UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2008.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From __________ to __________

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

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

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

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

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

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

Name of Each Exchange on
Title of Each Class Which Registered

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

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

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

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

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

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

DOCUMENTS INCORPORATED BY REFERENCE

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

PAR TECHNOLOGY CORPORATION

TABLE OF CONTENTS
FORM 10-K

- -------------------------------------------------------------------------------
Item Number
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PART I

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

PART II

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

PART III

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

PART IV

Item 15. Exhibits, Financial Statement Schedules

Signatures

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

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

PAR TECHNOLOGY CORPORATION

PART I

Item 1: Business

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

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

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

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

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

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

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

Hospitality Segment

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

Products
- --------

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

Software

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

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

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

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

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

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

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

Hardware

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

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

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

Systems Installation and Professional Services
- ----------------------------------------------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Backlog
- -------

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

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

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

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

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

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

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

Government Segment

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Backlog
- --------

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

Employees

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

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

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

Exchange Certifications

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

Item 1A: Risk Factors

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Item 2: Properties

The following are the principal facilities (by square footage) of the
Company:

Industry Floor Area Number of
Location Segment Principal Operations Sq. Ft.
-------- ------- -------------------- ----------

New Hartford, NY Hospitality Principal executive offices, 138,500
Government manufacturing, research and
development laboratories,
computing facilities

Rome, NY Government Research and development 52,800

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

Boulder, CO Hospitality Service 22,500

Boca Raton, FL Hospitality Research and development 14,900

Sydney, Australia Hospitality Sales and service 14,000

Las Vegas, NV Hospitality Service 8,800

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

Toronto, Canada Hospitality Sales, service and research and 7,700
development

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

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

Item 3: Legal Proceedings

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

PART II

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

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

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

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

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

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

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

Item 6: Selected Financial Data

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

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

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

Net revenues .................... $ 232,687 $ 209,484 $ 208,667 $ 205,639 $ 174,884

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

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

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

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

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

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

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

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

SELECTED CONSOLIDATED BALANCE SHEET DATA
(In thousands)

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

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

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

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

Forward-Looking Statements

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

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

Overview

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

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

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

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

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

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

Summary

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

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

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

Results of Operations -- 2008 Compared to 2007

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Results of Operations -- 2007 Compared to 2006

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Liquidity and Capital Resources

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Critical Accounting Policies

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

Revenue Recognition Policy

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

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

Hardware

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

Software

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

Service

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

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

Contracts

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

Accounts Receivable-Allowance for Doubtful Accounts

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

Inventories

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

Capitalized Software Development Costs

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

Goodwill

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Taxes

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

New Accounting Pronouncements Not Yet Adopted

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

Off-Balance Sheet Arrangements

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

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

INFLATION

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

INTEREST RATES

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

FOREIGN CURRENCY

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

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

Item 8: Financial Statements and Supplementary Data

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

Item 9A: Controls and Procedures

1. Evaluation of Disclosure Controls and Procedures.

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

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

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

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

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

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

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

3. Attestation Report of Independent Registered Public Accounting Firm.

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

4. Changes in Internal Controls over Financial Reporting

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

PART III

Item 10: Directors, Executive Officers and Corporate Governance

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

Item 11: Executive Compensation

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

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

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

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

Item 14: Principal Accounting Fees and Services

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

PART IV

Item 15: Exhibits, Financial Statement Schedules

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

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

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets at December 31, 2008 and 2007

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

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

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

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

Notes to Consolidated Financial Statements

(b) Exhibits
See list of exhibits.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
PAR Technology Corporation:

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

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

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

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

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

KPMG LLP

Syracuse, New York
March 16, 2009

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

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

See accompanying notes to consolidated financial statements

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

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

Net revenues:
Product ...................................... $ 81,763 $ 77,116 $ 83,237
Service ...................................... 75,430 67,370 61,979
Contract ..................................... 75,494 64,998 63,451
-------------- -------------- --------------

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

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

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

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

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

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

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

Weighted average shares outstanding

Basic ........................................ 14,421 14,345 14,193
============== ============== ==============
Diluted ...................................... 14,761 14,345 14,752
============== ============== ==============

See accompanying notes to consolidated financial statements

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

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

Net income (loss) ................................. $ 2,217 $ (2,708) $ 5,721
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments ..... (1,871) 961 122
-------------- -------------- --------------

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

See accompanying notes to consolidated financial statements

PAR TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

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

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

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

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

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

See accompanying notes to consolidated financial statements

PAR TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year ended December 31,
----------------------------------------------------
2008 2007 2006
------------- --------------- --------------

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

See accompanying notes to consolidated financial statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 -- Summary of Significant Accounting Policies

Basis of consolidation

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

Revenue recognition

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

Hardware

Software

Service

Contracts

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

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

Statement of cash flows

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

Accounts receivable - Allowance for doubtful accounts

Inventories

Property, plant and equipment

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

Other assets

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

Income taxes

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

assets to their net realizable amounts. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.

Other long-term liabilities

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

Foreign currency

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

Other income

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

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

Identifiable intangible assets

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

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

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

The components of identifiable intangible assets are:

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

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

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

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

Stock split

Stock-based compensation

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

Earnings per share

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

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

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

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

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

Goodwill

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

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

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

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

Accounting for impairment or disposal of long-lived assets

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

Reclassifications

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

Use of estimates

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

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

New Accounting Pronouncements Not Yet Adopted

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

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

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

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

Note 2 -- Business Acquisitions

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

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

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

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

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

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

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

Software costs $ 1,025 5 Years

Customer relationships 649 5 Years

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

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

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

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

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

Note 3 -- Accounts Receivable

The Company's net accounts receivable consist of:

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

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

Note 4 -- Inventories

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

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

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

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

Note 5 -- Property, Plant and Equipment

The components of property, plant and equipment are:

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

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

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

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

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

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

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

Note 6 -- Debt

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

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

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

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

Note 7 -- Stock based compensation

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

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

Information with respect to this plan is as follows:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Note 8-- Income Taxes

The provision (benefit) for income taxes consists of:

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

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

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

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

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

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

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

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

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

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

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

Note 9 -- Employee Benefit Plans

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

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

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

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

Note 10 -- Contingencies

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

Note 11 -- Segment and Related Information

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Note 12 -- Fair Value of Financial Instruments

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

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

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

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

Note 13 -- Related Party Transactions

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

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

Note 14 -- Selected Quarterly Financial Data (Unaudited)

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

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

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

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

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

PAR TECHNOLOGY CORPORATION

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

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

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

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

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

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

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

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

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

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

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

List of Exhibits

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

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

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

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

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

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

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

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

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

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

List of Exhibits
(Continued)

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

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

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

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

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

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

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

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

23 Consent of Independent Registered Public
Accounting Firm

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

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

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