferred tax asset-current
            
            
            48,838
            
            
            
            29,400


Deferred
tax assets (liabilities)-non-current:


Net
      operating loss
            
            
            3,962,488
            
            
            
            944,443Amortization
      intangibles
            
            
            105,865
            
            
            
            97,498Acquisition
      intangibles
            
            
            (3,962,871
            )
            
            
            -Stock
      options and other
            
            
            (46,302
            )
            
            
            -Fixed
      Assets
            
            
            119,356
            
            
            
            (38,811
            )Net
      deferred tax asset-non-current
            
            
            178,536
            
            
            
            1,003,130Valuation
      Allowance
            
            (227,374)
            
            
            
            (1,032,530
            )Net
      deferred tax asset
            
            $
            -
            
            
            $
            -





In
connection with the acquisition of Pixxures, FuGEN and Atlantic, we recorded a
deferred tax liability of $3,962,871 as a result of non-deductible identifiable
intangibles resulting from the acquisitions.




At
December 31, 2007 andDecember 31, 2006, respectively,
approximately $10.2 million and $2.6 million of net operating loss carryforwards
for federal income tax purposes were available to offset future taxable income
through the year 2027.  The ultimate realization of these assets is
dependent upon the generation of future taxable income sufficient to offset the
related deductions and loss carryforwards within the applicable carryforward
period.  Accordingly, a valuation allowance has been established
against all deferred tax assets including the net operating loss
carryforwards.





Included
in the total net operating losses at December 31, 2007 for federal purposes is
approximately $1.1 million from a subsidiary, FUGEN, and is subject to an annual
limitation of $73,400, resulting from a change in ownership pursuant to Internal
Revenue Code Section 382 as provided in the Tax Reform Act of 1986, and
approximately $5.0 million is from a recently acquired subsidiary, Pixxures, and
is subject to an annual Section 382 limitation of $275,000, resulting from a
change in ownership.





On
January 1, 2007, we adopted the provisions of FASB Interpretation No. 48
(FIN 48), Accounting for
Uncertainty in Income Taxes – an interpretation of FAS109, which provides a
financial statement recognition threshold and measurement attribute for a tax
position taken or expected to be taken in a tax return.  Under FIN 48, we
may record the tax benefit from an uncertain tax position only if it is more
likely than not that the tax position will be sustained on examination by the
taxing authorities, based on the technical merits of the position.  The tax
benefits recognized in the financial statements from such a position should be
measured based on the largest benefit that has a greater than 50% likelihood of
being realized upon ultimate settlement.  FIN 48 also provides guidance on
derecognition of income tax assets and liabilities, classification of current
and deferred income tax assets and liabilities, accounting for interest and
penalties associated with tax positions, and income tax
disclosures.


F
- 20


Xedar
Corporation


Notes
to Consolidated Financial Statements










We
recorded the cumulative effect of adopting FIN 48 net in deferred tax
assets, which resulted in no FIN 48 liability on the balance sheet.  The
total amount of unrecognized tax benefits as of the date of adoption was zero.
There are open statutes of limitations for taxing authorities in federal and
state jurisdictions to audit our tax returns from 2001 through the current
period. Our policy is to account for income tax related interest and penalties
in income tax expense in the statement of operations. There have been no income
tax related interest or penalties assessed or recorded. Because we have provided
a full valuation allowance on all of its deferred tax assets, the adoption of
FIN 48 had no impact on our effective tax rate.








Note
17.  Commitments




Operating
Leases





We lease
facilities under non-cancelable operating leases expiring between 2008 and
2013. Rent expense for the years ended December 31, 2007 and 2006 was $423,544
and $244,967, respectively.




Future
minimum lease payments under these leases are approximately (in
thousands):


Year
      Ending December 31,
              
              OperatingLeases2008
              
              $
              638,0212009
              
              
              413,2262010
              
              
              209,9922011
              
              
              209,6942012
              
              
              213,796Thereafter
              
              
              107,924Total
      at December 31, 2007
              
              $
              1,792,653


See also
Note 6 regarding certain commitments related to our joint venture.







Note
18.  Stock Options and Warrants








During
December 2006, we exchanged 1,550,717 options and 333,360 warrants from the
option and warrant holders, respectively, for 366,048 shares of restricted
common stock.  Of the 76,000 options remaining outstanding as of
December 31, 2006, 45,500 have subsequently expired, leaving 30,500 options
outstanding, all of which are vested.  All warrants have been
exchanged. As a result of this exchange, we recognized $13,729 of compensation
expense in 2007 and $30,833 of compensation expense in 2006.





Below is
a summary of stock option and warrant activity.


F
- 21


Xedar
Corporation


Notes
to Consolidated Financial Statements






Option
      Price
              Per
      Share
            
            Weighted
      Average
              Exercise
      Price
            
            Number
      of SharesBalance,
      December 31, 2005
            $0.24
      to $0.99
            
            $0.65
            
            1,680,702Canceled
            $0.68
      to $0.99
            
            $0.85
            
            (43,985)Exchanged
            $0.24
      to $0.99
            
            $0.64
            
            (1,550,717)Exercised
            $0.24
            
            $0.24
            
            (10,000)Balance,
      December 31, 2006
            $0.24
      to $0.99
            
            $0.65
            
            76,000Canceled
            $0.99
            
            $0.99
            
            (10,500)Exercised
            $0.68
            
            $0.68
            
            (35,000)Balance,
      December 31, 2007
            $0.99
            
            $0.99
            
            30,500







Stock
      Warrants
            Warrant
      Price
              Per Share
            
            Weighted
      Average
              Exercise Price
            
            Number of SharesBalance,
      December 31, 2003 through   December 31,
    2005
            $0.49
            
            $0.49
            
            333,360Exchanged
            $0.49
            
            $0.49
            
            (333,360)Balance,
      December 31, 2006 and 2007
            
            
            
            
            ---




The
weighted average exercise prices of stock options and warrants exercisable at
each period end are:





Option
      Price
              Per Share
            
            Weighted
      Average
              Exercise Price
            
            Number
      of
              SharesDecember
      31, 2006
            $0.68
      to $0.99
            
            $0.81
            
            61,250December
      31, 2007
            $0.99
            
            $0.99
            
            30,500





Below is
additional information regarding those options outstanding at December 31,
2007:





Option
      Exercise
              Price per Share
            Weighted
      Average
              Remaining
              Contractual
      Term
            Weighted
      Average
              Exercise
      Price
            Number
      of Shares$0.99
            7.34
            $0.99
            30,500





No stock
options were granted during 2007 or 2006. As a result, pro forma compensation
expense for stock options relates to the prior years’ stock options granted, but
not yet vested, at December 31, 2005. The amount of unrecognized compensation
cost relating to options granted, but not yet vested, amounted to $13,729 as of
December 31, 2006, all of which was expended during 2007.


F
- 22





Xedar
Corporation


Notes
to Consolidated Financial Statements







Note
19.  Director Share-based Compensation Plan





By
resolution of the Board of Directors dated February 9, 2007, we have entered
into an equity compensation arrangement or plan with each of our six
non-employee directors which provides that each such non-employee director will
receive 10,000 shares of our restricted common stock, vested in thirds annually,
commencing December 2007 (i.e., 3334 shares vested on December 31, 2007, 3333
shares will vest on December 31, 2008, and 3333 shares will vest on December 31,
2009).  We issued all 60,000 shares (10,000 shares for each of six
directors) in 2007.  The shares are restricted until they
vest.





Based on
the market price of our stock on the grant date, the total share valuation
issued under this arrangement was $147,000.  We are amortizing this
amount to expense over the 36 month vesting period.  We expensed
$49,000 during 2007, leaving an unamortized balance of $98,000 as of December
31, 2007, which we carry as a contra to equity.








Note
20.  Employee Benefit Plan





We have a
401(k) plan, which covers most of the employees with over 90 days of service.
 The plan provides for full vesting after 90 days in the plan.  Our
contribution rate is 50% of employee contributions up to a limit of $1,000 per
employee per year, except for Atlantic, where there is no cap on the 50%
contributions.  We fund the plan contributions as accrued.





We
contributed approximately $120,000 and $42,000 for 2007 and 2006,
respectively.








Note
21.  Segment Information




In 2007
and 2006 we managed our business and aggregated our operational and financial
information in two and four reportable segments, respectively.  Our
consulting segment provides independent verification and validation (IV&V)
and information assurance on large projects within several federal
agencies.  Our GIS segment provides government and oil and gas
customers with a combination of land database products and production services
related to the creation or enhancement of land records.  Our customer
relationship management segment provided software maintenance support, and was
sold in November 2006.  Our justice information systems segment
created and installed court case management systems, and was folded into the
consulting segment at the end of 2006 and subsequently sold in February
2007.





Financial
information for our business segments is (in thousands):





2007
            
            
            2006Sales:Consulting
            
            
            6,676
            
            
            
            3,299Geographical
      information systems
            
            
            4,466
            
            
            
            2,43411,142
            
            
            
            5,733Less:
      Discontinued operations - CRM and JIS
            
            
            -
            
            
            
            (504
            )Total
      sales
            
            
            11,142
            
            
            
            5,229





F
- 23


Xedar
Corporation


Notes
to Consolidated Financial Statements








In 2007
our revenue from the two customers which exceeded 10% of total revenue was
$2,767,000 and $1,245,000.  In 2006 our revenue from the two customers
which exceeded 10% of total revenue was $1,528,000 and $796,000.  The
revenue from each of these large customers was in the consulting
segment.




2007
            
            
            2006Loss
      from operations:
            
            
            (000s)
            
            
            
            (000s)Consulting
            
            
            124
            
            
            
            175Geographical
      information systems
            
            
            285
            
            
            
            350Corporate
      expense
            
            
            (4,850
            )
            
            
            (262
            )Total
      loss from continuing operations
            
            
            (4,441
            )
            
            
            (263
            )Less:
      Discontinued operations - CRM and JIS
            
            
            (75
            )
            
            
            347Total
      loss
            
            
            (4,367
            )
            
            
            (610
            )Identifiable
      fixed assets:Consulting
            
            
            231
            
            
            
            157Geographical
      information systems
            
            
            2,386
            
            
            
            735Justice
      information systems (JIS)
            
            
            -
            
            
            
            77Other
            
            
            51
            
            
            
            51Less
      : accumulated depreciation
            
            
            (742
            )
            
            
            (731
            )1,926
            
            
            
            289Less:
      Discontinued operations - CRM and JIS
            
            
            -
            
            
            
            (77
            )Total
      fixed assets
            
            
            1,926
            
            
            
            212Intangibles:Consulting
            
            
            8,049
            
            
            
            -Geographical
      information systems
            
            
            3,970
            
            
            
            -Less
      : accumulated amortization
            
            
            (1,291
            )
            
            
            -Total
      intangibles
            
            
            10,728
            
            
            
            -Depreciation
      and amortization(including
      intangibles)Consulting
            
            
            37
            
            
            
            37Geographical
      information systems
            
            
            190
            
            
            
            126Other
            
            
            1,300
            
            
            
            129Total
      depreciation and amortization
            
            
            1,527
            
            
            
            292




F
- 24


Xedar
Corporation


Notes
to Consolidated Financial Statements










As
discussed in Note 7, we sold our CRM segment in November
2006.   For 2006, CRM revenue was approximately $182,000, loss
from operations was approximately $87,000 and identifiable fixed assets were
zero.








Note
22.  Pro Forma Financial Information





Below are
the consolidated Xedar results of operations as though the business combinations
had been completed as of the beginning of each year.




2007
            
            
            
            2006Sales
            
            $
            16,591,464
            
            
            $
            16,935,338Net
      income (loss) from continuing operations
            
            $
            (5,192,918
            )
            
            $
            (1,648,931
            )Income
      (loss) from continuing operations per share
            
            $
            (0.20
            )
            
            $
            (0.08
            )








Note
23.  Other Subsequent Events





Restricted
Stock Unit Grants





We issued
restricted stock unit awards to a group of employees and contractors on January
2, 2008.  A restricted stock unit award is a grant valued in terms of
our common stock, but stock is not issued at the time of the
grant.  After the vesting period has been satisfied, we distribute
shares to the recipient.





We
measure the employee grants at the fair value of the unit on the grant date,
when the stock price was $2.17, and recognize this expense ratably over the
requisite service periods, which are the vesting periods.  Due to the
short vesting periods, we assumed a zero forfeiture rate.  If there
are forfeitures, we will adjust the expense recognition downward as those
forfeitures occur.





Because
the contractor grants have cliff vesting provisions, we will finalize
recognition of the fair value of the stock issued as of the vesting
date.  We will also conduct a provisional calculation at the end of
each quarter preceding the final calculation, and adjust based on the stock fair
value on those dates (Emerging Issues Task Force Issue No. 96-18, Accounting for Equity Instruments
That Are Issued to Other Than Employees for Acquiring, on in Conjunction with Selling, Goods or
Services.





We issued
units for 97,000 shares to thirteen employees, vesting between July 1, 2008 and
March 1, 2009.  We issued units for 21,000 shares to eight
contractors, vesting on July 1, 2008.





We will
record $210,490 compensation expense (and offset to Additional Paid-in Capital)
for the employee awards ratably over the employee requisite service
periods.  We will make an initial charge to expense for the
contractor-related grants using the fair value on March 31, 2008,
and  re-price the grants on June 30, 2008, and will finalize the
contractor compensation expense as of the July 1, 2008 vesting
date.




F
- 25


Xedar
Corporation


Notes
to Consolidated Financial Statements










Related
Party Loan





On March
3, 2008, we borrowed $1,000,000 from our President and CEO, Hugh H. Williamson,
III.  We used $478,000 of the loan to pay down our line of credit
with KeyBank National Association.  We are using the remainder of the
loan for working capital. The loan bears interest at a variable rate, which is
equal to the prime rate charged by KeyBank, which rate was 6.0% as of the
loan closing date.  The loan is secured by substantially all of our assets,
although the security interest is subordinate to the KeyBank line of
credit. The loan is to be repaid on the earlier of the receipt of $10 million in
new funding, or December 31, 2008.  The audit committee of our board
of directors, whose members are independent, reviewed the terms of the proposed
loan prior to its consummation and determined that it is fair to Xedar, and
as such does not constitute a conflict of interest.





Land
Pixx Notes Payable





On March
3, 2008, LandPixx borrowed $1,352,612 from Bank of the West, Evergreen, CO
(BOW), which LandPixx used to pay off most of their outstanding
loans.  The BOW loan bears 6.19% interest, has 60 monthly payments of
$15,434 beginning March 2008, followed by a balloon payment of $794,714 and is
secured by the aircraft and related sensor equipment owned by
LandPixx.  Mr. Hugh H. Williamson, III, our CEO, is a co-borrower on
the loan, and we have guaranteed prompt payment and performance of the
obligations arising under the loan.





Also on
March 3, 2008, LandPixx borrowed $183,777 from BOW, which it used to pay
off the remainder of the loans.  The BOW loan bears 5.385% interest, has 59
monthly payments of $2,655, and a final payment of $62,900 that is due and
payable on February 25, 2013.  The loan is secured by a $185,000 deposit
account at BOW.  Mr. Hugh H. Williamson III, our President and CEO,
owns the deposit account.  He is also a co-borrower on the
loan.




F
- 26


Item
8.  Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure





None.








Item
8A (T).  Controls and Procedures





As
supervised by our board of directors and our principal executive and principal
financial officers, management has established a system of disclosure controls
and procedures and has evaluated the effectiveness of that
system.  The system and its evaluation are reported on in the below
Management's Annual Report on Internal Control over Financial
Reporting.  Our principal executive and principal financial officers
have concluded that our disclosure controls and procedures (as defined in the
1934 Securities Exchange Act Rule 13a-15(e)) as of December 31, 2007, are
effective, based on the evaluation of these controls and procedures required by
paragraph (b) of Rule 13a-15.





Management's
Annual Report on Internal Control over Financial Reporting





Management
is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Rule 13a-15(f) of the Securities
Exchange Act of 1934 (the "Exchange Act").  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 U.S. generally
accepted accounting principles.





Management
assessed the effectiveness of internal control over financial reporting as of
December 31, 2007, our first year as a public company. We carried out this
assessment using the criteria of the Committee of Sponsoring Organizations of
the Treadway Commission (COSO) in Internal Control—Integrated
Framework.  The scope of our assessment did not include the on-site
operations of subsidiaries acquired during 2007, for the following
reasons:





·
            Entity
      level control testing was applied to the entire company, including 2007
      acquisitions, and was deemed
effective;


·
            Due
      diligence was performed on acquired companies’ financial information,
      and key accounting functions were integrated soon after
      acquisition;


·
            Accounting
      and financial reporting functions, and related information technology (IT)
      operations, are centralized and were included in the scope of our
      testing;


·
            Internal
      controls over the authorization and recorded valuation of acquisitions
      were tested and deemed effective.





This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial
reporting.  Management's report was not subject to attestation by our
registered public accounting firm, pursuant to temporary rules of the Securities
and Exchange Commission that permit us to provide only management's report in
this annual report.





Changes
in Internal Control over Financial Reporting during the Quarter Ended December
31, 2007





During
the quarter ended December 31, 2007, we designed and implemented remediation
steps over a significant deficiency reported in our Form 10-QSB dated
September 30, 2007, relating to restatement of the first and second quarter
Forms 10-QSB.  These remediation steps were developed following
investigation and review of the processes and activities surrounding the
significant deficiency and include changes to these processes to prevent or
detect similar future occurrences. Such changes included:


-
30 -





·
            Preparation
      by the chief financial officer (CFO) of detailed support for accounting
      positions and related disclosure for significant transactions, related
      party transactions, key accounting estimates and judgments and complex
      accounting areas;


·
            Review
      of such materials, prior to the issuance of the financial statements, by
      the chief executive officer (CEO), legal counsel and an independent
      consultant with knowledge of SEC financial and accounting regulations and
      the company’s business; and


·
            Documented
      use of an SEC disclosure checklist for each financial
    report.





As of
December 31, 2007, we have concluded that the controls related to the events
that led to the restatement were operating effectively and that we have
remediated this significant deficiency.





Based on
this assessment, management, including the CEO and CFO, determined that as of
December 31, 2007, our internal control over financial reporting is
effective.








Item
8B.  Other Information.





None.








Part
III





Item
9.  Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act





Information
concerning this item is incorporated by reference to our 2008 definitive proxy
statement which we shall file with the Commission not later than 120 days after
the end of the fiscal year covered by this report.








Item
10.  Executive Compensation





Information concerning this item is incorporated by reference to
our 2008 definitive proxy statement which we shall file with the Commission not
later than 120 days after the end of the fiscal year covered by this
report.








Item
11.  Security Ownership of Certain Beneficial Owners and
Management





Information
concerning this item is incorporated by reference to our 2008 definitive proxy
statement which we shall file with the Commission not later than 120 days after
the end of the fiscal year covered by this report.








Item
12. Certain Relationships and Related Transactions, and Director
Independence.





Information
concerning this item is incorporated by reference to our 2008 definitive proxy
statement which we shall file with the Commission not later than 120 days after
the end of the fiscal year covered by this report.




-
31 -


Item
13.  Exhibits





Number             Description




2.1
            Agreement
      and Plan of Merger, effective December 31, 2006, between Xedar
      Corporation, a Colorado corporation, PDS Acquisition Corp., a Colorado
      corporation, and Premier Data Services, Inc., a Delaware corporation
      (incorporated by reference to Exhibit 2.1 of our Current Report on Form
      8-K filed January 5, 2007)





3.1
            Articles
      of Incorporation of Xedar Corporation, dated May 6, 1974 (incorporated by
      reference to Exhibit 3.1 of our Current Report on Form 8-K filed January
      5, 2007)





3.2
            Articles
      of Amendment of Xedar Corporation, dated November 26, 1974 (incorporated
      by reference to Exhibit 3.2 of our Current Report on Form 8-K filed
      January 5, 2007)





3.3
            Articles
      of Amendment of Xedar Corporation, dated July 23, 1979 (incorporated by
      reference to Exhibit 3.3. of our Current Report on Form 8-K filed January
      5, 2007)





3.4
            Articles
      of Amendment of Xedar Corporation, dated September 29, 2004 (incorporated
      by reference to Exhibit 3.4 of our Current Report on Form 8-K filed
      January 5, 2007)





3.5
            Articles
      of Amendment of Xedar Corporation, dated December 12, 2005 (incorporated
      by reference to Exhibit 3.5 of our Current Report on Form 8-K filed
      January 5, 2007)





3.6
            Articles
      of Amendment of Xedar Corporation, dated December 18, 2006 (incorporated
      by reference to Exhibit 3.6 of our Current Report on Form 8-K filed
      January 5, 2007)





3.7
            Certificate
      of Correction Filed March 2, 2007 (incorporated by reference to Exhibit
      3.7 of our Quarterly Report on Form 10-QSB filed May 15,
    2007)





3.8
            Amended
      and Restated Bylaws of Xedar Corporation, dated February 7,
      2008 (incorporated by reference to Exhibit 3.1 of our Current Report
      on Form 8-K filed February 8, 2008)





10.1
            Interest
      Purchase Agreement, dated January 1, 2007, between David M. King, Glen W.
      Thurow, and PDS GIS/LIS, Inc. (incorporated by reference to Exhibit
      10.1 of our Current Report on Form 8-K filed January 5,
    2007)





10.2
            Stock
      Purchase Agreement, dated December 29, 2006, between Underwood Family
      Partners, Ltd., Battersea Capital, Inc., Kanouff LLC, and Xedar
      Corporation (incorporated by reference to Exhibit 10.2 of our Current
      Report on Form 8-K filed January 5,
2007)





10.3
            Purchase
      Agreement, dated February 20, 2007, between Premier Data Services, Inc., a
      Delaware corporation, and Justice Systems, Inc., a New Mexico corporation
      (incorporated by reference to Exhibit 10.1 of our Current Report on Form
      8-K filed February 26, 2007)





10.4
            Consulting
      Services Agreement, dated February 20, 2007, between Premier Data
      Services, Inc., a Delaware corporation, and Justice Systems, Inc., a New
      Mexico corporation (incorporated by reference to Exhibit 10.1 of our
      Current Report on Form 8-K filed February 26,
  2007)





10.5
            Stock
      Purchase Agreement, dated March 22, 2007, between Xedar Corporation, a
      Colorado corporation, Atlantic Systems Corporation, a Virginia
      Corporation, Don W. Rakestraw, Jeffrey R. Grime and J. O. McFalls III
      (incorporated by reference to Exhibit 10.1 of our Current Report on Form
      8-K filed July 27, 2007)


-
32 -




10.6
            First
      Amendment to Stock Purchase Agreement dated July 26, 2007 between Xedar
      Corporation, a Colorado corporation, Atlantic Systems Corporation, a
      Virginia Corporation, Don W. Rakestraw, Jeffrey R. Grime and J.O. McFalls
      III (incorporated by reference to Exhibit 10.2 of our Current Report on
      Form 8-K filed July 27, 2007)





10.7
            Debt
      Restructuring Agreement, dated December 29, 2006, between Premier Data
      Services, Inc., Jack Baum, and Sagebrook Technology Partners,
      L.P. (incorporated by reference to Exhibit 10.6 of our Registration
      Statement on Form SB-2 filed August 24,
2007)





10.8
            Consulting
      Agreement, dated January 5, 2007, between Xedar Corporation and C.C.R.I.
      Corporation. (incorporated by reference to Exhibit 10.7 of our
      Registration Statement on Form SB-2 filed August 24,
  2007)





10.9
            Consulting
      Agreement, dated January 9, 2007, between Xedar Corporation and Capital
      Group Communications, Inc.  (incorporated by reference to
      Exhibit 10.8 of our Registration Statement on Form SB-2 filed August 24,
      2007)





10.10
            Financial
      Consulting Services Agreement, dated January 9, 2007, between Xedar
      Corporation and Livestrong Venture Capital Partners, Inc. (incorporated by
      reference to Exhibit 10.9 of our Registration Statement on Form SB-2 filed
      August 24, 2007)





10.11
            Offer
      Letter, dated March 20, 2007, between Xedar Corporation and Don W.
      Rakestraw. (incorporated by reference to Exhibit 10.10 of our
      Registration Statement on Form SB-2 filed August 24,
  2007)





10.12
            Offer
      Letter, dated March 15, 2007, between Xedar Corporation and Jeffrey R.
      Grime.(incorporated by reference to Exhibit 10.11 of our Registration
      Statement on Form SB-2 filed August 24,
2007)





10.13
            Offer
      Letter, dated March 22, 2007, between Xedar Corporation and J.O. McFalls.
       (incorporated by reference to Exhibit 10.12 of our Registration
      Statement on Form SB-2 filed August 24,
2007)





10.14
            Subcontractor
      Agreement, dated January 19, 2007, between BearingPoint, LLC and FuGEN,
      Inc.  (incorporated by reference to Exhibit 10.13 of our
      Registration Statement on Form SB-2 filed August 24,
  2007)





10.15
            Statement
      of Work between IBM and FuGEN, Inc., dated October 28, 2005 (incorporated
      by reference to Exhibit 10.14 of our Registration Statement on Form SB-2
      filed August 24, 2007)





10.16
            Merger
      Agreement, between Premier Data Services, Inc., Premier Data Services,
      Acquisition, Inc., FuGEN, Inc., and the Stockholders of FuGEN, Inc.
      (incorporated by reference to Exhibit 10.16 of our Registration Statement
      on Form SB-2/A-1 filed November 13,
2007)





10.17
            Business
      Loan Agreement, dated June 7, 2007, between Xedar Corporation and KeyBank
      National Association (incorporated by reference to Exhibit 10.1 of our
      Current Report on Form 8-K filed June 12,
2007)


-
33 -




10.18
            Promissory
      Note, dated June 7, 2007, between Xedar Corporation and KeyBank National
      Association (incorporated by reference to Exhibit 10.2 of our Current
      Report on Form 8-K filed June 12,
2007)





10.19
            Commercial
      Security Agreement, dated June 7, 2007, between Xedar Corporation and
      KeyBank National Association (incorporated by reference to Exhibit 10.3 of
      our Current Report on Form 8-K filed June 12,
  2007)





10.20
            Commercial
      Guaranty, between Hugh H. Williamson, III and KeyBank National
      Association, for the benefit of Xedar Corporation (incorporated by
      reference to Exhibit 10.4 of our Current Report on Form 8-K filed June 12,
      2007)





10.21
            Xedar
      Corporation Calendar 2007 Management Incentive Plan (incorporated by
      reference to Exhibit 10.1 of our Current Report on Form 8-K filed July 31,
      2007)





10.22
            Asset
      Purchase Agreement, dated November 1, 2006, between Premier Data Services,
      Inc., and CustomerSoft, LLC (incorporated by reference to Exhibit 10.22 of
      our Registration Statement on Form SB-2/A-1 filed November 13,
      2007)





10.23
            Agreement
      and Plan of Merger, dated September 26, 2007, between Xedar Corporation,
      Pixx Acquisition Corp., and Pixxures, Inc. (incorporated by reference to
      Exhibit 10.1 of our Current Report on Form 8-K filed October 2,
      2007)





10.24
            Irrevocable Letter
      of Credit, by and among KeyBank National Association, on behalf of Xedar,
      and The Biltmore Bank of Arizona, dated September 27, 2007
      (incorporated by reference to Exhibit 10.1 of our Current Report on Form
      8-K filed October 3, 2007)





10.25
            Unconditional
      Guaranty, by and among Xedar and Silicon Valley Bank, dated September 28,
      2007 (incorporated by reference to Exhibit 10.2 of our Current Report on
      Form 8-K filed October 3, 2007)





10.26
            Xedar
      Corporation 2007 Equity Incentive Plan, adopted by the Board of Directors
      October 23, 2007, (incorporated by reference to Exhibit 5.1 of our
      Registration Statement on Form SB-2 filed December 19,
    2007)





10.27
            Promissory
      Note, dated December 10, 2007, between Xedar Corporation and KeyBank
      National Association (incorporated by reference to Exhibit 10.1 of
      our Current Report on Form 8-K filed December 18,
  2007)





10.28
            Commercial
      Security Agreement, dated December 10, 2007, between Xedar Corporation and
      KeyBank National Association (incorporated by reference to Exhibit
      10.2 of our Current Report on Form 8-K filed December 18,
      2007)


10.29
            Commercial
      Guaranty, between Hugh H. Williamson, III and KeyBank National
      Association, for the benefit of Xedar Corporation (incorporated by
      reference to Exhibit 10.3 of our Current Report on Form 8-K filed December
      18, 2007)





10.30
            Commercial
      Guaranty, between Humanade, L.L.C and KeyBank National Association, for
      the benefit of Xedar Corporation (incorporated by reference to
      Exhibit 10.4 of our Current Report on Form 8-K filed December 18,
      2007)


-
34 -




10.31
            Commercial
      Guaranty, between Nancy T. Williamson 1989 Revocable Trust and KeyBank
      National Association, for the benefit of Xedar
      Corporation (incorporated by reference to Exhibit 10.5 of our Current
      Report on Form 8-K filed December 18,
2007)





10.32
            Business
      Loan Agreement, dated September 28, 2007, between Xedar Corporation and
      KeyBank National Association (incorporated by reference to Exhibit 10.1 of
      our Current Report on Form 8-K filed January 23,
  2008)





10.33
            Promissory
      Note, dated September 28, 2007, between Xedar Corporation and KeyBank
      National Association (incorporated by reference to Exhibit 10.2 of our
      Current Report on Form 8-K filed January 23,
  2008)





10.34
            Commercial
      Security Agreement, dated September 28, 2007, between Xedar Corporation
      and KeyBank National Association (incorporated by reference to Exhibit
      10.3 of our Current Report on Form 8-K filed January 23,
    2008)





10.35
            Commercial
      Guaranty, between Hugh H. Williamson, III and KeyBank National
      Association, for the benefit of Xedar Corporation (incorporated by
      reference to Exhibit 10.4 of our Current Report on Form 8-K filed January
      23, 2008)





10.36
            Commercial
      Guaranty, between Humanade, L.L.C. and KeyBank National Association, for
      the benefit of Xedar Corporation (incorporated by reference to Exhibit
      10.5 of our Current Report on Form 8-K filed January 23,
    2008)





10.37
            Commercial
      Guaranty, between Nancy T. Williamson 1989 Revocable Trust and KeyBank
      National Association, for the benefit of Xedar Corporation (incorporated
      by reference to Exhibit 10.6 of our Current Report on Form 8-K filed
      January 23, 2008)





10.38
            Office
      Lease, dated February 21, 2008, by and between Xedar Corporation and
      HTD-Ptarmigan Place, LLC (incorporated by reference to exhibit 10.1 of our
      Current Report on Form 8-K filed February 22,
  2008)





10.39
            Business
      Loan Agreement, dated March 3, 2008, by and among LandPixx, LLC, Hugh H.
      Williamson, III, and Bank of the West (incorporated by reference to
      exhibit 10.1 of our Current Report on Form 8-K filed March 5,
      2008)





10.40
            Promissory
      Note, $1,352,612.00 principal amount, dated March 3, 2008, by and among
      LandPixx, LLC, Hugh H. Williamson, III, and Bank of the
      West (incorporated by reference to exhibit 10.2 of our Current Report
      on Form 8-K filed March 5, 2008)





10.41
            Promissory
      Note, $185,000.00 principal amount, dated March 3, 2008, by and among
      LandPixx, LLC, Hugh H. Williamson, III, and Bank of the
      West (incorporated by reference to exhibit 10.3 of our Current Report
      on Form 8-K filed March 5, 2008).





10.42
            Aircraft
      Security Agreement, dated March 3, 2008, by and between and among
      LandPixx, LLC, Hugh H. Williamson, III, and Bank of
      the West (incorporated by reference to exhibit 10.4 of our
      Current Report on Form 8-K filed March 5,
2008)


-
35 -





10.43
            Commercial
      Guaranty, by and among, Xedar Corporation, LandPixx, LLC, Hugh H.
      Williamson, III, and Bank of the West (incorporated by reference to
      exhibit 10.5 of our Current Report on Form 8-K filed March 5,
      2008)





10.44
            Commercial
      Guaranty, by and among, Landiscor, Inc., LandPixx, LLC, Hugh H.
      Williamson, III, and Bank of the West (incorporated by reference to
      exhibit 10.6 of our Current Report on Form 8-K filed March 5,
      2008)





10.45
            Commercial
      Guaranty, by and among, Pixxures, Inc., LandPixx, LLC, Hugh H. Williamson,
      III, and Bank of the West (incorporated by reference to exhibit 10.7
      of our Current Report on Form 8-K filed March 5,
  2008)





10.46
            Secured
      Subordinated Promissory Note, $1,000,000.00 principal amount, dated March
      3, 2008, by and between Hugh H. Williamson, III, and Xedar
      Corporation (incorporated by reference to exhibit 10.8 of our Current
      Report on Form 8-K filed March 5,
2008)





10.47
            Pledge
      and Security Agreement, dated March 3, 2008, by and between Xedar
      Corporation and Hugh H. Williamson, III (incorporated by reference to
      exhibit 10.9 of our Current Report on Form 8-K filed March 5,
      2008)





10.48
            Waiver
      – KeyBank National Association for the benefit of Xedar Corporation
      (incorporated by reference to exhibit 10.10 of our Current Report on Form
      8-K filed March 5, 2008)





10.49
            Assignment
      of Deposit Account, between Hugh H. Williamson, III, and Bank of the
      West (incorporated by reference to exhibit 10.11 of our Current
      Report on Form 8-K filed March 5,
2008)





14.1
            Code
      of Ethics (incorporated by reference to Exhibit 14.1 of our Annual Report
      on Form 10-KSB for the Year Ended December 31, 2006, filed March 16,
      2007)





21.1
            Subsidiaries
      (incorporated by reference to Exhibit 21.1 of our Registration Statement
      on Form SB-2/A-1 filed November 13,
2007)





31.1*
            Certification
      of President and Chief Executive Officer required by Rule
      13a-14(a)





31.2*
            Certification
      of Chief Financial Officer required by Rule
  13a-14(a)





32.1*
            Certification
      of President and Chief Executive Officer required by Section 906 of the
      Sarbanes-Oxley Act of 2002





32.2*
            Certification
      of Chief Financial Officer required by Section 906 of the
      Sarbanes-Oxley Act of 2002





*Filed
with this report.






Item
14. Principal Accountant Fees and Services




Information
concerning this item is incorporated by reference to our 2008 definitive proxy
statement which we shall file with the Commission not later than 120 days after
the end of the fiscal year covered by this report.


-
36 -




Signatures




In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.






Xedar
      CorporationDate: 
      March 27, 2008
            By:
            /s/ Hugh
      H. Williamson, IIIHugh
      H. Williamson, III
              President
      and Chief Executive Officer







In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.





Signature
            
            Title
            
            Date/s/  Hugh
      H. Williamson III
              Hugh
      H. Williamson, III
            
            President,
      Chief Executive Officer and Director (Chair)
            
            March
      27, 2008/s/  Steven
      M. Bragg
              Steven
      M. Bragg
            
            Chief
      Financial Officer, Treasurer and Secretary
            
            March
      27, 2008/s/ Samuel
      J. Camarata, Jr.
              Samuel
      J. Camarata, Jr.
            
            Director
            
            March
      27, 2008/s/  Jack
      H. Jacobs
              Jack
      H. Jacobs
            
            Director
            
            March
      27, 2008/s/
      Trusten A. McArtor
              Trusten
      A. McArtor
            
            Director
            
            March
      27, 2008/s/  John
      P. Moreno
              John
      P. Moreno
            
            Director
            
            March
      27, 2008/s/  Craig
      A. Parker
              Craig
      A. Parker
            
            Director
            
            March
      27, 2008/s/  Roger
      J. Steinbecker
              Roger
      J. Steinbecker
            
            Director
            
            March
      27, 2008


-
37 -





Exhibit
Index





Number             Description




2.1
            Agreement
      and Plan of Merger, effective December 31, 2006, between Xedar
      Corporation, a Colorado corporation, PDS Acquisition Corp., a Colorado
      corporation, and Premier Data Services, Inc., a Delaware corporation
      (incorporated by reference to Exhibit 2.1 of our Current Report on Form
      8-K filed January 5, 2007)





3.1
            Articles
      of Incorporation of Xedar Corporation, dated May 6, 1974 (incorporated by
      reference to Exhibit 3.1 of our Current Report on Form 8-K filed January
      5, 2007)





3.2
            Articles
      of Amendment of Xedar Corporation, dated November 26, 1974 (incorporated
      by reference to Exhibit 3.2 of our Current Report on Form 8-K filed
      January 5, 2007)





3.3
            Articles
      of Amendment of Xedar Corporation, dated July 23, 1979 (incorporated by
      reference to Exhibit 3.3. of our Current Report on Form 8-K filed January
      5, 2007)





3.4
            Articles
      of Amendment of Xedar Corporation, dated September 29, 2004 (incorporated
      by reference to Exhibit 3.4 of our Current Report on Form 8-K filed
      January 5, 2007)





3.5
            Articles
      of Amendment of Xedar Corporation, dated December 12, 2005 (incorporated
      by reference to Exhibit 3.5 of our Current Report on Form 8-K filed
      January 5, 2007)





3.6
            Articles
      of Amendment of Xedar Corporation, dated December 18, 2006 (incorporated
      by reference to Exhibit 3.6 of our Current Report on Form 8-K filed
      January 5, 2007)





3.7
            Certificate
      of Correction Filed March 2, 2007 (incorporated by reference to Exhibit
      3.7 of our Quarterly Report on Form 10-QSB filed May 15,
    2007)





3.8
            Amended
      and Restated Bylaws of Xedar Corporation, dated February 7,
      2008 (incorporated by reference to Exhibit 3.1 of our Current Report
      on Form 8-K filed February 8, 2008)





10.1
            Interest
      Purchase Agreement, dated January 1, 2007, between David M. King, Glen W.
      Thurow, and PDS GIS/LIS, Inc. (incorporated by reference to Exhibit
      10.1 of our Current Report on Form 8-K filed January 5,
    2007)





10.2
            Stock
      Purchase Agreement, dated December 29, 2006, between Underwood Family
      Partners, Ltd., Battersea Capital, Inc., Kanouff LLC, and Xedar
      Corporation (incorporated by reference to Exhibit 10.2 of our Current
      Report on Form 8-K filed January 5,
2007)





10.3
            Purchase
      Agreement, dated February 20, 2007, between Premier Data Services, Inc., a
      Delaware corporation, and Justice Systems, Inc., a New Mexico corporation
      (incorporated by reference to Exhibit 10.1 of our Current Report on Form
      8-K filed February 26, 2007)





10.4
            Consulting
      Services Agreement, dated February 20, 2007, between Premier Data
      Services, Inc., a Delaware corporation, and Justice Systems, Inc., a New
      Mexico corporation (incorporated by reference to Exhibit 10.1 of our
      Current Report on Form 8-K filed February 26,
  2007)





10.5
            Stock
      Purchase Agreement, dated March 22, 2007, between Xedar Corporation, a
      Colorado corporation, Atlantic Systems Corporation, a Virginia
      Corporation, Don W. Rakestraw, Jeffrey R. Grime and J. O. McFalls III
      (incorporated by reference to Exhibit 10.1 of our Current Report on Form
      8-K filed July 27, 2007)


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10.6
            First
      Amendment to Stock Purchase Agreement dated July 26, 2007 between Xedar
      Corporation, a Colorado corporation, Atlantic Systems Corporation, a
      Virginia Corporation, Don W. Rakestraw, Jeffrey R. Grime and J.O. McFalls
      III (incorporated by reference to Exhibit 10.2 of our Current Report on
      Form 8-K filed July 27, 2007)





10.7
            Debt
      Restructuring Agreement, dated December 29, 2006, between Premier Data
      Services, Inc., Jack Baum, and Sagebrook Technology Partners,
      L.P. (incorporated by reference to Exhibit 10.6 of our Registration
      Statement on Form SB-2 filed August 24,
2007)





10.8
            Consulting
      Agreement, dated January 5, 2007, between Xedar Corporation and C.C.R.I.
      Corporation. (incorporated by reference to Exhibit 10.7 of our
      Registration Statement on Form SB-2 filed August 24,
  2007)





10.9
            Consulting
      Agreement, dated January 9, 2007, between Xedar Corporation and Capital
      Group Communications, Inc.  (incorporated by reference to
      Exhibit 10.8 of our Registration Statement on Form SB-2 filed August 24,
      2007)





10.10
            Financial
      Consulting Services Agreement, dated January 9, 2007, between Xedar
      Corporation and Livestrong Venture Capital Partners, Inc. (incorporated by
      reference to Exhibit 10.9 of our Registration Statement on Form SB-2 filed
      August 24, 2007)





10.11
            Offer
      Letter, dated March 20, 2007, between Xedar Corporation and Don W.
      Rakestraw. (incorporated by reference to Exhibit 10.10 of our
      Registration Statement on Form SB-2 filed August 24,
  2007)





10.12
            Offer
      Letter, dated March 15, 2007, between Xedar Corporation and Jeffrey R.
      Grime.(incorporated by reference to Exhibit 10.11 of our Registration
      Statement on Form SB-2 filed August 24,
2007)





10.13
            Offer
      Letter, dated March 22, 2007, between Xedar Corporation and J.O. McFalls.
       (incorporated by reference to Exhibit 10.12 of our Registration
      Statement on Form SB-2 filed August 24,
2007)





10.14
            Subcontractor
      Agreement, dated January 19, 2007, between BearingPoint, LLC and FuGEN,
      Inc.  (incorporated by reference to Exhibit 10.13 of our
      Registration Statement on Form SB-2 filed August 24,
  2007)





10.15
            Statement
      of Work between IBM and FuGEN, Inc., dated October 28, 2005 (incorporated
      by reference to Exhibit 10.14 of our Registration Statement on Form SB-2
      filed August 24, 2007)





10.16
            Merger
      Agreement, between Premier Data Services, Inc., Premier Data Services,
      Acquisition, Inc., FuGEN, Inc., and the Stockholders of FuGEN, Inc.
      (incorporated by reference to Exhibit 10.16 of our Registration Statement
      on Form SB-2/A-1 filed November 13,
2007)





10.17
            Business
      Loan Agreement, dated June 7, 2007, between Xedar Corporation and KeyBank
      National Association (incorporated by reference to Exhibit 10.1 of our
      Current Report on Form 8-K filed June 12,
2007)


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10.18
            Promissory
      Note, dated June 7, 2007, between Xedar Corporation and KeyBank National
      Association (incorporated by reference to Exhibit 10.2 of our Current
      Report on Form 8-K filed June 12,
2007)





10.19
            Commercial
      Security Agreement, dated June 7, 2007, between Xedar Corporation and
      KeyBank National Association (incorporated by reference to Exhibit 10.3 of
      our Current Report on Form 8-K filed June 12,
  2007)





10.20
            Commercial
      Guaranty, between Hugh H. Williamson, III and KeyBank National
      Association, for the benefit of Xedar Corporation (incorporated by
      reference to Exhibit 10.4 of our Current Report on Form 8-K filed June 12,
      2007)





10.21
            Xedar
      Corporation Calendar 2007 Management Incentive Plan (incorporated by
      reference to Exhibit 10.1 of our Current Report on Form 8-K filed July 31,
      2007)





10.22
            Asset
      Purchase Agreement, dated November 1, 2006, between Premier Data Services,
      Inc., and CustomerSoft, LLC (incorporated by reference to Exhibit 10.22 of
      our Registration Statement on Form SB-2/A-1 filed November 13,
      2007)





10.23
            Agreement
      and Plan of Merger, dated September 26, 2007, between Xedar Corporation,
      Pixx Acquisition Corp., and Pixxures, Inc. (incorporated by reference to
      Exhibit 10.1 of our Current Report on Form 8-K filed October 2,
      2007)





10.24
            Irrevocable Letter
      of Credit, by and among KeyBank National Association, on behalf of Xedar,
      and The Biltmore Bank of Arizona, dated September 27, 2007
      (incorporated by reference to Exhibit 10.1 of our Current Report on Form
      8-K filed October 3, 2007)





10.25
            Unconditional
      Guaranty, by and among Xedar and Silicon Valley Bank, dated September 28,
      2007 (incorporated by reference to Exhibit 10.2 of our Current Report on
      Form 8-K filed October 3, 2007)





10.26
            Xedar
      Corporation 2007 Equity Incentive Plan, adopted by the Board of Directors
      October 23, 2007, (incorporated by reference to Exhibit 5.1 of our
      Registration Statement on Form SB-2 filed December 19,
    2007)





10.27
            Promissory
      Note, dated December 10, 2007, between Xedar Corporation and KeyBank
      National Association (incorporated by reference to Exhibit 10.1 of
      our Current Report on Form 8-K filed December 18,
  2007)





10.28
            Commercial
      Security Agreement, dated December 10, 2007, between Xedar Corporation and
      KeyBank National Association (incorporated by reference to Exhibit
      10.2 of our Current Report on Form 8-K filed December 18,
      2007)


10.29
            Commercial
      Guaranty, between Hugh H. Williamson, III and KeyBank National
      Association, for the benefit of Xedar Corporation (incorporated by
      reference to Exhibit 10.3 of our Current Report on Form 8-K filed December
      18, 2007)





10.30
            Commercial
      Guaranty, between Humanade, L.L.C and KeyBank National Association, for
      the benefit of Xedar Corporation (incorporated by reference to
      Exhibit 10.4 of our Current Report on Form 8-K filed December 18,
      2007)


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40 -




10.31
            Commercial
      Guaranty, between Nancy T. Williamson 1989 Revocable Trust and KeyBank
      National Association, for the benefit of Xedar
      Corporation (incorporated by reference to Exhibit 10.5 of our Current
      Report on Form 8-K filed December 18,
2007)





10.32
            Business
      Loan Agreement, dated September 28, 2007, between Xedar Corporation and
      KeyBank National Association (incorporated by reference to Exhibit 10.1 of
      our Current Report on Form 8-K filed January 23,
  2008)





10.33
            Promissory
      Note, dated September 28, 2007, between Xedar Corporation and KeyBank
      National Association (incorporated by reference to Exhibit 10.2 of our
      Current Report on Form 8-K filed January 23,
  2008)





10.34
            Commercial
      Security Agreement, dated September 28, 2007, between Xedar Corporation
      and KeyBank National Association (incorporated by reference to Exhibit
      10.3 of our Current Report on Form 8-K filed January 23,
    2008)





10.35
            Commercial
      Guaranty, between Hugh H. Williamson, III and KeyBank National
      Association, for the benefit of Xedar Corporation (incorporated by
      reference to Exhibit 10.4 of our Current Report on Form 8-K filed January
      23, 2008)





10.36
            Commercial
      Guaranty, between Humanade, L.L.C. and KeyBank National Association, for
      the benefit of Xedar Corporation (incorporated by reference to Exhibit
      10.5 of our Current Report on Form 8-K filed January 23,
    2008)





10.37
            Commercial
      Guaranty, between Nancy T. Williamson 1989 Revocable Trust and KeyBank
      National Association, for the benefit of Xedar Corporation (incorporated
      by reference to Exhibit 10.6 of our Current Report on Form 8-K filed
      January 23, 2008)





10.38
            Office
      Lease, dated February 21, 2008, by and between Xedar Corporation and
      HTD-Ptarmigan Place, LLC (incorporated by reference to exhibit 10.1 of our
      Current Report on Form 8-K filed February 22,
  2008)





10.39
            Business
      Loan Agreement, dated March 3, 2008, by and among LandPixx, LLC, Hugh H.
      Williamson, III, and Bank of the West (incorporated by reference to
      exhibit 10.1 of our Current Report on Form 8-K filed March 5,
      2008)





10.40
            Promissory
      Note, $1,352,612.00 principal amount, dated March 3, 2008, by and among
      LandPixx, LLC, Hugh H. Williamson, III, and Bank of the
      West (incorporated by reference to exhibit 10.2 of our Current Report
      on Form 8-K filed March 5, 2008)





10.41
            Promissory
      Note, $185,000.00 principal amount, dated March 3, 2008, by and among
      LandPixx, LLC, Hugh H. Williamson, III, and Bank of the
      West (incorporated by reference to exhibit 10.3 of our Current Report
      on Form 8-K filed March 5, 2008).





10.42
            Aircraft
      Security Agreement, dated March 3, 2008, by and between and among
      LandPixx, LLC, Hugh H. Williamson, III, and Bank of
      the West (incorporated by reference to exhibit 10.4 of our
      Current Report on Form 8-K filed March 5,
2008)


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41 -





10.43
            Commercial
      Guaranty, by and among, Xedar Corporation, LandPixx, LLC, Hugh H.
      Williamson, III, and Bank of the West (incorporated by reference to
      exhibit 10.5 of our Current Report on Form 8-K filed March 5,
      2008)





10.44
            Commercial
      Guaranty, by and among, Landiscor, Inc., LandPixx, LLC, Hugh H.
      Williamson, III, and Bank of the West (incorporated by reference to
      exhibit 10.6 of our Current Report on Form 8-K filed March 5,
      2008)





10.45
            Commercial
      Guaranty, by and among, Pixxures, Inc., LandPixx, LLC, Hugh H. Williamson,
      III, and Bank of the West (incorporated by reference to exhibit 10.7
      of our Current Report on Form 8-K filed March 5,
  2008)





10.46
            Secured
      Subordinated Promissory Note, $1,000,000.00 principal amount, dated March
      3, 2008, by and between Hugh H. Williamson, III, and Xedar
      Corporation (incorporated by reference to exhibit 10.8 of our Current
      Report on Form 8-K filed March 5,
2008)





10.47
            Pledge
      and Security Agreement, dated March 3, 2008, by and between Xedar
      Corporation and Hugh H. Williamson, III (incorporated by reference to
      exhibit 10.9 of our Current Report on Form 8-K filed March 5,
      2008)





10.48
            Waiver
      – KeyBank National Association for the benefit of Xedar Corporation
      (incorporated by reference to exhibit 10.10 of our Current Report on Form
      8-K filed March 5, 2008)





10.49
            Assignment
      of Deposit Account, between Hugh H. Williamson, III, and Bank of the
      West (incorporated by reference to exhibit 10.11 of our Current
      Report on Form 8-K filed March 5,
2008)





14.1
            Code
      of Ethics (incorporated by reference to Exhibit 14.1 of our Annual Report
      on Form 10-KSB for the Year Ended December 31, 2006, filed March 16,
      2007)





21.1
            Subsidiaries
      (incorporated by reference to Exhibit 21.1 of our Registration Statement
      on Form SB-2/A-1 filed November 13,
2007)





31.1*
            Certification
      of President and Chief Executive Officer required by Rule
      13a-14(a)





31.2*
            Certification
      of Chief Financial Officer required by Rule
  13a-14(a)





32.1*
            Certification
      of President and Chief Executive Officer required by Section 906 of the
      Sarbanes-Oxley Act of 2002





32.2*
            Certification
      of Chief Financial Officer required by Section 906 of the
      Sarbanes-Oxley Act of 2002





*Filed
with this report.




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