##### 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, 2009 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)
 
 (952) 707-5600
 
 þ o
 o o
 o þ
  Large accelerated filer oAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company þ




---



##### 



Index
 Page No.PART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Consolidated Financial Statements:Consolidated Statements of Operations for the Three and Six Months
Ended March 31, 2009 and 2008
    
    
    3Consolidated Balance Sheets as of March 31, 2009
and September 30, 2008
    
    
    4Consolidated Statements of Changes in Shareholders Equity for the
Six Months Ended March 31, 2009 and the Twelve Months Ended September 30, 2008
    
    
    5Consolidated Statements of Cash Flows for the Six Months Ended March 31,
2009 and 2008
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis
of Financial Condition and Results of Operation
    
    
    25Item 4.
    
    Controls and Procedures
    
    
    33PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    34Item 1A.
    
    Risk Factors
    
    
    34Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    34Item 3.
    
    Defaults upon Senior Securities
    
    
    34Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    34Item 5.
    
    Other Information
    
    
    35Item 6.
    
    Exhibits
    
    
    35SIGNATURESEXHIBITSEX-10.3EX-31.1EX-31.2EX-32.1EX-32.2
  2




---



##### 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 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenue
    
    $
    16,895
    
    
    $
    12,129
    
    
    $
    31,538
    
    
    $
    19,816Costs and expensesCost of goods sold
    
    
    9,263
    
    
    
    6,509
    
    
    
    16,858
    
    
    
    10,914Selling, general and
administrative
    
    
    5,752
    
    
    
    5,593
    
    
    
    11,653
    
    
    
    8,993Research and development
    
    
    1,403
    
    
    
    1,105
    
    
    
    2,810
    
    
    
    2,114Total costs and expenses
    
    
    16,418
    
    
    
    13,207
    
    
    
    31,321
    
    
    
    22,021Operating income (loss)
    
    
    477
    
    
    
    (1,078
    )
    
    
    217
    
    
    
    (2,205
    )Interest income
    
    
    33
    
    
    
    110
    
    
    
    72
    
    
    
    241Interest expense
    
    
    (419
    )
    
    
    (370
    )
    
    
    (869
    )
    
    
    (387
    )Income (loss) before
income taxes
    
    
    91
    
    
    
    (1,338
    )
    
    
    (580
    )
    
    
    (2,351
    )Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    
    91
    
    
    
    (1,338
    )
    
    
    (580
    )
    
    
    (2,351
    )Preferred stock dividends
    
    
    (50
    )
    
    
    (47
    )
    
    
    (99
    )
    
    
    (94
    )Preferred stock deemed
dividends
    
    
    (484
    )
    
    
    
    
    
    
    (479
    )
    
    
    (43
    )Net loss to common
shareholders
    
    $
    (443
    )
    
    $
    (1,385
    )
    
    $
    (1,158
    )
    
    $
    (2,488
    )Net loss per common share
 basic and diluted
    
    $
    (0.05
    )
    
    $
    (0.17
    )
    
    $
    (0.14
    )
    
    $
    (0.30
    )Weighted average common and
common share equivalents
Basic and diluted
    
    
    8,524
    
    
    
    8,306
    
    
    
    8,500
    
    
    
    8,234
  3




---



##### Table of Contents



XATA CORPORATION
CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    September 30,2009
    
    
    2008(Unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    $
    3,077
    
    
    $
    8,904Accounts receivable, less allowances
of $431 and $333
    
    
    9,656
    
    
    
    11,365Inventories
    
    
    4,022
    
    
    
    2,735Deferred product costs
    
    
    1,873
    
    
    
    1,474Current portion of investment in sales-type leases
    
    
    566
    
    
    
    768Prepaid expenses and other current assets
    
    
    665
    
    
    
    691Total current assets
    
    
    19,859
    
    
    
    25,937Equipment and leasehold improvements, net
    
    
    3,802
    
    
    
    3,925Intangible assets, net
    
    
    11,572
    
    
    
    12,420Goodwill
    
    
    3,011
    
    
    
    3,011Deferred product costs, net of current portion
    
    
    2,967
    
    
    
    2,685Investment in sales-type leases, net of current portion
    
    
    100
    
    
    
    310Debt financing costs, net
    
    
    583
    
    
    
    708Total assets
    
    $
    41,894
    
    
    $
    48,996LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term obligations
    
    $
    93
    
    
    $
    1,845Accounts payable
    
    
    5,101
    
    
    
    4,394Accrued expenses
    
    
    4,919
    
    
    
    6,574Deferred revenue
    
    
    5,475
    
    
    
    4,996Total current liabilities
    
    
    15,588
    
    
    
    17,809Long-term obligations, net of current portion
    
    
    8,571
    
    
    
    16,342Deferred revenue, net of current portion
    
    
    7,502
    
    
    
    7,848Other long-term liabilities
    
    
    904
    
    
    
    805Total liabilities
    
    
    32,565
    
    
    
    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 March 31, 2009
and 1,926 at September 30, 2008
    
    
    4,645
    
    
    
    5,181Series C, convertible, 1,400 shares designated;
1,269 shares issued and outstanding at March 31, 2009
and September 30, 2008
    
    
    4,426
    
    
    
    4,845Series D, convertible, 1,600 shares designated;
1,567 shares issued and outstanding at March 31, 2009
and September 30, 2008
    
    
    5,279
    
    
    
    5,937Series E, convertible, 1,400 shares designated;
1,356 shares issued and outstanding at March 31, 2009
    
    
    2,414
    
    
    
    Common stock, par value $0.01 per share; 25,000 shares
authorized; shares issued and outstanding: 8,791 at March 31, 2009
and 8,745 at September 30, 2008
    
    
    88
    
    
    
    87Additional paid-in capital
    
    
    31,727
    
    
    
    28,234Accumulated deficit
    
    
    (39,250
    )
    
    
    (38,092
    )Total shareholders equity
    
    
    9,329
    
    
    
    6,192Total liabilities and shareholders equity
    
    $
    41,894
    
    
    $
    48,996
  4




---



##### Table of Contents



XATA CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
 Series B
    
    
    Series C
    
    
    Series D
    
    
    Series E
    
    
    AdditionalCommon Stock
    
    
    Preferred Stock
    
    
    Preferred Stock
    
    
    Preferred Stock
    
    
    Preferred Stock
    
    
    Paid-In
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Shares
    
    
    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
    
    
    48
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    793
    
    
    
    
    
    
    
    793Forfeiture of restricted shares of common stock
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of preferred stock and warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,356
    
    
    
    2,414
    
    
    
    511
    
    
    
    
    
    
    
    2,925Record the beneficial conversion feature
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (484
    )
    
    
    484
    
    
    
    
    
    
    
    Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    38
    
    
    
    98
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (99
    )
    
    
    (1
    )Preferred stock deemed dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    484
    
    
    
    
    
    
    
    (479
    )
    
    
    Adjustment to reflect value of beneficial conversion feature
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (629
    )
    
    
    
    
    
    
    (419
    )
    
    
    
    
    
    
    (658
    )
    
    
    
    
    
    
    
    
    
    
    1,706
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (580
    )
    
    
    (580
    )Balance at March 31, 2009
    
    
    8,791
    
    
    $
    88
    
    
    
    1,964
    
    
    $
    4,645
    
    
    
    1,269
    
    
    $
    4,426
    
    
    
    1,567
    
    
    $
    5,279
    
    
    
    1,356
    
    
    $
    2,414
    
    
    $
    31,727
    
    
    $
    (39,250
    )
    
    $
    9,329
  5




---



##### Table of Contents



XATA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Six Months EndedMarch 31,2009
    
    
    2008Operating activitiesNet loss
    
    $
    (580
    )
    
    $
    (2,351
    )Adjustments to reconcile net loss to net cash provided by
operating activities:Depreciation and amortization
    
    
    1,486
    
    
    
    882Amortization of debt financing costs
    
    
    125
    
    
    
    42Stock based compensation
    
    
    793
    
    
    
    883Changes in assets and liabilities, net of impact of acquisition:Accounts receivable, net
    
    
    1,709
    
    
    
    (1,636
    )Inventories
    
    
    (1,286
    )
    
    
    1,591Deferred product costs
    
    
    (680
    )
    
    
    (484
    )Prepaid expenses and other assets
    
    
    26
    
    
    
    (668
    )Lease equipment receivable
    
    
    412
    
    
    
    110Accounts payable
    
    
    707
    
    
    
    (1,213
    )Accrued expenses
    
    
    (1,558
    )
    
    
    (1,220
    )Deferred revenue
    
    
    133
    
    
    
    1,254Net cash provided by (used in) operating activities
    
    
    1,287
    
    
    
    (2,810
    )Investing activitiesPurchase of equipment and leasehold improvements
    
    
    (516
    )
    
    
    (2,506
    )Purchase of GeoLogic Solutions, Inc., net of cash acquired
    
    
    
    
    
    
    (16,171
    )Net cash used in investing activities
    
    
    (516
    )
    
    
    (18,677
    )Financing activitiesBorrowings on long-term obligations
    
    
    18,077
    
    
    
    16,224Payments on long-term obligations
    
    
    (27,600
    )
    
    
    (89
    )Payments on financing costs
    
    
    
    
    
    
    (339
    )Proceeds from issuance of preferred stock and warrants
    
    
    2,925
    
    
    
    Proceeds from options and warrants exercised
    
    
    
    
    
    
    52Net cash (used in) provided by financing activities
    
    
    (6,598
    )
    
    
    15,848Decrease in cash and cash equivalents
    
    
    (5,827
    )
    
    
    (5,639
    )Cash and cash equivalentsBeginning
    
    
    8,904
    
    
    
    13,675Ending
    
    $
    3,077
    
    
    $
    8,036Supplemental disclosures of cash flow informationCash payments for interest
    
    $
    744
    
    
    $
    251Supplemental schedule of noncash investing and financing activitiesPreferred stock deemed dividends
    
    $
    479
    
    
    $
    43Preferred stock dividends payable
    
    $
    66
    
    
    $
    64Preferred stock dividends paid
    
    $
    98
    
    
    $
    94Issuance of warrants in consideration for financing fees
    
    
    
    
    
    $
    535Issuance of sellers note
    
    
    
    
    
    $
    2,000Issuance of common stock related to purchase of GeoLogic Solutions, Inc.
    
    
    
    
    
    $
    300
  6




---



##### 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




---



##### 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
  8




---



##### Table of Contents



As Previously
    
    
    
    
    
    As CurrentlyReported
    
    Reclassification
    
    ReportedFor the three months ended December 31,
2008:Cost of goods sold
    
    $
    6,688
    
    
    $
    907
    
    
    $
    7,595Selling, general and administrative expenses
    
    
    6,931
    
    
    
    (1,030
    )
    
    
    5,901Research and development expenses
    
    
    1,284
    
    
    
    123
    
    
    
    1,407For the three months ended December 31,
2007:Cost of goods sold
    
    $
    4,058
    
    
    $
    347
    
    
    $
    4,405Selling, general and administrative expenses
    
    
    3,716
    
    
    
    (316
    )
    
    
    3,400Research and development expenses
    
    
    1,040
    
    
    
    (31
    )
    
    
    1,009For the three months ended March 31, 2008:Cost of goods sold
    
    $
    6,009
    
    
    $
    500
    
    
    $
    6,509Selling, general and administrative expenses
    
    
    5,759
    
    
    
    (166
    )
    
    
    5,593Research and development expenses
    
    
    1,439
    
    
    
    (334
    )
    
    
    1,105
  Cash and Cash Equivalents
  Fair Value of Financial Instruments
  Inventories
  Investment in Sales-Type Leases
  9




---



##### Table of Contents



Years ending September 30,2009
    
    $
    3802010
    
    
    2962011
    
    
    42Total minimum lease payments
    
    
    718Less: amount representing interest (at 11.71%)
    
    
    (52
    )Present value of net minimum sales-type lease payments
    
    
    666Less: current portion of investment in sales-type leases
    
    
    (566
    )Investment in sales-type leases, excluding current portion
    
    $
    100
  Debt Financing Costs
  Equipment and Leasehold Improvements
   March 31,
    
    
    September 30,2009
    
    
    2008Office furniture and equipment
    
    $
    4,575
    
    
    $
    4,003Engineering and manufacturing equipment
    
    
    900
    
    
    
    831Leasehold improvements
    
    
    2,348
    
    
    
    2,4737,823
    
    
    
    7,307Less: accumulated depreciation
    
    
    (4,021
    )
    
    
    (3,382
    )Equipment and leasehold improvements, net
    
    $
    3,802
    
    
    $
    3,925
  10




---



##### Table of Contents



Capitalized Software 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,
 Accounting for the Impairment or Disposal of Long-Lived Assets
 11




---



##### Table of Contents



Weighted Average
    
    
    
    
    
    
    AccumulatedLife (years)
    
    
    Cost
    
    
    Amortization
    
    
    NetAcquired customer contracts
    
    
    8
    
    
    $
    13,500
    
    
    $
    (1,969
    )
    
    $
    11,531Other intangibles
    
    
    7
    
    
    
    49
    
    
    
    (8
    )
    
    
    41Total
    
    
    8
    
    
    $
    13,549
    
    
    $
    (1,977
    )
    
    $
    11,572
  Years Ending September 30,2009
    
    $
    8472010
    
    
    1,6952011
    
    
    1,6952012
    
    
    1,6952013
    
    
    1,695Thereafter
    
    
    3,945Total expected amortization expense
    
    $
    11,572
 Product Warranties
   Shipping Costs
  Advertising Costs
  12




---



##### Table of Contents



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
 The Hierarchy of Generally Accepted Accounting Principles (SFAS 162)
 The Hierarchy of Generally Accepted Accounting
Principles
 Note 2. Revenue and Cost of Goods Sold Information
  13




---



##### Table of Contents



Three months ended
    
    
    Six months endedMarch 31,
    
    
    March 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenue:Software
    
    $
    8,412
    
    
    $
    5,783
    
    
    $
    16,465
    
    
    $
    8,760Systems
    
    
    6,857
    
    
    
    5,561
    
    
    
    12,410
    
    
    
    9,348Services
    
    
    1,626
    
    
    
    785
    
    
    
    2,663
    
    
    
    1,708Total revenue
    
    $
    16,895
    
    
    $
    12,129
    
    
    $
    31,538
    
    
    $
    19,816
 Three months ended
    
    
    Six months endedMarch 31,
    
    
    March 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Cost of goods sold:Software
    
    $
    2,400
    
    
    $
    1,712
    
    
    $
    4,764
    
    
    $
    2,709Systems
    
    
    5,822
    
    
    
    4,096
    
    
    
    10,255
    
    
    
    6,832Services
    
    
    1,041
    
    
    
    701
    
    
    
    1,839
    
    
    
    1,373Total cost of goods sold
    
    $
    9,263
    
    
    $
    6,509
    
    
    $
    16,858
    
    
    $
    10,914
 Note 3. GeoLogic Solutions, Inc. Acquisition
    14




---



##### Table of Contents



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
  For the Three Months
    
    For the Six MonthsEnded March 31, 2008
    
    Ended March 31, 2008Revenue
    
    $
    13,795
    
    
    $
    26,769Net loss to common shareholders
    
    $
    (2,840
    )
    
    $
    (6,340
    )Net loss per common share  basic
and diluted
    
    $
    (0.34
    )
    
    $
    (0.76
    )Weighted average common and common
share equivalents  basic and diluted
    
    
    8,397
    
    
    
    8,325
  Note 4. Stock-Based Compensation
  15




---



##### Table of Contents



Stock Options
 Share-Based Payment,
  For the Three Months Ended
    
    For the Six Months EndedMarch 31,
    
    March 31,2009
    
    2008
    
    2009
    
    2008Number of shares granted
    
    
    659
    
    
    
    275
    
    
    
    725
    
    
    
    296Fair value
    
    $
    0.85
    
    
    $
    0.80
    
    
    $
    0.86
    
    
    $
    0.80Risk-free interest rate
    
    
    2.30
    %
    
    
    2.12
    %
    
    
    2.28
    %
    
    
    2.22
    %Expected volatility
    
    
    41.24
    %
    
    
    31.13
    %
    
    
    40.26
    %
    
    
    30.97
    %Expected life (in years)
    
    
    5.95
    
    
    
    3.70
    
    
    
    5.73
    
    
    
    3.70Dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
   16




---



##### Table of Contents



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
    
    
    725
    
    
    
    2.17Cancelled
    
    
    (49
    )
    
    
    4.20Options outstanding at March 31, 2009
    
    
    1,915
    
    
    
    3.73
    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
    
    
    889
    
    
    
    9.6
    
    
    $
    2.26
    
    
    
    123
    
    
    
    9.1
    
    
    $
    2.75$3.15 - $3.99
    
    
    124
    
    
    
    9.2
    
    
    
    3.63
    
    
    
    15
    
    
    
    8.7
    
    
    
    3.51$4.33 - $4.98
    
    
    45
    
    
    
    7.5
    
    
    
    4.57
    
    
    
    28
    
    
    
    7.4
    
    
    
    4.72$5.03 - $5.40
    
    
    857
    
    
    
    7.5
    
    
    
    5.23
    
    
    
    651
    
    
    
    7.4
    
    
    
    5.241,915
    
    
    
    8.6
    
    
    
    3.73
    
    
    
    817
    
    
    
    7.7
    
    
    
    4.81
  17




---



##### Table of Contents



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
    
    
    48
    
    
    
    3.24Vested
    
    
    (118
    )
    
    
    4.16Cancelled
    
    
    (2
    )
    
    
    2.99Restricted stock outstanding at March 31, 2009
    
    
    213
    
    
    
    4.25
   Restricted Stock Units
   18




---



##### Table of Contents



WeightedNumber of
    
    Average GrantShares
    
    Date Fair ValueRestricted stock outstanding at September 30, 2008
    
    
    
    
    
    
    Granted
    
    
    241
    
    
    $
    2.00Restricted stock outstanding at March 31, 2009
    
    
    241
    
    
    
    2.00
  Note 5. Commitments
 Leases
   Years ending September 30,2009
    
    $
    5392010
    
    
    1,0862011
    
    
    7482012
    
    
    5272013
    
    
    540Thereafter
    
    
    698Total
    
    $
    4,138
  401(k) Plan
  Note 6. Financing Arrangements
  19




---



##### Table of Contents



March 31, 2009
    
    
    September 30, 2008Subordinated notes
    
    $
    
    
    
    $
    1,225Subordinated convertible notes
    
    
    
    
    
    
    525Total notes payable
    
    
    
    
    
    
    1,750Senior secured revolving credit facility
    
    
    500
    
    
    
    8,223Secured term loan
    
    
    8,000
    
    
    
    8,000Capitalized leases
    
    
    164
    
    
    
    214Total long-term obligations
    
    
    8,664
    
    
    
    18,187Less current portion of long-term obligations
    
    
    93
    
    
    
    1,845Total long-term obligations, net of current portion
    
    $
    8,571
    
    
    $
    16,342
 Note 7. Shareholders Equity
 Common Stock
  Preferred Stock
  20




---



##### Table of Contents



Series B
    Series C
  Series D
  21




---



##### Table of Contents



Series E
     22




---



##### Table of Contents



Common Stock Warrants
   WeightedWeighted
    
    AverageNumber of
    
    Average
    
    RemainingWarrants
    
    Exercise Price
    
    Life (years)Warrants outstanding at September 30, 2007
    
    
    1,538
    
    
    $
    5.22
    
    
    
    2.9Granted
    
    
    457Warrants outstanding at September 30, 2008
    
    
    1,995
    
    
    
    3.54
    
    
    
    2.6Granted
    
    
    407Cancelled
    
    
    (451
    )Warrants outstanding at March 31, 2009
    
    
    1,951
    
    
    
    3.35
    
    
    
    4.3
 Note 8. Net Loss Per Common Share
   23




---



##### Table of Contents



24




---



##### 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 and net 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
    25




---



##### Table of Contents



Technology, People, Processes
  
    
    Technology.XATA provides a total fleet management solution, including systems,
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
 26




---



##### 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,
 27




---



##### Table of Contents



Accounting for the Impairment or Disposal of Long-Lived Assets
 Product Warranties.
 Capitalized software 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
 28




---



##### Table of Contents



Results of Operations for the three and six months ended March 31, 2009 and 2008
  Three months ended March 31,
    
    
    Six months ended March 31,2009
    
    
    2008
    
    
    2009
    
    
    2008SoftwareRevenue
    
    $
    8,412
    
    
    $
    5,783
    
    
    $
    16,465
    
    
    $
    8,760Cost of goods sold
    
    
    2,400
    
    
    
    1,712
    
    
    
    4,764
    
    
    
    2,709Gross margin
    
    $
    6,012
    
    
    $
    4,071
    
    
    $
    11,701
    
    
    $
    6,051Gross margin %
    
    
    71.5
    %
    
    
    70.4
    %
    
    
    71.1
    %
    
    
    69.1
    %SystemsRevenue
    
    $
    6,857
    
    
    $
    5,561
    
    
    $
    12,410
    
    
    $
    9,348Cost of goods sold
    
    
    5,822
    
    
    
    4,096
    
    
    
    10,255
    
    
    
    6,832Gross margin
    
    $
    1,035
    
    
    $
    1,465
    
    
    $
    2,155
    
    
    $
    2,516Gross margin %
    
    
    15.1
    %
    
    
    26.3
    %
    
    
    17.4
    %
    
    
    26.9
    %ServicesRevenue
    
    $
    1,626
    
    
    $
    785
    
    
    $
    2,663
    
    
    $
    1,708Cost of goods sold
    
    
    1,041
    
    
    
    701
    
    
    
    1,839
    
    
    
    1,373Gross margin
    
    $
    585
    
    
    $
    84
    
    
    $
    824
    
    
    $
    335Gross margin %
    
    
    36.0
    %
    
    
    10.7
    %
    
    
    30.9
    %
    
    
    19.6
    %TotalRevenue
    
    $
    16,895
    
    
    $
    12,129
    
    
    $
    31,538
    
    
    $
    19,816Cost of goods sold
    
    
    9,263
    
    
    
    6,509
    
    
    
    16,858
    
    
    
    10,914Gross margin
    
    $
    7,632
    
    
    $
    5,620
    
    
    $
    14,680
    
    
    $
    8,902Gross margin %
    
    
    45.2
    %
    
    
    46.3
    %
    
    
    46.5
    %
    
    
    44.9
    %
 Revenue
  29




---



##### Table of Contents



Cost of Goods Sold and Gross Margin
 Cost of software
 Cost of systems
 Cost of services
 Selling, General and Administrative Expenses
  30




---



##### Table of Contents



Research & Development Expenses
   Net Interest Expense
  Income Taxes
  Accounting for Uncertainty in Income Taxes  an
Interpretation of FASB Statement No. 109
 Net Loss to Common Shareholders
  31




---



##### Table of Contents



Liquidity and Capital Resources
           32




---



##### Table of Contents



Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures and Internal Control over Financial Reporting
   33




---



##### Table of Contents



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.
   1.
    
    Eight (8) directors (including Christopher P. Marshall, 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 one-year term expiring when their successors are elected and
qualified at the annual meeting in 2010.
 For
    
    WithheldJohn J. Coughlan
    
    
    11,785,470
    
    
    
    248,074Carl M. Fredericks
    
    
    11,581,365
    
    
    
    452,179Thomas G. Hudson
    
    
    11,784,970
    
    
    
    248,574Roger W. Kleppe
    
    
    11,524,542
    
    
    
    509,002Chad M. Lindbloom
    
    
    11,785,570
    
    
    
    247,974Michael J. Paxton
    
    
    11,785,070
    
    
    
    248,474Bharat S. Vedak
    
    
    11,785,370
    
    
    
    248,174Christopher P. Marshall
    
    
    1,964,429
    
    
    
    -0-
 34




---



##### Table of Contents



2.
    
    Approval of the Amendment and Restatement of the 2007 Long-Term Incentive and Stock
Option PlanFor: 8,715,496     Against: 614,277     Withheld: 15,434     Broker Non-Vote:
2,688,337
   1.
    
    Approval of Articles of Amendment of Second Restated Articles of Incorporation.For: 10,443,778     Against: 53,044     Withheld: 3,100
 
 Item 5. Other Information.
  
 Item 6. Exhibits.
 3.1
    
    Second Restated Articles of Incorporation, as amended through April 17, 2009
(incorporated by reference to Exhibit 3.1 of the Companys Report on Form 10-K filed
with the SEC on December 17, 2008, and Exhibits 3.1, 3.2 and 3.3 of the Companys
Report on Form 8-K filed with the SEC on April 21, 2009).3.2
    
    Restated Bylaws, as amended February 4, 2009 (incorporated by reference to
Exhibit 3.1 of the Companys Report on Form 8-K filed with the SEC on February 10,
2009).4.1
    
    Amended and Restated Investor Rights Agreement dated as of February 12, 2009
by and among the Company, Trident Capital Fund-V, L.P., Trident Capital Fund-V
Affiliates Fund, L.P., Trident Capital Fund-V Affiliates Fund (Q), L.P., Trident
Capital Fund-V Principals Fund, L.P. and Trident Capital Parallel Fund-
V, C.V. (incorporated by reference to Exhibit 4.1 of the Companys Report on Form
8-K filed with the SEC on February 18, 2009).4.2
    
    Form of Warrant issued on February 12, 2009 to Trident Capital Fund-V, L.P.,
Trident Capital Fund-V Affiliates Fund, L.P., Trident Capital Fund-V Affiliates Fund
(Q), L.P., Trident Capital Fund-V Principals Fund, L.P., Trident Capital Parallel
Fund-V, C.V., GW 2001 Fund, L.P., Weber Capital Partners II, L.P.and certain
members of the Companys management (incorporated by reference to Exhibit 4.2 of the
Companys Report on Form 8-K filed with the SEC on February 18, 2009).10.1
    
    Common Stock Warrant and Series E Preferred Stock Purchase Agreement dated as
of February 12, 2009 by and among XATA Corporation, Trident Capital Fund-V, L.P.,
Trident Capital Fund-V Affiliates Fund, L.P., Trident Capital Fund-V Affiliates Fund
(Q), L.P., Trident Capital Fund-V Principals Fund, L.P., Trident Capital Parallel
Fund-V, C.V., Weber Capital Partners II, L.P., GW 2001 Fund, L.P. and certain members
of the
 35




---



##### Table of Contents



Companys management (incorporated by reference to Exhibit 10.1 of the
Companys Report on Form 8-K filed with the SEC on February 18, 2009).10.2
    
    Exchange Agreement dated February 12, 2009 by and among XATA Corporation,
Trident Capital Fund-V, L.P., Trident Capital Fund-V Affiliates Fund, L.P., Trident
Capital Fund-V Affiliates Fund (Q), L.P., Trident Capital Fund-V Principals Fund,
L.P., Trident Capital Parallel Fund-V, C.V., Weber Capital Partners II, L.P., GW 2001
Fund, L.P. and certain members of the Companys management (incorporated by reference
to Exhibit 10.2 of the Companys Report on Form 8-K filed with the SEC on February 18,
2009).10.3
    
    Amendment, dated January 27, 2009, to certain promissory notes issued by the
Company on January 31, 2008 to Platinum Equity Capital Partners, L.P., Platinum Equity
Capital Partners-A, L.P., Platinum Equity Capital Partners-PF, L.P. and Platinum
Transportation Principals, LLC.10.4
    
    2007 Long-term Incentive and Stock Option Plan, as amended effective February
4, 2009 (incorporated by reference to Appendix A to the Companys Proxy Statement
filed with the Securities and Exchange Commission on December 22, 2008).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
 36




---



##### Table of Contents



Dated: May 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) 37