UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
  Washington,
D.C. 20549
  FORM 10-K
  [X]Annual Report under
Section13 or 15(d) of the
Securities Exchange Act of 1934
  For the year endedDecember 31, 2008
  [  ]Transition Report
under Section13 or
15(d)ofthe Securities
Exchange Act of 1934
 For the transition period
from   _______ to _______
  Commission
file number 000-08356
  XEDAR
CORPORATION
 (Exact
name of registrant as specified in its charter)
 
  COLORADO
                84-0684753(State
      or other jurisdiction of incorporation or
      organization)
                (IRS
      Employer Identification No.)
  3773
Cherry Creek North Drive, Ste. 995
 Denver,
CO 80209
 (Address
of principal executive offices)
 
 (303)
377-0033
 (Issuer’s
telephone number)
 
 8310
South Valley Highway, Suite 220
 Englewood,
CO 80112
 (Former
address of principal executive offices)
 
 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
 
 Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.  Yes  [
]   No [X]
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act.  Yes  [
]   No [X]
  Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during past
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes  [X]     No  [
]
  Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
 
 Indicate
by check mark whether the registrant is a larger accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See definition of "large accelerated filer," "accelerated
filer" and "smaller reporting company" in 12b-2 of the Exchange Act. (Check
one):
  Larger
      accelerated filer  ̈
                Accelerated
      filer  ̈Non-accelerated
      filer  ̈
                Smaller
      Reporting Company þ
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b–2 of the Exchange Act). Yes  [ ]   No [X]
 
 As of
June 30, 2008, there were 26,198,661 shares of the issuer’s no par value common
stock outstanding.  On that date the aggregate market value of the
common stock (based on the closing bid on such date) of the issuer held by
non-affiliates was approximately $15,930,038.
  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 22, 2009, 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.
  
  TABLE OF
CONTENTS
 
 PagePART IItem
      1
                                                            
                                                            Description
      of Business
                                                            4Item
      1A
                                                            
                                                            Risk
      Factors
                                                            10Item
      1B
                                                            
                                                            Unresolved
      staff comments
                                                            14Item
      2
                                                            
                                                            Description
      of Property
                                                            14Item
      3
                                                            
                                                            Legal
      Proceedings
                                                            15Item
      4
                                                            
                                                            Submission
      of Matters to a Vote of Security Holders
                                                            16PART IIItem
      5
                                                            
                                                            Market
      for Common Equity and Related Stockholder Matters and Small Business
      Issuer Purchases of Equity Securities
                                                            16Item
      6
                                                            
                                                            Selected
      Financial Data
                                                            19Item
      7
                                                            
                                                            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation
                                                            19Item
      8
                                                            
                                                            Financial
      Statements Supplementary Data.
                                                            37Item
      9
                                                            
                                                            Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                                                            70Item
      9A
                                                            
                                                            Controls
      and Procedures
                                                            70Item
      9B
                                                            
                                                            Other
      Information
                                                            70PART IIIItem
      10
                                                            
                                                            Directors,
      Executive Officers and Corporate Governance
                                                            71Item
      11
                                                            
                                                            Executive
      Compensation
                                                            71Item
      12
                                                            
                                                            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.
                                                            71Item 13
                                                            
                                                            Certain
      Relationships and Related Transactions, and Director
      Independence.
                                                            71Item
      14
                                                            
                                                            Principal
      Accountant Fees and Services.
                                                            71PART IVItem
      15
                                                            
                                                            Exhibits,
      Financial Statement Schedules
                                                            72Signatures
                                                            76
  -
2 -
  
 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.
  -
3 -
  Part
I
 
 Item
1.  Description of Business
 
 Our
mission is to enhance homeland and cyberspace defense and
security.  We do so by providing strategic consulting services, aerial
imagery, and critical infrastructure information and systems to our
customers.
 
 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.  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 conversion of Premier stock into our shares of common
stock was 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, of whom Robert Johnson and Mark Chase
remain with us today.  We issued a series of land database and mapping
products beginning in 1995 and continuing through the present.
  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 information technology systems and
enterprise security consulting projects with various Departments of the federal
government.
 
 On
January 1, 2007, we, through our wholly owned subsidiary PDS GIS/LIS, Inc., a
Delaware corporation, acquired Land Links Company Ltd., a New Mexico limited
liability company.  The acquisition of Land Links expanded our
foothold in the geographic information systems arena.
  On March
22, 2007 we acquired all of the outstanding stock of Atlantic Systems
Corporation, a Virginia corporation. Atlantic primarily provides strategic
and technical consulting services to various entities within the Department of
Defense and the intelligence community.  Further, Atlantic assists its
clients in selling their products and services to the federal
government.
 
  -
4 -
  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 employed a
much larger number of geospatial production personnel than we did prior to the
acquisition.  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 at the time.
 
 In April,
2007, prior to our acquisition of Pixxures, Pixxures and an unrelated entity,
Landiscor, Inc., an Arizona corporation, formed a joint venture, LandPixx, LLC,
for the purpose of acquiring, operating, and leasing a digital sensor and an
aircraft.  LandPixx was a 50% owned subsidiary of
Pixxures.  On March 3, 2008, LandPixx borrowed $1,353,000 from Bank of
the West, Evergreen, CO (BOW).  LandPixx used the BOW loan to pay off
most of its then outstanding debt.  The BOW loan bears 6.19% interest,
has 60 monthly principal and interest 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 $185,000 from BOW,
which it used to pay off the remainder of its outstanding loans.  This BOW
loan bears 5.385% interest, has 59 monthly principal and interest 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.
 
 On
December 31, 2008, we entered into an interest purchase agreement with Landiscor
under which we acquired from Landiscor its 50% ownership in
LandPixx.  As a result, LandPixx became our wholly owned
subsidiary.  As consideration for the sale of its ownership interest
in and to LandPixx, we have agreed to provide to Landiscor reduced pricing on
several services and selected rights to software owned by us, as described more
fully later in the footnotes our financial statements.
  At its
January 21, 2009 meeting, the board formed a strategic alternatives committee as
a subcommittee of the board of directors to investigate various potential
strategies to maximize shareholder value and assure the sustained health of the
Company.
 
 Business
Segments
 
 We
operate in two segments.
 
 Information Technology
Consulting Segment
 Our
consulting segment includes our wholly owned FuGEN, Inc. (Fugen) and Atlantic
Systems Corporation (Atlantic) subsidiaries.  This segment provides
strategic consulting services to the national intelligence community and the
Department of Defense.  It also provides independent verification and
validation, information assurance, and consulting services to several federal
agencies. We are a prime contractor to the Department of Defense, the national
intelligence agencies, and the Internal Revenue Service.  We serve the
U.S. Agency for International Development and the U.S. State Department as a
subcontractor.
 
  -
5 -
  Geographical Information
Systems Segment
 Our
geographical information systems (GIS) segment includes our wholly owned
Premier, Pixxures and LandPixx subsidiaries.  This segment engages in
two activities.  First, it collects digital aerial photographs of
various areas within the United States, enhances the resulting images, and sells
them to both commercial and government customers.  Second, it 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.  The segment’s client base includes the Bureau of Land
Management (BLM), the Bureau of Reclamation, the National Park Service, and more
than 200 commercial oil and gas customers.  Approximately 15% of the
segment revenue comes from subscriptions to database products, and 85% from
aerial imagery and production services.
 
 We own
one airplane and lease another for our aerial imagery collection
activity.  Each plane mounts a digital sensor that collects digital
images of the surface.  We then process these images to correct
errors, and seamlessly link the images to form larger-scale
imagery.  We sell the images directly to customers, and also as a
subcontractor to the federal government.
 
 Customers
who use the land database products typically access information through an
internet site.  The database products provide database queries,
reports, and digital maps for over 13,000,000 BLM, state, and county 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).
 
 The
segment production services provide 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,
extract information from aerial imagery, or to integrate disparate data
sets.
  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 to gather information from outside sources and our airplane
collection platforms, authenticate the information based on error-checking
routines, translate the information into usable formats, and tag the information
for multiple attributes and retrieval indexing.
 
 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.  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.
   -
6 -
  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.
 
 Customers
 
 We have a
diverse customer base that includes many of the largest companies and 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 2008,
our largest customers were Digital Globe, Inc. and DIA Sudden Capital. The
various Digital Globe, Inc. and DIA Sudden Capital contracts generated 12% and
11% of our total revenue, respectively. Our government contracts are subject to
terms that would allow for termination at the election of the
government.  With the exception of the 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.
 
 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
several 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-newsletter
to selected clients, attendance at trade shows, participation in selected trade
associations and an assortment of collateral materials.
   -
7 -
  
 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.
 
 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
  We
maintain a customer service desk at our Colorado location, which is open during
regular business hours to assist customers using our land
databases.  All customer contacts handled through the customer service
desk are tracked using a customer relationship management
database.  We have also posted training manuals on our Internet site
for the use of our products and databases.
   -
8 -
  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.
  Our
consulting segment competes against a large number of companies, and has
subcontracted with several of them.  Competitors include CACI, SAIC,
STG, ManTech, 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.
 
 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.
 
 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, Map Layout Express, PDS Studio,
and LotFinder.
 
 Employees
  As of
December 31, 2008, we had 101 total employees, of which 2 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.
 
  -
9 -
  Foreign
Operations and Subsidiaries
  The
Company does not have, and does not intend to have, foreign operations, exports,
or subsidiaries.
  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.
 
 Our
operations generated a loss of $6,452,000 and $4,367,000 in the years ended
December 31, 2008 and 2007, respectively.  We may not be able to
reverse this trend, increase revenue, or cut costs to a sufficient extent to
avoid losses in future periods.  Some of the risks related to our
business include:
 
 ·
                Database
      content.  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 of our product
      offerings and services, or require us to turn to more expensive data
      collection alternatives which could adversely affect our results of
      operation.
 
 ·
                Database subscription
      renewals.  Our financial results could weaken if we
      cannot consistently obtain customer renewal of database subscriptions or
      product maintenance agreements.  In 2008, we obtained
      approximately 8% of our sales 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 $15,000.  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 $635,000 of recurring
      revenue.
  -
10 -
  
 ·
                Acquisitions.  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.  There can be no assurance that a potential acquiree’s
      shareholders will accept stock as a higher proportion of payment and the
      least amount of cash, which will impact or cash flow. 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.  There can be no assurance that any potential
      acquisitions will allow us to create a cash flow neutral or cash positive
      position.
 
 ·
                Funding
      availability.  Given the state of the current credit
      markets, it may be difficult to obtain funds for either operational needs
      or prospective acquisitions.  We currently have $1.1 million of
      debt funding available through a previously authorized loan from our CEO,
      Mr. Hugh Williamson III.  Our 2009 budget projects EBITDA
      positive operations as of the second quarter of 2009, and continuing
      through the end of the year.  (see Item 7.
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operation, below, for a discussion and reconciliation of
      EBITDA)
 
 ·
                Growth
      strategy.  Our growth strategy involves expanding the
      range of geographic information systems services offerings, and increasing
      our penetration into the federal government system security
      market.  The addition of new geographical information systems
      services is 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.
 
 ·
                Federal government
      spending.  The federal government has shifted substantial
      funds into various war efforts, resulting in funding reductions in some of
      its established programs. These funding reductions have 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 some 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 Point One subsidiaries, which derive much of their business from
      the federal government.
  -
11 -
  
 ·
                Federal government
      contracting.  The following risks are inherent in
      government contracts:
 o
                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.
 o
                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.
 o
                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.
 o
                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.
 o
                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.
 
 ·
                Imagery
      capture.  Many of our projects require aerial imagery
      capture.  We accomplish this with the Pixxures airplane, a
      second leased airplane, and third-party outsourcers.  For the
      capture to be successful, the imagery must be free from
      clouds.  Additional specifications such as sun angle or leaf-off
      requirements limit the period for capture.  Further, both
      scheduled and unscheduled repairs and maintenance can keep our planes from
      flying for substantial periods of time.  Thus, prolonged periods
      of unfavorable weather conditions, as well as airplane repairs and
      maintenance may increase our capture cost and put completion of these
      projects at risk.
 
 ·
                Industry conditions and
      trends.  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, the current low price of oil
      and an ongoing consolidation trend in the oil and gas industry could
      result in an increased number of database subscription
      non-renewals.  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.
 
 ·
                Personnel
      loss.  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 these
      people, or our inability to recruit replacements for them or to otherwise
      attract, motivate, or retain qualified personnel could have an adverse
      effect on our business, operating results, and financial
      condition.
  -
12 -
  
 ·
                Competitive
      markets.  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, and developing new
      products and services.  Our land database products compete with
      offerings from InfoPipe Inc., Divestco Inc. and WhiteStar,
      Inc.  In addition, the federal government itself is 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, such as 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.
 
 ·
                Customer
      concentrations. Our customer base is concentrated and the loss of
      one or more of our key customers could have a negative impact on our
      revenue.  During the year ended December 31, 2008, 23% of our
      sales were 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 sales of our GIS and consulting
      segments.  Sales to our ten largest customers accounted for 56%
      of our net revenue in 2008.  We cannot be certain that
      our current customers will continue to enter into contracts with
      us.
 
 ·
                Intangible asset
      amortization. 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.  Substantial amortization
      of these assets will continue until early 2015. During that time, the
      amortization expense will be enough to offset our probable operating
      profits.
 
 ·
                System
      failures.  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 via the
      Internet to our customers would harm our business. 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.
 
 ·
                Stock
      sales.  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.  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.
  -
13 -
  
 ·
                Stock price
      volatility.  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 our control,
      including:
 o
                Quarterly
      variations in actual or anticipated results of
  operations;
 o
                Changes
      in financial estimates by securities
analysts;
 o
                Actions
      or announcements by us or our
competitors;
 o
                Regulatory
      actions;
 o
                Litigation;
 o
                Loss
      or gain of major customers or content
providers;
 o
                Additions
      or departures of key personnel; and
 o
                Future
      sales of our common stock.
 
 These
fluctuations may result in an immediate and significant decline in the trading
price of our common stock, which could cause a decline in the value of your
investment.
 
 Considering the uncertainties of the
present economic environment, an overall decline in the stock market may
have an impact on our stock price.  A lower stock price increases our
dilution if we choose to sell stock or issue it to pay for an acquisition, so we
would be less likely to issue stock under such circumstances.
 
 ·
                Affiliate
      control.  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, can have significant control over
      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.  Our directors, executive officers and other
      affiliates will continue to exert significant control over our future
      direction, which could reduce our sale
value.
 
 ·
                Dividends.  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.
 
 Item 1B.
Unresolved Staff Comments
 
 None.
 
 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,
approximately 3,200 square feet of office space in Arlington, Virginia and
approximately 2,600 square feet of office space in Albuquerque, New
Mexico.
  -
14 -
  Our lease
in Englewood, Colorado, requires monthly payments of $16,271 through June
2009,   $16,962 from July 2009 through June 2010, $17,304 from
July 2010 through June 2011, $17,645 from July 2011 through June 2012, and
$17,987 from July 2012 through June 2013 when the lease
expires.
 
 Our
Arvada, Colorado lease requires monthly rental payments of requires monthly
payments of $11,884 through March 2009 $13,348 thought June 2009, and $15,932
through May 2010 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 $8,511 and expires in May
2009.
 
 Our lease
in Arlington, Virginia, requires monthly payments of $10,400 through June 2009,
$10,686 from July 2009 through June 2010, $10,980 from July 2010 through June
2011, $11,282 from July 2011 through June 2012, and $11,592 from July 2012
through June 2013 when the lease expires.
 
 Our lease
in Albuquerque, New Mexico, requires monthly payments of $2,200 and expires in
March 2010.
 
 Our
airplane lease requires monthly payments of $35,000 and expires in March
2010.
 
 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. Vital Learning alleges that it brought
certain business opportunities concerning contracts with the United State Air
Force to the attention of defendants, and pursuant to an oral agreement, was
entitled to receive twenty percent of any contract price awarded in connection
with such business opportunities. Vital Learning Corporation 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. Based upon
current information, we believe that the suit is without merit. We have
responded, denying all claims of the plaintiff.
 
  -
15 -
  On
December 17, 2008, we commenced eviction proceedings against RE Expert with
respect to the premises located at 8310 S. Valley Highway, Suite 220, Englewood,
CO 80112.  RE Expert was the sublesee under the terms of a sublease dated
July 16, 2008.  Under the sublease, RE Expert was obligated to pay us
rent in the amount of $11,622.33 per month.  RE Expert failed to pay
rent in the months of October, November, and December.  As a result we
retained RE Expert’s security deposit, terminated the sublease, and commenced
eviction proceedings in accordance with Colorado law.   In the
interim, RE Expert abandoned the premises and removed its personal property
therefrom.  On December 26, 2008, we obtained a default judgment for
possession with respect to the premises.  Notwithstanding RE Expert's
breach of the sublease under the terms of our lease with Best Property Fund,
L.P., dated February 19, 2003, we are still obligated to pay the rent with
respect to the premises.
 
 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 Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
 
 Our
common stock trades on the over-the-counter bulletin board (OTCBB), operated by
the Financial Industry Regulatory Authority, Inc. (FINRA), under the ticker
symbol XDRC.OB.  As of March 3, 2009, there were approximately
368 holders of record of our common stock. On March 3, 2009, the last reported
sale price for our common stock on the OTCBB was $0.30 per share).
  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.
 
  Period
                        High
                        Low2008First
      Quarter
                        $
      2.60
                        $
      1.50Second
      Quarter
                        $
      2.50
                        $
      0.70Third
      Quarter
                        $
      1.40
                        $
      0.40Fourth
      Quarter
                        $
      0.78
                        $
      0.242007First
      Quarter
                        $3.25
                        $0.90Second
      Quarter
                        $4.85
                        $1.85Third
      Quarter
                        $4.85
                        $2.07Fourth
      Quarter
                        $3.60
                        $2.15
 
  -
16 -
  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
                                                                                                      
                                                                                                      699,093(2)
                                                                                                      
                                                                                                      $0(2)
                                                                                                      
                                                                                                      695,007Equity
      compensation plans not approved by security holders
                                                                                                      
                                                                                                      19,998(3)
                                                                                                      
                                                                                                      $0(3)
                                                                                                      
                                                                                                      0Total
                                                                                                      
                                                                                                      719,091
                                                                                                      
                                                                                                      $0
                                                                                                      
                                                                                                      695,007
  --------------------------------------------
 (1)
                As
      of December 31, 2008, the end of our last completed fiscal
      year, the aggregate 695,007 securities remaining available for
      issuance under all of our equity compensation plans are all available
      under our 2007 Equity Incentive
Plan.
 
 (2)
                Under
      our 2007 Equity Incentive Plan, we are authorized to issue, in aggregate,
      a maximum of 1,500,000 shares of our common stock.  We have
      issued a total of 808,093 Restricted Stock Units (RSU) under the Plan (see
      Note 23 to our Consolidated Financial Statements).  An RSU award
      is a grant of a right to receive shares of our common stock, valued in
      terms of the market value of our common stock, but no stock is issued at
      the time of the grant of the RSU, instead, shares of our common stock are
      issued only after a vesting period has been satisfied. Of the 808,093
      RSU's granted under the Plan, 3,500 were later forfeited pursuant to the
      provisions of the Plan (and are available for re-issue) because the
      vesting conditions were not satisfied, and 105,500 shares of our common
      stock have been issued in connection with the vesting of issued
      RSUs.  Additionally, we issued 400 shares of our common stock as
      vested stock awards under the Plan.  As a result, RSUs
      convertible into an aggregate of 695,007 shares of our common stock remain
      available for issuance under the
Plan.
 
 (3)
                By
      resolution of the Board of Directors, dated February 9, 2007, we entered
      into an equity compensation arrangement or plan with each of our six
      non-employee directors which provided that each such non-employee director
      would receive 10,000 shares of our restricted common stock, vested in
      thirds annually, commencing December 31, 2007 (i.e., 3,334 shares vested
      on December 31, 2007, 3,333 shares vested on December 31, 2008, and 3,333
      shares will vest on December 31, 2009). This equity compensation
      arrangement or plan has not been approved or ratified by our
      shareholders.
 
  -
17 -
  As of
December 31, 2008, and as of now, we maintained and maintain no other
equity compensation plan or arrangements.
 
 Unregistered
Sales of Securities
 
 On March
31, 2008, we issued to Samuel J. Camarata, Jack Jacobs, John P. Moreno, Craig A.
Parker, and Roger J. Steinbecker, each of whom are independent, non-employee
directors of the Company, 2,000 shares of our restricted common stock, or an
aggregate of 12,000 shares as directors fees.  The shares issued as
directors fees were offered and issued to accredited investors only, without
registration, in reliance on the exemptions from registration pursuant to
Section 4(2) of the Securities Act of 1933, as amended, and Regulation D
promulgated thereunder, and in reliance on similar exemptions under applicable
state securities laws.No finder’s fees or
underwriting commissions were paid in connection with the issuance of the shares
to our directors.
 
 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 became payable by us if the average price of our
common stock for the 60 trading days following the Trigger Date was less than
the negotiated average closing price.  The Trigger Date was
established by a majority of the Pixxures shareholders to be August 7, 2008.
Over the subsequent 60 trading days, the average closing price of our stock was
$0.8228, resulting in the issuance of 4,818,866 additional shares of our common
stock.  The shares issued in connection with the Pixxures transaction
were issued in reliance on exemptions from registration pursuant to Section 4(2)
of the Securities Act of 1933, as amended, and Rule 506 of Regulation D
promulgated thereunder, and in reliance on similar exemptions under applicable
state securities laws.  No finder’s fees or underwriting commissions
were paid in connection with the Pixxures transaction.
 
 On
October 23, 2008, we entered into an agreement for consulting services with
Wakabayashi Fund, LLC (“Wakabayashi”).  We issued to Wakabayashi Fund
166,667 shares of our restricted common stock in connection with and as
consideration under the consulting agreement.  The shares issued to
Wakabayashi Fund were offered and sold to accredited investors only, without
registration, in reliance on the exemptions from registration pursuant to
Section 4(2) of the Securities Act of 1933, as amended, and Regulation D
promulgated thereunder, and in reliance on similar exemptions under applicable
state securities laws.No finder’s fees or
underwriting commissions were paid in connection with the issuance of the shares
to Wakabayashi Fund.
 
 Our
directors may elect to receive payment of directors fees earned in shares of our
restricted common stock in lieu of payment in cash.  On October 28,
2008, we issued to our director Samuel J. Camarata 5,313 shares in lieu of
payment of $2,709.63; to our director Jack Jacobs 1,563 shares in lieu of
payment of $797.13; to our director John P. Moreno 5,000 shares in lieu of
payment of $2,550.00; to our director Craig A. Parker 5,876 shares in lieu of
payment of $2,996.76; and to our director Roger J. Steinbecker 5,563 in lieu of
payment of $2,837.13.  The shares issued to our directors in lieu of
payment of directors fees in cash were offered and sold to accredited investors
only, without registration, in reliance on the exemptions from registration
pursuant to Section 4(2) of the Securities Act of 1933, as amended, and
Regulation D promulgated thereunder, and in reliance on similar exemptions under
applicable state securities laws.No finder’s fees or
underwriting commissions were paid in connection with the issuance of the shares
to our directors.
  -
18 -
  On
November 24, 2008, we sold and issued, in a private placement, an aggregate of
100,000 shares of our no par value common stock, together with an aggregate of
200,000 warrants to purchase common stock at an exercise price of $1.00 per
share.  The warrants have a term of five years.  The shares
and warrants were sold for an aggregate purchase price of
$50,000.  The shares and warrants were offered and sold to accredited
investors only, without registration, in reliance on the exemptions from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended,
and Regulation D promulgated thereunder, and in reliance on similar exemptions
under applicable state securities laws. Commissions in the amount of $3,000 were
paid to Aspenwood Capital, a division of Green Drake Capital Corp., in
connection with the private placement.
 
 On
November 26, 2008, we sold and issued, in a private placement, an aggregate of
3,000,000 shares of our no par value common stock, together with an aggregate of
3,000,000 warrants to purchase common stock at an exercise price of $1.00 per
share.  The warrants have a term of five years.  The shares
and warrants were sold for an aggregate purchase price of
$1,500,000.  The shares and warrants were offered and sold to
accredited investors only, without registration, in reliance on the exemptions
from registration pursuant to Section 4(2) of the Securities Act of 1933, as
amended, and Regulation D promulgated thereunder, and in reliance on similar
exemptions under applicable state securities laws. No finder’s fees or
underwriting commissions were paid in connection with the private
placement.
  
 Item
6.  Selected Financial Data.
 
 Not
required.
  
 Item
7.  Management’s Discussion and Analysis of Financial Condition and
Results of Operation.
 
 The
following information includes certain forward-looking statements. 
Forward-looking statements are statements that estimate, project, or anticipate
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 by 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.
 
 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.  We cannot 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.
 
  -
19 -
  Overview
 
 Our
overall mission is to enhance homeland and cyberspace defense and
security.  We do so by providing strategic consulting services and
critical infrastructure information and systems to our customers.  We
operate in two segments.
 
 Information Technology
Consulting Segment
 Our
consulting segment includes our wholly owned FuGEN, Inc. (“FuGEN”) and Atlantic
Systems Corporation (Atlantic) subsidiaries.  This segment provides
strategic consulting services to the national intelligence community and the
Department of Defense.  It also provides independent verification and
validation, information assurance, and consulting services to several federal
agencies. We are a prime contractor to the Department of Defense, the national
intelligence agencies, and the Internal Revenue Service.  We serve the
U.S. Agency for International Development and the U.S. State Department as a
subcontractor.
 
 Geographical Information
Systems Segment
 Our
geographical information systems (“GIS”) segment includes our wholly owned
Premier, Pixxures, Inc. (“Pixxures”), and LandPixx subsidiaries.  This
segment engages in two activities.  First, it collects digital aerial
photographs of various areas within the United States, enhances the resulting
images, and sells them to both commercial and government
customers.  Second, it 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.  The segment’s client
base includes the Bureau of Land Management (“BLM”), the Bureau of Reclamation,
the National Park Service, and more than 200 commercial oil and gas
customers.  Approximately 15% of the segment revenue comes from
subscriptions to database products, and 85% from aerial imagery and production
services.
 
 Our
principal executive offices are located at 3773 Cherry Creek North Drive, Ste.
995, Denver Colorado 80209.  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 on the over-the-counter bulletin board (OTCBB) under the
ticker symbol “XDRC.OB.”
 
 Material
challenges and risks include:
 
 •
                  Given
      continuing commitments by Mr. Williamson to provide
      funding  through a $2.8 million credit facility (of which $1.1
      million is currently available), as well as our efforts to obtain funding
      elsewhere, and budgeted improvements in our operational plans, we believe
      that we can obtain sufficient funding for our operations through the end
      of 2009.  We describe our planned cash flow break-even later in
      the “Known Trends, Events, Demands, Commitments and Uncertainties”
      section.•
                  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 $22 million, depending on the cash flow of
      individual acquirees.
 
 •
                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.
  -
20 -
   •
                  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
      overall decline in the stock market may have an impact on our stock price;
      a lower stock price increases our dilution if we choose to sell stock or
      issue it to pay for an acquisition, so we would be less likely to issue
      stock under such
circumstances.
 
 •
                  A
      continued decline in the United States economy could lead to a reduction
      in our sales.  However, one of our primary customers is the
      federal government, which is less impacted by economic declines than other
      parts of the economy.
 
 •
                  An
      additional challenge and risk relates to the decline in our consulting
      segment’s sales because of decreases in contracts and
      customers.  Sales in our FuGEN subsidiary declined during 2008
      compared to 2007 by $293,000, or 14%.  This decrease occurred
      because our State Department contract was scaled down to three employees
      by late 2007, which we consider to be a sustainable number of
      consultants.  Also, during 2008, a contract with a federal
      intelligence agency that our Atlantic subsidiary was expecting was awarded
      to another company.  We do not expect any significant changes in
      our other government consulting contracts in 2009. During the year
      ended December 31, 2008, 23% of our sales were 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 sales of our
      consulting and GIS segment.  In addition, our customer base is
      concentrated and the loss of one or more of our key customers would have a
      negative impact on our net revenue.  Sales to our ten largest
      customers accounted for 56% of our net revenue in
  2008.
 
 •
                  In
      2008, we obtained approximately 8% of our sales 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
$15,000.
 
 •
                Many
      of our projects require aerial imagery capture.  We accomplish
      this with the Pixxures airplane, a second leased airplane, and third-party
      outsourcers.  For the capture to be successful, the imagery must
      be free from clouds.  Additionally, specifications such as sun
      angle or leaf-off requirements limit the period for
      capture.  Further, both scheduled and unscheduled repairs and
      maintenance can keep our planes from flying for substantial periods of
      time.  Thus, prolonged periods of unfavorable weather
      conditions, as well as airplane repairs and maintenance may increase our
      capture cost and put completion of these projects at
  risk.
  -
21 -
 
 •
                  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 FuGEN and Atlantic subsidiaries’ sales, which derive much of
      their business from the federal government.  Barring the
      significant reduction of war commitments by the new Administration, we
      assume this risk will
continue.
 
 •
                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
 
 We have
been unable to complete any acquisitions during 2008, because of the difficulty
of raising funds.  We continue to attempt to raise funds for this
purpose.  As described later under the EBITDA and Evaluation of Amounts and
Certainty of Cash Flow section, we have reduced expenses and improved our
operating results, such that we anticipate but cannot assure EBITDA breakeven in
the first half of 2009.  This improvement in our financial results may
make us a more attractive potential borrower, thereby allowing us to borrow
sufficient funds in 2009 to again pursue acquisition targets.
 
 In 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 consulting 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 staffing level for our
State Department project has varied between three and 25 employees over the past
three years.
 
 Key
Performance Indicators
 
 In
addition to the data in our financial statements, we carefully track and monitor
certain other key performance indicators.  These
include:
  -
22 -
  
 12/31/2008
                                      
                                      
                                      9/30/2008
                                      
                                      
                                      6/30/08
                                      
                                      
                                      3/31/08
                                      
                                      
                                      12/31/07GeneralTotal
      headcount
                                      
                                      
                                      101
                                      
                                      
                                      
                                      108
                                      
                                      
                                      
                                      102
                                      
                                      
                                      
                                      103
                                      
                                      
                                      
                                      104FuGENTotal
      backlog (000’s)
                                      
                                      $
                                      432
                                      
                                      
                                      $
                                      522
                                      
                                      
                                      $
                                      472
                                      
                                      
                                      $
                                      810
                                      
                                      
                                      $
                                      560%
      Consulting hours billed
                                      
                                      
                                      91
                                      %
                                      
                                      
                                      76
                                      %
                                      
                                      
                                      76
                                      %
                                      
                                      
                                      76
                                      %
                                      
                                      
                                      77
                                      %PixxuresTotal
      backlog (000’s)
                                      
                                      $
                                      269
                                      
                                      
                                      $
                                      793
                                      
                                      
                                      $
                                      677
                                      
                                      
                                      $
                                      638
                                      
                                      
                                      
                                      -Headcount
                                      
                                      
                                      30
                                      
                                      
                                      
                                      35
                                      
                                      
                                      
                                      33
                                      
                                      
                                      
                                      36
                                      
                                      
                                      
                                      38Atlantic%
      Consulting hours billed
                                      
                                      
                                      84
                                      %
                                      
                                      
                                      95
                                      %
                                      
                                      
                                      93
                                      %
                                      
                                      
                                      98
                                      %
                                      
                                      
                                      73
                                      %PremierBacklog
      (000’s)
                                      
                                      $
                                      1,636
                                      
                                      
                                      $
                                      1,858
                                      
                                      
                                      $
                                      784
                                      
                                      
                                      $
                                      608
                                      
                                      
                                      $
                                      645Annual
      subscriptions (000’s)
                                      
                                      $
                                      1,539
                                      
                                      
                                      $
                                      1,467
                                      
                                      
                                      $
                                      1,418
                                      
                                      
                                      $
                                      1,386
                                      
                                      
                                      $
                                      1,364Subscription
      loss rate
                                      
                                      
                                      1
                                      %
                                      
                                      
                                      4
                                      %
                                      
                                      
                                      5
                                      %
                                      
                                      
                                      6
                                      %
                                      
                                      
                                      8
                                      %
 
 
 The
subscription loss rate is based on losses incurred during the preceding 12-month
period.  We particularly focus on backlog, percentage utilization,
total annual subscriptions, and the subscription loss rate.
  Acquisitions
 
 In
December 2006 Premier entered into a reverse acquisition of us.  In
January 2007 we acquired Land Links Company Ltd.  In March 2007, we
acquired Atlantic and in October 2007, we acquired Pixxures.  In December
2008 we acquired the outstanding minority interest in LandPixx, such that
LandPixx is now our wholly owned subsidiary. 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 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.
  Strategic
Alternatives Committee
 
 At its
January 21, 2009 meeting, the board formed a strategic alternatives committee as
a subcommittee of the board of directors to investigate various potential
strategies to maximize shareholder value and assure the sustained health of the
Company.
 
  -
23 -
  Critical
Accounting Policies and Estimates
 
 This
Management’s Discussion and Analysis of Financial Condition and Results of
Operation 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 our 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.
  -
24 -
   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 $4.9million and $1.5 million
for the years ended December 31, 2008 and 2007, respectively.
  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 for both the years ended December 31, 2008 and 2007,
respectively.  We recorded $710,000 of deferred revenue related to
subscription revenues at December 31, 2008.
 
 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 $10.5
million and $6.8 million for the years ended December 31, 2008 and 2007,
respectively.
 
  -
25 -
  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 database subscriptions and software
maintenance 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 $183,000 and
$182,000 at December 31, 2008 and 2007, respectively, relate to any contract
where revenue has been recognized, but the customer has not yet been
invoiced.  Revenue from fixed price consulting contracts was
approximately $1.0 million and $1.4 million for the years ended December 31,
2008 and 2007, respectively.
  Share-Based
Payment
 
 We
account for share-based payments in accordance with Statement 123R of the
Financial Accounting Standards Board (FASB), “Share-Based
Payments”.  Under the fair value recognition provisions of Statement
123R, we measure share-based payments at the grant date based on the fair value
of the award and record the payments as expense on a straight-line basis over
the requisite service period.  We determine compensation expense for
options granted to non-employees in accordance with Statement 123R as the fair
value of the consideration received or the fair value of the equity instruments
issued, whichever is more reliably measured.
 
 The
valuation provisions of Statement 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, January 1, 2006, over the remaining service periods using the
compensation expense previously estimated.
 
 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.
 
  -
26 -
  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 our annual impairment tests of goodwill and other intangible assets
for 2007 and found no impairment.
 
 Our
annual impairments test of goodwill for 2008 resulted in no
impairment.  We tested Atlantic’s goodwill for impairment in the first
quarter of 2008.  The recorded goodwill related to Pixxures and Fugen
was reviewed for impairment at December 31, 2008 for their annual impairment
tests.   At December 31, 2008, we performed an additional review
of Atlantic’s goodwill impairment which was required since the Company’s market
capitalization periodically fell below book value.
 
 During
the first quarter of 2008, a contract with a federal intelligence agency that
Atlantic was expecting was awarded to another company.  Accordingly,
in March 2008, we recorded an impairment loss on our customer relationship
intangible for Atlantic of $618,000 for Atlantic related to the impact of this
lost contract.   This impairment charge reduced Atlantic’s
customer relationship intangible from $5,611,000 to
$4,993,000.   No events or changes in circumstances occurred
during 2008 which indicated that the carrying amounts of any of our assets may
not be recoverable.
 
 Recent
Accounting Pronouncements
 
 The
Emerging Issues Task Force issued “Issue 08-7, Accounting for Defensive
Intangible Assets” in September 2008.  This consensus requires
acquiring entities to record defensive intangible assets (those assets not
intended for use, but to be restricted from use by competitors) as separate
accounting units.  This has no immediate impact on our reported
results, but may have an impact when recording the value of new
acquisitions.
 
 The
Emerging Issues Task Force issued “Issue 07-5, Determining Whether an Instrument
is Indexed to an Entity’s Own Stock” in June 2008.  This consensus
requires that a company record a warrant as a liability and subsequently engage
in mark to market accounting, where the company can record either a gain or loss
in every subsequent reporting period, depending on the closing price of the
stock on the last day of each reporting period.  This requirement only
applies if the warrants contain “down-round” provisions that protect holders
from declines in the stock price.  In essence, the requirement will be
triggered by any warrant provision that will subsequently alter either the
quantity of warrants issued or their price. The reason for this treatment is
that such conditions are a type of guarantee, which is inconsistent with the
nature of equity. As of the quarter ended March 31, 2009, we will begin mark to
market accounting for the warrants we issued during the year ended December 31,
2008.  We are still evaluating the value of the impact to our
financial position.
   -
27 -
  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 anticipate that
SFAS 141 will not materially affect our financial position or results of
operations except on new acquisitions after January 1, 2009.
  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 anticipate that SFAS 160 will not materially
affect our financial position or results of operations.
 
 In
September 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value
Measurements”.SFAS 157 defines fair
value, establishes a framework for measuring fair value in accounting principles
generally accepted in the U.S. and expands disclosures about fair value
measurements. SFAS 157 was effective for financial statements issued for fiscal
years beginning after November 15, 2007, and interim periods within those
fiscal years. On January 1, 2008 we only partially adopted the provisions
of SFAS 157 because of the issuance of FASB Staff Position FAS 157-2, “Effective
Date of FASB Statement No. 157”, which allows companies to delay the effective
date of SFAS 157 for non-financial assets and liabilities. The partial adoption
had no material impact on our consolidated financial position and results
of operations.  We believe that the remaining provisions will have no
material effect on our financial position or results of operations when they
become effective on January 1, 2009.
 
 Liquidity
and Capital Resources
 
 Lines of
Credit: Loans
 
 During
2007, we signed a business loan agreement with KeyBank, National Association for
a $500,000 revolving line of credit.  The line of credit is evidenced
by a loan agreement and promissory note bearing interest at a variable rate
equal to the prime rate of KeyBank, with an initial interest rate equal to
8.25%.  We subsequently 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 KeyBank, with an initial interest rate equal to
7.5%.  On December 10, 2007, we temporarily 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%.  We have since paid off and terminated the $500,000 increase in
the line of credit, leaving a $1,000,000 line of credit outstanding at December
31, 2008.
  -
28 -
  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.
 
 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 National Association.  We used 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 demand.   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.   During the year ended December 31, 2008, our board
determined that additional working capital was necessary, and Mr. Williamson
agreed to loan us an additional $1,800,000, on the same terms and conditions
pursuant to which the March 3, 2008 loan was made.  During October and
November 2008, we paid down $1,100,000 of the balance. We have borrowed
$1,700,000 under the loan as of December 31, 2008.  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.
 
 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.  On December 31, 2008, we bought the remaining
50% interest in LandPixx.  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.  During 2008, the loan
was paid off.
 
 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 aircraft.  The three companies were all
co-borrowers.  The loan matures on July 13, 2012.  During 2008, the
loan was paid off.
 
 On March
3, 2008, LandPixx borrowed $1,353,000 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 principal
and interest 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.  The outstanding balance on
the loan was $1,272,000 at December 31, 2008.
   -
29 -
  Also on
March 3, 2008, LandPixx borrowed $185,000 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 principal and
interest 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.  The outstanding balance on the loan was $165,000 at December
31, 2008.
 
 We had
cash and cash equivalents of $771,000 at December 31, 2008.  Our total
current assets at December 31, 2008, were $3,786,000.    We
also had non-current assets of $17,697,000, including $7,934,000 in net
intangible assets and $7,939,000 in goodwill. Our total assets as of December
31, 2008 were $21,483,000.
 
 Our total
current liabilities were $5,324,000 at December 31, 2008, which primarily
included $710,000 of unrecognized subscription revenue, current portion of notes
payable of $115,000, outstanding lines of credit of $1,000,000, accounts payable
of $1,062,000, short-term notes payable to related parties of $1,700,000,
$143,000 of current obligations under a capital lease and other accrued
liabilities of $168,000.  We had $1,321,000 of long term notes payable
(LandPixx and Pixxures) and $81,000 of non-current obligations under capital
leases at December 31, 2008.
 
 Net Cash
from Continuing Operations – Operating Activity
 
 During
the year ended December 31, 2008, we used $2,275,000 of cash in operating
activity.  This included a $6,452,000 net loss, offset by non-cash
items of $2,697,000 of depreciation and amortization expense, a $618,000
customer relationship intangible charge, and of $539,000 of stock issued for
services.  We also used $332,000 of cash in changes in current assets
and liabilities.
 
 During
the year ended December 31, 2007, we used $1,878,000 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.
 
 Net Cash
from Continuing Operations – Investing Activity
 
 In our
investing activity, we used $155,000 of net cash for the year ended December 31,
2008.  We invested in computer hardware and software, primarily in our
GIS segment.
 
 In 2007,
we received $256,000 from investing activity.  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.
 
  -
30 -
  Net Cash
from Continuing Operations – Financing Activity
 
 Our
financing activity provided $2,769,000 for the year ended December 31,
2008.  The main source of the cash was a $2,800,000 loan from our
President and CEO, Hugh H. Williamson, III and $1,550,000 from securities sold
in a private placement.  It was partially offset by $321,000 used in
net pay down on our line of credit with KeyBank.  We also
replaced a $1,579,000 loan with a $1,537,000 loan having better payment
terms.  We made $100,000 of payments against the principal balance on
the new loan.  We paid down $1,100,000 on the loan from Mr. Williamson
and $40,000 on capital leases.
 
 In 2007,
we received $700,000 from financing activity.  We borrowed $1,321,000
on the line of credit.   This included a $400,000 payment to the
former controlling shareholders of the Xedar shell corporation as partial
consideration for the purchase.  We made $104,000 of loan repayments to
related parties, and $117,000 of payments on the Pixxures long term
lease.
 
 EBITDA
and Evaluation of amount and certainty of cash flow
 
 Our
reported net loss is strongly impacted by the amortization expense associated
with our various acquisitions, intangible impairment, and equity compensation
paid to both employees and suppliers.  We believe that adjusted EBITDA
earnings are more representative of our actual operating performance than net
earnings, because they more closely indicate the state of our cash flows than
the net profit or loss.  We define adjusted EBITDA as earnings before
interest, taxes, depreciation, amortization, equity payments, and intangible
impairment.
 
 Adjusted
EBITDA is not a financial performance measurement under generally accepted
accounting principles.  Adjusted EBITDA has material limitations and
should not be considered as an alternative to net income (loss), cash flows
provided by operations, investing or financing activities, or other financial
statement data presented in the consolidated financial statements as indicators
of financial performance or liquidity.  Items excluded from adjusted
EBITDA are significant components in understanding our financial
performance.  Because adjusted EBITDA is not a measurement determined
in accordance with GAAP and is subject to varying calculations, adjusted EBITDA
as presented may not be comparable to other similarly titled measures of
performance used by other companies.
 
 The
following table reconciles our adjusted EBITDA to our net losses during
2008.
 
 Year
      Ended
                                            December
      31, 2008Adjusted
      EBITDA
                                          
                                          $
                                          (2,611,000
                                          )Depreciation
      and amortization and impairment
                                          
                                          
                                          3,315,000Equity
      compensation to employees and contractors
                                          
                                          
                                          363,000Interest
      expense, net
                                          
                                          
                                          212,000Taxes
                                          
                                          
                                          23,000Net
      loss
                                          
                                          $
                                          (6,524,000
                                          )
 
  -
31 -
  During
2008, we rationalized numerous redundancies in our Premier and Pixxures
subsidiaries to increase efficiencies, particularly in operations and technology
development.  These cost reductions had been substantially completed
during 2008; however, because nearly all of the reductions were implemented
during the second half of 2008, the total cost reduction realized during 2008
was $327,000, versus $1,008,000 when fully realized during 2009.  We
plan additional cost reductions, primarily in the first and second quarters of
2009, which should further improve our adjusted EBITDA results.
 
 Our cash
flow from operations has been negative for the past three years. We have used
all cash available to us under our existing line of credit. In the year ended
December 31, 2008, Hugh H. Williamson III, our President and CEO, has
provided $2,800,000 of additional funding.  We have budgeted for positive
cash flow from operations by April 2009, which represents a revenue level of
approximately $22 million. Given continuing commitments by Mr. Williamson to
provide funding, as well as our efforts to obtain funding elsewhere, and our
merger of the Premier and Pixxures subsidiaries into one facility, we believe
that we can obtain sufficient funding for our operations through the end of
2009.
 
 $1.5 million of our annual
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 99% 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
 
 Net
loss
 
 During
the year ended December 31, 2008, we incurred a net loss of $6,452,000, compared
to a net loss of $4,367,000 in 2007, an increase of $2,085,000, or
48%.  Our sales increased in 2008 from 2007 by $6,613,000, or
59%.  The main reasons our sales grew but our net loss increased
were:
 
 •
                A
      corresponding increase in cost of sales of $7,178,000, primarily due to
      the addition of the new Atlantic and Pixxures
  subsidiaries;•
                An
      increase in intangibles amortization of
  $885,000;
 
 •
                Customer
      relationship intangible impairment expense of $618,000 ($0 in the
      2007);
  •
                  A
      decrease in our gross margin from 31% to 16% due to increased volume of
      consulting and aero-spatial activities with lower margin sales and an
      increased proportion of billable staff that resulted from merging Land
      Links operations into
Premier;
 
 •
                  An
      increase in other selling and administrative expense by $794,000 primarily
      due to the addition of the new Atlantic and Pixxures
      subsidiaries.
 
  -
32 -
  Other
factors increasing the net loss were an increase in interest expense, net, of
$196,000 and the sale of the JIS Division in 2007, resulting in a $74,000 gain,
compared to none in 2008.  The main factor offsetting the increased
net loss was investor relations expense.  In the year ended December
31, 2007, we incurred $1,253,000 of investor relations expense, compared to
$85,000 in the year ended December 31, 2008.  Compensation expense has
decreased for 2008 compared to 2007 by $148,000.
 
 The above
information is discussed in more detail below.
 
 Sales
 
 Sales
increased to $17,755,000 in 2008 from $11,142,000 in 2007, which was an increase
of $6,613,000, or 59%.  This increase was largely due to sales made by
Atlantic and Pixxures in 2008.  These two subsidiaries were acquired
in 2007 and sold $12,754,000 and $6,084,000 of services for the years ended
December 31, 2008 and 2007, respectively.  Premier’s sales increased
by $249,000, or 9%.  FuGEN’s sales declined by $293,000, or 14%, as a
result of reduced funding on government contracts.
 
 Our
consulting segment increased its sales from $6,676,000 in 2007 to $9,654,000 for
2008, a 45% increase.  This increase was primarily due to sales made
by our Atlantic subsidiary, which we acquired in March
2007.  Atlantic’s sales were 44% of our total sales for the year ended
December 31, 2008.  On the other hand, FuGEN’s sales decreased by
$293,000, or 14%, for the year ended December 31, 2008 as compared to the year
ended December 31, 2007.  This decrease occurred because our State
Department contract was 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
2009.
 
 Sales
increased in our GIS segment from $4,466,000 in the year ended December 31, 2007
to $8,101,000 in the year ended December 31, 2008, an 81%
increase.  This increase was primarily due to sales made by our
Pixxures subsidiary, which we acquired in October 2007.  Pixxures
produced 28% of total sales in the year ended December 31,
2008.  Premier’s sales for the same period increased by $249,000, or
9%.  We experienced some growth in sales to the Bureau of Land
Management, as well as increased database subscription sales to our oil and gas
customers.  New data collection and production contracts at our
Pixxures subsidiary are too new to serve as the basis for estimates of future
sales results.
 
 Cost of
Sales; Gross Profit
 
 Cost of
sales increased 93% to $14,891,000 for the year ended December 31, 2008 from
$7,713,000 for the year ended December 31, 2007.  Our gross margin for
the year ended December 31, 2008 was 16%, compared to 31% for the year ended
December 31, 2007.  We began consolidating our reporting of the
operations of our Land Links subsidiary into Premier at the beginning of
2008.  This increased Premier’s proportion of billable staff and
increased our cost of sales.  We also have experienced an increased
volume of consulting and geospatial activity with lower margin
sales.
 
  -
33 -
  Our
consulting segment margin increased to $1,611,000 for the year ended December
31, 2008 from $789,000 for the year ended December 31, 2007.  Cost of
sales for the consulting segment increased by $2,157,000, or
37%.  Atlantic’s cost of sales for the year ended December 31, 2008
accounted for 43% of total cost of sales, which correlates to Atlantic’s 44% of
total sales.  In addition, Atlantic’s cost of sales increased
$2,500,000 or 62% from 2007 to 2008 and contributes to the overall increase in
cost of sales. This increase occurred primarily because we purchased
Atlantic at the end of the first quarter of 2007 and its operations were not
being fully integrated until later in the second quarter of
2007.  FuGEN’s cost of sales decreased by $343,000, or 18%, for
the year ended December 31, 2008 as compared to the year ended December 31,
2007. FuGEN reduced headcount related to the revenue reduction in this segment
caused by a reduced number of consulting contracts with the State
Department.
 
 The GIS
segment margin decreased to $1,113,000 or 14% from $2,640,000 or 59% in
2007.   In 2008, the GIS segment had significantly more production
contracts; we earn a lower margin on GIS production contracts compared to
subscription services.  Our percentage margins decreased as Pixxures’
results (which are production contracts), were included for a full twelve months
in 2008 instead of only three months in 2007.   Additionally, both of
our airplanes were grounded during the majority of the fourth quarter of 2008,
which resulted in significant costs and no offsetting revenues.  In
2009, we anticipate margins will improve.
 
 We
consolidated our JIS segment into our consulting segment as of the end of 2006,
and subsequently sold it in the first quarter of 2007.  In 2007 the
JIS segment had net income of $74,000 as a result of the sale of its
assets.  There was no corresponding amount for 2008.
 
 Compensation
 
 Our
administrative compensation expense decreased by $148,000, or 6%, during 2008 as
compared to 2007.   This decrease was primarily a result of an
increase of Premier billable staff following the merger of Land Links operations
into those of Premier. This was offset by $363,000 in net compensation expense
recorded during 2008 related to restricted stock units to employees and
contractors.
 
 Amortization
of intangibles
 
 During
2008, we incurred $2,176,000 of amortization of intangibles resulting from
acquisitions of Land Links, Atlantic and Pixxures.  There was a full
year of amortization in 2008.  During 2007, this expense was
$1,291,000, consisting of twelve months of Land Links’ intangibles amortization,
ten months of Atlantic’s intangibles amortization, and three months of Pixxures’
intangibles amortization.
 
 During
the year ended December 31, 2008, we recorded a customer relationship intangible
impairment loss of $618,000, with none during the year ended December 31,
2007.
 
  -
34 -
  Investor
relations expense
 
 During
the year ended December 31, 2008, we incurred $85,000 of investor relations
expense, compared to $1,253,000 during the year ended December 31,
2007.  In October, 2008, we entered into a consulting agreement with
Wakabayashi Fund, LLC to providecommunications and public relations services during the fourth quarter of
2008.  As consideration for these services, we issued 166,667 shares
of our restricted common stock to Wakabayashi.  Because of the
contract terms, we charged the entire value of the agreement to expense in the
fourth quarter of 2008.  In January 2007, we engaged the services of
three investor relations firms (Capital Group Communications, Inc. (“Capital”),
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
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.
 
 Legal,
accounting and outside services
 
 We
continued to experience increases in our legal, accounting and outside services
as we continue to execute our business plan.  Our legal, accounting
and outside services expense include  expenses related to the cost of
being a public entity, valuation of potential acquisitions, fund raising and
compliance with new regulations applicable to smaller reporting
companies.  This expense increased by $191,000, or 17%, during 2008,
compared to 2007.  The primary element of this expense is the cost of
being a public entity that totaled $833,000 during 2008.  This
included $343,000 of auditing and outside accounting fees, $157,000 of legal
expenses, $100,000 in costs related to fund raising, $31,000 in SEC filing fees
and $107,000 in Board fees.  Director and officer insurance during
2008 was $31,000.  During 2007 we 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
of Director fees, and $37,000 for acquisition valuation
services.  Director and officer insurance during 2007 was
$36,000.
 
 Other
expense
 
 During
the year ended December 31, 2008, we incurred $2,385,000 of other selling and
administrative expense, compared to $1,591,000 during the year ended December
31, 2007, an increase of $794,000, or 50%.  These expenses include
depreciation, stock issued for services, insurance, rent, marketing, supplies
and other similar expenses.  The increase was primarily due to the
addition of selling and administrative expense of the newly acquired Atlantic
and Pixxures subsidiaries, which included $318,000 of depreciation expense of
airplane and related equipment of the LandPixx subsidiary. In addition,
stock compensation related to director fees was $91,000 for year ended December
31, 2008.  The increase related to the newly acquired entities was
also due to a $283,000 increase in insurance, a $276,000 increase in office
rent, a $104,000 increase in telephone, a $95,000 increase in licenses and fees,
and a $90,000 increase in supplies. These increases were offset by other minor
miscellaneous decreases in other expense.  In order to reduce our
expense going forward, we have consolidated our Premier and Pixxures
subsidiaries into a single facility.
 
  -
35 -
  We expect
our operating expense to increase further in the future as we execute our
business plan.
 
 Interest
Expense
 
 Interest
expense was $228,000 and $42,000 in 2008 and 2007, respectively.  
This included interest accrued on our line of credit and notes payable to fund
our operating losses and related to the purchase of the airplane by
LandPixx.  We also had minor amounts of offsetting interest
income.
 
 We had
$23,000 of income tax expense for the year ended December 31, 2008, compared to
$17,000 for the year ended December 31, 2007, an increase of 35%.
 
 Future
Plans
 
 Our
expansion will be driven by a combination of organic growth and acquisitions in
both our consulting and GIS segments. We expect that growth in our GIS segment
will be founded upon the acquisition of other companies that provide related
critical infrastructure information that can be combined with this segment’s
existing database products. This should result in an expansion of the GIS
segment’s customer base into additional federal and state agencies, and
additional regional oil and gas production companies to which the segment does
not already sell, and further product penetration into the existing customer
base.
 
 We expect
that growth in the consulting segment will be founded upon the acquisition of
other companies, such that we can use the acquired companies’ sales personnel to
cross-sell services to 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 with existing
federal customers and an expansion into additional federal
agencies.  We are particularly interested in acquiring companies that
provide strategic and technical consulting services to the national intelligence
community.
 
 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, revenue or expense, results of operations, liquidity, capital
expenditures or capital resources that are material to
investors.
  -
36 -
  ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
 
 TABLE
OF CONTENTS
  PageIndependent
      Auditors’ Report
                          38Consolidated
      Balance Sheet as of December 31, 2008 and December 31,
2007
                          39Consolidated
      Statement of Income for the years ended December 31, 2008 and December 31,
      2007
                          40Consolidated
      Statement of Stockholders’ Equity for the years ended December 31, 2008,
      and December 31, 2007
                          41Consolidated
      Statement of Cash Flows for the years ended December 31, 2008 and December
      31, 2007
                          42Notes
      to Consolidated Financial Statements
                          43
 
  -
37 -
    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, 2008 and 2007, and the related statements of operations,
stockholders’ equity and cash flows for the years ended December 31, 2008 and
2007. 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, 2008 and 2007, and the results of their operations and their cash
flows for the years ended December 31, 2008 and 2007 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 13,
2009
 Denver,
Colorado
 
 
 -
38 -
  
 Xedar
Corporation
 Consolidated
Balance Sheet
 
 December
      31,
                                                              
                                                              
                                                              December
      31,2008
                                                              
                                                              
                                                              2007AssetsCurrent
      AssetsCash
      and cash equivalents
                                                              
                                                              $
                                                              771,000
                                                              
                                                              
                                                              $
                                                              432,000Trade
      accounts receivable, net of allowance for doubtful accounts of $9,000 and
      $10,000, respectively
                                                              
                                                              
                                                              2,602,000
                                                              
                                                              
                                                              
                                                              2,749,000Unbilled
      revenue
                                                              
                                                              
                                                              183,000
                                                              
                                                              
                                                              
                                                              182,000Related
      party receivable
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              272,000Other
      current assets
                                                              
                                                              
                                                              230,000
                                                              
                                                              
                                                              
                                                              165,000Total
      Current Assets
                                                              
                                                              
                                                              3,786,000
                                                              
                                                              
                                                              
                                                              3,800,000Property
      and equipment, net
                                                              
                                                              
                                                              1,824,000
                                                              
                                                              
                                                              
                                                              1,926,000Intangible
      assets, net
                                                              
                                                              
                                                              7,934,000
                                                              
                                                              
                                                              
                                                              10,728,000Goodwill
                                                              
                                                              
                                                              7,939,000
                                                              
                                                              
                                                              
                                                              7,954,000Total
      Assets
                                                              
                                                              $
                                                              21,483,000
                                                              
                                                              
                                                              $
                                                              24,408,000Liabilities
      and Stockholders' EquityCurrent
      LiabilitiesAccounts
      payable
                                                              
                                                              $
                                                              1,062,000
                                                              
                                                              
                                                              $
                                                              1,126,000Deferred
      revenue
                                                              
                                                              
                                                              710,000
                                                              
                                                              
                                                              
                                                              639,000Accrued
      compensation
                                                              
                                                              
                                                              426,000
                                                              
                                                              
                                                              
                                                              466,000Accrued
      liabilities
                                                              
                                                              
                                                              168,000
                                                              
                                                              
                                                              
                                                              171,000Current  portion
      of capital lease obligations
                                                              
                                                              
                                                              143,000
                                                              
                                                              
                                                              
                                                              -Line
      of credit
                                                              
                                                              
                                                              1,000,000
                                                              
                                                              
                                                              
                                                              1,321,000Related
      party note payable
                                                              
                                                              
                                                              1,700,000
                                                              
                                                              
                                                              
                                                              -Current
      portion of notes payable
                                                              
                                                              
                                                              115,000
                                                              
                                                              
                                                              
                                                              459,000Total
      Current Liabilities
                                                              
                                                              
                                                              5,324,000
                                                              
                                                              
                                                              
                                                              4,182,000Capital
      lease obligations – less current portion
                                                              
                                                              
                                                              81,000
                                                              
                                                              
                                                              
                                                              -Notes
      payable - less current portion
                                                              
                                                              
                                                              1,321,000
                                                              
                                                              
                                                              
                                                              1,094,000Total
      Liabilities
                                                              
                                                              
                                                              6,726,000
                                                              
                                                              
                                                              
                                                              5,276,000Commitments
      and contingencies (See Note 21)Stockholders'
      EquityCommon
      stock, no par value, 50,000,000 shares authorized;  34,413,394
      and 26,186,646 shares issued and outstanding, respectively
                                                              
                                                              
                                                              27,300,000
                                                              
                                                              
                                                              
                                                              25,264,000Unearned
      compensation
                                                              
                                                              
                                                              (49,000
                                                              )
                                                              
                                                              
                                                              (98,000
                                                              )Stockholder
      note receivable
                                                              
                                                              
                                                              (211,000
                                                              )
                                                              
                                                              
                                                              (202,000
                                                              )Accumulated
      deficit
                                                              
                                                              
                                                              (12,283,000
                                                              )
                                                              
                                                              
                                                              (5,832,000
                                                              )Total
      Stockholders' Equity
                                                              
                                                              
                                                              14,757,000
                                                              
                                                              
                                                              
                                                              19,132,000Total
      Liabilities and Stockholders' Equity
                                                              
                                                              $
                                                              21,483,000
                                                              
                                                              
                                                              $
                                                              24,408,000
  See
Financial Statement Notes
  -
39 -
 
 
 Xedar
Corporation
 Consolidated
Statement of
Operations
 
 Year
      EndedDecember
      312008
                                          
                                          
                                          2007Sales
                                          
                                          $
                                          17,755,000
                                          
                                          
                                          $
                                          11,142,000Cost
      of sales (principally consulting compensation)
                                          
                                          
                                          14,891,000
                                          
                                          
                                          
                                          7,713,000Gross
      profit
                                          
                                          
                                          2,864,000
                                          
                                          
                                          
                                          3,429,000Selling
      and Administrative ExpenseCompensation
      and payroll taxes
                                          
                                          
                                          2,500,000
                                          
                                          
                                          
                                          2,648,000Amortization
      of intangibles and impairment
                                          
                                          
                                          2,794,000
                                          
                                          
                                          
                                          1,291,000Investor
      relations expense
                                          
                                          
                                          85,000
                                          
                                          
                                          
                                          1,253,000Legal,
      accounting and outside services
                                          
                                          
                                          1,317,000
                                          
                                          
                                          
                                          1,126,000Other
      expense
                                          
                                          
                                          2,385,000
                                          
                                          
                                          
                                          1,591,000Total
      Selling and Administrative Expense
                                          
                                          
                                          9,081,000
                                          
                                          
                                          
                                          7,909,000Net
      Operating Loss
                                          
                                          
                                          (6,217,000
                                          )
                                          
                                          
                                          (4,480,000
                                          )Other
      ExpenseInterest
      expense, net
                                          
                                          
                                          (212,000
                                          )
                                          
                                          
                                          (16,000
                                          )Loss
      from continuing operations before income tax and minority
      interest
                                          
                                          
                                          (6,429,000
                                          )
                                          
                                          
                                          (4,496,000
                                          )Income
      tax expense
                                          
                                          
                                          (23,000
                                          )
                                          
                                          
                                          (17,000
                                          )Minority
      interest in net loss of consolidated subsidiary
                                          
                                          
                                          -
                                          
                                          
                                          
                                          72,000Loss
      from continuing operations
                                          
                                          
                                          (6,452,000
                                          )
                                          
                                          
                                          (4,441,000
                                          )Discontinued
      operations, net of income tax effect:Loss
      from discontinued Justice InformationSystems
      segment
                                          
                                          
                                          -
                                          
                                          
                                          
                                          74,000Net
      Loss
                                          
                                          $
                                          (6,452,000
                                          )
                                          
                                          $
                                          (4,367,000
                                          )Net
      Loss per Share – Basic and Diluted:Loss
      per share Continuing Operations
                                          
                                          $
                                          (0.24
                                          )
                                          
                                          $
                                          (0.19
                                          )Loss
      per share Discontinued Operations
                                          
                                          $
                                          0.00
                                          
                                          
                                          $
                                          0.00
                                          )Net
      loss per share
                                          
                                          $
                                          (0.24
                                          )
                                          
                                          $
                                          (0.19
                                          )Shares
      Used in Computing Net Loss per Share:Basic
      and Diluted
                                          
                                          
                                          26,956,180
                                          
                                          
                                          
                                          23,357,153
  See
Financial Statement Notes
  -
40 -
  Xedar
Corporation
 Consolidated
Statement of Changes in Stockholders' Equity
 Years
Ended December 31, 2008 and December 31, 2007
 
 Common
      StockShares
                                                                                                          
                                                                                                          
                                                                                                          Amount
                                                                                                          
                                                                                                          
                                                                                                          StockholderNote
      Receivable
                                                                                                          
                                                                                                          
                                                                                                          UnearnedCompensation
                                                                                                          
                                                                                                          
                                                                                                          AdditionalPaid-InCapital
                                                                                                          
                                                                                                          
                                                                                                          AccumulatedDeficit
                                                                                                          
                                                                                                          
                                                                                                          TotalBalance
      - December 31, 2006
                                                                                                          
                                                                                                          
                                                                                                          18,031,000
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          3,543,000
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          (1,465,000
                                                                                                          )
                                                                                                          
                                                                                                          $
                                                                                                          2,077,000Issuance of 6,475,584 shares tob
                                                                                                            uy
      Land Links Company,
                                                                                                            Atlantic
      Systems, Inc., and
                                                                                                            Pixxures,
      Inc.
                                                                                                          
                                                                                                          
                                                                                                          6,476,000
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          19,849,000
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (195,000
                                                                                                          )
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          19,654,000Issuance of 1,260,000 shares for
                                                                                                            professional
      services, director
                                                                                                            fees,
      and to employees
                                                                                                          
                                                                                                          
                                                                                                          1,270,000
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          1,253,000
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          1,253,000Recognition
      of stock option
                                                                                                            expense for
      exchange of
                                                                                                            options
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          14,000
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          14,000Unamortized
      balance of share-
                                                                                                            based
      compensation
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (98,000
                                                                                                          )
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (98,000
                                                                                                          )Conversion
      of Baum/Sagebrook
                                                                                                            debt
      to stock
                                                                                                          
                                                                                                          
                                                                                                          280,000
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          280,000
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          280,000Settlement
      of Pixxures acquisition
                                                                                                            liability
                                                                                                          
                                                                                                          
                                                                                                          131,000
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          326,000
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          326,000Interest
      accrued on shareholder
                                                                                                            note
      receivable
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (7,000
                                                                                                          )
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (7,000
                                                                                                          )Net
      Loss
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (4,367,000
                                                                                                          )
                                                                                                          
                                                                                                          
                                                                                                          (4,367,000
                                                                                                          )Balance
      - December 31, 2007
                                                                                                          
                                                                                                          
                                                                                                          26,187,000
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          25,264,000
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (202,000
                                                                                                          )
                                                                                                          
                                                                                                          
                                                                                                          (98,000
                                                                                                          )
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (5,832,000
                                                                                                          )
                                                                                                          
                                                                                                          
                                                                                                          19,132,000Issuance
      of 105,500 shares for
                                                                                                            conversion of
      restricted
                                                                                                            stock
      units
                                                                                                          
                                                                                                          
                                                                                                          106,000
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -Share
      based compensation for
                                                                                                            restricted
      stock units issued
                                                                                                            for
      professional services
                                                                                                            and to
      employees
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          362,000
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          362,000Issuance
      of 201,982 shares for
                                                                                                            professional
      services and
                                                                                                            director
      fees
                                                                                                          
                                                                                                          
                                                                                                          202,000
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          127,000
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          127,000Shares
      issued to former Pixxures
                                                                                                            shareholders
      in stock
                                                                                                            true-up
      adjustment
                                                                                                          
                                                                                                          
                                                                                                          4,819,000
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -Private
      equity sale of common
                                                                                                            stock,
      net of costs of $3,000
                                                                                                          
                                                                                                          
                                                                                                          3,100,000
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          612,000
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          612,000Value
      of warrants issued with private
                                                                                                            equity
      sale
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          935,000
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          935,000Amortization
      of prior year common
                                                                                                            stock
      issued
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          49,000
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          49,000Interest
      accrued on shareholder
                                                                                                            note
      receivable
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (9,000
                                                                                                          )
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (9,000
                                                                                                          )Net
      Loss
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          
                                                                                                          (6,452,000
                                                                                                          )
                                                                                                          
                                                                                                          
                                                                                                          (6,452,000
                                                                                                          )Balance
      - December 31, 2008
                                                                                                          
                                                                                                          
                                                                                                          34,413,000
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          27,300,000
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          (211,000
                                                                                                          )
                                                                                                          
                                                                                                          $
                                                                                                          (49,000
                                                                                                          )
                                                                                                          
                                                                                                          $
                                                                                                          -
                                                                                                          
                                                                                                          
                                                                                                          $
                                                                                                          (12,283,000
                                                                                                          )
                                                                                                          
                                                                                                          $
                                                                                                          14,757,000
 See
Financial Statement Notes
 -
41 -
  Xedar
Corporation
 Consolidated
Cash Flow Statement
 
 Year
      EndedDecember
      31,2008
                                                      
                                                      
                                                      2007Cash
      flow From Operating Activity:Net
      Loss
                                                      
                                                      $
                                                      (6,452,000
                                                      )
                                                      
                                                      $
                                                      (4,367,000
                                                      )Adjustments
      to reconcile net loss to net cash provided by operating
      activityStock
      and restricted stock units issued for services
                                                      
                                                      
                                                      539,000
                                                      
                                                      
                                                      
                                                      1,155,000Stock
      option expense for exchange of options
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      14,000Depreciation
      and amortization of property and equipment
                                                      
                                                      
                                                      521,000
                                                      
                                                      
                                                      
                                                      244,000Amortization
      of intangibles and impairment
                                                      
                                                      
                                                      2,794,000
                                                      
                                                      
                                                      
                                                      1,291,000Loss
      on disposition of property and equipment
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      2,000Accrued
      interest on note receivable from stockholder
                                                      
                                                      
                                                      (9,000
                                                      )
                                                      
                                                      
                                                      (7,000
                                                      )Changes
      in current assets and liabilities:(Increase)
      decrease in:Trade
      accounts receivable
                                                      
                                                      
                                                      147,000
                                                      
                                                      
                                                      
                                                      (198,000
                                                      )Unbilled
      revenue
                                                      
                                                      
                                                      (1,000
                                                      )
                                                      
                                                      
                                                      (63,000
                                                      )Related
      party receivable
                                                      
                                                      
                                                      272,000
                                                      
                                                      
                                                      
                                                      (281,000
                                                      )Other
      assets
                                                      
                                                      
                                                      (50,000
                                                      )
                                                      
                                                      
                                                      143,000Increase
      (decrease) in:Accounts
      payable
                                                      
                                                      
                                                      (64,000
                                                      )
                                                      
                                                      
                                                      321,000Accrued
      compensations
                                                      
                                                      
                                                      (40,000
                                                      )
                                                      
                                                      
                                                      -Accrued
      liabilities and other
                                                      
                                                      
                                                      (3,000
                                                      )
                                                      
                                                      
                                                      33,000Deferred
      revenue
                                                      
                                                      
                                                      71,000
                                                      
                                                      
                                                      
                                                      (165,000
                                                      )Net
      Cash (Used) by Operating Activity
                                                      
                                                      
                                                      (2,275,000
                                                      )
                                                      
                                                      
                                                      (1,878,000
                                                      )Cash
      Flow from Investing ActivityAcquisition
      of property and equipment
                                                      
                                                      
                                                      (155,000
                                                      )
                                                      
                                                      
                                                      (419,000
                                                      )Acquired
      cash from Atlantic and Pixxures
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      524,000Cash
      from consolidation of LandPixx
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      151,000Net
      Cash Provided (Used) by Investing Activity
                                                      
                                                      
                                                      (155,000
                                                      )
                                                      
                                                      
                                                      256,000Cash
      Flow from Financing ActivityProceeds
      from private equity sale
                                                      
                                                      
                                                      1,550,000
                                                      
                                                      
                                                      
                                                      -Costs
      paid for private equity sale
                                                      
                                                      
                                                      (3,000
                                                      )
                                                      
                                                      
                                                      -Proceeds
      from lines of credit
                                                      
                                                      
                                                      157,000
                                                      
                                                      
                                                      
                                                      1,321,000Payments
      on lines of credit
                                                      
                                                      
                                                      (478,000
                                                      )
                                                      
                                                      
                                                      (400,000
                                                      )Payments
      on long-term notes payable
                                                      
                                                      
                                                      (1,654,000
                                                      )
                                                      
                                                      
                                                      (221,000
                                                      )Proceeds
      from long-term notes payable
                                                      
                                                      
                                                      1,537,000
                                                      
                                                      
                                                      
                                                      -Proceeds
      from a related party note payable
                                                      
                                                      
                                                      2,800,000
                                                      
                                                      
                                                      
                                                      -Payments
      on related party note payable
                                                      
                                                      
                                                      (1,100,000
                                                      )
                                                      
                                                      
                                                      -Payments
      on capital lease obligations
                                                      
                                                      
                                                      (40,000
                                                      )
                                                      
                                                      
                                                      -Net
      Cash Provided by Financing Activity
                                                      
                                                      
                                                      2,769,000
                                                      
                                                      
                                                      
                                                      700,000Net
      Increase (Decrease) Increase in Cash
                                                      
                                                      
                                                      339,000
                                                      
                                                      
                                                      
                                                      (922,000
                                                      )Cash
      and Cash Equivalents - Beginning of year
                                                      
                                                      
                                                      432,000
                                                      
                                                      
                                                      
                                                      1,355,000Cash
      and Cash Equivalents - End of year
                                                      
                                                      $
                                                      771,000
                                                      
                                                      
                                                      $
                                                      432,000Supplemental
      Cash Flow DisclosureNon-Cash
      TransactionsIssuance
      of 360,000 shares to buy Land Links
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      360,000Issuance
      of 4,381,000 shares to buy Atlantic Systems, Inc.
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      13,359,000Issuance
      of 1,734,782 shares to buy Pixxures, Inc.
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      6,130,000Note
      receivable from shareholder acquired in connection with purchase of
      Atlantic Systems
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      202,000Conversion
      of debt to stock
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      280,000Bonus
      to Pixxures' officers
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      326,000Purchase
      of fixed assets through capital lease obligations
                                                      
                                                      $
                                                      264,000
                                                      
                                                      
                                                      $
                                                      -Cash
      paid for interest
                                                      
                                                      $
                                                      228,000
                                                      
                                                      
                                                      $
                                                      16,000
  See
Financial Statement Notes
  -
42 -
  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), a Delaware corporation, began operation in
1994.  In December 2006, Premier acquired Xedar Corporation (Xedar) in
a reverse merger.  We accounted for the transaction as a reverse
ac­quisition of Xedar by Premier.  Premier was deemed to be the
purchaser and surviving company for accounting pur­poses.
 
 Our
overall mission is to enhance homeland and cyberspace defense and
security.  We do so by providing strategic consulting services and
critical infrastructure information and systems to our customers.  We
operate in two segments.  Our consulting segment includes our wholly
owned FuGEN, Inc. (Fugen) and Atlantic Systems Corporation (Atlantic)
subsidiaries.  This segment provides strategic consulting services to
the national intelligence community and the Department of Defense.  It
also provides independent verification and validation, information assurance,
and consulting services to several federal agencies. We are a prime contractor
to the Department of Defense, the national intelligence agencies, and the
Internal Revenue Service.  We serve the U.S. Agency for International
Development and the U.S. State Department as a subcontractor.  We
typically incur a modest decline in consulting revenue during the fourth quarter
of each year, because of a smaller number of business days than in other
quarters that is driven by a high concentration of mandatory federal government
holidays.
 
 Our
geographical information systems (GIS) segment includes our wholly owned
Premier, Pixxures, Inc. (Pixxures) and LandPixx, LLC (LandPixx)
subsidiaries.  This segment engages in two
activities.  First, it collects digital aerial photographs of various
areas within the United States, enhances the resulting images, and sells them to
both commercial and government customers.  Second, it 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.  The segment’s client base includes the Bureau of Land
Management (BLM), the Bureau of Reclamation, the National Park Service, and more
than 200 commercial oil and gas customers.  Approximately 15% of the
segment revenue comes from subscriptions to database products, and 85% from
aerial imagery and production services.  We typically incur a modest
decline in revenue related to GIS production services during the fourth quarter
of each year, because of reduced client activity levels and a smaller number of
business days than in other quarters.
 
 We own
one airplane and lease another for our aerial imagery collection
activity.  Each plane mounts a digital sensor that collects digital
images of the surface.  We then process these images to correct
errors, and seamlessly link the images to form larger-scale
imagery.  We sell the images directly to customers, and also as a
subcontractor to the federal government.
 
 Customers
who use the land database products typically access information through an
internet site.  The database products provide database queries,
reports, and digital maps for over 13,000,000 BLM, state, and county 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).
  -
43 -
  Xedar
Corporation
 Notes
to Consolidated Financial Statements
 
 
 The
segment production services provide 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,
extract information from aerial imagery, or to integrate disparate data
sets.
 
 Until we
sold it in February 2007, we had a Justice Information Systems (JIS) segment
which created and installed court case management systems.  This
segment was folded into the consulting segment at the end of 2006 and
subsequently sold in February 2007.
 
 On
January 1, 2007, we acquired Land Links Company Ltd. (Land Links).  On
March 22, 2007, we acquired all of the outstanding stock of
Atlantic.  On October 1, 2007, we acquired all of the outstanding
stock of Pixxures.  Until December 31, 2008, Pixxures owned a 50%
interest in LandPixx.  On December 31, 2008, we acquired 100% of LandPixx
and LandPixx became our wholly owned subsidiary. We have always consolidated
LandPixx because we control the entity.
 
 Principles
of Consolidation and Basis of Presentation
 
 The
accompanying consolidated financial statements include the accounts of Xedar and
its subsidiaries, FuGEN, Inc. (FuGEN), Land Links Company Ltd. (Land Links),
Pixxures, Inc. (Pixxures), Atlantic Systems Corporation (Atlantic), Premier,
LandPixx.  We have eliminated all significant intercompany balances and
transactions in consolidation.
 
 The
accompanying financial statements are prepared in accordance with accounting
principles generally accepted in the United States and include, in our opinion,
all adjustments, consisting only of normal recurring adjustments, necessary in
order to make the financial statements not misleading.
 
 We
include results from operations of acquired companies in our consolidated
financial statements from their respective effective acquisition
dates.
 
 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.
   -
44 -
  Xedar
Corporation
 Notes
to Consolidated Financial Statements
 
 
 We
received 23% of our 2008 sales from two customers who each comprised more than
10% of our sales, totaling $2,202,000 and $1,874,000, respectively. One of
these customers was in our consulting segment and one was in our GIS segment.
For the year ended December 31, 2008, two individual customers each
accounted for 17% and 13% of accounts receivable, respectively.  Both
of these customers were in the consulting segment.  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.   The
revenue and accounts receivable from all of these customers in 2007 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 1 to 7 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 our annual impairment tests of goodwill and other intangible assets
for 2007 and found no impairment.
  -
45 -
  Xedar
Corporation
 Notes
to Consolidated Financial Statements
 
 
 Our
annual impairment tests of goodwill for 2008 resulted in no
impairment.  We tested Atlantic’s goodwill for impairment in the first
quarter of 2008.  The recorded goodwill related to Pixxures and Fugen
was reviewed for impairment at December 31, 2008 for their annual impairment
tests.   At December 31, 2008, we performed an additional review
of Atlantic’s goodwill impairment which was required since the Company’s market
capitalization periodically fell below book value.
 
 During
the first quarter of 2008, a contract with a federal intelligence agency that
Atlantic was expecting was awarded to another company.  Accordingly,
in March 2008, we recorded an impairment loss on our customer relationship
intangible for Atlantic of $618,000 for Atlantic related to the impact of this
lost contract.   This impairment charge reduced Atlantic’s
customer relationship intangible from $5,611,000 to $4,993,000.  No
events or changes in circumstances occurred during 2008 which indicated that the
carrying amounts of any of our assets may not be recoverable.
 
 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.
 
 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 our 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.
   -
46 -
  Xedar
Corporation
 Notes
to Consolidated Financial Statements
 
 
 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 $4.9 million and $1.5 million for the year ended December 31, 2008
and 2007, respectively.
  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 for each of the years ended December 31, 2008 and
2007.  We recorded $710,000 of deferred revenue related to
subscription revenues at December 31, 2008.
 
 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 $10.5 million and
$6.8 million for the years ended December 31, 2008 and 2007,
respectively.
 
  -
47 -
  Xedar
Corporation
 Notes
to Consolidated Financial Statements
 
 
 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 $183,000 and $182,000 at December 31,
2008 and 2007, respectively, relate to any contract where revenue has been
recognized, but the customer has not yet been invoiced.  Revenue from
fixed price consulting contracts was approximately $1.0 million and $1.4 million
for the years ended December 31, 2008 and 2007, respectively.
 
 Advertising
 
 We
expense advertising cost as we incur it.  We incurred $17,000
advertising expense in 2008. We incurred $11,000 advertising expense in
2007.
 
 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 stock options, warrants and restricted stock units in the
calculation of diluted weighted average shares outstanding, because the effect
of such securities would have been anti-dilutive.  Accordingly, our
basic and diluted weighted average shares outstanding were the same for the
periods reported.
 
  -
48 -
  Xedar
Corporation
 Notes
to Consolidated Financial Statements
 
 
 Use of
Estimates
 
 The
preparation of financial statements in conformity with generally accepted
accounting standards (GAAP) 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, 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 significantly from those
estimates.
 
 Share-Based
Payment
 
 We
account for share-based payments in accordance with Statement 123R of the
Financial Accounting Standards Board (FASB), “Share-Based
Payments”.  Under the fair value recognition provisions of Statement
123R, we measure share-based payments at the grant date based on the fair value
of the award and record the payments as expense on a straight-line basis over
the requisite service period.  We determine compensation expense for
options granted to non-employees in accordance with Statement 123R as the fair
value of the consideration received or the fair value of the equity instruments
issued, whichever is more reliably measured.
 
 The
valuation provisions of Statement 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, January 1, 2006, over the remaining service periods using the
compensation expense previously estimated.
 
 Reclassifications
 
 We have
reclassified certain 2007 financial statement data to conform to the 2008
presentation. These
reclassifications primarily relate to employee benefits and director fees which
are now presented in different categories within selling and administrative
expense than they were in our prior year filing.
 
 Recent
Accounting Pronouncements
 
 The
Emerging Issues Task Force issued “Issue 08-7, Accounting for Defensive
Intangible Assets” in September 2008.  This consensus requires
acquiring entities to record defensive intangible assets (those assets not
intended for use, but to be restricted from use by competitors) as separate
accounting units.  This has no immediate impact on our reported
results, but may have an impact when recording the value of new
acquisitions.
 
  -
49 -
  Xedar
Corporation
 Notes
to Consolidated Financial Statements
  
  The
Emerging Issues Task Force issued “Issue 07-5, Determining Whether an Instrument
is Indexed to an Entity’s Own Stock” in June 2008.  This consensus
requires that a company record a warrant as a liability and subsequently engage
in mark to market accounting, where the company can record either a gain or loss
in every subsequent reporting period, depending on the closing price of the
stock on the last day of each reporting period.  This requirement only
applies if the warrants contain “down-round” provisions that protect holders
from declines in the stock price.  In essence, the requirement will be
triggered by any warrant provision that will subsequently alter either the
quantity of warrants issued or their price. The reason for this treatment is
that such conditions are a type of guarantee, which is inconsistent with the
nature of equity. As of the quarter ended March 31, 2009, we will begin mark to
market accounting for the warrants we issued during the year ended December 31,
2008.  We are still evaluating the value of the impact to our
financial position.
  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 anticipate that
SFAS 141 will not materially affect our financial position or results of
operations except on new acquisitions after January 1, 2009.
  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 anticipate that SFAS 160 will not materially
affect our financial position or results of operations.
 
 In
September 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value
Measurements”. SFAS 157 defines fair value, establishes a framework for
measuring fair value in accounting principles generally accepted in the U.S. and
expands disclosures about fair value measurements. SFAS 157 was effective for
financial statements issued for fiscal years beginning after November 15,
2007, and interim periods within those fiscal years. On January 1, 2008 we
only partially adopted the provisions of SFAS 157 because of the issuance of
FASB Staff Position FAS 157-2, “Effective Date of FASB Statement No. 157”, which
allows companies to delay the effective date of SFAS 157 for non-financial
assets and liabilities. The partial adoption had no material impact on our
consolidated financial position and results of operations.  We believe that
the remaining provisions will have no material effect on our financial position
or results of operations when they become effective on January 1,
2009.
  -
50 -
  Xedar
Corporation
 Notes
to Consolidated Financial Statements
 
  Note
2.   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.   We allocated the full $360,000 purchase price to
non-compete agreements.  We recorded no liabilities and no other
assets in the acquisition.
   Note
3.   Atlantic Systems
 
 On March
22, 2007 we acquired all of the outstanding stock of Atlantic, a Virginia
corporation.   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 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, non-compete agreements of $1,003,000 and
customer relationships 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.
  
 Note
4.  Pixxures
 
 On
October 1, 2007 we acquired Pixxures in a stock-for-stock
transaction.  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 Trigger Date was less than the average closing price.  The Trigger
Date was established by a majority of the Pixxures shareholders to be August 7,
2008. Based on the Trigger Date described of August 7, 2008, the final
measurement date of the 60 trading days was October 31, 2008.  Over
the 60 trading days, the average closing price of our stock was $0.8228,
resulting in issuance of 4,818,866 additional shares of our common
stock.  This included issuance of 4,481,545 shares as purchase true-up
as well as 289,132 and 48,189 additional shares, respectively,  issued
in satisfaction of bonuses to the former CEO and controller of Pixxures
discussed below.
 
 When we
issued the shares we recorded the current fair value of the additional shares.
We simultaneously reduced the amount previously recorded for securities issued
at the date of acquisition to the lower current value of those
securities.  Thus the two entries offset each other, other than to
record the increased number of shares issued and outstanding.
  -
51 -
  Xedar
Corporation
 Notes
to Consolidated Financial Statements
 
 
 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 $325,826 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.
  
 Note
5.  Discontinued Operations
 
 On March
1, 2007, the Company completed the sale of the Company’s Justice Information
Systems 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.
  
 Note
6.  Property and Equipment
  Property
      and equipment include the following
      approximate amounts:
                                                                                          
                                                                                          December
    31,2008
                                                                                          
                                                                                          2007Computer
      Equipment
                                                                                          
                                                                                          $
                                                                                          590,000
                                                                                          
                                                                                          $
                                                                                          530,000Software
                                                                                          
                                                                                          
                                                                                          427,000
                                                                                          
                                                                                          
                                                                                          429,000Airplane
      and Equipment
                                                                                          
                                                                                          
                                                                                          1,576,000
                                                                                          
                                                                                          
                                                                                          1,568,000Furniture
      and Fixtures
                                                                                          
                                                                                          
                                                                                          61,000
                                                                                          
                                                                                          
                                                                                          63,000Office
      Equipment
                                                                                          
                                                                                          
                                                                                          64,000
                                                                                          
                                                                                          
                                                                                          66,000Leasehold
      Improvements
                                                                                          
                                                                                          
                                                                                          19,000
                                                                                          
                                                                                          
                                                                                          13,000Less
      accumulated depreciation and amortization
                                                                                          
                                                                                          
                                                                                          (913,000
                                                                                          )
                                                                                          
                                                                                          (743,000
                                                                                          )Fixed
      assets, net
                                                                                          
                                                                                          $
                                                                                          1,824,000
                                                                                          
                                                                                          $
                                                                                          1,926,000
 
  -
52 -
  Xedar
Corporation
 Notes
to Consolidated Financial Statements
 
 
 Depreciation
and amortization expense (other than amortization of intangibles) for the years
ended December 31, 2008 and 2007  was $521,000
and  $244,0000, respectively, and is included in other selling and
administrative expenses of the statement of operations.
 
 
 Note
7.  Intangible Assets
 
 As of
December 31, 2008, we had $7,934,000 of intangible assets, net of
$3,467,000 of amortization.  As of December 31, 2007, we had
$10,728,000 of intangible assets, net of $1,291,000 of
amortization.  We acquired our intangibles in connection with our
purchases of Land Links, Atlantic and Pixxures.  See Notes 2, 3,
and 4.
 
 Intangible
      assets include the following
      approximate amounts:
                                Estimated
                                
                                Value
      as of
                                
                                
                                Value
      as ofUseful
      Life
                                
                                December
      31,
                                
                                
                                December
      31,(years)
                                
                                2008
                                
                                
                                2007Non-compete
      agreements acquired with purchase of Land Links
                                5
                                
                                $
                                360,000
                                
                                
                                $
                                360,000Customer
      contracts acquired with purchase of Atlantic
                                5
                                
                                
                                1,435,000
                                
                                
                                
                                1,435,000Non-compete
      agreements acquired with purchase of Atlantic
                                5
                                
                                
                                1,003,000
                                
                                
                                
                                1,003,000Customer
      relationships acquired with purchase of Atlantic
                                8
                                
                                
                                4,993,000
                                
                                
                                
                                5,611,000Trademark
      and trade name acquired with purchase of Pixxures
                                15
                                
                                
                                350,000
                                
                                
                                
                                350,000Web
      hosting and related technology acquired with purchase of
      Pixxures
                                1.5
                                
                                
                                893,000
                                
                                
                                
                                893,000Customer
      relationships acquired with purchase of Pixxures
                                8
                                
                                
                                2,367,000
                                
                                
                                
                                2,367,000Less
      accumulated amortization
                                
                                
                                
                                (3,467,000
                                )
                                
                                
                                (1,291,000
                                )Total
      intangible assets, net
                                
                                
                                $
                                7,934,000
                                
                                
                                $
                                10,728,000
 
 We
incurred $2,176,000 and $1,291,000 of amortization expense for the years ended
December 31, 2008 and 2007, respectively. We estimate that the aggregate
amortization expense in each of the five succeeding years, from 2009 through
2013, shall be $1,629,000, $1,480,000, $1,480,000, $1,002,000, $920,000 and
$1,423,000 thereafter.
 
 Note
8.  Goodwill
 
 As of
December 31, 2008, we had $7,939,000 of goodwill. As of December 31, 2007, we
had $7,954,000 of goodwill.
 
 The
following is a summary of changes in the carrying amount of goodwill for the
years ended December 31, 2008 and 2007:
  -
53 -
  Xedar
Corporation
 Notes
to Consolidated Financial Statements
 
 
  GoodwillBalance
      at December 31, 2007
                                    
                                    $
                                    7,954,000Miscellaneous
      purchase price adjustment
                                    
                                    
                                    (15,000
                                    )Balance
      at December 31, 2008
                                    
                                    $
                                    7,939,000
 
  Note
9.  Accrued Liabilities
  Accrued
liabilities include the following approximate amounts:
 December
    31,2008
                                                      
                                                      2007Accrued
      professional services
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      70,000Accrued
      taxes
                                                      
                                                      
                                                      76,000
                                                      
                                                      
                                                      
                                                      33,000Other
      accrued liabilities
                                                      
                                                      
                                                      92,000
                                                      
                                                      
                                                      
                                                      68,000Total
      accrued liabilities
                                                      
                                                      $
                                                      168,000
                                                      
                                                      
                                                      $
                                                      171,000
 
 Note
10.  Capital Lease
 
 We follow
the provisions of SFAS No. 13 “Accounting for Leases” in determining the
criteria for capital leases.  Leases that do not meet the criteria are
classified as operating leases and related rentals are charged to expense in the
year incurred.  We have capital leases for certain software and
equipment with a gross value of $264,000 at December 31, 2008.  At
December 31, 2008, future minimum lease payments under capital leases were as
follows (in thousands):
  Year
      Ending December 31,2009
                                      
                                      $
                                      143,0002010
                                      
                                      
                                      62,0002011
                                      
                                      
                                      19,000Total payments
                                      
                                      
                                      224,000Less amount representing interest
                                      
                                      
                                      (15,000
                                      )Present
      value of minimum lease payments at December 31, 2008
                                      
                                      $
                                      209,000
 
  -
54 -
  Xedar
Corporation
 Notes
to Consolidated Financial Statements
 
 
 The
current portion of capital lease obligations at December 31, 2008 and 2007
was
 $143,000
and $0, respectively.
 
 Note
11.  Debt
 
 Notes
payable include the following approximate amounts:
  December 31,2008
                                                                                    
                                                                                    
                                                                                    2007Current
      portion:Line
      of credit with KeyBank
                                                                                    
                                                                                    $
                                                                                    1,000,000
                                                                                    
                                                                                    
                                                                                    $
                                                                                    1,321,000Note
      payable to Bank of the West
                                                                                    
                                                                                    
                                                                                    115,000
                                                                                    
                                                                                    
                                                                                    
                                                                                    —Note
      payable to related party
                                                                                    
                                                                                    
                                                                                    1,700,000
                                                                                    
                                                                                    
                                                                                    
                                                                                    —Note
      payable to Silicon Valley Bank
                                                                                    
                                                                                    
                                                                                    —
                                                                                    
                                                                                    
                                                                                    
                                                                                    396,000Note
      payable to Biltmore Bank of Arizona
                                                                                    
                                                                                    
                                                                                    —
                                                                                    
                                                                                    
                                                                                    
                                                                                    63,000$
                                                                                    2,815,000
                                                                                    
                                                                                    
                                                                                    $
                                                                                    1,780,000N
      Non-current portion:Line
      of credit with KeyBank
                                                                                    
                                                                                    $
                                                                                    —
                                                                                    
                                                                                    
                                                                                    $
                                                                                    —Note
      payable to Bank of the West
                                                                                    
                                                                                    
                                                                                    1,321,000
                                                                                    
                                                                                    
                                                                                    
                                                                                    —Note
      payable to related party
                                                                                    
                                                                                    
                                                                                    —
                                                                                    
                                                                                    
                                                                                    
                                                                                    —Note
      payable to Silicon Valley Bank
                                                                                    
                                                                                    
                                                                                    —
                                                                                    
                                                                                    
                                                                                    
                                                                                    730,000N      Note
      payable to Biltmore Bank of Arizona
                                                                                    
                                                                                    
                                                                                    —
                                                                                    
                                                                                    
                                                                                    
                                                                                    364,000$
                                                                                    1,321,000
                                                                                    
                                                                                    
                                                                                    $
                                                                                    1,094,000
 
 The
aggregate annual payments of long-term debt outstanding as of December 31,
2008, are summarized as follows:
  2009
                                                  
                                                  $
                                                  2,815,0002010
                                                  
                                                  $
                                                  134,0002011
                                                  
                                                  $
                                                  143,0002012
                                                  
                                                  $
                                                  152,0002013
                                                  
                                                  $
                                                  892,000Total debt
                                                  
                                                  $
                                                  4,136,000
 
 We were
in compliance with all debt covenants as of December 31,
2008.
  -
55 -
  Xedar
Corporation
 Notes
to Consolidated Financial Statements
 
 
 Note
12.  Convertible Notes Payable to Related Parties
 
 We had
outstanding two notes payable to former shareholders at December 31,
2006.  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 had been repaid
or converted as of December 31, 2007.
  
 Note
13.  Lines of Credit
 
 We have a
business agreement with KeyBank National Association (“KeyBank”), pursuant to
which we have a $1,000,000 revolving line of credit.  We had fully
drawn this line of credit at December 31, 2008.  The line calls for
monthly interest payments, matures on April 15, 2009, and is secured by the
company’s assets and is subject to restrictive covenants.
 
 We
previously had a second line of credit with KeyBank for $500,000.  On
March 3, 2008, we borrowed $1,000,000 from our President and CEO, Hugh H.
Williamson III (see Note 15).  We used $478,000 of the loan to pay off
our second line of credit with KeyBank.
 
 The
average interest rate on the KeyBank lines of credit was 5.11% for the year
ended December 31, 2008.  The average dollar amount of the borrowing
was $1,040,000 for the year ended December 31, 2008.  The weighted
average interest rate was 5.17% and 7.71% for the years ended December 31, 2008
and 2007, respectively.
  
 Note
14. LandPixx Notes Payable
 
 On March
3, 2008, LandPixx borrowed $1,353,000 from Bank of the West, Evergreen, CO
(BOW).  LandPixx used the BOW loan to pay off most of its then
outstanding debt.  The BOW loan bears 6.19% interest, has 60 monthly
principal and interest 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.  The outstanding balance on the loan was $1,272,000 at December
31, 2008.
 
 Also on
March 3, 2008, LandPixx borrowed $185,000 from BOW, which it used to pay
off the remainder of its outstanding loans.  This BOW loan bears 5.385%
interest, has 59 monthly payments of principal and interest 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
outstanding balance on the loan was $165,000 at December 31, 2008.
 
 Both
loans are subject to restrictive covenants.
 
  -
56 -
  Xedar
Corporation
 Notes
to Consolidated Financial Statements
 
 
 Note
15.  Related Party Credit Facility
 
 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 was 3.25% at December 31,
2008.  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 demand.  During the year ended December 31,
2008, our board determined that additional working capital was necessary, and
Mr. Williamson agreed to loan us an additional $1,800,000, on the same terms and
conditions pursuant to which the March 3, 2008 loan was made.  During
October and November 2008, we paid down $1,100,000 of the balance.  We
have borrowed $1,700,000 under the loan as of December 31, 2008.  As
of December 31, 2008, $1.1 million is currently available.  We paid
Mr. Williamson $83,000 of interest associated with this note during
2008.
 
 During
2007, we borrowed $141,000 from our President and CEO.  All amounts
were paid in full by December 31, 2007, except for accrued interest at 8.25% of
$6,000.
  
 Note
16.  Other Related Party Transactions
 
 We
entered into a consulting arrangement with a shareholder and former President of
Atlantic.  The arrangement provides for a consulting retainer in the
amount of $11,000 per month.  The arrangement remains in effect until
the shareholder sells for specified proceeds a certain portion of shares he
obtained from our purchase of Atlantic.
 
 During
the year ended December 31, 2008 and 2007, we had related party revenues of
$231,000 and $100,000, respectively, from our former LandPixx joint venture
partner, related to their use of the aircraft and equipment.
 
 Pixxures
provided certain services to our former LandPixx joint venture
partner.  Consolidated revenues include such revenue for the year
ended December 31, 2008 and 2007 of $114,000 and $12,000,
respectively.  There was a corresponding accounts receivable of $0 and
$272,000 as of December 31, 2008 and 2007, respectively.  The accounts
receivable include amounts due prior to our acquisition of
Pixxures.
  
 Note
17.  Shareholder Note Receivable
 
 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 $202,000 note payable to Atlantic.
 We acquired the note, which bears 4.73% interest, as part of the
acquisition of Atlantic.  As of December 31, 2008, we have accrued
$16,000 of interest to date for the note.  We classify the note as a
contra to equity.  Interest is payable annually and principal is due
in full by December 31, 2015.
 
  -
57 -
  Xedar
Corporation
 Notes
to Consolidated Financial Statements
 
 
 Note  18.
LandPixx – Acquisition of Minority Interest
 
 On
December 31, 2008, we entered into an interest purchase agreement with
Landiscor, Inc., under which we acquired from Landiscor its 50% ownership in
LandPixx.  Immediately prior to consummation of the agreement, we
owned 50% of LandPixx through our wholly owned subsidiary,
Pixxures.  With the closing of the agreement through Pixxures, Inc.,
we now own 100% of LandPixx.  We have always consolidated LandPixx
because we control the entity.  As consideration for the sale of its
ownership interest in and to LandPixx, we have agreed to provide to Landiscor,
pursuant to the terms of the Agreement, a credit of $50,000 against the first
$50,000 of billings for services issued to Landiscor which shall be payable in
cash to Landiscor on December 31, 2009 if the credit has not been used by that
time.  We also granted to Landiscor an irrevocable, perpetual,
non-exclusive right to the object and source code for our eNavigator software
application, as well as various computer hardware, a pre-defined list of
software upgrades, and 80 hours of software developer time to assist with system
installation.  The value of these items was deemed to be
deminimus.  We deemed that all assets and liabilities assumed were
already included in our books at fair value.  Due to the insignificant
amount of purchase consideration and that no intangible assets were identified,
no amounts were recorded as a result of this agreement.
  
 Note
19.  Income Tax
 
 Our
      income tax provision is:12/31/2008
                                                          
                                                          
                                                          12/31/2007Current
      provision:Federal
                                                          
                                                          $
                                                          -
                                                          
                                                          
                                                          $
                                                          -State
      and local
                                                          
                                                          
                                                          23,000
                                                          
                                                          
                                                          
                                                          17,000Total
      current provision
                                                          
                                                          
                                                          23,000
                                                          
                                                          
                                                          
                                                          17,000Deferred
      tax expense:Federal
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -State
      and local
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -Total
      deferred tax
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -Income
      tax
                                                          
                                                          $
                                                          23,000
                                                          
                                                          
                                                          $
                                                          17,000
 
  The
income tax provision differs from that which would have resulted from the use of
the federal statutory income tax rate as:
  12/31/2008
                                          
                                          
                                          12/31/2007Federal
      income tax provision at statutory rate of 34%
                                          
                                          $
                                          (2,193,000
                                          )
                                          
                                          $
                                          (1,479,000
                                          )State
      income tax, net of federal benefit
                                          
                                          
                                          (177,000
                                          )
                                          
                                          
                                          (180,000
                                          )Permanent
      items
                                          
                                          
                                          221,000
                                          
                                          
                                          
                                          83,000Change
      in valuation allowance
                                          
                                          
                                          2,172,000
                                          
                                          
                                          
                                          1,593,000$
                                          23,000
                                          
                                          
                                          $
                                          17,000
   -
58 -
  Xedar
Corporation
 Notes
to Consolidated Financial Statements
 
 
 The
significant items of our deferred tax assets and liabilities as of December 31,
2008, and December 31, 2007 are:
  12/31/2008
                                    
                                    
                                    12/31/2007Deferred
      tax assets-current:Accrued
      liabilities
                                    
                                    $
                                    44,000
                                    
                                    
                                    $
                                    45,000Allowance
      for doubtful accounts
                                    
                                    
                                    3,000
                                    
                                    
                                    
                                    4,000Net
      deferred tax asset-current
                                    
                                    
                                    47,000
                                    
                                    
                                    
                                    49,000
 Deferred
      tax assets (liabilities)-non-current:Net
      operating loss
                                                  
                                                  
                                                  5,001,000
                                                  
                                                  
                                                  
                                                  3,962,000Amortization
      intangibles
                                                  
                                                  
                                                  114,000
                                                  
                                                  
                                                  
                                                  106,000Acquisition
      intangibles
                                                  
                                                  
                                                  (2,929,000
                                                  )
                                                  
                                                  
                                                  (3,963,000
                                                  )Stock
      options and other
                                                  
                                                  
                                                  (30,000
                                                  )
                                                  
                                                  
                                                  (46,000
                                                  )Fixed
      Assets
                                                  
                                                  
                                                  196,000
                                                  
                                                  
                                                  
                                                  119,000Net
      deferred tax asset-non-current
                                                  
                                                  
                                                  2,352,000
                                                  
                                                  
                                                  
                                                  179,000Valuation
      Allowance
                                                  
                                                  (2,399,000)
                                                  
                                                  
                                                  
                                                  (227,000
                                                  )Net
      deferred tax asset
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -
 
 The
Company accounts for income taxes in accordance with Statement of Financial
Accounting Standard No. 109, Accounting for Income Taxes (SFAS
109).  Under the provisions of SFAS 109, a deferred tax liability or
asset (net of a valuation allowance) is provided in the financial statements 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.
 
 At
December 31, 2008 and December 31, 2007, respectively, approximately $14 million
and $10 million of net operating loss carryforwards for federal income tax
purposes were available to offset future taxable income through the year
2028.  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, 2008 for federal purposes is
approximately $1 million from a subsidiary, FUGEN, Inc. 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,
Inc., and is subject to an annual Section 382 limitation of $275,000 resulting
from a change in ownership.
 
  -
59 -
  Xedar
Corporation
 Notes
to Consolidated Financial Statements
 
 
 On
January 1, 2007, we adopted the provisions of FASB Interpretation No. 48
(FIN 48), “Accounting for Uncertainty in Income Taxes – an interpretation of
FAS 109”, 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.
 
 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 2002 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
20.  Commitments and Contingencies
  Operating
Leases
 
 We lease
facilities under non-cancelable operating leases expiring between 2009 and
2013. Rent expense, net of sublease income of $96,000, for the year ended
December 31, 2008 was $700,000. Rent expense, net of sublease income of $49,000,
for the year ended December 31, 2007 was $424,000, respectively.
  As of
December 31, 2008, future minimum lease payments under these leases are
approximately:
 
 Year
      Ending December 31,
                                                  
                                                  OperatingLeases2009
                                                  
                                                  $
                                                  1,018,0002010
                                                  
                                                  
                                                  558,0002011
                                                  
                                                  
                                                  355,0002012
                                                  
                                                  
                                                  351,0002013
                                                  
                                                  
                                                  177,000Thereafter
                                                  
                                                  
                                                  -Total
      at December 31, 2008
                                                  
                                                  $
                                                  2,459,000
   -
60 -
  Xedar
Corporation
 Notes
to Consolidated Financial Statements
 
 
 During
2008, we commenced eviction proceedings against RE Expert, concerning office
space which we had formerly occupied.  The sublessee failed to pay
three months of rent due to us.  As a result, we retained the security
deposit, terminated the sublease, and commenced eviction
proceedings.  RE Expert subsequently abandoned the premises. Under the
terms of our lease, we are still obligated to pay the rent with respect to the
premises.
 
 Contingencies
 
 In
conjunction with our acquisition of Atlantic Systems, we, at our discretion,
agreed to issue up to an additional 2,000,000 shares of our common stock to the
Shareholders of Atlantic.  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.
 
 We hold
certain employment agreements with the CEO of Atlantic in which he will receive
annually a grant of restricted stock units under our 2007 Equity Incentive Plan
equal to 20% of his base annual salary.  If this agreement is
terminated by us at any time prior to the sale of $2.64 million of Xedar common
stock owned by this employee, he will be entitled to continued payment of his
base annual salary until the $2.64 million threshold is met, together with a
final termination payment of $550,000.  However, if the employee is
terminated for cause, he will be entitled only to payment of compensation
through the date of his termination and no additional compensation upon
termination.
 
 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,
2008.
 
 We
continue to defend against litigation from Vital Learning Corporation. We
believe the suit is without merit.
 
 See also
Note 16 for our discussion of our agreement with a shareholder and former
President of Atlantic.
   -
61 -
  Xedar
Corporation
 Notes
to Consolidated Financial Statements
 
 
 Note
21.  Stock Options
 
 Below is
a summary of stock option activity.
  Option
      Price
                                          Per
      Share
                                        
                                        Weighted
      Average
                                          Exercise
      Price
                                        
                                        Number
      of OptionsBalance,
      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
                                        
                                        30,500Canceled
                                        $0.99
                                        
                                        $0.99
                                        
                                        (12,500)Balance,
      December 31, 2008
                                        $0.99
                                        
                                        $0.99
                                        
                                        18,000
  The
weighted average exercise prices of stock options exercisable at each period end
are:
 
 Option
      Price
                              Per
      Share
                            
                            Weighted
      Average
                              Exercise
      Price
                            
                            Number
      of
                              SharesDecember
      31, 2007
                            $0.99
                            
                            $0.99
                            
                            30,500December
      31, 2008
                            $0.99
                            
                            $0.99
                            
                            18,000
 
 Below is
additional information regarding those options outstanding at December 31,
2008:
 
 Option
      Exercise
                        Price
      per Share
                      Weighted
      Average
                        Remaining
                        Contractual
      Term
                      Weighted
      Average
                        Exercise
      Price
                      Number
      of Shares$0.99
                      6.34
                      $0.99
                      18,000
 
 Premier
cancelled its stock option plan in December 2006.  No stock options
were granted during 2008 or 2007.  The amount of unrecognized
compensation cost relating to options granted, but not yet vested, amounted to
$14,000 as of December 31, 2006, all of which was expensed during
2007.
 
  -
62 -
  Xedar
Corporation
 Notes
to Consolidated Financial Statements
 
 
 Note
22.  Common stock and restricted stock units issued for
services
 
 Year
      Ended December 31,2008
                                              
                                              
                                              2007Stock
      issued for professional services
                                              
                                              $
                                              85,000
                                              
                                              
                                              $
                                              1,080,000Stock
      issued for director's fees
                                              
                                              
                                              42,000
                                              
                                              
                                              
                                              147,000Restricted
      stock units issued to employees – vested portion
                                              
                                              
                                              317,000
                                              
                                              
                                              
                                              -Restricted
      stock units issued for professional services
                                              
                                              
                                              46,000
                                              
                                              
                                              
                                              -Unamortized
      balance of current year common stock issued
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (98,000
                                              )Amortization
      of prior year common stock issued
                                              
                                              
                                              49,000
                                              
                                              
                                              
                                              -Total
                                              
                                              $
                                              539,000
                                              
                                              
                                              $
                                              1,129,000
 
 See Notes
23, 25 and 26 for further discussion
  
 Note 23. Restricted Stock Unit
Grants
 
 During
2008, we issued 381,170 restricted stock unit awards, together with that number
of additional restricted stock units having a value equivalent to $111,000 based
on the market value of our common stock on the vesting date, to our employees
and contractors, of which 3,500 restricted stock units were later
forfeited.  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 of our common stock to
the recipient.
 
 In some
cases, we issue dollars of restricted stock unit awards, which convert into
stock units on the payment date.  Since the number of restricted stock
units can vary until the payment date, we recalculate the number of restricted
stock units associated with these grants based on the closing price of our stock
on the last business day of the reporting period.  As of December 31,
2008, there were $111,000 of restricted stock unit awards, that we valued at the
$0.26 closing price of our stock on December 31, 2008, resulting in the
assumption that 426,923 restricted stock units had been issued for the $111,000
of restricted stock unit awards.
 
  -
63 -
  Xedar
Corporation
 Notes
to Consolidated Financial Statements
 
 Employee
and Consultant Restricted Stock Units Granted and Outstanding
 For the
Year Ended December 31, 2008
  Date
      of the Grant
                                                                                                                            
                                                                                                                            Number
      of
                                                                                                                              RSUsGranted
                                                                                                                              as
      of
                                                                                                                              December
      31, 2008
                                                                                                                            
                                                                                                                            Unit
      Fair Value
                                                                                                                              on
      the Date
                                                                                                                              ofGrant
                                                                                                                            
                                                                                                                            Total
      Fair Value on the Date of Grant
                                                                                                                            
                                                                                                                            Vesting Period
                                                                                                                            
                                                                                                                            Compensation
      Expense Recorded for the RSUs Vested during the Year Ended December 31,
      2008
                                                                                                                            
                                                                                                                            Compensation
      Expense Remaining for the Unvested RSUs as of December 31, 2008January
      2008
                                                                                                                            
                                                                                                                            118,000
                                                                                                                            
                                                                                                                            $2.17
                                                                                                                            
                                                                                                                            $256,000
                                                                                                                            
                                                                                                                            Between
      July 2008
                                                                                                                              and
      March 2009
                                                                                                                            
                                                                                                                            $247,000
                                                                                                                            
                                                                                                                            $   3,000March
      2008
                                                                                                                            
                                                                                                                            21,170
                                                                                                                            
                                                                                                                            $2.50
                                                                                                                            
                                                                                                                            53,000
                                                                                                                            
                                                                                                                            March
      2010
                                                                                                                            
                                                                                                                            26,000
                                                                                                                            
                                                                                                                            27,000April
                                                                                                                              2008
                                                                                                                            
                                                                                                                            2,000
                                                                                                                            
                                                                                                                            $2.06
                                                                                                                            
                                                                                                                            4,000
                                                                                                                            
                                                                                                                            January
      2010
                                                                                                                            
                                                                                                                            2,000
                                                                                                                            
                                                                                                                            2,000July
                                                                                                                              2008
                                                                                                                            
                                                                                                                            234,615
                                                                                                                            
                                                                                                                            $0.26
                                                                                                                            
                                                                                                                            61,000
                                                                                                                            
                                                                                                                            December
      2008
                                                                                                                            
                                                                                                                            61,000
                                                                                                                            
                                                                                                                            0September
                                                                                                                              2008
                                                                                                                            
                                                                                                                            50,000
                                                                                                                            
                                                                                                                            $1.02
                                                                                                                            
                                                                                                                            51,000
                                                                                                                            
                                                                                                                            September
      2013
                                                                                                                            
                                                                                                                            3,000
                                                                                                                            
                                                                                                                            48,000October
                                                                                                                              2008
                                                                                                                            
                                                                                                                            342,308
                                                                                                                            
                                                                                                                            Between
      $0.26
                                                                                                                              and
      $0.78
                                                                                                                            
                                                                                                                            167,000
                                                                                                                            
                                                                                                                            Between
      Sept. 2009
                                                                                                                              and
      Sept. 2013
                                                                                                                            
                                                                                                                            22,000
                                                                                                                            
                                                                                                                            145,000November
      2008
                                                                                                                            
                                                                                                                            30,000
                                                                                                                            
                                                                                                                            $0.35
                                                                                                                            
                                                                                                                            11,000
                                                                                                                            
                                                                                                                            Between
      Nov. 2009
                                                                                                                              and
      Nov. 2010
                                                                                                                            
                                                                                                                            1,000
                                                                                                                            
                                                                                                                            10,000December
      2008
                                                                                                                            
                                                                                                                            10,000
                                                                                                                            
                                                                                                                            $0.40
                                                                                                                            
                                                                                                                            4,000
                                                                                                                            
                                                                                                                            November
      2011
                                                                                                                            
                                                                                                                            0
                                                                                                                            
                                                                                                                            4,000Less:
                                                                                                                              Forfeitures
                                                                                                                            
                                                                                                                            (3,500)
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            (6,000)Total
                                                                                                                            
                                                                                                                            804,593
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            $601,000
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            $362,000
                                                                                                                            
                                                                                                                            $239,000
 
 We
converted 84,500 units into common stock with total value of $183,000 and
distributed them to our employees who vested during
2008.   During 2008, we issued a majority of the units to
employees.  We measure the employee grants at the fair value of the
unit on the grant date, and recognize this expense ratably over the requisite
service periods, which are the vesting periods.  Because of the short
vesting periods, we assume a zero forfeiture rate.  If there are
forfeitures, we adjust the expense recognition downward as those forfeitures
occur.  We recognized $317,000 of expense on vested employee units
during 2008.  The $317,000 of expense on vested employee units during
2008 is included in compensation expense on the accompanying Consolidated
Statement of Operations.  At December 31, 2008, a total of 699,093
unvested restricted stock units exist and all are held by
employees.
  -
64 -
  Xedar
Corporation
 Notes
to Consolidated Financial Statements
 
 
 We issued
units for 21,000 shares to eight contractors on January 2, 2008, when the stock
price was $2.17, vesting in July 2008.  We recorded the entire $46,000
charge to expense for the contractor-related grants using the fair value on the
issue date.  We converted all 21,000 units into common stock with
total value of $46,000 and distributed them to our contractors in the third
quarter of 2008.
  
 Note
24.  Private Equity Sale and Warrants
 
 In
November 2008, we sold and issued, in a private placement, 3,100,000 shares of
our common stock, together with warrants to purchase 3,200,000 shares of common
stock at an exercise price of $1.00 per share.  The warrants have a
term of five years.  The common stock and warrants were sold for
$1,550,000 pursuant to the terms and conditions of subscription
agreements.  We incurred $3,000 in commission expense related to the
private placement.
 
 The fair
value of the warrants as of the date of grant was $935,000 and was recorded as a
reduction of proceeds from Common Stock sold.  The fair value for the
warrants was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted-average assumptions used for stock option
grants issued under the option plans:
  Year ended
                                          December 31,2008Weighted
      average risk-free interest rate
                                        
                                        
                                        2.0E  Expected
      life of options (years)
                                        
                                        
                                        5E  Expected
      stock volatility
                                        
                                        
                                        216.0E  Expected
      dividend yield
                                        
                                        
                                        0.0
  There
were no warrants outstanding during 2007.
  
 Note
25.  Director Share-based Compensation Plan
 
 In
February 2007, we granted 60,000 shares to members of the Board of Directors, to
be vested over three years. Based on the market price of our stock on the grant
date, the total share valuation was $147,000.  We charged this amount
to expense over 36 months, of which $49,000 was recorded during each of the
years ended December 31, 2007 and 2008.
 
 In March
2008, we granted 12,000 shares to members of the Board of Directors, to be
vested by December 31, 2008.  Based on the market price of our stock
on the grant date, the total share valuation was $30,000.  We charged
this amount to expense during the year ended December 31, 2008.  The
remaining $49,000 of unrecognized expense is included as unearned compensation
in the accompanying Consolidated Statement of Changes in Shareholders Equity and
will be recognized in 2009.
 
  -
65 -
  Xedar
Corporation
 Notes
to Consolidated Financial Statements
 
 
 In
October 2008, we paid the Board’s quarterly board and committee attendance fees
with 23,315 shares, to be vested immediately.  Based on the market
price of our stock on the grant date, the total share valuation was
$12,000.  We charged this amount to expense during the year ended
December 31, 2008.
  
 Note
26.  Consulting Agreement
 
 In
January 2007, we engaged the services of three investor relations firms (Capital
Group Communications, Inc. (Capital), 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 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.
 
 In
October, 2008, we entered into a consulting agreement with Wakabayashi Fund,
LLC, under which Wakabayashi will
provide certain investor communications and public relations services
during the fourth quarter of 2008 and the first quarter of 2009.  As
consideration for these services, we issued 166,667 shares of our restricted
common stock to Wakabayashi in October 2008.  We valued these shares
at the market price of our stock on the date the agreements were signed,
resulting in a total valuation of $85,000.  Because of the contract
terms, we charged the entire value of the shares issued in 2008 to expense in
the fourth quarter of 2008.  As discussed in Note 31, the additional
166,667 shares related to services to be provided in 2009 were issued and
expensed in the first quarter of 2009.
   Note
27.  Employee Stock Purchase Plan
 
 In July
2008, we adopted the Xedar Corporation 2008 Employee Stock Purchase Plan (the
"ESPP"), which provides eligible employees with an opportunity to purchase our
common stock at a discount through accumulated payroll deductions, during each
six-month offering period.  The price at which the stock is sold under
the ESPP is equal to 85% of the fair market value of the common stock, on the
first or last day of the offering period, whichever is lower. A total of
1,000,000 shares of common stock have been reserved for issuance under the
ESPP.
 
 As of
December 31, 2008, no shares have been issued under the ESPP.
  
 Note
28.  Employee Benefit Plan
 
 We have
two 401(k) plans, which employees are eligible to participate in the plan the
first of the month following their date of hire.  The employee is
eligible to receive a discretionary employer matching contribution once they
have completed three months of service.   Xedar’s contribution
rate is equal to 50% up to the first 6% of the employees’ annual salary deferred
into the plan, except for Atlantic, where there is no waiting period on the
employer match and no cap on the 50% contributions.  We fund the plan
contributions as accrued.
  -
66 -
  Xedar
Corporation
 Notes
to Consolidated Financial Statements
 
 
 We
contributed approximately $220,000 and $120,000 for the years ended December 31,
2008 and December 31, 2007, respectively.
 
 Note
29.  Segment Information
  We manage
our business and aggregate our operational and financial information within two
reportable segments. Our segments are described in Note 1.  Prior to
January 1, 2007, we had an additional segment, our Justice Information Systems
(JIS) segment.  It was folded into the consulting segment at the end
of 2006, and subsequently sold on March 1, 2007.
 
 The
statement of operations for the years ended December 31, 2008, and December 31,
2007, and the balance sheets as of December 31, 2008 and December 31, 2007, 2008
for our business segments was:
 
 
 2008
                                      
                                      
                                      2007Sales:Consulting
                                      
                                      
                                      9,654,000
                                      
                                      
                                      
                                      6,676,000Geographical
      information systems
                                      
                                      
                                      8,101,000
                                      
                                      
                                      
                                      4,466,000Total
      sales
                                      
                                      
                                      17,755,000
                                      
                                      
                                      
                                      11,142,000
    -
67 -
  Xedar
Corporation
 Notes
to Consolidated Financial Statements
  
 
 2008
                                                                                                      
                                                                                                      
                                                                                                      2007Income
      (Loss) from operations:Consulting
                                                                                                      
                                                                                                      $
                                                                                                      536,000
                                                                                                      
                                                                                                      
                                                                                                      $
                                                                                                      124,000Geographical
      information systems
                                                                                                      
                                                                                                      
                                                                                                      (1,129,000
                                                                                                      )
                                                                                                      
                                                                                                      
                                                                                                      285,000Corporate
      expense
                                                                                                      
                                                                                                      
                                                                                                      (5,859,000
                                                                                                      )
                                                                                                      
                                                                                                      
                                                                                                      (4,850,000
                                                                                                      )Total
      loss from continuing operations
                                                                                                      
                                                                                                      
                                                                                                      (6,452,000
                                                                                                      )
                                                                                                      
                                                                                                      
                                                                                                      (4,441,000
                                                                                                      )Less:
      Discontinued operations - Justice information systems
(JIS)
                                                                                                      
                                                                                                      
                                                                                                      -
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      (74,000
                                                                                                      )Total
      loss
                                                                                                      
                                                                                                      $
                                                                                                      (6,452,000
                                                                                                      )
                                                                                                      
                                                                                                      $
                                                                                                      (4,367,000
                                                                                                      )Identifiable
      fixed assets:Consulting
                                                                                                      
                                                                                                      $
                                                                                                      97,000
                                                                                                      
                                                                                                      
                                                                                                      $
                                                                                                      231,000Geographical
      information systems
                                                                                                      
                                                                                                      
                                                                                                      2,577,000
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      2,386,000Justice
      information systems (JIS)
                                                                                                      
                                                                                                      
                                                                                                      -
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      -Other
                                                                                                      
                                                                                                      
                                                                                                      63,000
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      51,000Less
      : accumulated depreciation
                                                                                                      
                                                                                                      
                                                                                                      (913,000
                                                                                                      )
                                                                                                      
                                                                                                      
                                                                                                      (742,000
                                                                                                      )Total
      fixed assets
                                                                                                      
                                                                                                      $
                                                                                                      1,824,000
                                                                                                      
                                                                                                      
                                                                                                      $
                                                                                                      1,926,000Intangibles:Consulting
                                                                                                      
                                                                                                      $
                                                                                                      7,431,000
                                                                                                      
                                                                                                      
                                                                                                      $
                                                                                                      8,049,000Geographical
      information systems
                                                                                                      
                                                                                                      
                                                                                                      3,970,000
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      3,970,000Less
      : accumulated amortization
                                                                                                      
                                                                                                      
                                                                                                      (3,467,000
                                                                                                      )
                                                                                                      
                                                                                                      
                                                                                                      (1,291,000
                                                                                                      )Total
      intangibles
                                                                                                      
                                                                                                      $
                                                                                                      7,934,000
                                                                                                      
                                                                                                      
                                                                                                      $
                                                                                                      10,728,000Depreciation,
      amortization and impairment (including intangibles)Consulting
                                                                                                      
                                                                                                      $
                                                                                                      1,819,000
                                                                                                      
                                                                                                      
                                                                                                      $
                                                                                                      37,000Geographical
      information systems
                                                                                                      
                                                                                                      
                                                                                                      1,480,000
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      1,300,000Other
                                                                                                      
                                                                                                      
                                                                                                      16,000
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      190,000Total
      depreciation and amortization
                                                                                                      
                                                                                                      $
                                                                                                      3,315,000
                                                                                                      
                                                                                                      
                                                                                                      $
                                                                                                      1,527,000Goodwill:Consulting
                                                                                                      
                                                                                                      $
                                                                                                      6,070,000
                                                                                                      
                                                                                                      
                                                                                                      $
                                                                                                      6,070,000Geographical
      information systems
                                                                                                      
                                                                                                      
                                                                                                      1,869,000
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      1,884,000Total
      goodwill
                                                                                                      
                                                                                                      $
                                                                                                      7,939,000
                                                                                                      
                                                                                                      
                                                                                                      $
                                                                                                      7,954,000
 
 
  -
68 -
  Xedar
Corporation
 Notes
to Consolidated Financial Statements
 
 
 Note
30.  Pro Forma Financial Information
 
 Below are
our consolidated results of operations for the year ended December 31, 2007, as
though the business acquisitions made during 2007 had been completed as of
January 1, 2007.
 
  2007Sales
                                  
                                  $
                                  16,591,000Net
      income (loss) from continuing operations
                                  
                                  $
                                  (5,193,000
                                  )Income
      (loss) from continuing operations per share
                                  
                                  $
                                  (0.20
                                  )
 
 
 
 Note
31. Subsequent Events
 
 On
January 2, 2009, we issued 166,667 shares of our restricted common stock to
Wakabayashi Fund, LLC.  This stock issuance was in consideration for a
consulting agreement with Wakabayashi which we entered into on October 23, 2008,
under which Wakabayashi will provide certain investor communications and public
relations services commencing on January 1, 2009, and continuing thereafter for
a three month period.
 
 On
January 21, 2009, we issued 250,000 shares of our restricted common stock to
Capital Group Communications, Inc., in exchange for various investor relations
services during the first quarter of 2009.
 
  -
69 -
  Item
9.  Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
  None
  
 Item
9A(T).  Controls and Procedures.
 
 As
supervised by our board of directors and our principal executive and principal
financial officers, management has established and maintained a system of
disclosure controls and procedures and has evaluated the effectiveness of that
system.   Our principal executive and principal financial officers
evaluated the effectiveness of our disclosure controls and procedures (as
defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or
15d-15(e)) as of December 31, 2008, and have concluded that these controls and
procedures were effective.
 
 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 Rules 13a-15(f) or 15d-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
carried out an evaluation of the effectiveness of internal control over
financial reporting as of December 31, 2008. We carried out this evaluation
using criteria similar to that proscribed by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control—Integrated
Framework. Based on that evaluation, management, including the CEO and CFO,
determined that as of December 31, 2008, our internal control over financial
reporting was 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.
 
 We
identified no changes in our internal control over financial reporting in
connection with the evaluation required by paragraph (d) of Securities
Exchange Act of 1934 Rule 13a-15 or 15d-15 that occurred during the fiscal
quarter ended December 31, 2008 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
 
 Item
9B.  Other Information.
 
 None.
 
  -
70 -
  Part
III
   Item
10.  Directors, Executive Officers and Corporate
Governance.
 
 
 Information
concerning this item is incorporated by reference to our 2009 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.  Executive Compensation
 
 Information concerning this item is incorporated by reference to
our 2009 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.  Security Ownership of Certain Beneficial Owners and
Management
 
 Information
concerning this item is incorporated by reference to our 2009 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
13. Certain Relationships and Related Transactions, and Director
Independence.
 
 Information
concerning this item is incorporated by reference to our 2009 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 14. Principal Accountant Fees
and Services
  Information
concerning this item is incorporated by reference to our 2009 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.
 
  -
71 -
  Item
15.  Exhibits
 
 Number
                    Description2.1
                    Agreement
      and Plan of Merger, effective December 31, 2006, by and among 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 (incorporated by reference to Exhibit 3.7 of our Quarterly
      Report on Form 10QSB/A filed May 16, 2007)3.8
                    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 7,
      2008)10.1
                    Business
      Loan Agreement, dated September 28, 2007, by and 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)10.2
                    Promissory
      Note, dated September 28, 2007, by and 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)10.3
                    Commercial
      Security Agreement, dated September 28, 2007, by and 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)10.4
                    Commercial
      Guaranty, by and among 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)10.5
                    Commercial
      Guaranty, by and among 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)10.6
                    Commercial
      Guaranty, by and among 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)10.7
                    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)
  -
72 -
  
 Number
                              Description10.8
                              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)10.9
                              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)10.10
                              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)10.11
                              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)10.12
                              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)10.13
                              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)
 10.14
                            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)10.15
                            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)10.16
                            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)10.17
                            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)10.18
                            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)10.19
                            Secured
      Subordinated Promissory Note, dated March 3, 2008, as amended April 24,
      2008, $2,000,000.00 principal amount, by and between Hugh H. Williamson,
      III, and Xedar Corporation (incorporated by reference to Exhibit 10.1 of
      our Current Report on Form 8-K filed April 29, 2008)10.20
                            Pledge
      and Security Agreement, dated March 3, 2008, by and between Xedar
      Corporation and Hugh H. Williamson, III (incorporated by reference to
      Exhibit 10.2 of our Current Report on Form 8-K filed April 29,
      2008)10.21
                            24
      Month Consulting Agreement Extension/Amendment To Agreement, dated April
      23, 2008, by and between Capital Group Communications, Inc., and Xedar
      Corporation (incorporated by reference to Exhibit 10.3 of our Current
      Report on Form 8-K filed April 29,
2008)
  -
73 -
  
 Number
                      Description10.22
                      Consulting
      Agreement between Jeffrey R. Grime and Xedar Corporation, effective July
      1, 2008 (incorporated by reference to Exhibit 10.1 of our Current Report
      on Form 8-K filed July 3, 2008)10.23
                      Employment
      Letter Agreement between Don W. Rakestraw and Xedar Corporation, effective
      July 1, 2008 (incorporated by reference to Exhibit 10.2 of our Current
      Report on Form 8-K filed July 3, 2008)10.24
                      Secured
      Subordinated Promissory Note, dated March 3, 2008, as amended April 24,
      2008, as amended June 30, 2008, $2,100,000.00 principal amount, by and
      between Hugh H. Williamson, III, and Xedar Corporation (incorporated by
      reference to Exhibit 10.1 of our Current Report on Form 8-K filed July 3,
      2008)10.25
                      Pledge
      and Security Agreement, dated March 3, 2008, as amended April 24, 2008, as
      amended June 30, 2008, by and between Xedar Corporation and Hugh H.
      Williamson, III (incorporated by reference to Exhibit 10.2 of our Current
      Report on Form 8-K filed July 3, 2008)10.26
                      Sublease
      Agreement and Consent By Landlord to Sublease, effective August 5, 2008,
      between Premier Data Services, Inc., REexpert, LLC and Best Property Fund,
      LP (incorporated by reference to Exhibit 10.1 of our Current Report on
      Form 8-K filed August 8, 2008)10.27
                      Office
      Lease, dated February 19, 2003, by and between Premier Data Services,
      Inc., and Best Property Fund, LP (incorporated by reference to Exhibit
      10.2 of our Current Report on Form 8-K filed August 8,
    2008)10.28
                      Secured
      Subordinated Promissory Note, dated March 3, 2008, as amended April 24,
      2008, as amended June 30, 2008, as amended August 20, 2008, $2,350,000.00
      principal amount, by and between Hugh H. Williamson, III, and Xedar
      Corporation (incorporated by reference to Exhibit 10.1 of our Current
      Report on Form 8-K filed August 25, 2008)10.29
                      Pledge
      and Security Agreement, dated March 3, 2008, as amended April 24, 2008, as
      amended June 30, 2008, as amended August 20, 2008, by and between Xedar
      Corporation and Hugh H. Williamson, III (incorporated by reference to
      Exhibit 10.2 of our Current Report on Form 8-K filed August 25,
      2008)10.30
                      Secured
      Subordinated Promissory Note, dated March 3, 2008, as amended April 24,
      2008, as amended June 30, 2008, as amended August 20, 2008, as amended
      September 4, 2008,  $2,550,000.00 principal amount, by and
      between Hugh H. Williamson, III, and Xedar Corporation (incorporated by
      reference to Exhibit 10.1 of our Current Report on Form 8-K filed
      September 9, 2008)10.31
                      Pledge
      and Security Agreement, dated March 3, 2008, as amended April 24, 2008, as
      amended June 30, 2008, as amended August 20, 2008, as amended September 4,
      2008, by and between Xedar Corporation and Hugh H. Williamson, III
      (incorporated by reference to Exhibit 10.2 of our Current Report on Form
      8-K filed September 9, 2008)10.32
                      Secured
      Subordinated Promissory Note, dated March 3, 2008, as amended April 24,
      2008, as amended June 30, 2008, as amended August 20, 2008, as amended
      September 4, 2008,  as amended October 9, 2008, $2,800,000.00
      principal amount, by and between Hugh H. Williamson, III, and Xedar
      Corporation (incorporated by reference to Exhibit 10.1 of our Current
      Report on Form 8-K filed October 14,
2008)
  -
74 -
  
 Number
                      Description10.33
                      Pledge
      and Security Agreement, dated March 3, 2008, as amended April 24, 2008, as
      amended June 30, 2008, as amended August 20, 2008, as amended September 4,
      2008, as amended October 9, 2008, by and between Xedar Corporation and
      Hugh H. Williamson, III (incorporated by reference to Exhibit 10.2 of our
      Current Report on Form 8-K filed October 14, 2008)10.34
                      Consulting
      Agreement, dated October 23, 2008, by and between Xedar Corporation, a
      Colorado corporation, and Wakabayashi Fund, a Japanese limited liability
      company (Incorporated by reference to Exhibit 10.1 of our Current Report
      on Form 8-K filed October 27, 2008)10.35
                      Consulting
      Agreement, dated October 23, 2008, by and between Xedar Corporation, a
      Colorado corporation, and Wakabayashi Fund, a Japanese limited liability
      company (Incorporated by reference to Exhibit 10.2 of our Current Report
      on Form 8-K filed October 27, 2008)10.36
                      Form
      of Subscription Agreement, $1,500,000.00 Equity Round Offering (Units
      consisting of Shares and Warrants)(Incorporated by reference to Exhibit
      99.1 of our Current Report on Form 8-K filed December 2,
    2008)10.37
                      Termination
      of Sublease Agreement between Premier Data Services, Inc. and REexpert,
      LLC, due to eviction of REexpert (incorporated by reference to our Current
      Report on Form 8-K filed December 23, 2008)10.38
                      Secured
      Subordinated Promissory Note, dated March 3, 2008, as amended and restated
      as of December 31, 2008, $2,800,000.00 principal amount, by and between
      Hugh H. Williamson, III, and Xedar Corporation (incorporated by reference
      to Exhibit 10.1 of our Current Report on Form 8-K filed December 31,
      2008)10.39
                      Pledge
      and Security Agreement, dated March 3, 2008, as amended as of December 31,
      2008, by and between Xedar Corporation and Hugh H. Williamson, III
      (incorporated by reference to Exhibit 10.2 of our Current Report on Form
      8-K filed December 31, 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*
                      Subsidiaries31.1*
                      Certification
      of President and Chief Executive Officer - Hugh Williamson III, pursuant
      to Rule 13a-14(a).31.2*
                      Certification
      of Chief Financial Officer - Steven M. Bragg, pursuant to Rule
      13a-14(a)32.1*
                      Certification
      of Chief Executive Officer - Hugh Williamson III, pursuant to Section 906
      of the Sarbanes-Oxley Act of 2002.32.2*
                      Certification
      of Chief Financial Officer - Steven M. Bragg, pursuant to Section 906 of
      the Sarbanes-Oxley Act of
2002.
 
 *Filed
with this report.
  -
75 -
  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 16, 2009
                  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
                                                                      
                                                                      President,
      Chief Executive Officer and Director (Chair)
                                                                      
                                                                      March
      16, 2009Hugh
      H. Williamson, III/s/Steven
      M. Bragg
                                                                      
                                                                      Chief
      Financial Officer, Treasurer and Secretary
                                                                      
                                                                      March
      16, 2009Steven
      M. Bragg/s/ Samuel J. Camarata, Jr.
                                                                      
                                                                      Director
                                                                      
                                                                      March
      16, 2009Samuel
      J. Camarata, Jr./s/ Jack H. Jacobs
                                                                      
                                                                      Director
                                                                      
                                                                      March
      16, 2009Jack
      H. Jacobs/s/ Trusten A. McArtor
                                                                      
                                                                      Director
                                                                      
                                                                      March
      16, 2009Trusten
      A. McArtor/s/John P.
    Moreno
                                                                      
                                                                      Director
                                                                      
                                                                      March
      16, 2009John
      P. Moreno/s/
      Craig A. Parker
                                                                      
                                                                      Director
                                                                      
                                                                      March
      16, 2009Craig
      A. Parker/s/ Alan V.
      Rogers
                                                                      
                                                                      Director
                                                                      
                                                                      March
      16, 2009Alan V.
      Rogers/s/
      Roger J. Steinbecker
                                                                      
                                                                      Director
                                                                      
                                                                      March
      16, 2009Roger
      J. Steinbecker
 
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 Exhibit
Index 
 Number
                    Description2.1
                    Agreement
      and Plan of Merger, effective December 31, 2006, by and among 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 (incorporated by reference to Exhibit 3.7 of our Quarterly
      Report on Form 10QSB/A filed May 16, 2007)3.8
                    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 7,
      2008)10.1
                    Business
      Loan Agreement, dated September 28, 2007, by and 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)10.2
                    Promissory
      Note, dated September 28, 2007, by and 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)10.3
                    Commercial
      Security Agreement, dated September 28, 2007, by and 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)10.4
                    Commercial
      Guaranty, by and among 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)10.5
                    Commercial
      Guaranty, by and among 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)10.6
                    Commercial
      Guaranty, by and among 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)10.7
                    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)
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 Number
                              Description10.8
                              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)10.9
                              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)10.10
                              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)10.11
                              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)10.12
                              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)10.13
                              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)
 10.14
                            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)10.15
                            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)10.16
                            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)10.17
                            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)10.18
                            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)10.19
                            Secured
      Subordinated Promissory Note, dated March 3, 2008, as amended April 24,
      2008, $2,000,000.00 principal amount, by and between Hugh H. Williamson,
      III, and Xedar Corporation (incorporated by reference to Exhibit 10.1 of
      our Current Report on Form 8-K filed April 29, 2008)10.20
                            Pledge
      and Security Agreement, dated March 3, 2008, by and between Xedar
      Corporation and Hugh H. Williamson, III (incorporated by reference to
      Exhibit 10.2 of our Current Report on Form 8-K filed April 29,
      2008)10.21
                            24
      Month Consulting Agreement Extension/Amendment To Agreement, dated April
      23, 2008, by and between Capital Group Communications, Inc., and Xedar
      Corporation (incorporated by reference to Exhibit 10.3 of our Current
      Report on Form 8-K filed April 29,
2008)
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 Number
                      Description10.22
                      Consulting
      Agreement between Jeffrey R. Grime and Xedar Corporation, effective July
      1, 2008 (incorporated by reference to Exhibit 10.1 of our Current Report
      on Form 8-K filed July 3, 2008)10.23
                      Employment
      Letter Agreement between Don W. Rakestraw and Xedar Corporation, effective
      July 1, 2008 (incorporated by reference to Exhibit 10.2 of our Current
      Report on Form 8-K filed July 3, 2008)10.24
                      Secured
      Subordinated Promissory Note, dated March 3, 2008, as amended April 24,
      2008, as amended June 30, 2008, $2,100,000.00 principal amount, by and
      between Hugh H. Williamson, III, and Xedar Corporation (incorporated by
      reference to Exhibit 10.1 of our Current Report on Form 8-K filed July 3,
      2008)10.25
                      Pledge
      and Security Agreement, dated March 3, 2008, as amended April 24, 2008, as
      amended June 30, 2008, by and between Xedar Corporation and Hugh H.
      Williamson, III (incorporated by reference to Exhibit 10.2 of our Current
      Report on Form 8-K filed July 3, 2008)10.26
                      Sublease
      Agreement and Consent By Landlord to Sublease, effective August 5, 2008,
      between Premier Data Services, Inc., REexpert, LLC and Best Property Fund,
      LP (incorporated by reference to Exhibit 10.1 of our Current Report on
      Form 8-K filed August 8, 2008)10.27
                      Office
      Lease, dated February 19, 2003, by and between Premier Data Services,
      Inc., and Best Property Fund, LP (incorporated by reference to Exhibit
      10.2 of our Current Report on Form 8-K filed August 8,
    2008)10.28
                      Secured
      Subordinated Promissory Note, dated March 3, 2008, as amended April 24,
      2008, as amended June 30, 2008, as amended August 20, 2008, $2,350,000.00
      principal amount, by and between Hugh H. Williamson, III, and Xedar
      Corporation (incorporated by reference to Exhibit 10.1 of our Current
      Report on Form 8-K filed August 25, 2008)10.29
                      Pledge
      and Security Agreement, dated March 3, 2008, as amended April 24, 2008, as
      amended June 30, 2008, as amended August 20, 2008, by and between Xedar
      Corporation and Hugh H. Williamson, III (incorporated by reference to
      Exhibit 10.2 of our Current Report on Form 8-K filed August 25,
      2008)10.30
                      Secured
      Subordinated Promissory Note, dated March 3, 2008, as amended April 24,
      2008, as amended June 30, 2008, as amended August 20, 2008, as amended
      September 4, 2008,  $2,550,000.00 principal amount, by and
      between Hugh H. Williamson, III, and Xedar Corporation (incorporated by
      reference to Exhibit 10.1 of our Current Report on Form 8-K filed
      September 9, 2008)10.31
                      Pledge
      and Security Agreement, dated March 3, 2008, as amended April 24, 2008, as
      amended June 30, 2008, as amended August 20, 2008, as amended September 4,
      2008, by and between Xedar Corporation and Hugh H. Williamson, III
      (incorporated by reference to Exhibit 10.2 of our Current Report on Form
      8-K filed September 9, 2008)10.32
                      Secured
      Subordinated Promissory Note, dated March 3, 2008, as amended April 24,
      2008, as amended June 30, 2008, as amended August 20, 2008, as amended
      September 4, 2008,  as amended October 9, 2008, $2,800,000.00
      principal amount, by and between Hugh H. Williamson, III, and Xedar
      Corporation (incorporated by reference to Exhibit 10.1 of our Current
      Report on Form 8-K filed October 14,
2008)
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 Number
                      Description10.33
                      Pledge
      and Security Agreement, dated March 3, 2008, as amended April 24, 2008, as
      amended June 30, 2008, as amended August 20, 2008, as amended September 4,
      2008, as amended October 9, 2008, by and between Xedar Corporation and
      Hugh H. Williamson, III (incorporated by reference to Exhibit 10.2 of our
      Current Report on Form 8-K filed October 14, 2008)10.34
                      Consulting
      Agreement, dated October 23, 2008, by and between Xedar Corporation, a
      Colorado corporation, and Wakabayashi Fund, a Japanese limited liability
      company (Incorporated by reference to Exhibit 10.1 of our Current Report
      on Form 8-K filed October 27, 2008)10.35
                      Consulting
      Agreement, dated October 23, 2008, by and between Xedar Corporation, a
      Colorado corporation, and Wakabayashi Fund, a Japanese limited liability
      company (Incorporated by reference to Exhibit 10.2 of our Current Report
      on Form 8-K filed October 27, 2008)10.36
                      Form
      of Subscription Agreement, $1,500,000.00 Equity Round Offering (Units
      consisting of Shares and Warrants)(Incorporated by reference to Exhibit
      99.1 of our Current Report on Form 8-K filed December 2,
    2008)10.37
                      Termination
      of Sublease Agreement between Premier Data Services, Inc. and REexpert,
      LLC, due to eviction of REexpert (incorporated by reference to our Current
      Report on Form 8-K filed December 23, 2008)10.38
                      Secured
      Subordinated Promissory Note, dated March 3, 2008, as amended and restated
      as of December 31, 2008, $2,800,000.00 principal amount, by and between
      Hugh H. Williamson, III, and Xedar Corporation (incorporated by reference
      to Exhibit 10.1 of our Current Report on Form 8-K filed December 31,
      2008)10.39
                      Pledge
      and Security Agreement, dated March 3, 2008, as amended as of December 31,
      2008, by and between Xedar Corporation and Hugh H. Williamson, III
      (incorporated by reference to Exhibit 10.2 of our Current Report on Form
      8-K filed December 31, 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*
                      Subsidiaries31.1*
                      Certification
      of President and Chief Executive Officer - Hugh Williamson III, pursuant
      to Rule 13a-14(a).31.2*
                      Certification
      of Chief Financial Officer - Steven M. Bragg, pursuant to Rule
      13a-14(a)32.1*
                      Certification
      of Chief Executive Officer - Hugh Williamson III, pursuant to Section 906
      of the Sarbanes-Oxley Act of 2002.32.2*
                      Certification
      of Chief Financial Officer - Steven M. Bragg, pursuant to Section 906 of
      the Sarbanes-Oxley Act of
2002.
 
 *Filed
with this report.
 
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