##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended March 31, 2010 or
 o
    
    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: 0-27166
 XATA Corporation
 
  Minnesota
    
    41-1641815(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification Number)
  
   
   þ o
  o o
  o þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ




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##### 



Index
 Page No.PART I.
    
    FINANCIAL INFORMATIONItem 1. Consolidated Financial Statements:Consolidated Statements of Operations for the Three and Six Months Ended March 31, 2010 and 2009
    
    
    3Consolidated Balance Sheets as of March 31, 2010 and September 30, 2009
    
    
    4Consolidated Statements of Changes in Shareholders Equity for the Six Months Ended March 31,
2010 and the Twelve Months Ended September 30, 2009
    
    
    5Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2010 and 2009
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis
of Financial Condition and Results of Operation
    
    
    26Item 4. Controls and Procedures
    
    
    32PART II.
    
    OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    33Item 1A. Risk Factors
    
    
    33Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    33Item 3. Defaults upon Senior Securities
    
    
    33Item 4. Reserved
    
    
    33Item 5. Other Information
    
    
    33Item 6. Exhibits
    
    
    34SIGNATURESEXHIBITSEX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



Item 1.
    
    Consolidated Financial Statements.
 XATA CORPORATION
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
  For the Three Months Ended
    
    
    For the Six Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenue
    
    $
    18,104
    
    
    $
    16,895
    
    
    $
    35,628
    
    
    $
    31,538Costs and expensesCost of goods sold
    
    
    9,065
    
    
    
    9,263
    
    
    
    18,757
    
    
    
    16,858Selling, general and administrative
    
    
    6,925
    
    
    
    5,752
    
    
    
    13,075
    
    
    
    11,653Research and development
    
    
    1,599
    
    
    
    1,403
    
    
    
    2,933
    
    
    
    2,810Acquisition related costs
    
    
    58
    
    
    
    
    
    
    
    837
    
    
    
    Total costs and expenses
    
    
    17,647
    
    
    
    16,418
    
    
    
    35,602
    
    
    
    31,321Operating income
    
    
    457
    
    
    
    477
    
    
    
    26
    
    
    
    217Interest expense on financing activities
    
    
    (579
    )
    
    
    
    
    
    
    (1,358
    )
    
    
    Acquisition related interest and mark to market
    
    
    (192
    )
    
    
    
    
    
    
    (354
    )
    
    
    Net interest and other expense
    
    
    (88
    )
    
    
    (386
    )
    
    
    (364
    )
    
    
    (797
    )(Loss) income before income taxes
    
    
    (402
    )
    
    
    91
    
    
    
    (2,050
    )
    
    
    (580
    )Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net (loss) income
    
    
    (402
    )
    
    
    91
    
    
    
    (2,050
    )
    
    
    (580
    )Preferred stock dividends
    
    
    (52
    )
    
    
    (50
    )
    
    
    (103
    )
    
    
    (99
    )Preferred stock deemed dividends
    
    
    (1,654
    )
    
    
    (484
    )
    
    
    (1,668
    )
    
    
    (479
    )Net loss to common shareholders
    
    $
    (2,108
    )
    
    $
    (443
    )
    
    $
    (3,821
    )
    
    $
    (1,158
    )Net loss per common share  basic and diluted
    
    $
    (0.23
    )
    
    $
    (0.05
    )
    
    $
    (0.43
    )
    
    $
    (0.14
    )Weighted average common and
common share equivalents
Basic and diluted
    
    
    9,147
    
    
    
    8,524
    
    
    
    8,894
    
    
    
    8,500
  3




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##### Table of Contents



XATA CORPORATION
 
 CONSOLIDATED BALANCE SHEETS
  March 31,
    
    
    September 30,2010
    
    
    2009ASSETSCurrent assetsCash and cash equivalents
    
    $
    13,865
    
    
    $
    3,440Accounts receivable, less allowances
of $547 at March 31, 2010 and $368 at September 30, 2009
    
    
    10,698
    
    
    
    9,323Inventories
    
    
    2,488
    
    
    
    4,104Deferred product costs
    
    
    2,267
    
    
    
    2,060Prepaid expenses and other current assets
    
    
    645
    
    
    
    1,064Total current assets
    
    
    29,963
    
    
    
    19,991Equipment, leased equipment and leasehold improvements, net
    
    
    5,379
    
    
    
    3,980Intangible assets, net
    
    
    16,317
    
    
    
    10,725Goodwill
    
    
    15,775
    
    
    
    3,011Deferred product costs, net of current portion
    
    
    2,108
    
    
    
    2,470Other assets
    
    
    248
    
    
    
    487Total assets
    
    $
    69,790
    
    
    $
    40,664LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of debt obligations
    
    $
    1,077
    
    
    $
    84Accounts payable
    
    
    5,238
    
    
    
    5,366Accrued expenses
    
    
    4,841
    
    
    
    5,914Deferred revenue
    
    
    5,012
    
    
    
    5,280Total current liabilities
    
    
    16,168
    
    
    
    16,644Debt obligations, net of current portion
    
    
    490
    
    
    
    8,534Deferred revenue, net of current portion
    
    
    4,784
    
    
    
    6,101Other long-term liabilities
    
    
    726
    
    
    
    820Total liabilities
    
    
    22,168
    
    
    
    32,099Shareholders equityPreferred stock, no par, 50,000 shares authorized:Series B, 4% convertible, 2,250 shares designated;
shares issued and outstanding: 2,044 at March 31, 2010
and 2,004 at September 30, 2009
    
    
    4,906
    
    
    
    4,790Series C, convertible, 1,400 shares designated;
shares issued and outstanding: 1,269 at March 31, 2010
and September 30, 2009
    
    
    4,426
    
    
    
    4,426Series D, convertible, 1,600 shares designated;
shares issued and outstanding: 1,567 at March 31, 2010
and September 30, 2009
    
    
    5,279
    
    
    
    5,279Series F, convertible, 1,400 shares designated;
shares issued and outstanding: 1,356 at March 31, 2010
and September 30, 2009
    
    
    2,365
    
    
    
    2,365Series G, convertible, 10,100 shares designated;
shares issued and outstanding: 10,067 at March 31, 2010
    
    
    26,877
    
    
    
    Common stock, par value $0.01 per share; 100,000 shares
authorized; shares issued and outstanding: 9,813 at
March 31, 2010 and 8,789 at September 30, 2009
    
    
    98
    
    
    
    88Contingent common stock earn-out
    
    
    6,452
    
    
    
    Additional paid-in capital
    
    
    41,172
    
    
    
    32,536Accumulated deficit
    
    
    (44,740
    )
    
    
    (40,919
    )Accumulated other comprehensive income
    
    
    787
    
    
    
    Total shareholders equity
    
    
    47,622
    
    
    
    8,565Total liabilities and shareholders equity
    
    $
    69,790
    
    
    $
    40,664
  4




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##### Table of Contents



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
    )
    
    $
    
    
    
    
    6,192 $Issuance 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    847
    
    
    
    
    
    
    
    
    
    
    
    847Issuance of common stock for share based
compensation awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    216
    
    
    
    2
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    Issuance of common stock for acquisition of
Turnpike Global Technologies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    810
    
    
    
    8
    
    
    
    
    
    
    
    2,422
    
    
    
    
    
    
    
    
    
    
    
    2,430Forfeiture of restricted shares of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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
    
    
    40
    
    
    
    102
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (103
    )
    
    
    
    
    
    
    (1
    )Preferred stock deemed dividends
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14
    )
    
    
    
    
    
    
    Comprehensive loss:Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    787
    
    
    
    787Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,050
    )
    
    
    
    
    
    
    (2,050
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,263
    )Balance at March 31, 2010
    
    
    2,044
    
    
    $
    4,906
    
    
    $
    1,269
    
    
    $
    4,426
    
    
    
    1,567
    
    
    $
    5,279
    
    
    
    1,356
    
    
    $
    2,365
    
    
    
    10,067
    
    
    $
    26,877
    
    
    
    9,813
    
    
    $
    98
    
    
    $
    6,452
    
    
    $
    41,172
    
    
    $
    (44,740
    )
    
    $
    787
    
    
    $
    47,622
  5




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##### Table of Contents



XATA CORPORATION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
  For the Six Months EndedMarch 31,2010
    
    
    2009Operating activitiesNet loss
    
    $
    (2,050
    )
    
    $
    (580
    )Adjustments to reconcile net loss to net cash provided by
operating activities:Depreciation and amortization of intangibles
    
    
    2,320
    
    
    
    1,486Amortization of debt financing costs
    
    
    458
    
    
    
    125Non-cash interest expense on convertible debt
    
    
    892
    
    
    
    Non-cash charges for issuance of equity securities related to the
acquisition of Turnpike Global Technologies
    
    
    354
    
    
    
    Stock based compensation
    
    
    847
    
    
    
    793Changes in assets and liabilities, net of impact of acquisition:Accounts receivable, net
    
    
    (478
    )
    
    
    1,709Inventories
    
    
    1,616
    
    
    
    (1,286
    )Deferred product costs
    
    
    156
    
    
    
    (680
    )Prepaid expenses and other assets
    
    
    448
    
    
    
    438Accounts payable
    
    
    (742
    )
    
    
    707Accrued expenses
    
    
    (1,932
    )
    
    
    (1,558
    )Deferred revenue
    
    
    (1,584
    )
    
    
    133Net cash provided by operating activities
    
    
    305
    
    
    
    1,287Investing activitiesPurchase of equipment and leasehold improvements
    
    
    (1,073
    )
    
    
    (516
    )Acquisition of Turnpike Global Technologies, net of cash acquired
    
    
    (9,451
    )
    
    
    Net cash used in investing activities
    
    
    (10,524
    )
    
    
    (516
    )Financing activitiesBorrowings on long-term obligations, net of costs
    
    
    29,709
    
    
    
    18,077Payments on long-term obligations
    
    
    (9,072
    )
    
    
    (27,600
    )Proceeds from issuance of preferred stock and warrants
    
    
    
    
    
    
    2,925Net cash provided by (used in) financing activities
    
    
    20,637
    
    
    
    (6,598
    )Effects of exchange rate on cash
    
    
    7
    
    
    
    Increase (decrease) in cash and cash equivalents
    
    
    10,425
    
    
    
    (5,827
    )Cash and cash equivalentsBeginning
    
    
    3,440
    
    
    
    8,904Ending
    
    $
    13,865
    
    
    $
    3,077Supplemental disclosures of cash flow informationCash payments for interest
    
    $
    329
    
    
    $
    744Supplemental schedule of noncash investing and financing activitiesAssets acquired under capital lease obligation
    
    $
    92
    
    
    $
    Preferred stock deemed dividends
    
    $
    1,668
    
    
    $
    479Preferred stock dividends
    
    $
    103
    
    
    $
    66Preferred stock dividends paid
    
    $
    102
    
    
    $
    98Conversion of debt into Series G preferred stock and warrants
    
    $
    30,592
    
    
    $
    Contingent common stock earnout related to purchase of Turnpike Global Technologies
    
    $
    6,452
    
    
    $
    Issuance of common stock related to purchase of Turnpike Global Technologies
    
    $
    2,430
    
    
    $
    
  6




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##### Table of Contents



Note 1. Significant Accounting Policies
 Presentation
   Principles of Consolidation
  Revenue Recognition
 Software  Revenue Recognition, Revenue Recognition  Overall, and Revenue Recognition  Multiple Element Arrangements
   7




---



##### Table of Contents



Third-Party Reseller Agreements
 Revenue Recognition Principal Agent Considerations
 Allowance for Doubtful Accounts
  8




---



##### Table of Contents



Foreign Currency Translation
  Use of Estimates
  Basis of Presentation
  Subsequent Events
  Cash and Cash Equivalents
  Fair Value of Financial Instruments
 Fair Value Hierarchy
 Fair Value Measurement and Disclosures,
 Level 1 
 Level 2 
 9




---



##### Table of Contents



Level 3 
   Fair Value Measurements at Reporting Date UsingMarch 31, 2010
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Liabilities:Contingent earn out
    
    $
    176
    
    
    $
    
    
    
    $
    
    
    
    $
    176Total
    
    $
    176
    
    
    $
    
    
    
    $
    
    
    
    $
    176
  Inventories
  Investment in Sales-Type Leases
  Years ending September 30,2010
    
    $
    712011
    
    
    38Total minimum lease payments
    
    
    109Less: amount representing interest (at 11.71%)
    
    
    (18
    )Present value of net minimum sales-type lease payments
    
    
    91Less: current portion of investment in sales-type leases
    
    
    (87
    )Investment in sales-type leases, excluding current portion
    
    $
    4
 10




---



##### Table of Contents



Debt Financing Costs
  Equipment, Leased Equipment and Leasehold Improvements
   March 31,
    
    
    September 30,2010
    
    
    2009Office furniture and equipment
    
    $
    5,649
    
    
    $
    4,464Leased equipment
    
    
    1,880
    
    
    
    520Engineering and manufacturing equipment
    
    
    912
    
    
    
    900Leasehold improvements
    
    
    2,640
    
    
    
    2,65011,081
    
    
    
    8,534Less: accumulated depreciation
    
    
    (5,702
    )
    
    
    (4,554
    )Equipment and leasehold improvements, net
    
    $
    5,379
    
    
    $
    3,980
  Capitalized Software Development Costs
 Software  Costs
to Be Sold, Leased, or Otherwise Marketed
 11




---



##### Table of Contents



Long-Lived Assets
  Goodwill
 Intangibles  Goodwill and
Others,
  Balance at September 30, 2009
    
    $
    3,011Goodwill from acquisition of Turnpike
    
    
    12,301Foreign currency translation adjustment
    
    
    463Balance at March 31, 2010
    
    $
    15,775
 Intangible Assets
 Property, Plant, and Equipment  Overall,
 12




---



##### Table of Contents



Weighted
    
    
    
    
    
    
    
    
    
    
    Foreign CurrencyAverage Life
    
    
    
    
    
    
    Accumulated
    
    
    Translation(years)
    
    
    Cost
    
    
    Amortization
    
    
    Adjustment
    
    
    NetAcquired customer contracts
    
    
    7.8
    
    
    $
    14,900
    
    
    $
    (3,735
    )
    
    $
    57
    
    
    $
    11,222Acquired technology
    
    
    7.0
    
    
    
    2,700
    
    
    
    (131
    )
    
    
    110
    
    
    
    2,679Reseller relationships
    
    
    6.0
    
    
    
    1,500
    
    
    
    (85
    )
    
    
    61
    
    
    
    1,476Trademark
    
    
    10.0
    
    
    
    900
    
    
    
    (30
    )
    
    
    36
    
    
    
    906Other intangibles
    
    
    7.0
    
    
    
    49
    
    
    
    (15
    )
    
    
    
    
    
    
    34Total
    
    
    7.7
    
    
    $
    20,049
    
    
    $
    (3,996
    )
    
    $
    264
    
    
    $
    16,317
  Years ending September 30,2010
    
    $
    1,3472011
    
    
    2,6942012
    
    
    2,6942013
    
    
    2,6942014
    
    
    2,694Thereafter
    
    
    4,194Total expected amortization expense
    
    $
    16,317
 Product Warranties
   Shipping Costs
  13




---



##### Table of Contents



Advertising Costs
  Income taxes
 Income Taxes -
Overall
 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:
 14




---



##### Table of Contents



ASU No. 2009-14:
  Note 2. Revenue and Cost of Goods Sold Information
  For the Three Months Ended
    
    
    For the Six Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenue:Software
    
    $
    11,372
    
    
    $
    8,412
    
    
    $
    21,608
    
    
    $
    16,465Systems
    
    
    5,594
    
    
    
    6,857
    
    
    
    11,791
    
    
    
    12,410Services
    
    
    1,138
    
    
    
    1,626
    
    
    
    2,229
    
    
    
    2,663Total revenue
    
    $
    18,104
    
    
    $
    16,895
    
    
    $
    35,628
    
    
    $
    31,538
 For the Three Months Ended
    
    
    For the Six Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Cost of goods sold:Software
    
    $
    3,049
    
    
    $
    2,400
    
    
    $
    5,688
    
    
    $
    4,764Systems
    
    
    5,228
    
    
    
    5,822
    
    
    
    11,537
    
    
    
    10,255Services
    
    
    788
    
    
    
    1,041
    
    
    
    1,532
    
    
    
    1,839Total cost of goods sold
    
    $
    9,065
    
    
    $
    9,263
    
    
    $
    18,757
    
    
    $
    16,858
   15




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##### Table of Contents



Note 3. Turnpike Global Technologies, Inc. and Turnpike Global Technologies LLC Acquisition
    Cash
    
    
    
    
    
    $
    10,000Common stock of XATA (1)
    
    
    
    
    
    
    2,477Potential earn-out in additional common stock of XATA (2)
    
    
    
    
    
    
    6,297Total purchase price
    
    
    
    
    
    $
    18,774Cash
    
    $
    548Accounts receivable, less allowances for doubtful accounts
    
    
    838Prepaid expenses
    
    
    4Equipment and leasehold improvements, net
    
    
    1,419Accounts payable
    
    
    (609
    )Accrued expenses
    
    
    (546
    )Capital lease obligations
    
    
    (1,681
    )Net liabilities
    
    
    
    
    
    
    (27
    )Acquired customer contracts and other intangible assets, net(3)
    
    
    
    
    
    
    6,500Goodwill
    
    
    
    
    
    
    12,301Total
    
    
    
    
    
    $
    18,774
 16




---



##### Table of Contents



(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: 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 Three
    
    For the Six MonthsMonths Ended
    
    Ended March 31,March 31, 2009
    
    2010
    
    2009(unaudited)
    
    (unaudited)
    
    (unaudited)Revenue
    
    $
    18,256
    
    
    $
    37,282
    
    
    $
    34,164Net loss to common shareholders
    
    $
    (159
    )
    
    $
    (2,904
    )
    
    $
    (3,124
    )Net loss per common share  basic and diluted
    
    $
    (0.02
    )
    
    $
    (0.30
    )
    
    $
    (0.33
    )Weighted average common and common
share equivalents  basic and diluted
    
    
    9,357
    
    
    
    9,726
    
    
    
    9,334
 Note 4. Stock-Based Compensation
  17




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##### Table of Contents



Stock Options
 Compensation  Stock Compensation,
  For the Three Months Ended
March 31,
    
    For the Six Months Ended
March 31,2010
    
    2009
    
    2010
    
    2009Number of shares granted
    
    
    39
    
    
    
    659
    
    
    
    459
    
    
    
    725Fair value per share
    
    $
    1.29
    
    
    $
    0.85
    
    
    $
    1.31
    
    
    $
    0.86Risk-free interest rate
    
    
    3.18
    %
    
    
    2.30
    %
    
    
    3.06
    %
    
    
    2.28
    %Expected volatility
    
    
    39.30
    %
    
    
    41.24
    %
    
    
    42.41
    %
    
    
    40.26
    %Expected life (in years)
    
    
    5.23
    
    
    
    5.95
    
    
    
    5.93
    
    
    
    5.73Dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 Compensation  Stock Compensation  Overall,
 18




---



##### 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
    
    
    459
    
    
    
    2.90Cancelled:Expired
    
    
    (25
    )
    
    
    5.23Forfeited
    
    
    (40
    )
    
    
    2.95Options outstanding at March 31, 2010
    
    
    2,299
    
    
    $
    3.56
    Options Outstanding
    
    Options ExercisableWeighted
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    Weighted
    
    
    
    
    
    Average
    
    WeightedRemaining
    
    Average
    
    
    
    
    
    Remaining
    
    AverageRange of
    
    Number
    
    Contractual
    
    Exercise
    
    Number
    
    Contractual
    
    Exerciseexercise price
    
    of Shares
    
    Life (Years)
    
    Price
    
    of Shares
    
    Life (Years)
    
    Price$2.00 - $2.99
    
    
    1,282
    
    
    
    8.9
    
    
    $
    2.46
    
    
    
    392
    
    
    
    8.5
    
    
    $
    2.39$3.00 - $3.99
    
    
    156
    
    
    
    8.7
    
    
    
    3.52
    
    
    
    77
    
    
    
    8.8
    
    
    
    3.40$4.33 - $4.98
    
    
    35
    
    
    
    6.4
    
    
    
    4.64
    
    
    
    30
    
    
    
    6.3
    
    
    
    4.70$5.03 - $5.40
    
    
    826
    
    
    
    6.7
    
    
    
    5.23
    
    
    
    826
    
    
    
    6.7
    
    
    
    5.232,299
    
    
    
    8.1
    
    
    
    3.56
    
    
    
    1,325
    
    
    
    7.3
    
    
    
    4.27
  19




---



##### Table of Contents



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
    
    
    15
    
    
    
    3.00Vested
    
    
    (72
    )
    
    
    3.54Forfeited
    
    
    (2
    )
    
    
    3.20Restricted stock outstanding at March 31, 2010
    
    
    97
    
    
    $
    4.09
   Restricted Stock Units
   20




---



##### Table of Contents



WeightedNumber of
    
    
    Average GrantShares
    
    
    Date Fair ValueRestricted stock outstanding at September 30, 2008
    
    
    
    
    
    $
    Granted
    
    
    241
    
    
    
    2.00Restricted stock outstanding at September 30, 2009
    
    
    241
    
    
    
    2.00Granted
    
    
    146
    
    
    
    2.89Vested
    
    
    (200
    )
    
    
    2.20Cancelled:Expired
    
    
    
    
    
    
    Forfeited
    
    
    (12
    )
    
    
    2.18Restricted stock outstanding at March 31, 2010
    
    
    175
    
    
    $
    2.50
    Note 5. Commitments
 Leases
   Years ending September 30,2010
    
    $
    6292011
    
    
    8542012
    
    
    5582013
    
    
    5452014
    
    
    551Thereafter
    
    
    147Total
    
    $
    3,284
 21




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##### Table of Contents



401(k) Plan
  Note 6. Financing Arrangements
  March 31,
    
    
    September 30,2010
    
    
    2009Contingent earn out
    
    $
    176
    
    
    $
    Senior secured revolving credit facility
    
    
    
    
    
    
    500Secured term loan
    
    
    
    
    
    
    8,000Capitalized leases
    
    
    1,391
    
    
    
    118Total debt obligations
    
    
    1,567
    
    
    
    8,618Less current portion of debt obligations
    
    
    1,077
    
    
    
    84Total debt obligations, net of current portion
    
    $
    490
    
    
    $
    8,534
    22




---



##### Table of Contents



Note 7. Shareholders Equity
 Common Stock
  Preferred Stock
  Series B
  Series C
  Series D
  Series E and Series F
  23




---



##### Table of Contents



Series G
     Common Stock Warrants
  24




---



##### Table of Contents



WeightedWeighted
    
    
    AverageNumber of
    
    
    Average
    
    
    RemainingWarrants
    
    
    Exercise Price
    
    
    Life (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 March 31, 2010
    
    
    4,951
    
    
    
    3.13
    
    
    
    5.6
 Note 8. Net Loss Per Common Share
   25




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##### Table of Contents



Item 2. Managements
Discussion and Analysis of Financial Condition and Results of Operations
 Forward-looking Statements
  
    
    although we have generated operating income recently, operating losses
may occur in the future and may be in excess of amounts that could be
funded from operations and thus we may be dependent upon external
investment to support our operations during these periods;
    
    we will continue to be dependent upon positioning systems and
communication networks owned and controlled by others, and
accordingly, their problems may adversely impact us;
    
    for the foreseeable future, we are dependent upon the continued
receipt and fulfillment of new orders for our current products;
    
    our growth and profitability depend on our timely introduction and
market acceptance of new products, our ability to continue to fund
research and development activities, and our ability to establish and
maintain strategic partner relationships.
  Overview
    26




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##### Table of Contents



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 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.
    
    RouteTracker has been recognized as one of the first solutions to fully
automate, from end-to-end, the fuel and mileage tax process required by the
International Fuel Tax Agreement (IFTA). RouteTracker interacts with various
handheld devices using Bluetooth as a wireless in-cab communication medium. The
information collected by RouteTracker is made available to the end-user via
web-based reporting.
 
    
    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 from
multibillion-dollar organizations to small, single owner operations, 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
 27




---



##### Table of Contents



aspects of the project, from implementation to conversion, integration, training and problem
solving.
 Critical Accounting Policies
   Results of Operations for the three and six months ended March 31, 2010 and 2009
  For the Three Months Ended
    
    
    For the Six Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009SoftwareRevenue
    
    $
    11,372
    
    
    $
    8,412
    
    
    $
    21,608
    
    
    $
    16,465Cost of goods sold
    
    
    3,049
    
    
    
    2,400
    
    
    
    5,688
    
    
    
    4,764Gross margin
    
    $
    8,323
    
    
    $
    6,012
    
    
    $
    15,920
    
    
    $
    11,701Gross margin %
    
    
    73.2
    %
    
    
    71.5
    %
    
    
    73.7
    %
    
    
    71.1
    %SystemsRevenue
    
    $
    5,594
    
    
    $
    6,857
    
    
    $
    11,791
    
    
    $
    12,410Cost of goods sold
    
    
    5,228
    
    
    
    5,822
    
    
    
    11,537
    
    
    
    10,255Gross margin
    
    $
    366
    
    
    $
    1,035
    
    
    $
    254
    
    
    $
    2,155Gross margin %
    
    
    6.5
    %
    
    
    15.1
    %
    
    
    2.2
    %
    
    
    17.4
    %ServicesRevenue
    
    $
    1,138
    
    
    $
    1,626
    
    
    $
    2,229
    
    
    $
    2,663Cost of goods sold
    
    
    788
    
    
    
    1,041
    
    
    
    1,532
    
    
    
    1,839Gross margin
    
    $
    350
    
    
    $
    585
    
    
    $
    697
    
    
    $
    824Gross margin %
    
    
    30.8
    %
    
    
    36.0
    %
    
    
    31.3
    %
    
    
    30.9
    %TotalRevenue
    
    $
    18,104
    
    
    $
    16,895
    
    
    $
    35,628
    
    
    $
    31,538Cost of goods sold
    
    
    9,065
    
    
    
    9,263
    
    
    
    18,757
    
    
    
    16,858Gross margin
    
    $
    9,039
    
    
    $
    7,632
    
    
    $
    16,871
    
    
    $
    14,680Gross margin %
    
    
    49.9
    %
    
    
    45.2
    %
    
    
    47.4
    %
    
    
    46.5
    %
 28




---



##### Table of Contents



Revenue
     Cost of Goods Sold and Gross Margin
 Cost of software
 Cost of systems
 29




---



##### Table of Contents



Cost of services
 Selling, General and Administrative Expenses
  Research & Development Expenses
  Acquisition Related Costs
 Business Combinations
 Interest Expense on Financing Activities
  Acquisition Related Interest and Mark to Market Expense
 30




---



##### Table of Contents



Net Interest and Other Expense
  Income Taxes
 Income Tax
  Net Loss to Common Shareholders
  Liquidity and Capital Resources
  31




---



##### Table of Contents



Recently Issued Accounting Standards
  
 Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures and Internal Control over Financial Reporting
   32




---



##### Table of Contents



Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 None
 
 Item 3. Defaults Upon Senior Securities.
 None
 
 Item 4. Reserved
 
 Item 5. Other Information.
 Submission of Matters to a Vote of Security Holders
 The annual meeting of shareholders of the Company was held on February 17, 2010. As of the
record date, January 7, 2010, there were 8,787,994 shares of Common Stock and 6,235,266
shares of Series B, Series C, Series D, and Series F Preferred Stock of the Company (which
votes as if converted to Common Stock on 1 for 1 basis) entitled to vote at the meeting.
There were in attendance at the meeting in person or by proxy holders of approximately
13.4 million shares of voting stock, which is equivalent to approximately 89% of the total
number of eligible voting shares of the Company issued and outstanding.Matters voted upon and the results thereof are as follows:
 1.
    
    Eight (8) directors (including Donald R. Dixon, who was elected by the holders
of the Series B Preferred Stock, voting separately by ballot as a class) were elected
to serve for a
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one-year term expiring when their successors are elected and qualified at the annual
meeting in 2011.
 For
    
    
    WithheldJohn J. Coughlan
    
    
    10,828,627
    
    
    
    287,680Thomas G. Hudson
    
    
    10,808,376
    
    
    
    307,931Roger W. Kleppe
    
    
    10,864,765
    
    
    
    251,542Chad M. Lindbloom
    
    
    10,815,067
    
    
    
    301,240Christopher P. Marshall
    
    
    10,690,198
    
    
    
    426,109Michael J. Paxton
    
    
    10,867,976
    
    
    
    248,331Bharat S. Vedak
    
    
    10,865,467
    
    
    
    250,840Donald R. Dixon
    
    
    2,043,793
    
    
    
    -0-
 2.
    
    Approval of the Amendment and Restatement of the Companys Articles of
Incorporation to increase the number of shares of common stock authorized for issuance.For:
12,797,011           Against: 601,582           Withheld: 7,626           Broker Non-Vote: -0-3.
    
    Approval of the Amendment and Restatement of the Companys Articles of
Incorporation to increase the number of shares of preferred stock suthorized for
issuance.For: 10,759,875           Against: 352,032           Withheld: 4,400           Broker Non-Vote: 2,289,9124.
    
    Approval of the Amendment and Restatement of all the Companys existing
Certificates of Designation.For: 10,784,006           Against: 322,501           Withheld: 9,800           Broker Non-Vote: 2,289,9125.
    
    Approval to create and designate rights and preferences for Series G Preferred
Stock.For: 10,774,961           Against: 331,412           Withheld: 9,934           Broker Non-Vote: 2,289,9126.
    
    Approval of the Amendment and Restatement of the Companys Articles of
Incorporation to provide that the Minnesota Control Share Acquisition Act will not
apply to the Company and its shareholders.For: 10,738,807           Against: 367,700           Withheld: 9,800           Broker Non-Vote: 2,289,9127.
    
    Consent to issuances of securities in accordance with the rules and regulations
of the NASDAQ Stock Market.For: 10,786,300           Against: 299,632           Withheld: 30,375           Broker Non-Vote: 2,289,912
 
 Item 6. Exhibits.
 31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
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Dated:  May 7, 2010
    XATA Corporation
(Registrant)by:
    /s/ Mark E. TiesMark E. TiesChief Financial Officer
(Signing as Principal Financial and Accounting
Officer, and as Authorized Signatory of
Registrant) 35