##### 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 December 31, 2008 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
 (Exact Name of Registrant as Specified in its Charter)
 Minnesota
    
    41-1641815(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification Number)965 Prairie Center Drive, Eden Prairie, Minnesota
    
    55344(Address of Principal Executive Offices)
    
    (Zip Code)
 (952) 707-5600
   þ o
 o þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)




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##### 



Index
 Page No.PART I. FINANCIAL INFORMATIONItem 1. Consolidated Financial Statements:Consolidated Statements of Operations for the Three Months Ended December 31, 2008 and 2007
    
    
    3Consolidated Balance Sheets as of December 31, 2008 and September 30, 2008
    
    
    4Consolidated Statements of Changes in Shareholders Equity for the Three Months Ended December
31, 2008 and the Twelve Months Ended September 30, 2008
    
    
    5Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2008 and 2007
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis
of Financial Condition and Results of Operation
    
    
    22Item 4. Controls and Procedures
    
    
    29PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    30Item 1A. Risk Factors
    
    
    30Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    30Item 3. Defaults upon Senior Securities
    
    
    30Item 4. Submission of Matters to a Vote of Security Holders
    
    
    30Item 5. Other Information
    
    
    30Item 6. Exhibits
    
    
    30SIGNATURESEXHIBITSEX-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 EndedDecember 31,2008
    
    
    2007Net sales
    
    $
    14,643
    
    
    $
    7,687Costs and expenses
Cost of goods sold
    
    
    6,688
    
    
    
    3,779Selling, general and administrative
    
    
    6,931
    
    
    
    3,995Research and development
    
    
    1,284
    
    
    
    1,040Total costs and expenses
    
    
    14,903
    
    
    
    8,814Operating loss
    
    
    (260
    )
    
    
    (1,127
    )Interest income
    
    
    38
    
    
    
    131Interest expense
    
    
    (450
    )
    
    
    (17
    )Loss before income taxes
    
    
    (672
    )
    
    
    (1,013
    )Income tax expense
    
    
    
    
    
    
    Net loss
    
    
    (672
    )
    
    
    (1,013
    )Preferred stock dividends
    
    
    (49
    )
    
    
    (47
    )Preferred stock deemed dividends
    
    
    5
    
    
    
    (43
    )Net loss to common shareholders
    
    $
    (716
    )
    
    $
    (1,103
    )Net loss per common share  basic and diluted
    
    $
    (0.08
    )
    
    $
    (0.14
    )Weighted average common and
common share equivalentsBasic and diluted
    
    
    8,468
    
    
    
    8,163
  3




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##### Table of Contents



XATA CORPORATION
 
 CONSOLIDATED BALANCE SHEETS
  December 31,
    
    
    September 30,2008
    
    
    2008ASSETSCurrent assetsCash and cash equivalents
    
    $
    8,902
    
    
    $
    8,904Accounts receivable, less allowances
of $388 and $333
    
    
    8,818
    
    
    
    11,365Inventories
    
    
    3,269
    
    
    
    2,735Deferred product costs
    
    
    1,749
    
    
    
    1,474Current portion of investment in sales-type leases
    
    
    695
    
    
    
    768Prepaid expenses and other current assets
    
    
    461
    
    
    
    691Total current assets
    
    
    23,894
    
    
    
    25,937Equipment and leasehold improvements, net
    
    
    3,773
    
    
    
    3,925Intangible assets, net
    
    
    11,996
    
    
    
    12,420Goodwill
    
    
    3,011
    
    
    
    3,011Deferred product costs, net of current portion
    
    
    2,896
    
    
    
    2,685Investment in sales-type leases, net of current portion
    
    
    174
    
    
    
    310Debt financing costs, net
    
    
    645
    
    
    
    708Total assets
    
    $
    46,389
    
    
    $
    48,996LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term obligations
    
    $
    1,841
    
    
    $
    1,845Accounts payable
    
    
    3,643
    
    
    
    4,394Accrued expenses
    
    
    4,968
    
    
    
    6,574Deferred revenue
    
    
    5,458
    
    
    
    4,996Total current liabilities
    
    
    15,910
    
    
    
    17,809Long-term obligations, net of current portion
    
    
    16,095
    
    
    
    16,342Deferred revenue, net of current portion
    
    
    7,694
    
    
    
    7,848Other long-term liabilities
    
    
    778
    
    
    
    805Total liabilities
    
    
    40,477
    
    
    
    42,804Shareholders equityPreferred stock, no par, 10,000 shares authorized: Series B,
4% convertible, 2,250 shares designated; shares
issued and outstanding: 1,964 at December 31, 2008
and 1,926 at September 30, 2008
    
    
    5,274
    
    
    
    5,181Series C, convertible, 1,400 shares designated; 1,269 shares
issued and outstanding at December 31, 2008
and September 30, 2008
    
    
    4,845
    
    
    
    4,845Series D, convertible, 1,600 shares designated; 1,567 shares
issued and outstanding at December 31, 2008
and September 30, 2008
    
    
    5,937
    
    
    
    5,937Common stock, par value $0.01 per share; 25,000 shares
authorized; shares issued and outstanding: 8,776 at December 31, 2008
and 8,745 at September 30, 2008
    
    
    88
    
    
    
    87Additional paid-in capital
    
    
    28,576
    
    
    
    28,234Accumulated deficit
    
    
    (38,808
    )
    
    
    (38,092
    )Total shareholders equity
    
    
    5,912
    
    
    
    6,192Total liabilities and shareholders equity
    
    $
    46,389
    
    
    $
    48,996
  4




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##### Table of Contents



XATA CORPORATION
 
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
  Series B
    
    
    Series C
    
    
    Series D
    
    
    AdditionalCommon Stock
    
    
    Preferred Stock
    
    
    Preferred Stock
    
    
    Preferred Stock
    
    
    Paid-In
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    TotalBalance at September 30, 2007
    
    
    8,516
    
    
    $
    85
    
    
    
    1,851
    
    
    $
    4,921
    
    
    
    1,269
    
    
    $
    4,845
    
    
    
    1,567
    
    
    $
    5,937
    
    
    $
    25,760
    
    
    $
    (34,470
    )
    
    $
    7,078Common stock issued on exercise of options
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44
    
    
    
    
    
    
    
    44Issuance of restricted shares of common stock
    
    
    151
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,588
    
    
    
    
    
    
    
    1,588Forfeiture of restricted shares of common stock
    
    
    (28
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common stock and warrants
    
    
    91
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    843
    
    
    
    
    
    
    
    844Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    75
    
    
    
    191
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (192
    )
    
    
    (1
    )Preferred stock deemed dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (69
    )
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,361
    )
    
    
    (3,361
    )Balance at September 30, 2008
    
    
    8,745
    
    
    
    87
    
    
    
    1,926
    
    
    
    5,181
    
    
    
    1,269
    
    
    
    4,845
    
    
    
    1,567
    
    
    
    5,937
    
    
    
    28,234
    
    
    
    (38,092
    )
    
    
    6,192Issuance of restricted shares of common stock
    
    
    33
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    343
    
    
    
    
    
    
    
    343Forfeiture of restricted shares of common stock
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common stock and warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    38
    
    
    
    98
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49
    )
    
    
    49Preferred stock deemed dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (672
    )
    
    
    (672
    )Balance at December 31, 2008
    
    
    8,776
    
    
    $
    88
    
    
    
    1,964
    
    
    $
    5,274
    
    
    
    1,269
    
    
    $
    4,845
    
    
    
    1,567
    
    
    $
    5,937
    
    
    $
    28,576
    
    
    $
    (38,808
    )
    
    $
    5,912
  5




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##### Table of Contents



XATA
CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
  For the Three Months EndedDecember 31,2008
    
    
    2007Cash provided by (used in) operating activitiesNet loss
    
    $
    (672
    )
    
    $
    (1,013
    )Adjustments to reconcile net loss to net cash provided by
operating activities:Depreciation and amortization
    
    
    733
    
    
    
    250Amortization of debt financing costs
    
    
    63
    
    
    
    Stock based compensation
    
    
    343
    
    
    
    382Changes in assets and liabilities, net of impact of acquisition:Accounts receivable, net
    
    
    2,547
    
    
    
    (2,388
    )Inventories
    
    
    (534
    )
    
    
    1,036Deferred product costs
    
    
    (486
    )
    
    
    (83
    )Prepaid expenses and other assets
    
    
    231
    
    
    
    (403
    )Lease equipment receivable
    
    
    209
    
    
    
    Accounts payable
    
    
    (751
    )
    
    
    (1,058
    )Accrued expenses
    
    
    (1,584
    )
    
    
    (1,376
    )Deferred revenue
    
    
    308
    
    
    
    781Net cash provided by (used in) operating activities
    
    
    407
    
    
    
    (3,872
    )Cash used in investing activitiesPurchase of equipment and leasehold improvements
    
    
    (157
    )
    
    
    (615
    )Net cash used in investing activities
    
    
    (157
    )
    
    
    (615
    )Cash used in financing activitiesBorrowings on long-term obligations
    
    
    12,076
    
    
    
    Payments on long-term obligations
    
    
    (12,328
    )
    
    
    (50
    )Net cash used in financing activities
    
    
    (252
    )
    
    
    (50
    )Decrease in cash and cash equivalents
    
    
    (2
    )
    
    
    (4,537
    )Cash and cash equivalentsBeginning
    
    
    8,904
    
    
    
    13,675Ending
    
    $
    8,902
    
    
    $
    9,138Supplemental disclosures of cash flow informationCash payments for interest
    
    $
    398
    
    
    $
    12Supplemental schedule of noncash investing and financing activitiesPreferred stock deemed dividends
    
    
    (5
    )
    
    $
    43Preferred stock dividends payable
    
    
    17
    
    
    
    16Preferred stock dividends paid
    
    
    98
    
    
    
    94
  6




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##### Table of Contents



Note 1. Significant Accounting Policies
 Presentation
   Principles of Consolidation
  Revenue Recognition
 Software Revenue Recognition Software Revenue Recognition with Respect to Certain Transactions Revenue Recognition in Financial
Statements
   7




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##### Table of Contents



Application of AICPA Statement of Position 97-2 to Arrangements That Include the Right to Use
Software Stored on Another Entitys Hardware
 Allowance for Doubtful Accounts
  Use of Estimates
  Basis of Presentation
  Cash and Cash Equivalents
  8




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##### Table of Contents



Fair Value of Financial Instruments
  Inventories
  Investment in Sales-Type Leases
  Years ending September 30,2009
    
    
    6042010
    
    
    2962011
    
    
    42Total minimum lease payments
    
    
    942Less: amount representing interest (at 11.71%)
    
    
    (73
    )Present value of net minimum sales-type lease payments
    
    
    869Less: current portion of investment in sales-type leases
    
    
    (695
    )Investment in sales-type leases, excluding current portion
    
    $
    174
  Debt Financing Costs
  Equipment and Leasehold Improvements
  9




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##### Table of Contents



December 31,
    
    
    September 30,2008
    
    
    2008Office furniture and equipment
    
    $
    4,111
    
    
    $
    4,003Engineering and manufacturing equipment
    
    
    894
    
    
    
    831Leasehold improvements
    
    
    2,459
    
    
    
    2,4737,464
    
    
    
    7,307Less: accumulated depreciation
    
    
    (3,691
    )
    
    
    (3,382
    )Equipment and leasehold improvements, net
    
    $
    3,773
    
    
    $
    3,925
  Capitalized System Development Costs
 Accounting for the Costs of Computer Software to Be Sold, Leased, or
Otherwise Marketed
  Long-Lived Assets
  Goodwill and Intangible Assets
 Goodwill and Other Intangible Assets,
 10




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##### Table of Contents



Accounting for the Impairment or Disposal of Long-Lived Assets
  Weighted Average
    
    
    
    
    
    
    AccumulatedLife (years)
    
    
    Cost
    
    
    Amortization
    
    
    NetAcquired customer contracts
    
    
    8
    
    
    $
    13,500
    
    
    $
    (1,547
    )
    
    $
    11,953Other intangibles
    
    
    7
    
    
    
    49
    
    
    
    (6
    )
    
    
    43Total
    
    
    8
    
    
    $
    13,549
    
    
    $
    (1,553
    )
    
    $
    11,996
  Years Ending September 30,2009
    
    $
    1,2702010
    
    
    1,6952011
    
    
    1,6952012
    
    
    1,6952013
    
    
    1,695Thereafter
    
    
    3,948Total expected amortization expense
    
    $
    11,996
 Product Warranties
  11




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##### Table of Contents



Shipping Costs
  Advertising Costs
  Income taxes
 Accounting for
Income Taxes
 Recently Issued Accounting Standards
 Fair Value Measurements (SFAS 157)
 Fair Value Measurements Effective Date of FASB
No. 157,
 Business Combinations  Revised (SFAS 141R)
 Business Combinations
 12




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##### Table of Contents



The Hierarchy of Generally Accepted Accounting Principles (SFAS 162)
 The Hierarchy of Generally Accepted Accounting
Principles
 Note 2. GeoLogic Solutions, Inc. Acquisition
    Cash
    
    
    
    
    
    $
    15,277Debt obligations
    
    
    
    
    
    
    1,750Common stock
    
    
    
    
    
    
    300Transaction costs
    
    
    
    
    
    
    1,560Total purchase price
    
    
    
    
    
    $
    18,887Cash
    
    $
    557Other current assets
    
    
    6,208Property and equipment
    
    
    554Intangible and other assets
    
    
    1,049Current liabilities
    
    
    (5,992
    )Net assets
    
    
    
    
    
    
    2,376Acquired customer contracts
    
    
    
    
    
    
    13,500Goodwill
    
    
    
    
    
    
    3,011Total
    
    
    
    
    
    $
    18,887
 13




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##### Table of Contents



For the ThreeMonths EndedDecember 31, 2007Net sales
    
    $
    12,974Net loss to common shareholders
    
    $
    (3,500
    )Net loss per common share  basic and diluted
    
    $
    (0.42
    )Weighted average common and common
share equivalents  basic and diluted
    
    
    8,254
  Note 3. Stock-Based Compensation
  Stock Options
 Share-Based Payment,
 14




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##### Table of Contents



For the Three Months EndedDecember 31,2008
    
    2007Number of shares granted
    
    
    67
    
    
    
    21Fair value
    
    $
    0.97
    
    
    $
    0.86Risk-free interest rate
    
    
    2.12
    %
    
    
    3.51
    %Expected volatility
    
    
    30.60
    %
    
    
    28.85
    %Expected life (in years)
    
    
    3.50
    
    
    
    3.60Dividend yield
    
    
    
    
    
    
    
   WeightedAverageShares
    
    Exercise PriceOptions outstanding at September 30, 2007
    
    
    1,232
    
    
    $
    5.01Granted
    
    
    323
    
    
    
    3.05Exercised
    
    
    (15
    )
    
    
    2.98Cancelled
    
    
    (301
    )
    
    
    4.43Options outstanding at September 30, 2008
    
    
    1,239
    
    
    
    4.66Granted
    
    
    67
    
    
    
    3.80Exercised
    
    
    
    
    
    
    Cancelled
    
    
    (24
    )
    
    
    4.43Options outstanding at December 31, 2008
    
    
    1,282
    
    
    $
    4.62
   15




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##### Table of Contents



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$2.99
    
    
    230
    
    
    
    9.1
    
    
    $
    2.99
    
    
    
    25
    
    
    
    9.1
    
    
    $
    2.99$3.15 - $3.99
    
    
    150
    
    
    
    7.9
    
    
    
    3.69
    
    
    
    40
    
    
    
    3.4
    
    
    
    3.81$4.33 - $4.98
    
    
    45
    
    
    
    7.8
    
    
    
    4.57
    
    
    
    28
    
    
    
    7.5
    
    
    
    4.72$5.03 - $5.40
    
    
    857
    
    
    
    7.7
    
    
    
    5.23
    
    
    
    528
    
    
    
    7.6
    
    
    
    5.271,282
    
    
    
    8.0
    
    
    $
    4.62
    
    
    
    621
    
    
    
    7.4
    
    
    $
    5.06
  Restricted Stock Awards
   WeightedNumber of
    
    
    Average GrantShares
    
    
    Date Fair ValueRestricted stock outstanding at September 30, 2007
    
    
    361
    
    
    $
    5.22Granted
    
    
    151
    
    
    
    3.04Vested
    
    
    (198
    )
    
    
    4.94Cancelled
    
    
    (29
    )
    
    
    4.08Restricted stock outstanding at September 30, 2008
    
    
    285
    
    
    
    4.37Granted
    
    
    33
    
    
    
    3.80Vested
    
    
    (24
    )
    
    
    5.29Cancelled
    
    
    (2
    )
    
    
    2.99Restricted stock outstanding at December 31, 2008
    
    
    292
    
    
    $
    4.24
 16




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##### Table of Contents



Note 4. Commitments
 Leases
   Years ending September 30,
2009
    
    $
    7872010
    
    
    1,0862011
    
    
    7482012
    
    
    5272013
    
    
    540Thereafter
    
    
    698Total
    
    $
    4,386
  401(k) Plan
  Note 5. Financing Arrangements
  17




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##### Table of Contents



December 31, 2008
    
    
    September 30, 2008Subordinated notes
    
    $
    1,225
    
    
    $
    1,225Subordinated convertible notes
    
    
    525
    
    
    
    525Total notes payable
    
    
    1,750
    
    
    
    1,750Senior secured revolving credit facility
    
    
    8,000
    
    
    
    8,223Secured term loan
    
    
    8,000
    
    
    
    8,000Capitalized leases
    
    
    186
    
    
    
    214Total long-term obligations
    
    
    17,936
    
    
    
    18,187Less current portion of long-term obligations
    
    
    1,841
    
    
    
    1,845Total long-term obligations, net of current portion
    
    $
    16,095
    
    
    $
    16,342
 Note 6. Shareholders Equity
 Common Stock
  Preferred Stock
  18




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Series B
    Series C
  19




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##### Table of Contents



Series D
  Common Stock Warrants
   WeightedWeighted
    
    
    AverageNumber of
    
    
    Average
    
    
    RemainingWarrants
    
    
    Exercise Price
    
    
    Life (years)Warrants outstanding at September 30, 2007
    
    
    1,538
    
    
    $
    5.22
    
    
    
    2.9Granted
    
    
    457Exercised
    
    
    Cancelled
    
    
    Warrants outstanding at September 30, 2008
    
    
    1,995
    
    
    
    3.54
    
    
    
    2.6Granted
    
    
    Exercised
    
    
    Cancelled
    
    
    (451
    )Warrants outstanding at December 31, 2008
    
    
    1,544
    
    
    $
    3.65
    
    
    
    3.1
 Note 7. Net Loss Per Share
  20




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Note 8. Subsequent Event
 Amendment to Seller Notes
  21




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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 expect to incur operating losses in the current fiscal
year, these losses may continue beyond the expected timeframe or in
excess of the expected magnitude, and we may be dependent upon
external investment to support our operations during periods in which
we incur operating losses;
    
    we may be unable to adapt to technological change quickly enough to
grow or to retain our customer base;
    
    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
    22




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##### Table of Contents



Technology, People, Processes
  
    
    Technology.XATA provides a total fleet management solution, including hardware,
software and services. XATANET, our web-based, on-demand scalable software, includes a
variety of web-based enterprise applications. As our flagship product, 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 return on investment. 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.
    
    People.Several XATA employees have been with our company for many years, providing a
thorough understanding of the trucking industry. 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 Recognition Software Revenue Recognition with Respect to Certain Transactions Revenue Recognition in
Financial Statements
 23




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##### Table of Contents



Application of AICPA Statement of Position 97-2 to Arrangements That Include the Right to Use
Software Stored on Another Entitys Hardware
 Allowance for doubtful accounts.
 Goodwill. Goodwill and Other Intangible Assets,
 24




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##### Table of Contents



Accounting for the Impairment or Disposal of Long-Lived Assets
 Product Warranties.
 Capitalized system development costs Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed
 Income taxes
 Accounting for Uncertainty in Income Taxes  an
Interpretation of FASB Statement No. 109
 25




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Results of Operations for the three months ended December 31, 2008 and 2007
  For the three monthsEnded December 31,2008
    
    2007Net sales
    
    
    100.0
    %
    
    
    100.0
    %Gross profit
    
    
    54.3
    %
    
    
    50.8
    %Selling, general and administrative expense
    
    
    47.3
    %
    
    
    52.0
    %Research and development expense
    
    
    8.8
    %
    
    
    13.5
    %Operating loss
    
    
    (1.8
    %)
    
    
    (14.7
    %)Net loss
    
    
    (4.6
    %)
    
    
    (13.2
    %)
 Net Sales
  Cost of Goods Sold
  26




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Selling, General and Administrative Expenses
  Research & Development Expenses
  Net Interest Expense
  Income Taxes
  Accounting for Uncertainty in Income Taxes  an
Interpretation of FASB Statement No. 109
 27




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Net Loss to Common Shareholders
  Liquidity and Capital Resources
         28




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Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures and Internal Control over Financial Reporting
   29




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Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
  
 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
 30




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Dated:  February 4, 2009
    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) 31