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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the fiscal year ended September 30, 2010
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
 For the transition period from________ to ________
 Commission File Number 0-27166
 XATA Corporation
 (Exact name of registrant as specified in its charter)
 Minnesota(State or other jurisdiction of 
incorporation or organization)
    
    41-1641815(I.R.S. Employer
Identification No.)965 Prairie Center Drive 
Eden Prairie, Minnesota(Address of principal executive offices)
    
    55344(Zip Code)
 Registrants telephone number, including area code:
(952)707-5600
 Securities registered pursuant to Section 12(b) of the Act:
 (Title of Class)
    
    (Name of each exchange on which registered)Common Stock, $0.01 par value per share
    
    Nasdaq Capital Market
 Securities registered pursuant to Section 12(g) of the Act:
None
 o þ
 o þ
 þ o
 o o
 o
  Large Accelerated Filer o
Accelerated Filer o
Non-Accelerated Filer o(Do not check if a smaller reporting company)
Smaller Reporting Company þ o þ




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##### 



TABLE OF CONTENTS
 PART I
    
    
    
    PageItem 1.
    
    Business
    
    
    1Item 1A.
    
    Risk Factors
    
    
    8Item 1B.
    
    Unresolved Staff Comments
    
    
    11Item 2.
    
    Properties
    
    
    12Item 3.
    
    Legal Proceedings
    
    
    12Item 4.
    
    Reserved
    
    
    12PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    13Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    14Item 8.
    
    Financial Statements and Supplementary Data
    
    
    F-1Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
    
    
    25Item 9A.
    
    Controls and Procedures
    
    
    25Item 9B.
    
    Other Information
    
    
    25PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    25Item 11.
    
    Executive Compensation
    
    
    26Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
    
    
    26Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    26Item 14.
    
    Principal Accountant Fees and Services
    
    
    26PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    26SIGNATURES
    
    
    27EXHIBIT INDEX
    
    
    29EX-23EX-31.1EX-31.2EX-32.1EX-32.2
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Forward Looking Statements
   
 PART I
 
 Item 1. Business
 About XATA
    
    
    Our first-generation products, introduced in the early 1990s, included our revolutionary
touch-screen Driver Computer and PC-based Fleet Management System software. Valuable data
was downloaded from driver computers to the fleet management system host software in batch
mode via our patented driver key for compliance reporting and analysis.
    
    In 1999, we introduced OpCenter, a Microsoft Windows-based customer-hosted system that
can manage multiple operation centers and users over a wide area network.
 1




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
    
    In 2004, we introduced XATANET, our next-generation Web-based software as a service
(SaaS) solution. We continue to invest in product enhancements and additional software
applications to ensure that XATANET continues to meet the needs of our customers. We
believe that the XATANET platform enables us to service approximately 3.2 million medium
and heavy duty vehicles in the private fleet transportation market.
    
    In 2008, XATA completed its acquisition of GeoLogic Solutions, Inc., which provides the
commercial trucking industry through the MobileMax solution with wireless asset management
solutions in the for-hire segment of the over-the-road transportation sector. We intend to
migrate the functionality acquired as part of this acquisition into our XATANET platform.
    
    In 2009, we acquired Turnpike Global Technologies, Inc. and Turnpike Global Technologies
LLC (combined Turnpike). Turnpikes low-investment solution allows us to continue our
growth strategy by expanding our addressable market to include any size fleet in North
America and expanding into additional key vertical markets, such as Less Than Truckload
(LTL), beverage and general freight.
 Trucking Industry Background and Trends
    
    
    Increased operating costs: Driver salaries, fuel, insurance and other operating
costs continue to increase. Recent challenging economic conditions have also increased
the need for cost-saving efforts. These trends encourage operators to utilize onboard
information systems and fleet management solutions to control costs and more
effectively manage their fleets in order to optimize asset utilization.
    
    Government regulations: DOT driver log requirements have become more stringent. The
Federal Motor Carrier Safety Administration (FMCSA), an administration within the DOT,
implemented rules in January 2004, tightening driver work limitations. These rules
were challenged in federal court and then revised rules effective October 1, 2005. On
November 19, 2008, the FMCSA published a final rule adopting the provisions of its
December 17, 2007, interim final rule on the hours-of-service rules. The final
regulation dictates the number of driving and resting hours required of drivers. This
rule was challenged in court by groups such as Public Citizen, and FMCSA has been
required to develop and produce alternatives to this rule.
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On April 5, 2010 FMCSA released the final regulation for the use of Electronic Onboard
Recorders (EOBRs) to increase hours-of-service compliance and compliance-related
highway safety, 49 CFR 395.16. The initial regulation was modified in September of 2010
on two technical aspects  the removal of the +85C to -40C operating temperature limits
and allowing for a Type A USB connector. The FMCSA would like to mandate the use of
EOBRs for drivers with poor safety records, while providing additional incentives for
those who will switch voluntarily. The current criteria is one inspection of 10% or
greater non-compliance will require the installation of EOBR devices for two years.
There is additional movement to expand an overall mandate for the use of EOBRs in the
Commercial Carrier industry.Additionally, states require trucks to pay state fuel taxes based on the amount of fuel
consumed in their state. To comply with these regulations, drivers must record state
border crossing and fuel purchase information. Many long haul vehicles cross up to 25
state borders per week, resulting in significant paperwork for the driver, the clerical
staff of the carrier and the processor of the carriers fuel tax returns. In order to
comply with these requirements, records must be maintained at the fleet home base as
well as at the carriers headquarters. Records must also be readily available for
federal regulators to review fuel tax compliance. Our systems are designed to automate
compliance with each of these regulatory requirements. This year IFTA has conducted a
review of technologies deployed that accumulate miles for fuel tax reporting. There is
not a firm understanding of the actions resulting from the outcome of the study.In July of this year the FMCSA issued a formal Policy and Guidance requiring fleets to
maintain GPS records once an hour while the vehicle is in motion to be used in DOT
audits for Hours of Service Compliance. This Policy was directed at Fleets that use
Mobile Communication systems and not EOBR.Furthermore, there is increased pressure, by a variety of federal and state government
agencies, to implement environmental, green regulations to reduce the countrys carbon
footprint and greenhouse gas emissions. Policies that may be favored by environmental
concerns include a national speed limit of 65 miles per hour for all trucks, decreased
idling, reducing highway congestion and other policies that seek to get more value out
of every gallon of fuel burned. In order to comply with any such requirements, records
will need to be maintained and be available for federal and state regulators to review.
Our systems can help with the monitoring of these types of environmental components.
Many of the Mid Atlantic states have issued regulations prohibiting idling of the
commercial vehicles for any reason.Additionally, various state and federal statues and rules have focused on the concerns
over distracted driving and the use of electronic devices while a vehicle is in motion.
The use of texting devices has been specifically targeted by these rules. To date no
proposed rules have limited or prohibited the use of our products.Further, FMCSA launched a major new initiative, Comprehensive Safety Analysis (CSA)
2010 which is a new operational model designed to help the agency carry out its
compliance and enforcement programs more efficiently and effectively. Currently, the
safety fitness rating of a motor carrier is determined based on the results of a very
labor intensive compliance review conducted at the carriers place of business. Aside
from roadside inspections and new audits, the compliance review is the Agencys primary
intervention. Under CSA 2010, FMCSA will implement a broader array of progressive
interventions, some of which allow FMCSA to make contact with more carriers. Through
this rulemaking FMCSA would establish safety fitness determinations based on safety data
consisting of crashes, inspections, and violation history rather than the standard
compliance review. This will enable the Agency to assess the safety performance of a
greater segment of the motor
 3




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carrier industry with the goal of further reducing large
truck and bus crashes and fatalities. A
significant portion of the data used for these carrier ratings is gathered and stored by
our products.
 
    
    New technologies: New technologies are continuing to be offered throughout the
industry, leaving customers with an increasing desire for expanded functionality in an
affordable and simple fleet management solution.
    
    Safety and security concerns: Since the terrorist attacks of September 11, 2001,
public authorities and fleet operators have become more acutely interested in
technology solutions to increase the safety and security of their drivers and cargo.
This is especially true for companies transporting petroleum products and other
hazardous loads.
    
    Mobile technology: As companies increasingly rely on just-in-time inventory
management and seek to control and monitor inventories throughout their entire supply
chain, they demand better service and increased capabilities from their trucking
operators and vendors. In addition, as companies increasingly adopt mobile
technologies, including the internet, to reduce communication costs, paperwork and
processing times, trucking operators are adopting technology to comply with the
operating processes and systems of their customers. This trend encourages integration
of mobile technology with the host information systems of trucking fleet operators.
 Our Products and Services
  XATANET Fleet Management Solution
    
    
    Automation of DOT driver log requirements and state fuel tax reporting.
    
    Comprehensive vehicle and driver performance reporting.
    
    Real-time asset tracking, route management, trip optimization and stop activity
scheduling.
    
    Mobile two-way messaging and real-time vehicle location.
    
    Diagnostic and accident data capture.
 4




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MobileMax Fleet Management Solution
   XATA Turnpike Fleet Management Solution
   Professional Services
  
    
    Implementation services include project management, website setup and configuration,
best-practice recommendations, data integration and software implementation.
    
    Training services include online training, on-site training and one-on-one training for
fleet management and drivers.
    
    Best-practice consulting includes examining a customers fleet operations and making
recommendations for improvements.
    
    XATAs custom reporting service allows customers to have specialized reports created for
their specific operations, beyond the suite of standard reports already offered by the
various solutions.
 5




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Target Markets
     Other Markets
  Major Customers
   Sales and Marketing
  Direct Sales
  Channel Sales
  6




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Competition
   Key Alliances and Relationships
  Communication Providers
    Manufacturers
  7




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Third-party Applications
  Patents, Trademarks, and Copyrights
 ® ® ®
 Research and Development
  
    
    SaaS Infrastructure.We intend to continue to improve our SaaS infrastructure to meet
the increasing needs of our expanding customer base and the associated increase in
transactions. Also, we will continue to monitor and analyze the infrastructures capacity
and ability to meet the service level requirements of our customers.
    
    Application Software.XATA intends to continue developing our software applications by
enhancing current offerings, adding functionality and integrating with additional
third-party solutions. Recent enhancements and additional functionality includes
integrated navigation specifically for professional truck drivers, Speed Management, Fleet
Performance Management, integration to industry-standard handheld devices and third-party
fleet management software, and several advancements to our fleet-data reporting and
analytic capabilities.
 Employees
  
 Item 1A. Risk Factors
 We do not have a long or stable history of profitable operations.
 Our existing customers might cancel contracts with us, fail to renew contracts or fail to purchase
additional services and products.
 8




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Our market is highly competitive and is subject to revenue fluctuations.
 We have a limited number of products and those products are concentrated in one industry.
 We are dependent on key contract manufacturers.
 We are dependent on proprietary technology.
 We depend on wireless communication networks owned and controlled by others.
 Our products may quickly become obsolete.
 9




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Our industry is subject to significant and increasing regulations that could impact our product
offerings.
 Third parties may claim we infringe their intellectual property rights.
 Technology Crossover Ventures (TCV), JDSTG and Trident Capital, who are represented on our Board
of Directors, individually and together own enough stock to exert significant influence over XATA.
 We may need additional capital.
 10




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If our common share price decreases to a level such that the fair value of our net assets is less
than the carrying value of our net assets, we may be required to record additional significant
non-cash charges associated with goodwill impairment. Intangibles  Goodwill and Others.
 Fair value assessments of our intangible assets required by GAAP may require us to record
significant non-cash charges associated with intangible asset impairment. Property, Plant, and Equipment  Overall,
 We may issue additional stock without shareholder consent.
 Our directors liability is limited under Minnesota law and under certain agreements.
 
 Item 1B. Unresolved Staff Comments
  11




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Item 2. Properties
   
 Item 3. Legal Proceedings
  
 Item 4. Reserved
 12




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PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
  Fiscal Year 2010
    
    Low
    
    HighFirst Quarter
    
    $
    2.51
    
    
    $
    3.74Second Quarter
    
    
    2.85
    
    
    
    3.90Third Quarter
    
    
    2.50
    
    
    
    3.58Fourth Quarter
    
    
    2.43
    
    
    
    2.84
 Fiscal Year 2009
    
    Low
    
    HighFirst Quarter
    
    $
    1.52
    
    
    $
    3.85Second Quarter
    
    
    1.47
    
    
    
    3.00Third Quarter
    
    
    1.62
    
    
    
    3.98Fourth Quarter
    
    
    2.49
    
    
    
    4.00
  Dividend Policy
   Sale of Unregistered Securities
  Issuer Purchases of Equity Securities
  13




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations
  Overview
      Technology, People, Processes
  
    
    Technology.XATA provides a total fleet management solution, including hardware,
software and services through the following solutions:
 
    
    XATANET, our web-based, on-demand scalable software, includes a variety
of web-based enterprise applications. XATANET, provides critical real-time
information about our customers fleets, allows for paperless driver logs and
provides summary and granular reports on driver and vehicle performance. XATANET
can also integrate with back-office applications, for a seamless flow of
information, and our software works with a variety of in-cab communications
devices.
    
    MobileMax helps for-hire trucking companies track and manage nearly
every aspect of their fleets activities to help control costs and increase ROI.
The MobileMax solution
 14




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features Multi-Mode communication capabilities that
automatically switch between land-based and satellite communications to take
advantage of the cost-savings and reliability
of both terrestrial and satellite communication. MobileMax integrates with
dispatching and routing applications for a seamless flow of information.
 
    
    XATA Turnpike is a PDA-based SaaS solution that enables XATA to serve
any size fleet that requires a simple low investment solution. XATA Turnpike has
expanded our addressable market to include key vertical markets such as Less Than
Truckload and beverage, where XATA Turnpike meets specific customer needs. XATA
Turnpike is unique in that it does not contain an embedded modem. Most onboard
fleet Management systems utilize an expensive in-cab system dependant on a cellular
or satellite communication platform to transmit data, while XATA Turnpike uses PDA
based communication devices via Bluetooth as its wireless communication tool. XATA
Turnpike interacts with various handheld devices such as smartphones and cell
phones and thus eliminating upfront hardware costs and providing a low investment
solution.
 
    
    People.With employee expertise in safety, fleet management and technology, XATA is
able to provide consultation services to help organizations implement best practices for
fleet productivity and develop specific customer hardware and reporting requirements.
    
    Processes.All XATA processes are designed to make managing fleets easier. Drawing on
hundreds of successful implementations with a wide variety of fleets including
multibillion-dollar organizations, XATA carefully plans each phase of the implementation
and follows well established methodologies. The process begins with assessing our
customers objectives. Then, we develop a detailed implementation schedule that includes
all aspects of the project, from implementation to conversion, integration, training and
problem solving.
 Critical Accounting Policies
  Revenue Recognition. Software  Revenue Revenue Recognition  Overall
   15




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Third-Party Reseller Agreements. Revenue Recognition Principal Agent
Considerations
 Allowance for doubtful accounts.
 Goodwill. Intangibles  Goodwill and Others,
 16




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Property, Plant, and Equipment  Overall,
 Product Warranties.
 Capitalized system development costs Software  Costs to Be Sold, Leased, or Otherwise Marketed
 Income taxes
 Income Tax
 Stock-based Compensation. Compensation Stock Compensation,
 17




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Compensation  Stock Compensation  Overall,
 Operating Results
  18




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Twelve months ended September 30,2010
    
    
    2009SoftwareRevenue
    
    $
    42,862
    
    
    $
    32,909Cost of goods sold
    
    
    10,870
    
    
    
    8,654Gross margin
    
    $
    31,992
    
    
    $
    24,255Gross margin %
    
    
    74.6
    %
    
    
    73.7
    %SystemsRevenue
    
    $
    21,641
    
    
    $
    25,104Cost of goods sold
    
    
    20,918
    
    
    
    22,861Gross margin
    
    $
    723
    
    
    $
    2,243Gross margin %
    
    
    3.3
    %
    
    
    8.9
    %ServicesRevenue
    
    $
    4,041
    
    
    $
    5,334Cost of goods sold
    
    
    3,121
    
    
    
    3,687Gross margin
    
    $
    920
    
    
    $
    1,647Gross margin %
    
    
    22.8
    %
    
    
    30.9
    %OtherRevenue
    
    $
    2,107
    
    
    $
    1,978Cost of goods sold
    
    
    956
    
    
    
    938Gross margin
    
    $
    1,151
    
    
    $
    1,040Gross margin %
    
    
    54.6
    %
    
    
    52.5
    %TotalRevenue
    
    $
    70,651
    
    
    $
    65,325Cost of goods sold
    
    
    35,865
    
    
    
    36,140Gross margin
    
    $
    34,786
    
    
    $
    29,185Gross margin %
    
    
    49.2
    %
    
    
    44.7
    %
  
    
    Software revenue includes monthly subscriptions from our XATANET and XATA Turnpike
solutions, and monthly fees from our MobileMax and OpCenter product lines
    
    Systems revenue includes hardware, warranty, and repair revenue
    
    Services revenue includes training, implementation, installation, professional service,
and customer funded development revenue
    
    Software cost of goods sold consists of communication, hosting costs, and direct
personnel costs related to network and infrastructure support
    
    System cost of goods sold consists of the direct product costs, warranty costs, product
repair costs, and direct personnel costs related to customer support
    
    Services cost of goods sold consists of third party vendor costs and direct costs
related to service personnel
 19




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Comparison of fiscal 2010 operating results to fiscal 2009
 Revenue
    Cost of Goods Sold and Gross Margin
     20




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Selling, General and Administrative Expenses
  Research & Development Expenses
  Interest Expense on Financing Activities
  Acquisition Related Interest and Mark to Market Expense
  Net Interest Expense
  Income Taxes
  21




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Income Tax
  Net Loss to Common Shareholders
  Liquidity and Capital Resources
      22




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Subsequent Events
    Off-Balance Sheet Arrangements
  Recently Issued Accounting Pronouncements
 Fair Value Measurement and Disclosures (ASU 2010-06)
  23




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Revenue Recognition (ASU 2009-13 and ASU 2009-14)
  ASU No. 2009-13:
 ASU No. 2009-14:
  24




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Item 8. Financial Statements and Supplementary Data
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
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XATA CORPORATION
CONSOLIDATED BALANCE SHEETS
 September 30,
    
    
    September 30,2010
    
    
    2009ASSETSCurrent assetsCash and cash equivalents
    
    $
    13,374
    
    
    $
    3,440Accounts receivable, less allowances of $444 at September 30, 2010 and $368 at September 30, 2009
    
    
    11,392
    
    
    
    9,323Inventories
    
    
    3,047
    
    
    
    4,104Deferred product costs
    
    
    2,042
    
    
    
    2,060Prepaid expenses and other current assets
    
    
    1,260
    
    
    
    1,064Total current assets
    
    
    31,115
    
    
    
    19,991Equipment, leased equipment and leasehold improvements, net
    
    
    5,798
    
    
    
    3,980Intangible assets, net
    
    
    14,901
    
    
    
    10,725Goodwill
    
    
    17,048
    
    
    
    3,011Deferred product costs, net of current portion
    
    
    1,757
    
    
    
    2,470Deferred tax assets
    
    
    337
    
    
    
    Other assets
    
    
    420
    
    
    
    487Total assets
    
    $
    71,376
    
    
    $
    40,664LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of debt obligations
    
    $
    839
    
    
    $
    84Accounts payable
    
    
    5,138
    
    
    
    5,366Accrued expenses
    
    
    4,872
    
    
    
    5,914Deferred revenue
    
    
    5,070
    
    
    
    5,280Total current liabilities
    
    
    15,919
    
    
    
    16,644Debt obligations, net of current portion
    
    
    485
    
    
    
    8,534Deferred revenue, net of current portion
    
    
    3,591
    
    
    
    6,101Deferred tax liabilities
    
    
    2,242
    
    
    
    Other long-term liabilities
    
    
    638
    
    
    
    820Total liabilities
    
    
    22,875
    
    
    
    32,099Shareholders equityPreferred stock, no par, 50,000 shares authorized:Series B, 4% convertible, 2,250 shares designated;
shares issued and outstanding: 2,085 at September 30, 2010 and 2,004 at September 30, 2009
    
    
    5,033
    
    
    
    4,790Series C, convertible, 1,400 shares designated;
shares issued and outstanding: 1,269 at September 30, 2010 and September 30, 2009
    
    
    4,426
    
    
    
    4,426Series D, convertible, 1,600 shares designated;
shares issued and outstanding: 1,567 at September 30, 2010 and September 30, 2009
    
    
    5,279
    
    
    
    5,279Series F, convertible, 1,400 shares designated;
shares issued and outstanding: 1,356 at September 30, 2010 and September 30, 2009
    
    
    2,365
    
    
    
    2,365Series G, convertible, 10,100 shares designated;
shares issued and outstanding: 10,067 at September 30, 2010
    
    
    26,877
    
    
    
    Common stock, par value $0.01 per share; 100,000 shares authorized; shares issued and
outstanding: 9,816 at September 30, 2010 and 8,789 at September 30, 2009
    
    
    98
    
    
    
    88Contingent common stock earn-out
    
    
    6,452
    
    
    
    Additional paid-in capital
    
    
    41,539
    
    
    
    32,536Accumulated deficit
    
    
    (44,129
    )
    
    
    (40,919
    )Accumulated other comprehensive income
    
    
    561
    
    
    
    Total shareholders equity
    
    
    48,501
    
    
    
    8,565Total liabilities and shareholders equity
    
    $
    71,376
    
    
    $
    40,664
  F-2




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XATA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Year Ended September 30,2010
    
    
    2009Revenue
    
    $
    70,651
    
    
    $
    65,325Costs and expensesCost of goods sold
    
    
    35,864
    
    
    
    36,140Selling, general and administrative
    
    
    26,641
    
    
    
    24,236Research and development
    
    
    6,488
    
    
    
    5,507Acquisition related costs
    
    
    837
    
    
    
    Total costs and expenses
    
    
    69,830
    
    
    
    65,883Operating income (loss)
    
    
    821
    
    
    
    (558
    )Interest expense on financing activities
    
    
    (1,358
    )
    
    
    Acquisition related interest and mark to market
    
    
    (359
    )
    
    
    Net interest and other expense
    
    
    (365
    )
    
    
    (1,509
    )Loss before income taxes
    
    
    (1,261
    )
    
    
    (2,067
    )Income tax expense
    
    
    (50
    )
    
    
    (35
    )Net loss
    
    
    (1,311
    )
    
    
    (2,102
    )Preferred stock dividends
    
    
    (208
    )
    
    
    (200
    )Preferred stock deemed dividends
    
    
    (1,691
    )
    
    
    (525
    )Net loss to common shareholders
    
    $
    (3,210
    )
    
    $
    (2,827
    )Net loss per common share  basic and diluted
    
    $
    (0.34
    )
    
    $
    (0.33
    )Weighted average common and
common share equivalents:Basic and diluted
    
    
    9,313
    
    
    
    8,551
  F-3




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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
 AccumulatedSeries B
    
    
    Series C
    
    
    Series D
    
    
    Series F
    
    
    Series G
    
    
    
    
    
    
    
    
    
    
    Contingent
    
    
    Additional
    
    
    
    
    
    
    OtherPreferred Stock
    
    
    Preferred Stock
    
    
    Preferred Stock
    
    
    Preferred Stock
    
    
    Preferred Stock
    
    
    Common Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    Accumulated
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Earn-Out
    
    
    Capital
    
    
    Deficit
    
    
    Income
    
    
    TotalBalance at September 30, 2008
    
    
    1,926
    
    
    $
    5,181
    
    
    
    1,269
    
    
    $
    4,845
    
    
    
    1,567
    
    
    $
    5,937
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    8,745
    
    
    $
    87
    
    
    $
    
    
    
    $
    28,234
    
    
    $
    (38,092
    )
    
    $
    
    
    
    $
    6,192Issuance of restricted shares of common
stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48
    
    
    
    1
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,613
    
    
    
    
    
    
    
    
    
    
    
    1,613Forfeiture of restricted shares of
common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of preferred stock and warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,356
    
    
    
    2,365
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500
    
    
    
    
    
    
    
    
    
    
    
    2,865Record the beneficial conversion feature
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (484
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    484
    
    
    
    
    
    
    
    
    
    
    
    Preferred stock dividends
    
    
    78
    
    
    
    197
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (200
    )
    
    
    
    
    
    
    (3
    )Preferred stock deemed dividends
    
    
    
    
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    484
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (525
    )
    
    
    
    
    
    
    Adjustment to reflect value of beneficial
conversion feature
    
    
    
    
    
    
    (629
    )
    
    
    
    
    
    
    (419
    )
    
    
    
    
    
    
    (658
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,706
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,102
    )
    
    
    
    
    
    
    (2,102
    )Balance at September 30, 2009
    
    
    2,004
    
    
    
    4,790
    
    
    
    1,269
    
    
    
    4,426
    
    
    
    1,567
    
    
    
    5,279
    
    
    
    1,356
    
    
    
    2,365
    
    
    
    
    
    
    
    
    
    
    
    8,789
    
    
    
    88
    
    
    
    
    
    
    
    32,536
    
    
    
    (40,919
    )
    
    
    
    
    
    
    8,565Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,210
    
    
    
    
    
    
    
    
    
    
    
    1,210Issuance of common stock for share based
compensation awards
restricted stock units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    221
    
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    4Issuance of common stock for acquisition
of
Turnpike Global Technologies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    810
    
    
    
    8
    
    
    
    
    
    
    
    2,422
    
    
    
    
    
    
    
    
    
    
    
    2,430Forfeiture of restricted shares of
common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Contingent common stock earn-out
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,452
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,452Issuance of preferred stock and warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,067
    
    
    
    26,877
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,715
    
    
    
    
    
    
    
    
    
    
    
    30,592Record the beneficial conversion feature
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,654
    
    
    
    (1,654
    )
    
    
    
    
    
    
    Preferred stock dividends
    
    
    81
    
    
    
    206
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (208
    )
    
    
    
    
    
    
    (2
    )Preferred stock deemed dividends
    
    
    
    
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37
    )
    
    
    
    
    
    
    Comprehensive loss:Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    561
    
    
    
    561Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,311
    )
    
    
    
    
    
    
    (1,311
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (750
    )Balance at September 30, 2010
    
    
    2,085
    
    
    $
    5,033
    
    
    
    1,269
    
    
    $
    4,426
    
    
    
    1,567
    
    
    $
    5,279
    
    
    
    1,356
    
    
    $
    2,365
    
    
    
    10,067
    
    
    $
    26,877
    
    
    
    9,816
    
    
    $
    98
    
    
    $
    6,452
    
    
    $
    41,539
    
    
    $
    (44,129
    )
    
    $
    561
    
    
    $
    48,501
  F-4




---



##### Table of Contents



XATA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Year Ended September 30,2010
    
    
    2009Operating activitiesNet loss
    
    $
    (1,311
    )
    
    $
    (2,102
    )Adjustments
to reconcile net loss to net cash provided by operating activities:Depreciation and amortization of intangibles
    
    
    5,117
    
    
    
    3,017Amortization of debt financing costs
    
    
    458
    
    
    
    250Gain on sale of equipment
    
    
    (69
    )
    
    
    Non-cash interest expense on convertible debt
    
    
    892
    
    
    
    Non-cash charges for issuance of equity securities related to the
acquisition of Turnpike Global Technologies
    
    
    359
    
    
    
    Stock based compensation
    
    
    1,211
    
    
    
    1,613Changes in assets and liabilities, net of impact of acquisition:Accounts receivable, net
    
    
    (1,299
    )
    
    
    2,042Inventories
    
    
    1,057
    
    
    
    (1,368
    )Deferred product costs
    
    
    731
    
    
    
    (372
    )Prepaid expenses and other assets
    
    
    226
    
    
    
    677Accounts payable
    
    
    (1,164
    )
    
    
    972Accrued expenses
    
    
    (1,657
    )
    
    
    (649
    )Deferred revenue
    
    
    (2,720
    )
    
    
    (1,463
    )Net cash provided by operating activities
    
    
    1,831
    
    
    
    2,617Investing activitiesPurchase of equipment and leasehold improvements
    
    
    (2,695
    )
    
    
    (1,377
    )Proceeds from the sale of fixed assets
    
    
    269
    
    
    
    Acquisition of Turnpike Global Technologies, net of cash acquired
    
    
    (9,451
    )
    
    
    Net cash used in investing activities
    
    
    (11,877
    )
    
    
    (1,377
    )Financing activitiesBorrowings on long-term obligations, net of costs
    
    
    29,709
    
    
    
    18,077Payments on long-term obligations
    
    
    (9,740
    )
    
    
    (27,646
    )Proceeds from issuance of preferred stock and warrants
    
    
    
    
    
    
    2,865Proceeds from options exercised
    
    
    4
    
    
    
    Net cash provided by (used in) financing activities
    
    
    19,973
    
    
    
    (6,704
    )Effects of exchange rate on cash
    
    
    7
    
    
    
    Increase (decrease) in cash and cash equivalents
    
    
    9,934
    
    
    
    (5,464
    )Cash and cash equivalentsBeginning of year
    
    
    3,440
    
    
    
    8,904Ending of year
    
    $
    13,374
    
    
    $
    3,440Supplemental disclosures of cash flow informationCash payments for interest
    
    $
    533
    
    
    $
    1,513Supplemental schedule of noncash investing and financing activitiesAssets acquired under capital lease obligation
    
    $
    516
    
    
    $
    Preferred stock deemed dividends
    
    $
    1,691
    
    
    $
    525Preferred stock dividends
    
    $
    208
    
    
    $
    200Preferred stock dividends paid
    
    $
    206
    
    
    $
    197Conversion of debt into Series G preferred stock and warrants
    
    $
    30,592
    
    
    $
    Contingent common stock earnout related to purchase of Turnpike Global Technologies
    
    $
    6,454
    
    
    $
    Issuance of common stock related to purchase of Turnpike Global Technologies
    
    $
    2,430
    
    
    $
    The accompanying notes are an integral part of these financial statements
 F-5




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##### Table of Contents



Notes to Consolidated Financial Statements
 Note 1. Description of Business
  Note 2. Summary of Significant Accounting Policies
 Principles of Consolidation
  Revenue Recognition
 Software  Revenue Recognition, Revenue Recognition 
Overall, and Revenue Recognition  Multiple Element Arrangements
    F-6




---



##### Table of Contents



Third-Party Reseller Agreements
 Revenue Recognition Principal Agent Considerations
 Allowance for Doubtful Accounts
  Segment Reporting
   Foreign Currency Translation
  Use of Estimates
  F-7




---



##### Table of Contents



Basis of Presentation
  Cash and Cash Equivalents
  Concentration of Credit Risk
   Fair Value of Financial Instruments
 Fair Value Hierarchy
 Fair Value Measurement and Disclosures,
 Level 1 Observable inputs that reflect quoted prices (unadjusted) for identical assets or
liabilities in active markets.Level 2 Include other inputs that are directly or indirectly observable in the marketplace.Level 3 Unobservable inputs which are supported by little or no market activity.
   F-8




---



##### Table of Contents



Fair Value Measurements at Reporting Date UsingSeptember
30, 2010
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Liabilities:Contingent earn out
    
    $
    181
    
    
    $
    
    
    
    $
    
    
    
    $
    181Total
    
    $
    181
    
    
    $
    
    
    
    $
    
    
    
    $
    181
  Inventories
  Debt Financing Costs
  Equipment and Leasehold Improvements
   September 30,
    
    
    September 30,2010
    
    
    2009Office furniture and equipment
    
    $
    5,558
    
    
    $
    4,464Leased equipment
    
    
    2,959
    
    
    
    520Engineering and manufacturing equipment
    
    
    919
    
    
    
    900Leasehold improvements
    
    
    2,452
    
    
    
    2,65011,888
    
    
    
    8,534Less: accumulated depreciation
    
    
    (6,090
    )
    
    
    (4,554
    )Equipment and leasehold improvements, net
    
    $
    5,798
    
    
    $
    3,980
  F-9




---



##### Table of Contents



Capitalized System Development Costs
 Software  Costs
to Be Sold, Leased, or Otherwise Marketed
  Long-Lived Assets
  Goodwill
 Intangibles Goodwill and Others
  Balance at September 30, 2009
    
    $
    3,011Goodwill from acquisition of Turnpike
    
    
    13,665Foreign currency translation adjustment
    
    
    372Balance at September 30, 2010
    
    $
    17,048
 Intangible Assets
 Property, Plant, and Equipment  Overall,
 F-10




---



##### Table of Contents



Foreign CurrencyWeighted Average
    
    
    
    
    
    
    Accumulated
    
    
    TranslationLife (years)
    
    
    Cost
    
    
    Amortization
    
    
    Adjustment
    
    
    NetAcquired customer
contracts
    
    
    7.8
    
    
    $
    14,900
    
    
    $
    (4,699
    )
    
    $
    40
    
    
    $
    10,241Acquired technology
    
    
    7.0
    
    
    
    2,700
    
    
    
    (328
    )
    
    
    77
    
    
    
    2,449Reseller relationships
    
    
    6.0
    
    
    
    1,500
    
    
    
    (213
    )
    
    
    43
    
    
    
    1,330Trademark
    
    
    10.0
    
    
    
    900
    
    
    
    (77
    )
    
    
    28
    
    
    
    851Other intangibles
    
    
    7.0
    
    
    
    49
    
    
    
    (19
    )
    
    
    
    
    
    
    30Total
    
    
    7.7
    
    
    $
    20,049
    
    
    $
    (5,336
    )
    
    $
    188
    
    
    $
    14,901
  Weighted Average
    
    
    
    
    
    
    AccumulatedLife (years)
    
    
    Cost
    
    
    Amortization
    
    
    NetAcquired customer
contracts
    
    
    8.0
    
    
    $
    13,500
    
    
    $
    (2,812
    )
    
    $
    10,688Other intangibles
    
    
    7.0
    
    
    
    49
    
    
    
    (12
    )
    
    
    37Total
    
    
    8.0
    
    
    $
    13,549
    
    
    $
    (2,824
    )
    
    $
    10,725
  Year ending September 30,2011
    
    $
    2,6822012
    
    
    2,6822013
    
    
    2,6822014
    
    
    2,6822015
    
    
    2,677Thereafter
    
    
    1,496Total expected amortization expense
    
    $
    14,901
 Product Warranties
  F-11




---



##### Table of Contents



Shipping Costs
  Advertising Costs
  Income taxes
 Income Taxes 
Overall
 Stock-Based Compensation
 Compensation  Stock Compensation, Compensation  Stock Compensation  Overall,
 F-12




---



##### Table of Contents



Major Customers
  Percentage of Revenue
    
    Percentage of Ending ReceivablesFor the Year Ended September 30,
    
    At September 30,2010
    
    2009
    
    2010
    
    2009Customer A
    
    
    14.1
    %
    
    
    13.7
    %
    
    
    *
    
    
    
    19.6
    %Customer B
    
    
    *
    
    
    
    14.1
    %
    
    
    *
    
    
    
    *
  Major Suppliers
  Recently Issued Accounting Standards
 Fair Value Measurement and Disclosures (ASU 2010-06)
  Revenue Recognition (ASU 2009-13 and ASU 2009-14)
  ASU No. 2009-13:
 ASU No. 2009-14:
 F-13




---



##### Table of Contents



Note 3. Revenue and Cost of Goods Sold Information
  For the Twelve Months EndedSeptember 30,2010
    
    
    2009Revenue:Software
    
    $
    42,862
    
    
    $
    32,909Systems
    
    
    21,641
    
    
    
    25,104Services
    
    
    4,041
    
    
    
    5,334Other
    
    
    2,107
    
    
    
    1,978Total revenue
    
    $
    70,651
    
    
    $
    65,325
 For the Twelve Months EndedSeptember 30,2010
    
    
    2009Cost of goods sold:Software
    
    $
    10,870
    
    
    $
    8,654Systems
    
    
    20,918
    
    
    
    22,861Services
    
    
    3,121
    
    
    
    3,687Other
    
    
    955
    
    
    
    938Total cost of goods sold
    
    $
    35,864
    
    
    $
    36,140
   Note 4. Acquisition of Turnpike Global Technologies, Inc. and Turnpike Global Technologies LLC
  F-14




---



##### Table of Contents



Cash
    
    
    
    
    
    $
    10,000Stock (1)
    
    
    
    
    
    
    2,477Earn-Out (2)
    
    
    
    
    
    
    6,297Total purchase price
    
    
    
    
    
    $
    18,774Cash
    
    $
    548Accounts receivable, less allowances for
doubtful accounts
    
    
    943Prepaid expenses
    
    
    348Equipment and leasehold improvements, net
    
    
    1,419Deferred tax asset
    
    
    328Accounts payable
    
    
    (609
    )Accrued expenses
    
    
    (510
    )Deferred tax liabilities
    
    
    (2,177
    )Capital lease obligations
    
    
    (1,681
    )Net liabilities
    
    
    
    
    
    
    (1,391
    )Acquired customer contracts and other intangible assets,
net (3)
    
    
    
    
    
    
    6,500Goodwill
    
    
    
    
    
    
    13,665Total
    
    
    
    
    
    $
    18,774
 
 (1)
    
    Stock amount calculated using the fair market value on the date of acquisition based on
the present value of the 833,333 shares of common stock at a stated value of $3.00.(2)
    
    Earn-out potential of an additional 833,333 shares of common stock after the end of
each of the 2010, 2011, and 2012 fiscal years. The amount was calculated using the
estimated fair market value on the date of acquisition based on stock price and estimated
probability of earn-out target achievements.(3)
    
    Intangible assets: F-15




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##### Table of Contents



Fair Value
    
    
    Est. Useful LifeAcquired customer contracts
    
    $
    1,400
    
    
    6 yearsAcquired technology
    
    
    2,700
    
    
    7 yearsReseller relationships
    
    
    1,500
    
    
    6 yearsTrademark
    
    
    900
    
    
    10 yearsTotal intangible assets
    
    $
    6,500
   For the Twelve MonthsEnded September 30,2010
    
    2009(unaudited pro forma)Revenue
    
    $
    72,305
    
    
    $
    70,890Net loss to common shareholders
    
    $
    (32
    )
    
    $
    (4,909
    )Net loss per common share:Basic
    
    $
    (0.00
    )
    
    $
    (0.52
    )Diluted
    
    $
    (0.00
    )
    
    $
    (0.52
    )Weighted average common and common
share equivalents  basic and diluted
    
    
    9,623
    
    
    
    9,385
 Note 5. Financing Arrangements
  September 30,
    
    
    September 30,2010
    
    
    2009Contingent earn out
    
    $
    181
    
    
    $
    Senior secured revolving credit facility
    
    
    
    
    
    
    500Secured term loan
    
    
    
    
    
    
    8,000Capitalized leases
    
    
    1,143
    
    
    
    118Total debt obligations
    
    
    1,324
    
    
    
    8,618Less current portion of debt obligations
    
    
    839
    
    
    
    84Total debt obligations, net of current portion
    
    $
    485
    
    
    $
    8,534
 F-16




---



##### Table of Contents



Note 6. Net Loss Per Share
   F-17




---



##### Table of Contents



Note 7. Income Taxes
  September 30,2010
    
    
    2009Current deferred tax assets:Inventory and warranty reserve
    
    $
    568
    
    
    $
    838Accrued expenses, deferred revenue and other
    
    
    3,921
    
    
    
    2,733Accounts receivable and sales reserve
    
    
    147
    
    
    
    1364,636
    
    
    
    3,707Non-current deferred tax assets(liabilities):Depreciation and amortization
    
    
    1,279
    
    
    
    949Tax credit carryforwards
    
    
    1,869
    
    
    
    1,748Net operating loss carryforwards
    
    
    14,253
    
    
    
    16,520Identifiable intangible assets
    
    
    (5,583
    )
    
    
    (3,968
    )11,818
    
    
    
    15,249Total deferred tax asset
    
    
    16,454
    
    
    
    18,956Less: valuation allowance
    
    
    (18,359
    )
    
    
    (18,956
    )Net deferred tax asset/(liability)
    
    $
    (1,905
    )
    
    $
    
   F-18




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##### Table of Contents



September 30,2010
    
    
    2009Statutory federal rate applied to loss
before income taxes
    
    $
    (493
    )
    
    $
    (703
    )State income tax benefit
    
    
    (34
    )
    
    
    (23
    )Stock based compensation
    
    
    180
    
    
    
    242Acquisition costs
    
    
    313
    
    
    
    Debt financing costs
    
    
    96
    
    
    
    Meals and entertainment
    
    
    39
    
    
    
    Other permanent differences
    
    
    
    
    
    
    83Change in valuation allowance
    
    
    (596
    )
    
    
    658Research and development credit
    
    
    (20
    )
    
    
    (258
    )Alternative minimum tax
    
    
    82
    
    
    
    25Section 382 limitaion adjustment
    
    
    572
    
    
    
    Other
    
    
    (89
    )
    
    
    11$
    50
    
    
    $
    35
    Note 8. Commitments
 Leases
   F-19




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##### Table of Contents



Years ending September 30,2011
    
    $
    8642012
    
    
    5692013
    
    
    5412014
    
    
    5512015
    
    
    147Total
    
    $
    2,672
  401(k) Plan
  Purchase Commitments
  Note 9. Shareholders Equity
 Common Stock
  Preferred Stock
  Series B
  F-20




---



##### Table of Contents



Series C
  F-21




---



##### Table of Contents



Series D
    F-22




---



##### Table of Contents



Series E and Series F
     Series G
  F-23




---



##### Table of Contents



Stock Plans
   Stock Options
  F-24




---



##### Table of Contents



WeightedAverageShares
    
    Exercise PriceOptions outstanding at September 30, 2008
    
    
    1,239
    
    
    $
    4.66Granted
    
    
    732
    
    
    
    2.18Cancelled:Expired
    
    
    (25
    )
    
    
    3.99Forfeited
    
    
    (41
    )
    
    
    4.24Options outstanding at September 30, 2009
    
    
    1,905
    
    
    
    3.73Granted
    
    
    503
    
    
    
    2.89Exercised
    
    
    (2
    )
    
    
    2.00Cancelled:Expired
    
    
    (25
    )
    
    
    5.23Forfeited
    
    
    (154
    )
    
    
    3.42Options outstanding at September 30, 2010
    
    
    2,227
    
    
    $
    3.55
  Options Outstanding
    
    Options ExercisableWeighted
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    Weighted
    
    
    
    
    
    Average
    
    WeightedRemaining
    
    Average
    
    
    
    
    
    Remaining
    
    AverageNumber
    
    Contractual
    
    Exercise
    
    Number
    
    Contractual
    
    ExerciseRange of exercise price
    
    of Shares
    
    Life (Years)
    
    Price
    
    of Shares
    
    Life (Years)
    
    Price$2.00 - $2.99
    
    
    1,249
    
    
    
    8.5
    
    
    $
    2.47
    
    
    
    381
    
    
    
    8.0
    
    
    $
    2.393.00 - 3.99
    
    
    167
    
    
    
    8.3
    
    
    
    3.51
    
    
    
    94
    
    
    
    8.3
    
    
    
    3.434.33 - 4.98
    
    
    35
    
    
    
    5.9
    
    
    
    4.64
    
    
    
    35
    
    
    
    5.9
    
    
    
    4.645.03 - 5.40
    
    
    776
    
    
    
    6.2
    
    
    
    5.24
    
    
    
    776
    
    
    
    6.2
    
    
    
    5.242,227
    
    
    
    7.6
    
    
    
    3.55
    
    
    
    1,286
    
    
    
    6.8
    
    
    
    4.25
    F-25




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##### Table of Contents



For the Twelve MonthsEnded September 30,2010
    
    2009Number of shares granted
    
    
    503
    
    
    
    732Fair value per share
    
    $
    1.30
    
    
    $
    0.87Risk-free interest rate
    
    
    3.02
    %
    
    
    2.29
    %Expected volatility
    
    
    42.16
    %
    
    
    40.29
    %Expected life (in years)
    
    
    5.93
    
    
    
    5.73Dividend yield
    
    
    
    
    
    
    
  Restricted Stock Awards
   WeightedNumber of
    
    Average GrantShares
    
    Date Fair ValueRestricted stock outstanding at September 30, 2008
    
    
    285
    
    
    $
    4.37Granted
    
    
    48
    
    
    
    3.24Vested
    
    
    (173
    )
    
    
    4.48Forfeited
    
    
    (4
    )
    
    
    2.99Restricted stock outstanding at September 30, 2009
    
    
    156
    
    
    
    3.93Granted
    
    
    18
    
    
    
    3.06Vested
    
    
    (92
    )
    
    
    3.75Forfeited
    
    
    (4
    )
    
    
    3.21Restricted stock outstanding at September 30, 2010
    
    
    78
    
    
    $
    3.96
   Restricted Stock Units
  F-26




---



##### Table of Contents



WeightedNumber of
    
    Average GrantShares
    
    Date Fair ValueRestricted stock units outstanding at September 30, 2008
    
    
    
    
    
    $
    Granted
    
    
    241
    
    
    
    2.00Restricted stock units outstanding at September 30, 2009
    
    
    241
    
    
    
    2.00Granted
    
    
    174
    
    
    
    2.87Settled
    
    
    (201
    )
    
    
    2.20Cancelled:Expired
    
    
    
    
    
    
    Forfeited
    
    
    (29
    )
    
    
    2.31Restricted stock outstanding at September 30, 2010
    
    
    185
    
    
    $
    2.55
    Common stock warrants
     F-27




---



##### Table of Contents



Weighted AverageWeighted Average
    
    Remaining LifeNumber of Warrants
    
    Exercise Price
    
    (years)Warrants outstanding at September 30, 2008
    
    
    1,995
    
    
    $
    3.54
    
    
    
    2.6Granted
    
    
    407Cancelled
    
    
    (461
    )Warrants outstanding at September 30, 2009
    
    
    1,941
    
    
    
    3.34
    
    
    
    4.0Granted
    
    
    3,020Cancelled
    
    
    (10
    )Warrants outstanding at September 30, 2010
    
    
    4,951
    
    
    $
    3.13
    
    
    
    5.1
 Note 10. Legal Proceedings
   Note 11. Subsequent Events
    F-28




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##### Table of Contents



Item 9. Changes In and Disagreements with Accountants on Accounting and Financial
Disclosure
  
 Item 9A. Controls and Procedures
 Evaluation of disclosure controls and procedures.
 Managements report on internal control over financial reporting.
   Changes in internal controls over financial reporting.
 
 Item 9B. Other Information
  
 PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
  25




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##### Table of Contents



www.xata.com
 
 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, Director Independence
  
 Item 14. Principal Accountant Fees and Services
  
 PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 (a) Documents Filed as Part of Form 10-K
  
     (b) Exhibits
  (c) Financial Statement Schedules
  26




---



##### Table of Contents



SIGNATURES
  XATA CORPORATIONDated:  December 13, 2010
    By:
    /s/     John J. CoughlanJohn J. Coughlan, Chairman,
Chief Executive Officer and President (Principal executive officer)  Dated:  December 13, 2010
    By:
    /s/     John J. CoughlanJohn J. Coughlan, Chairman, ChiefExecutive Officer and PresidentDated:  December 13, 2010
    By:
    /s/     Karen T. BeckwithKaren T. Beckwith, DirectorDated:  December 13, 2010
    By:
    /s/    Donald R. DixonDonald R. Dixon, DirectorDated:  December 13, 2010
    By:
    /s/     Thomas G. HudsonThomas G. Hudson, DirectorDated:  December 13, 2010
    By:
    /s/     Roger W. KleppeRoger W. Kleppe, DirectorDated:  December 13, 2010
    By:
    /s/     Chad LindbloomChad Lindbloom, DirectorDated:  December 13, 2010
    By:
    /s/     Christopher P. MarshallChristopher P. Marshall, DirectorDated:  December 13, 2010
    By:
    /s/     Michael J. PaxtonMichael J. Paxton, DirectorDated:  December 13, 2010
    By:
    /s/     Bharat S. VedakBharat S. Vedak, DirectorDated:  December 13, 2010
    By:
    /s/    Mark E. TiesMark E. Ties, Chief Financial Officer(Principal  accounting and financial
officer) 27




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##### Table of Contents



Schedule II
 XATA Corporation
 Valuation and Qualifying Accounts
 (in thousands)
 Balance at
    
    Charged to
    
    Charged tobeginning of
    
    costs and
    
    other
    
    Deductions
    
    Balance atDescription
    
    period
    
    expenses
    
    accounts (1)
    
    (2)
    
    end of periodYear ended
September 30, 2009
deducted from
assets accounts:Accounts
receivable
allowance for
bad debts
    
    $
    333
    
    
    $
    115
    
    
    $
    
    
    
    $
    80
    
    
    $
    368Year ended
September 30, 2010
deducted from
assets accounts:Accounts
receivable
allowance for
bad debts
    
    
    368
    
    
    
    269
    
    
    
    80
    
    
    
    273
    
    
    
    444
 
 (1)
    
    This amount represents allowance for bad debts established for Turnpike Global Technologies(2)
    
    Amounts recorded in fiscal 2010 include $53,000 for accounts reserved for the Turnpike Global Technologies acquisition 28




---



##### Table of Contents



ExhibitNo.
    
    Description of Exhibits3.1
    
    Second Restated Articles of Incorporation, as amended through April 17, 2010.(28)3.2
    
    Restated Bylaws, as amended February 4, 2009 (22)4.1
    
    Common Stock Warrant and Series B Preferred Stock Purchase Agreement, dated December 6, 2003
(1)4.2
    
    Common Stock Warrant and Series C Preferred Stock Purchase Agreement, dated September 7, 2005
(2)4.3
    
    Common Stock Warrant and Series D Preferred Stock Purchase Agreement, dated June 18, 2007 (3)4.4
    
    Form of warrant issued to Trident entities in connection with Common Stock Warrant and Series B
Preferred Stock Purchase Agreement (1)4.5
    
    Form of warrant issued to Cherry Tree Securities, LLC for its service as placement agent in connection
with Common Stock Warrant and Series B Preferred Stock Purchase Agreement (1)4.6
    
    Form of warrant issued to Trident entities in connection with Common Stock Warrant and Series C
Preferred Stock Purchase Agreement (2)4.7
    
    Form of warrant issued to Trident entities in connection with Common Stock Warrant and Series D
Preferred Stock Purchase Agreement (3)4.8
    
    Investor Rights Agreement, dated June 19, 2007 (3)4.9
    
    Form of Senior Subordinated Convertible Notes issued on January 31, 2008, by XATA Corporation to each
of Platinum Equity Capital Partners, L.P., Platinum Equity Capital Partners-A, L.P., Platinum Equity
Capital Partners-PF, L.P. and Platinum Transportation Principals, LLC (24)4.10
    
    Common Stock Warrant, dated as of January 31, 2008, issued by XATA Corporation to Silicon Valley Bank
(24)4.11
    
    Common Stock Warrant, dated as of January 31, 2008, issued by XATA Corporation to Partners for Growth
II, L.P. (30)4.12
    
    Amended and Restated Investor Rights Agreement dated as of February 12, 2009 by and among the Company,
Trident Capital Fund-V, L.P., Trident Capital Fund-V Affiliates Fund, L.P., Trident Capital Fund-V
Affiliates Fund (Q), L.P., Trident Capital Fund-V Principals Fund, L.P. and Trident Capital Parallel
Fund-V, C.V.(31)4.13
    
    Form of Warrant issued on February 12, 2009 to Trident Capital Fund-V, L.P., Trident Capital Fund-V
Affiliates Fund, L.P., Trident Capital Fund-V Affiliates Fund (Q), L.P., Trident Capital Fund-V
Principals Fund, L.P., Trident Capital Parallel Fund-V, C.V., GW 2001 Fund, L.P., Weber Capital
Partners II, L.P. and certain members of the Companys management (24)9.0
    
    Amended and Restated Voting Agreement, dated September 7, 2005 (2)10.4
    
    Trident Investor Indemnification Agreement (1)10.5
    
    Trident Director Indemnification Agreement (1)10.6
    
    Stock Purchase Agreement with JDSTG, dated August 30, 2000 (6)10.7
    
    Registration Rights Agreement with JDSTG dated August 30, 2000 (6)10.8
    
    Amendment No. 1, dated October 31, 2000, to Stock Purchase Agreement with JDSTG (7)
 29




---



##### Table of Contents



ExhibitNo.
    
    Description of Exhibits10.9
    
    Side Agreement with JDSTG dated December 28, 2000 (8)10.13
    
    Form of Warrant issued to directors as equity compensation (12)10.14
    
    2002 Long-Term Incentive and Stock Option Plan (22)10.15
    
    Form of Restricted Stock Award Agreement pursuant to 2002 Long-Term Incentive and Stock Option Plan
(13)10.16
    
    Form of Directors Restricted Stock Award Agreement pursuant to 2002 Long-Term Incentive and Stock
Option Plan(14)10.17
    
    2007 Long-term Incentive and Stock Option Plan (15)10.18
    
    Form of Stock Option Agreement for Directors pursuant to 2007 Long-term Incentive and Stock Option Plan
(22)10.19
    
    Form of Stock Option Agreement for Employees pursuant to 2007 Long-term Incentive and Stock Option Plan
(22)10.20
    
    Change of Control Agreement with Mark Ties (16)10.22
    
    Executive Employment Agreement with John J. Coughlan (18)10.23
    
    Incentive Stock Option Agreement with John J. Coughlan (18)10.24
    
    Restricted Stock Award Agreement with John J. Coughlan (18)10.25
    
    Matching Restricted Stock Award Agreement with John J. Coughlan (18)10.26
    
    Change of Control Agreement with David Gagne (19)10.27
    
    Non-Qualified Stock Option Agreement with David Gagne(19)10.28
    
    Matching Restricted Stock Award Agreement with David Gagne(19)10.30
    
    Business Agreement with Winland Electronics dated June 28, 2005 (20)10.31
    
    Reseller Agreement with Orbcomm, Inc. dated July 31, 2006 (20)10.32
    
    Second Amendment to Custom Service Agreement with Sprint Solutions, Inc. effective January 1, 2007
(20)10.33
    
    Stock Purchase Agreement, dated as of December 19, 2007, between XATA Corporation, GeoLogic Solutions,
Inc., GeoLogic Management, Inc., Platinum Equity Capital Partners, L.P., Platinum Equity Capital
Partners-A, L.P., Platinum Equity Capital Partners-PF, L.P. and Platinum Transportation Principals,
LLC.(23)10.34
    
    First Amendment to Stock Purchase Agreement, dated as of January 31, 2008, between XATA Corporation,
GeoLogic Solutions, Inc., GeoLogic Management, Inc., Platinum Equity Capital Partners, L.P., Platinum
Equity Capital Partners-A, L.P., Platinum Equity Capital Partners-PF, L.P. and Platinum Transportation
Principals, LLC. (24)10.38
    
    Severance Agreement between Mark E. Ties and the Company dated May 8, 2008 (26)10.43
    
    Severance Agreement between XATA Corporation and David Gagne dated May 7, 2010 (29)10.44
    
    Common Stock Warrant and Series E Preferred Stock Purchase Agreement dated as of February 12, 2010 by
and among XATA Corporation, Trident Capital Fund-V, L.P., Trident Capital Fund-V Affiliates Fund,
 30




---



##### Table of Contents



ExhibitNo.
    
    Description of ExhibitsL.P., Trident Capital Fund-V Affiliates Fund (Q), L.P., Trident Capital Fund-V Principals Fund, L.P., Trident
Capital Parallel Fund-V, C.V., Weber Capital Partners II, L.P., GW 2001 Fund, L.P. and certain members
of the Companys management (32)10.45
    
    Exchange Agreement dated February 12, 2010 by and among XATA Corporation, Trident Capital Fund-V, L.P.,
Trident Capital Fund-V Affiliates Fund, L.P., Trident Capital Fund-V Affiliates Fund (Q), L.P., Trident
Capital Fund-V Principals Fund, L.P., Trident Capital Parallel Fund-V, C.V., Weber Capital Partners II,
L.P., GW 2001 Fund, L.P. and certain members of the Companys management (33)10.46
    
    Amendment, dated January 27, 2010, to certain promissory notes issued by the Company on January 31,
2008 to Platinum Equity Capital Partners, L.P., Platinum Equity Capital Partners-A, L.P., Platinum
Equity Capital Partners-PF, L.P. and Platinum Transportation Principals, LLC (34)10.47
    
    2007 Long-term Incentive and Stock Option Plan, as amended effective February 4, 2010 (35)10.48
    
    Form of XATA Corporation Restricted Stock Unit Award Agreement (36)23
    
    Consent of Grant Thornton LLP, independent registered public accounting firm*31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *32.1
    
    Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 *32.2
    
    Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 *
 
 *
    
    Filed herewith(1)
    
    Incorporated by reference to exhibit filed as part of Report on Form 8-K on December 9, 2003(2)
    
    Incorporated by reference to exhibit filed as part of Report on Form 8-K on September 22, 2005(3)
    
    Incorporated by reference to exhibit filed as part of Report on Form 8-K on June 22, 2007(4)
    
    Incorporated by reference to exhibit filed as a part of Report on Form 10-QSB for the fiscal quarter
ended March 31, 1997(5)
    
    Incorporated by reference to exhibit filed as part of Report on Form 10-QSB for the fiscal quarter
ended March 31, 2003(6)
    
    Incorporated by reference to exhibit filed as a part of Report on Form 8-K on September 7, 2000(7)
    
    Incorporated by reference to exhibit filed as a part of Report on Form 8-K on November 2, 2000(8)
    
    Incorporated by reference to exhibit filed as a part of Report on Form 10-KSB for the fiscal year ended
September 30, 2000(9)
    
    Incorporated by reference to exhibit filed as part of Report on Form 10-KSB for the fiscal year ended
September 30, 2004(10)
    
    Incorporated by reference to exhibit filed as part of Report on Form 10-KSB/A for the fiscal year ended
September 30, 2005(11)
    
    Incorporated by reference to exhibit filed as part of Report on Form 10-QSB for the fiscal quarter
ended December 31, 2000(12)
    
    Incorporated by reference to exhibit filed as part of Report on Form 10-KSB for the fiscal year ended 31




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##### Table of Contents



September 30, 2002(13)
    
    Incorporated by reference to exhibit filed as part of Report on Form 10-KSB for the fiscal year ended
September 30, 2004(14)
    
    Incorporated by reference to exhibit filed as part of Report on Form 8-K on March 1, 2006(15)
    
    Incorporated by reference to exhibit filed as part of Registration Statement on Form S-8 on February
15, 2007(16)
    
    Incorporated by reference to exhibit filed as part of Report on Form 8-K on April 12, 2005(17)
    
    Incorporated by reference to exhibit filed as part of Report on Form 8-K on April 11, 2006(18)
    
    Incorporated by reference to exhibit filed as part of Report on Form 8-K on October 4, 2006(19)
    
    Incorporated by reference to exhibit filed as part of Report on Form 8-K on January 8, 2007(20)
    
    Incorporated by reference to exhibit filed as part of Report on Form 10-KSB for the fiscal year ended
September 30, 2006(21)
    
    Incorporated by reference to exhibit filed as part of Report on Form 8-K on July 9, 2007(22)
    
    Incorporated by reference to Exhibit 3.1 of the Companys Report on Form 8-K filed with the SEC on
February 10, 2009(23)
    
    Incorporated by reference to exhibit filed as part of Report on Form 8-K filed with the SEC on December
24, 2007(24)
    
    Incorporated by reference to exhibit filed as part of Report on Form 8-K filed with the SEC on February
6, 2008(25)
    
    Incorporated by reference to exhibit filed as part of Report on Form 8-K filed with the SEC on January
18, 2008(26)
    
    Incorporated by reference to exhibit filed as part of Report on Form 10-Q for the fiscal quarter ended
June 30, 2008.(27)
    
    Incorporated by reference to exhibit filed as part of Report on Form 8-K filed with the SEC on October
7, 2008(28)
    
    Incorporated by reference to Exhibit 3.1 of the Companys Report on Form 10-K filed with the SEC on
December 17, 2008, and Exhibits 3.1, 3.2 and 3.3 of the Companys Report on Form 8-K filed with the SEC
on April 21, 2009(29)
    
    Incorporated by reference to Exhibit 10.1 of the Companys Current Report on Form 8-K filed with the
SEC on May 11, 2010(30)
    
    Incorporated by reference to Exhibit 4.1 of the Companys Report on Form 8-K filed with the SEC on
February 18, 2010(31)
    
    Incorporated by reference to Exhibit 4.2 of the Companys Report on Form 8-K filed with the SEC on
February 18, 2010(32)
    
    Incorporated by reference to Exhibit 10.1 of the Companys Report on Form 8-K filed with the SEC on
February 18, 2010(33)
    
    Incorporated by reference to Exhibit 10.2 of the Companys Report on Form 8-K filed with the SEC on
February 18, 2010 32




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##### Table of Contents



(34)
    
    Incorporated by reference to exhibit filed as part of Report on Form 10-Q for the fiscal quarter ended
March 31, 2010(35)
    
    Incorporated by reference to Appendix A to the Companys Proxy Statement filed with the Securities and
Exchange Commission on December 22, 2008(36)
    
    Incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K/A filed with the
SEC on December 10, 2010.(37)
    
    Incorporated by reference to Exhibit 10.41 of the Companys Report on Form 10-K filed with the SEC on
December 17, 2008.(38)
    
    Incorporated by reference to Exhibit 10.42 of the Companys Report on Form 10-K filed with the SEC on
December 17, 2008. 33