Overview

We have two primary lines of business.

First, we obtain federal geographical and land information ownership data from the Bureau of Land Management and state and county geographical and land information data from various states and counties and convert this information into databases that are sold to oil and gas companies, as well as several agencies of the federal government, along with browser software that allows users to easily access ownership information about specific parcels of land. This service is offered both on compact disc and through an Internet site. Nearly all sales are on an annual or quarterly subscription basis. We also offer production mapping services to a number of clients.

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

We have over 200 commercial and government customers. Approximately 75% of our revenue is derived from government customers, which include the Department of State, the National Park Service, the Internal Revenue Service, the Bureau of Land Management, the Bureau of Reclamation, and the U.S. Forest Service. Our commercial customers include most of the major domestic petroleum companies including: Anadarko Petroleum, BP America, ConocoPhillips, Devon Energy, EnCana, Shell, Williams Production, and Yates Petroleum.

- 2 -

Our principal executive offices are located at 8310 South Valley Highway, Suite 220, Englewood, Colorado 80112 and our telephone number is 303-377-0033. We also maintain an Internet site at www.xedarinc.com . Our common stock trades in the Over-the-Counter market (OTC.BB) under the ticker symbol “XDRC.OB.”

Company History

We are a Colorado corporation, incorporated in 1974. Since 2003, and prior to December 31, 2006, we engaged in minimal operations. Effective December 31, 2006, through a wholly owned subsidiary formed specifically for that purpose, we merged with Premier Data Services, Inc., a Delaware corporation, as reported in our Current Report on Form 8-K filed on January 5, 2007. Before the merger there was no material relationship between us, our affiliates, and Premier Data Services, Inc. Post merger, we conduct the business of Premier Data Services, Inc., through our wholly owned subsidiary, Premier Data Services, Inc. The transaction has been accounted for as a reverse acquisition of Xedar Corporation by Premier Data Services, Inc. and Premier Data Services, Inc is deemed to be the purchaser and surviving company for accounting purposes. Accordingly, its assets and liabilities are included in the consolidated balance sheet at their historical book values and the results of operations of Premier Data Services, Inc. have been presented for the comparative prior period. Premier Data Services, Inc. was formed in 1994 by four partners, three of whom remain with us today. We issued a string of successful land database and mapping products, including ClaimFinder® in 1995, LeaseFinder® in 1996, LotFinder® and CartéView® in 1997, Lease Sale System in 1998, Land Link® in 1999, PDS Studio® in 2001, Launch Pad in 2002, Map Layout Express in 2003, Map Server in 2004 and the Historical Lease Sale database in 2006. Also, we developed a number of custom applications for selected Federal Government clients, such as the BLM Lease Sale System, Mining Claim ADP, and OG Map II software. These custom applications expanded our base of development experience, allowing us to transfer technology from our custom design work into packaged software products.

 

Initial sales efforts were targeted primarily at the mining industry, followed by the oil & gas industry and then the federal government market, with sales to the Bureau of Land Management (BLM), Bureau of Reclamation, and U.S. Forest Service.

We acquired FuGEN, Inc., a Maryland-based software development and systems consulting company, in early 2002. This gave us an expanded foothold in the federal government marketplace, which has led to major information technology systems and enterprise security consulting projects with the Department of State, the Veterans Administration, the Bureau of Land Management, and the National Park Service. FuGEN was also founded in 1994. The founder and the initial two members of FuGEN’s executive staff are still active in our day-to-day operations.

We, through our subsidiary PDS GIS/LIS, Inc., a Delaware corporation, acquired Land Links Company Ltd., a New Mexico Limited Liability Company pursuant to an Interest Purchase Agreement dated January 1, 2007. This acquisition expanded our foothold in the geographic information systems arena.

Capital Structure

Our authorized common stock consists of 50,000,000 shares of common stock, no par value per share. Each owner of our common stock has equal right to dividends and voting and there are no preemptive rights associated therewith.

- 3 -

Geographical Information Systems Segment

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

Customers who use the land database products can access information through an internet site or by compact disc. The database products provide database queries, reports, and digital maps for over 13,000,000 Bureau of Land Management and state land records in the Rocky Mountain area of the United States. Users can investigate such land information as competitor activity, federal and state lease ownership, lot and tract survey data, open federal acres, split estate lands, and trend acreage positions.

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

Information Technology Consulting Segment

Our consulting segment provides independent verification and validation and information assurance on large projects within several federal agencies. In fiscal year 2006, our consulting segment’s client base included the National Park Service as a prime contractor, and the Internal Revenue Service, USAID and the Department of State as a subcontractor. The Department of State contract represents 46% of the segment’s revenues. There is typically a modest decline in consulting revenues during the fourth quarter of each year, due to a smaller number of business days than in other quarters that is driven by a high concentration of mandatory federal government holidays.

Other Segments

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

Product Development and Technology

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

 
·

Gathering content from outside sources;

 
·

Authenticating the content based on error-checking routines;

 
·

Translating this information into useable formats;

 
·

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

 
·

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

- 4 -

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

We use proprietary and non-proprietary technologies that index critical information in a variety of ways, such as broad field categories, document type, and document title. We employ robust, redundant storage technology to ensure that its critical information is highly available. Our processes allow for updating as soon as new information becomes available.

Customers

We have a diverse customer base that includes many of the largest companies or government entities in the industries we serve. Our government customers include counties, states, and the federal government. The majority of our GIS customers are comprised of large multi-national and national oil and exploration companies. In 2006, our largest two customers generated 37% of our total revenue.

Government Contracts

We sell our products and services to various government agencies and entities. One contract, through a prime contractor with the Department of State, comprised 27% of our total 2006 revenue. Our government contracts are subject to terms that would allow for termination at the election of the government. With the exception of the Department of State contract, 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.

Sales and Marketing

A sales focus is embedded throughout all levels of our corporate culture and has contributed significantly to our consistently strong revenue growth and current sales funnel. We have two full time sales people, yet we have eight employees with a large portion of their focus and responsibilities connected to sales. In addition to our own personnel, we have multiple teaming and reseller relationships, which are utilized as an economical means to promote, install and maintain our products and services.

We support this sales focus through a combination of marketing efforts which include a well maintained, functional and attractive web site, a quarterly e-news letter to all clients, attendance at selected trade shows, participation in selected trade associations and an assortment of collateral materials.

Federal land data customers 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 Bureau of Land Management, 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.

- 5 -

Our commercial oil and gas customers are easily identified, because they appear in the databases provided by the Bureau of Land Management 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.

Federal systems security projects 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 funding vehicles to be used, reviews the proposals, and assigns contracts. In some cases, we do not have access to a particular funding vehicle, and so we have managed projects from the position of a subcontractor to another entity with the appropriate funding vehicle. 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 three months to a year, with very large projects occasionally requiring a longer sales cycle.

Customer Support

Our customer support program includes customer service, training, and surveys:

 
·

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

 
·

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

 
·

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

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

Competition

The dominant player in the GIS marketplace is Environmental Systems Research Institute (ESRI), which is the largest GIS company in the world. ESRI is a privately held company. ESRI’s target market is top-level major GIS systems. We are an ESRI Business Partner that builds extensions to ESRI products to integrate with its client’s specific business processes. 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. Thus far, 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.

- 6 -

Our consulting segment competes against a large number of companies, and has subcontracted with several of them. Competitors include CACI, SCS, SAIC, STG, Inc., ITS Services, NCI Information Services and Stanley Associates. We differentiate our self by virtue of the quality of the services we deliver, as well as the use of an internal analysis tool that improves the efficiency of our consultants. The segment’s quality of service has resulted in several of our projects extending for many years.

Intellectual Property

We rely 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, dealers, and others, to protect our rights. In addition, we exercise reasonable measures to protect our intellectual property rights and enforce these rights when we become aware of any potential or actual violation or misuse.

Intellectual property licensed from third parties is a vital component of our offerings and, in many cases, cannot be independently replaced or recreated by us or others. We have longstanding relationships with the government agencies, and manufacturers from whom we license information. Almost all of the licenses that we rely upon are nonexclusive and expire within one to two years unless renewed.

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.

Employees

As of December 31, 2006, we had approximately 45 total employees, of which 4 were part time employees, and all of whom are located within the United States. None of the employees are represented by a collective bargaining agreement and we consider our employee relations to be good.

Available Information

Our annual report on Form 10-KSB, quarterly reports on Form 10-QSB, current reports on Form 8-K, and amendments to those reports are available, without charge, on our website, www.xedarinc.com, as soon as reasonably practicable after they are filed electronically with the SEC. We have also posted our code of conduct and code of ethics on our website. In addition, you may read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, DC 20549 and you may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Further the SEC maintains a website at www.sec.gov that contains copies of our reports, proxy and information statements, and other information concerning us. Copies of our reports, proxy and information statements are also available, without charge, when requested in writing from Xedar Corporation, attn: Secretary, 8310 South Valley Highway, Suite 220, Englewood, CO 80112.

- 7 -

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

We depend on database content obtained through agreements with third parties, and the failure to maintain these agreements could prove harmful to our business.

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 adversely affect our financial condition.

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

In 2006, we obtained approximately 24% of our revenue from subscriptions to our database products. Our results depend on our ability to achieve and sustain high annual renewal rates on existing subscriptions and to enter into new subscription arrangements on commercially acceptable terms. A failure to achieve high annual renewal rates on commercially acceptable terms would have a material adverse effect on our business, financial condition, and operating results.

Our growth strategy may prove unsuccessful.

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

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

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

- 8 -

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

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

The loss of key personnel could impair our future success.

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

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

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

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

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

- 9 -

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

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

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

Sales of substantial amounts of our common stock in the public market, or the perception that such sales could occur, could adversely affect the market price of our shares. As of December 31, 2006, we had 18,030,518 shares of common stock outstanding. Our principal stockholders are entitled to require us to register such shares under the Securities Act of 1933 and, in some cases, are subject to the lock-up agreements described below. 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.

Substantially all of our shareholders have agreed not to sell or otherwise dispose of their shares of common stock until July 2007, with the exception of two shareholders who own approximately 2,230,000 shares, and who may sell those shares at any time, subject to applicable securities law. However, upon the expiration of the lock-up periods, a significant number of shares of our common stock will, subject to applicable securities law, become freely tradable, which could depress the market price of our stock.

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

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

 
·

Quarterly variations in actual or anticipated results of operations;

 
·

Changes in financial estimates by securities analysts;

 
·

Actions or announcements by us or our competitors;

 
·

Regulatory actions;

 
·

Litigation;

 
·

Loss or gain of major customers or content providers;

 
·

Additions or departures of key personnel; and

 
·

Future sales of our common stock.

- 10 -

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

Item 1B. Unresolved Staff Comments

 

None.