##### 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 June 30, 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
 
  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)




---



##### 



Index
 Page No.PART I. FINANCIAL INFORMATIONItem 1. Consolidated Financial Statements:Consolidated Statements of Operations for the Three Months and Nine Months Ended June 30,
2008 and 2007
    
    
    3Consolidated Balance Sheets as of June 30, 2008
and September 30, 2007
    
    
    4Consolidated Statements of Changes in Shareholders Equity for the Nine Months Ended June 30,
2008 and the Twelve Months Ended September 30, 2007
    
    
    5Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2008 and 2007
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis
of Financial Condition and Results of Operations
    
    
    22Item 3. Quantitative and Qualitative Disclosures About Market
Risk
    
    
    30Item 4. Controls and Procedures
    
    
    30PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    31Item 1A. Risk Factors
    
    
    31Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds
    
    
    31Item 3. Defaults upon Senior Securities
    
    
    31Item 4. Submission of Matters to a Vote of Security Holders
    
    
    32Item 5. Other Information
    
    
    32Item 6. ExhibitsSIGNATURESEXHIBITSSeverance AgreementSection 302 CertificationSection 302 CertificationSection 1350 CertificationSection 1350 Certification
  2




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##### Table of Contents



Item 1. Consolidated Financial Statements.
 XATA CORPORATION
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
   Three months ended
    
    
    Nine months endedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales
    
    $
    16,167
    
    
    $
    7,984
    
    
    $
    35,983
    
    
    $
    23,920Costs and expensesCost of goods sold
    
    
    8,542
    
    
    
    4,282
    
    
    
    18,609
    
    
    
    13,133Selling, general and administrative
    
    
    6,218
    
    
    
    3,620
    
    
    
    15,693
    
    
    
    10,115Research and development
    
    
    1,599
    
    
    
    1,061
    
    
    
    4,078
    
    
    
    3,258Total costs and expenses
    
    
    16,359
    
    
    
    8,963
    
    
    
    38,380
    
    
    
    26,506Operating loss
    
    
    (192
    )
    
    
    (979
    )
    
    
    (2,397
    )
    
    
    (2,586
    )Interest income
    
    
    86
    
    
    
    109
    
    
    
    327
    
    
    
    298Interest expense
    
    
    (531
    )
    
    
    (5
    )
    
    
    (918
    )
    
    
    (18
    )Loss before income taxes
    
    
    (637
    )
    
    
    (875
    )
    
    
    (2,988
    )
    
    
    (2,306
    )Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    (637
    )
    
    
    (875
    )
    
    
    (2,988
    )
    
    
    (2,306
    )Preferred stock dividends
    
    
    (49
    )
    
    
    (46
    )
    
    
    (143
    )
    
    
    (138
    )Preferred stock deemed dividends
    
    
    (26
    )
    
    
    (722
    )
    
    
    (69
    )
    
    
    (817
    )Net loss to common shareholders
    
    $
    (712
    )
    
    $
    (1,643
    )
    
    $
    (3,200
    )
    
    $
    (3,261
    )Net loss per common share  basic and diluted
    
    $
    (0.08
    )
    
    $
    (0.21
    )
    
    $
    (0.39
    )
    
    $
    (0.41
    )Weighted average common and
common share equivalents   basic and diluted
    
    
    8,411
    
    
    
    7,959
    
    
    
    8,293
    
    
    
    7,908
  3




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##### Table of Contents



XATA CORPORATION
 
 CONSOLIDATED BALANCE SHEETS
  June 30, 2008
    
    
    September 30, 2007(Unaudited)ASSETSCurrent AssetsCash and cash equivalents
    
    $
    8,284
    
    
    $
    13,675Accounts receivable, less allowances for doubtful accounts and sales returns of $752 at June 30,
2008 and $256 at September 30, 2007
    
    
    10,042
    
    
    
    3,280Inventories
    
    
    3,305
    
    
    
    2,672Deferred product costs
    
    
    1,260
    
    
    
    752Current portion of investment in sales-type leases
    
    
    873
    
    
    
    Prepaid expenses and other current assets
    
    
    1,250
    
    
    
    393Total current assets
    
    
    25,014
    
    
    
    20,772Equipment and leasehold improvements, net
    
    
    3,930
    
    
    
    1,583Intangible assets
    
    
    12,944
    
    
    
    Goodwill
    
    
    1,702
    
    
    
    Deferred product costs, net of current portion
    
    
    2,335
    
    
    
    1,798Investment in sales-type leases, net of current portion
    
    
    523
    
    
    
    Other assets
    
    
    871
    
    
    
    Total assets
    
    $
    47,319
    
    
    $
    24,153LIABILITIES AND SHAREHOLDERS
EQUITYCurrent LiabilitiesAccounts payable
    
    $
    5,165
    
    
    $
    3,419Current portion of long-term obligations
    
    
    2,111
    
    
    
    161Accrued expenses
    
    
    5,219
    
    
    
    3,548Deferred revenue
    
    
    4,343
    
    
    
    3,105Total current liabilities
    
    
    16,838
    
    
    
    10,233Long-term obligations, net of current portion
    
    
    16,365
    
    
    
    220Deferred rent, net of current portion
    
    
    825
    
    
    
    98Deferred revenue, net of current portion
    
    
    7,028
    
    
    
    6,524Total liabilities
    
    
    41,056
    
    
    
    17,075Shareholders EquityPreferred stock, no par, 10,000 shares authorized:Series B, 4% convertible, 2,250 shares designated;
shares issued and outstanding: 1,926 at June 30, 2008
and 1,851 at September 30, 2007
    
    
    5,181
    
    
    
    4,921Series C, convertible, 1,400 shares designated;
1,269 shares issued and outstanding at June 30, 2008
and September 30, 2007
    
    
    4,845
    
    
    
    4,845Series D, convertible, 1,600 shares designated;
1,567 shares issued and outstanding at June 30, 2008
and September 30, 2007
    
    
    5,937
    
    
    
    5,937Common stock, par value $0.01 per share; 25,000 shares
authorized; shares issued and outstanding: 8,763 at June 30, 2008
and 8,516 at September 30, 2007
    
    
    88
    
    
    
    85Additional paid-in capital
    
    
    27,882
    
    
    
    25,760Accumulated deficit
    
    
    (37,670
    )
    
    
    (34,470
    )Total shareholders equity
    
    
    6,263
    
    
    
    7,078Total liabilities and shareholders equity
    
    $
    47,319
    
    
    $
    24,153
  4




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##### Table of Contents



XATA CORPORATION
 
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
   Series B
    
    
    Series C
    
    
    Series D
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    UnearnedPreferred Stock
    
    
    Preferred Stock
    
    
    Preferred Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    Stock-Based
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Compensation
    
    
    Deficit
    
    
    TotalBalance at September 30, 2006
    
    
    1,779
    
    
    $
    4,579
    
    
    
    1,269
    
    
    $
    4,845
    
    
    
    
    
    
    $
    
    
    
    
    7,963
    
    
    $
    80
    
    
    $
    23,246
    
    
    $
    (900
    )
    
    $
    (26,660
    )
    
    $
    5,190Common stock issued on exercise of options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    54Issuance of restricted shares of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    450
    
    
    
    4
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    Elimination of unearned compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (900
    )
    
    
    900
    
    
    
    
    
    
    
    Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,021
    
    
    
    
    
    
    
    
    
    
    
    2,021Forfeiture of restricted shares of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112
    
    
    
    1
    
    
    
    604
    
    
    
    
    
    
    
    
    
    
    
    605Issuance of preferred stock and warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,567
    
    
    
    5,279
    
    
    
    
    
    
    
    
    
    
    
    739
    
    
    
    
    
    
    
    
    
    
    
    6,018Preferred stock dividends
    
    
    72
    
    
    
    183
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (185
    )
    
    
    (2
    )Preferred stock deemed dividends
    
    
    
    
    
    
    159
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    658
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (817
    )
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,808
    )
    
    
    (6,808
    )Balance at September 30, 2007
    
    
    1,851
    
    
    
    4,921
    
    
    
    1,269
    
    
    
    4,845
    
    
    
    1,567
    
    
    
    5,937
    
    
    
    8,516
    
    
    
    85
    
    
    
    25,760
    
    
    
    
    
    
    
    (34,470
    )
    
    
    7,078Common stock issued on exercise of options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    43Issuance of restricted shares of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    151
    
    
    
    2
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,238
    
    
    
    
    
    
    
    
    
    
    
    1,238Forfeiture of restricted shares of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common stock and warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    91
    
    
    
    1
    
    
    
    843
    
    
    
    
    
    
    
    
    
    
    
    844Preferred stock dividends
    
    
    75
    
    
    
    191
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (143
    )
    
    
    48Preferred stock deemed dividends
    
    
    
    
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (69
    )
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,988
    )
    
    
    (2,988
    )Balance at June 30, 2008
    
    
    1,926
    
    
    $
    5,181
    
    
    
    1,269
    
    
    $
    4,845
    
    
    
    1,567
    
    
    $
    5,937
    
    
    
    8,763
    
    
    $
    88
    
    
    $
    27,882
    
    
    $
    
    
    
    $
    (37,670
    )
    
    $
    6,263
  5




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##### Table of Contents



XATA CORPORATION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 Nine Months Ended June 30,2008
    
    
    2007Cash flows from operating activitiesNet loss
    
    $
    (2,988
    )
    
    $
    (2,306
    )Adjustments to reconcile net loss to net cash provided by
operating activities:Depreciation of fixed assets and amortization of intangibles
    
    
    1,701
    
    
    
    653Amortization of debt financing costs
    
    
    104
    
    
    
    Issuance of warrants for services rendered
    
    
    
    
    
    
    33Stock based compensation
    
    
    1,238
    
    
    
    1,497Changes in assets and liabilities, net of the impact of acquisitions:Accounts receivable, net
    
    
    (2,711
    )
    
    
    1,551Inventories
    
    
    2,101
    
    
    
    286Deferred product costs
    
    
    (1,044
    )
    
    
    2,258Prepaid expenses and other assets
    
    
    (651
    )
    
    
    (86
    )Lease equipment receivable
    
    
    429
    
    
    
    Accounts payable
    
    
    (1,205
    )
    
    
    (224
    )Accrued expenses
    
    
    (913
    )
    
    
    (410
    )Deferred rent
    
    
    33
    
    
    
    Deferred revenue
    
    
    1,741
    
    
    
    (1,559
    )Net cash (used in) provided by operating activities
    
    
    (2,165
    )
    
    
    1,693Cash flows from investing activitiesPurchase of equipment and leasehold improvements
    
    
    (2,757
    )
    
    
    (202
    )Additions to system development costs
    
    
    
    
    
    
    (160
    )Purchase of GeoLogic Solutions, Inc., net of cash acquired
    
    
    (16,277
    )
    
    
    Net cash (used in) investing activities
    
    
    (19,034
    )
    
    
    (362
    )Cash flows from financing activitiesBorrowings on long-term obligations
    
    
    16,224
    
    
    
    Payments on long-term obligations
    
    
    (128
    )
    
    
    (80
    )Payments on financing costs
    
    
    (339
    )
    
    
    Proceeds from issuance of common stock
    
    
    
    
    
    
    605Proceeds from issuance of preferred stock and warrants
    
    
    
    
    
    
    5,978Proceeds from options exercised and warrants issued
    
    
    51
    
    
    
    53Net cash provided by financing activities
    
    
    15,808
    
    
    
    6,556(Decrease) increase in cash and cash equivalents
    
    
    (5,391
    )
    
    
    7,887Cash and cash equivalentsBeginning
    
    
    13,675
    
    
    
    6,354Ending
    
    $
    8,284
    
    
    $
    14,241Supplemental disclosures of cash flow informationCash payments for interest
    
    $
    627
    
    
    $
    17Supplemental schedule of noncash investing and financing activitiesPreferred stock deemed dividends
    
    
    69
    
    
    
    817Preferred stock dividends payable
    
    
    16
    
    
    
    16Preferred stock dividends paid
    
    
    191
    
    
    
    183Equipment purchased under capital lease
    
    
    
    
    
    
    98Issuance of warrants in consideration for financing fees
    
    
    535
    
    
    
    Issuance of sellers note
    
    
    2,000
    
    
    
    Issuance of common stock in consideration for GeoLogic purchase
    
    
    300
    
    
    
    
  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
 Use of Estimates
  Basis of Presentation
  Cash and Cash Equivalents
  Concentration of Credit Risk
   8




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##### Table of Contents



Fair Value of Financial Instruments
  Inventories
  June 30,
    
    
    September 30,2008
    
    
    2007Parts and accessories
    
    $
    1,260
    
    
    $
    1,021Finished goods
    
    
    2,005
    
    
    
    1,651Repair
    
    
    40
    
    
    
    Total inventories
    
    $
    3,305
    
    
    $
    2,672
 Investment in Sales-Type Leases
  9




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##### Table of Contents



Years ending September 30,2008
    
    $
    2762009
    
    
    9012010
    
    
    3232011
    
    
    42Total minimum lease payments
    
    
    1,542Less: amount representing interest (at 11.71%)
    
    
    (146
    )Present value of net minimum sales-type lease payments
    
    
    1,396Less: current installments of investment in sales-type leases
    
    
    (873
    )Investment in sales-type leases, excluding current installments
    
    $
    523
  Other Assets
  Equipment and Leasehold Improvements
   June 30,
    
    
    September 30,2008
    
    
    2007Office furniture and equipment
    
    $
    3,940
    
    
    $
    3,353Leasehold improvements
    
    
    2,242
    
    
    
    78Engineering and manufacturing equipment
    
    
    692
    
    
    
    574Operating-lease equipment
    
    
    124
    
    
    
    6,998
    
    
    
    4,005Less: accumulated depreciation
    
    
    (3,068
    )
    
    
    (2,422
    )Equipment and leasehold improvements, net
    
    $
    3,930
    
    
    $
    1,583
 10




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##### Table of Contents



Long-Lived Assets
  Goodwill and Intangible Assets
 Goodwill and Other Intangible Assets, Accounting for the Impairment or
Disposal of Long-Lived Assets
   WeightedAverage
    
    
    
    
    
    
    AccumulatedLife (years)
    
    
    Cost
    
    
    Amortization
    
    
    NetAcquired customer contracts
    
    
    7.6
    
    
    $
    13,500
    
    
    $
    (703
    )
    
    $
    12,797Other intangibles
    
    
    6.3
    
    
    
    158
    
    
    
    (11
    )
    
    
    147Total
    
    
    
    
    
    $
    13,658
    
    
    $
    (714
    )
    
    $
    12,944
 11




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##### Table of Contents



Years Ending September 30,2008
    
    $
    4292009
    
    
    1,7132010
    
    
    1,7132011
    
    
    1,7132012
    
    
    1,713Thereafter
    
    
    5,663Total expected amortization expense
    
    $
    12,944
 Product Warranties
   Shipping Costs
  Advertising Costs
  Research and Development Costs
 Accounting for the Costs of Computer Software to Be Sold, Leased,
or Otherwise Marketed
 Income taxes
 12




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##### Table of Contents



Accounting for
Income Taxes
 Recently Issued Accounting Standards
 Accounting for Uncertainty in Income Taxes (FIN 48)
 Accounting for Uncertainty in Income Taxes
 Fair Value Measurements (SFAS 157)
  The Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159)
 The Fair Value Option for Financial Assets and
Financial Liabilities,
 Note 2. GeoLogic Solutions, Inc. Acquisition
  13




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##### Table of Contents



Cash
    
    
    
    
    
    $
    15,277Debt obligations
    
    
    
    
    
    
    2,000Common stock
    
    
    
    
    
    
    300Transaction costs
    
    
    
    
    
    
    1,557Total purchase price
    
    
    
    
    
    $
    19,134Cash
    
    $
    557Other current assets
    
    
    6,589Property and equipment
    
    
    578Intangible and other assets
    
    
    1,690Current liabilities
    
    
    (5,482
    )Net assets
    
    
    
    
    
    
    3,932Acquired customer contracts
    
    
    
    
    
    
    13,500Goodwill
    
    
    
    
    
    
    1,702Total
    
    
    
    
    
    $
    19,134
  For the Three Months Ended
    
    For the Nine Months EndedJune 30,
    
    June 30,2008
    
    2007
    
    2008
    
    2007Net sales
    
    $
    16,167
    
    
    $
    13,605
    
    
    $
    42,936
    
    
    $
    40,475Net loss to common shareholders
    
    $
    (637
    )
    
    $
    (3,484
    )
    
    $
    (6,977
    )
    
    $
    (13,924
    )Net loss per common share  basic and
diluted
    
    $
    (0.08
    )
    
    $
    (0.43
    )
    
    $
    (0.84
    )
    
    $
    (1.74
    )Weighted average common and common
share equivalents  basic and diluted
    
    
    8,411
    
    
    
    8,050
    
    
    
    8,293
    
    
    
    7,999
 14




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Note 3. Stock-Based Compensation
  Stock Options
 Share-Based Payment,
   15




---



##### Table of Contents



For the Three Months Ended
    
    For the Nine Months EndedJune 30,
    
    June 30,2008
    
    2007
    
    2008
    
    2007Number of shares granted
    
    
    27
    
    
    
    25
    
    
    
    323
    
    
    
    879Fair value
    
    $
    0.87
    
    
    $
    1.30
    
    
    $
    0.81
    
    
    $
    1.81Risk-free interest rate
    
    
    2.47
    %
    
    
    4.65
    %
    
    
    2.24
    %
    
    
    4.65
    %Expected volatility
    
    
    29.88
    %
    
    
    31.91
    %
    
    
    30.88
    %
    
    
    3.57
    %Expected life (in years)
    
    
    3.5
    
    
    
    3.5
    
    
    
    3.7
    
    
    
    4.1Dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
   WeightedAverageShares
    

Exercise PriceOptions outstanding at September 30, 2007
    
    
    1,232
    
    
    $
    5.01Granted
    
    
    323
    
    
    
    3.05Exercised
    
    
    (15
    )
    
    
    2.98Cancelled
    
    
    (234
    )
    
    
    4.55Options outstanding at June 30, 2008
    
    
    1,306
    
    
    $
    4.63
  16




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##### Table of Contents



Options Outstanding
    
    Options ExercisableWeighted
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    Weighted
    
    
    
    
    
    Average
    
    WeightedRange of
    
    Number
    
    Remaining
    
    Average
    
    
    
    
    
    Remaining
    
    Averageexercise
    
    of
    
    Contractual
    
    Exercise
    
    Number
    
    Contractual
    
    Exerciseprice
    
    Shares
    
    Life (Years)
    
    Price
    
    of Shares
    
    Life (Years)
    
    Price$2.85 - $2.95
    
    
    270
    
    
    
    5.1
    
    
    $
    2.99
    
    
    
    25
    
    
    
    9.5
    
    
    $
    2.99$3.15 - $3.99
    
    
    83
    
    
    
    3.7
    
    
    
    3.60
    
    
    
    31
    
    
    
    2.4
    
    
    
    3.92$4.33 - $4.98
    
    
    96
    
    
    
    4.5
    
    
    
    4.79
    
    
    
    46
    
    
    
    5.4
    
    
    
    4.82$5.03 - $5.40
    
    
    857
    
    
    
    4.4
    
    
    
    5.23
    
    
    
    316
    
    
    
    4.4
    
    
    
    5.221,306
    
    
    
    4.5
    
    
    $
    4.63
    
    
    
    418
    
    
    
    4.7
    
    
    $
    4.94
  Restricted Stock Awards
   WeightedAverage GrantShares
    
    Date Fair ValueRestricted stock outstanding at September 30, 2007
    
    
    361
    
    
    $
    5.22Granted
    
    
    151
    
    
    
    3.04Vested
    
    
    (163
    )
    
    
    4.97Forfeited
    
    
    (10
    )
    
    
    5.03Restricted stock outstanding at June 30, 2008
    
    
    339
    
    
    $
    4.37
  17




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Note 4. Commitments
 401(k) Plan
  Note 5. Financing Arrangements
     18




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##### Table of Contents



June 30, 2008
    
    
    September 30, 2007Senior secured revolving credit facility
    
    $
    8,223
    
    
    $
    Secured term loan
    
    
    8,000
    
    
    
    Capitalized leases
    
    
    253
    
    
    
    38116,476
    
    
    
    381Less current maturities
    
    
    2,111
    
    
    
    161Total long-term obligations
    
    $
    14,365
    
    
    $
    220Subordinated notes
    
    $
    1,475
    
    
    $
    Subordinated convertible notes
    
    
    525
    
    
    
    Total notes payable
    
    $
    2,000
    
    
    $
    
 Note 6. Shareholders Equity
 Common Stock
  Preferred Stock
  Series B
   19




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Series C
  Series D
  20




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##### Table of Contents



Common Stock Warrants
   WeightedWeighted
    
    AverageAverage
    
    Remaining
    
    AggregateNumber of
    
    Exercise
    
    Contractual
    
    IntrinsicShares
    
    Price
    
    Life (Years)
    
    ValueWarrants outstanding at September 30, 2007
    
    
    1,538
    
    
    $
    3.61
    
    
    
    2.89
    
    
    $
    44Granted
    
    
    457
    
    
    
    3.31
    
    
    
    4.59Exercised
    
    
    
    
    
    
    
    
    
    
    Cancelled
    
    
    
    
    
    
    
    
    
    
    Warrants outstanding at June 30, 2008
    
    
    1,995
    
    
    $
    3.54
    
    
    
    2.85
    
    
    $
    683
  Note 7. Net Loss Per Share
   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 encounter unexpected costs or difficulties relating to the
integration of the XATA and GeoLogic Solutions, Inc. businesses;
    
    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.Our web-based, on-demand scalable software includes a variety of web-based
enterprise applications, including XATANET®, our flagship application. 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.
    
    People.Several XATA employees have been with our company for more than 15 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
  23




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##### Table of Contents



Revenue Recognition. Software Revenue Recognition Software Revenue Recognition with Respect to Certain Transactions Revenue Recognition in Financial
Statements
  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 and sales returns.
 24




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Goodwill and Intangible Assets. Goodwill and Other Intangible Assets, Accounting for the Impairment or Disposal of Long-Lived
Assets
  Product Warranties
 25




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##### Table of Contents



Capitalized system development costs Accounting for the Costs of
Computer Software to Be Sold, Leased, or Otherwise Marketed
 Research and development costs. Accounting for the Costs of Computer
Software to Be Sold, Leased, or Otherwise Marketed.
 Income taxes Accounting for
Income Taxes
 Results of Operations for the three months and nine months ended June 30, 2008 and 2007
  Three months ended
    
    Nine months endedJune 30,
    
    June 30,2008
    
    2007
    
    2008
    
    2007Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of goods sold
    
    
    47.2
    %
    
    
    46.4
    %
    
    
    48.3
    %
    
    
    45.1
    %Selling, general and administrative expenses
    
    
    38.5
    %
    
    
    45.3
    %
    
    
    43.6
    %
    
    
    42.3
    %Research and development expenses
    
    
    9.9
    %
    
    
    13.3
    %
    
    
    11.3
    %
    
    
    13.6
    %Operating loss
    
    
    (1.2
    %)
    
    
    (12.3
    %)
    
    
    (6.7
    %)
    
    
    (10.8
    %)Net loss
    
    
    (3.9
    %)
    
    
    (11.0
    %)
    
    
    (8.3
    %)
    
    
    (9.6
    %)
 Net Sales
  26




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Cost of Goods Sold
    Selling, General and Administrative Expenses
 27




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##### Table of Contents



Research & Development Expenses
  Interest Income and Expense
   Income Taxes
  Net Loss to Common Shareholders
  Liquidity and Capital Resources
 28




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29




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Item 3. Quantitative and Qualitative Disclosures about Market Risk.
   
 Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures and Internal Control over Financial Reporting
    30




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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.
 10.1
    
    Severance Agreement between Mark E. Ties and the Company dated May 8, 200831.1
    
    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
 31




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Dated: August 8, 2008
    
    XATA Corporation(Registrant)by:
    
    /s/ Mark E. Ties

Mark E. Ties
Chief Financial Officer(Signing as Principal Financial and Accounting
Officer, and as Authorized Signatory of
Registrant)
 32