##### 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, 2007
 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)
  
  (952) 707-5600
 
  þ o
 o þ
  o o þ




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##### 



Index
 Page No.PART I. FINANCIAL INFORMATIONItem 1. Financial Statements:Balance Sheets as of March 31, 2007 and September 30, 2006
    
    
    3Statements of Operations for the Three and Six Months Ended March 31, 2007 and 2006
    
    
    4Statements of Changes in Shareholders Equity
as of March 31, 2007 and September 30, 2006
    
    
    5Statements of Cash Flows for the Three and Six Months Ended March 31, 2007 and 2006
    
    
    6Notes to Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis
of Financial Conditions and Results of Operations
    
    
    17Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    22Item 4. Controls and Procedures
    
    
    23PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    23Item 1A. Risk Factors
    
    
    24Item 2. Unregistered Sales of Equity Securities and Use
of Proceeds
    
    
    24Item 3. Defaults upon Senior Securities
    
    
    24Item 4. Submission of Matters to a Vote of Security
Holders
    
    
    24Item 5. Other Information
    
    
    25Item 6. Exhibits
    
    
    25SIGNATURESEXHIBITSAmendment to Restated Article of IncorporationCertificationCertificationCertificationCertification
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 XATA CORPORATION
 
 BALANCE SHEETS
   March 31,
    
    
    September 30,2007
    
    
    2006ASSETSCurrent AssetsCash and cash equivalents
    
    $
    8,736
    
    
    $
    6,354Accounts receivable, less allowances for doubtful accounts
and sales returns of $410 and $472
    
    
    4,598
    
    
    
    5,260Inventories
    
    
    1,778
    
    
    
    2,212Deferred product costs
    
    
    1,160
    
    
    
    3,433Prepaid expenses
    
    
    279
    
    
    
    270Total current assets
    
    
    16,551
    
    
    
    17,529Equipment and leasehold improvements, net
    
    
    1,094
    
    
    
    1,316Captialized system development costs, net
    
    
    1,177
    
    
    
    1,191Deferred product costs, net of current portion
    
    
    2,544
    
    
    
    1,687Total assets
    
    $
    21,366
    
    
    $
    21,723LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesCurrent portion of long-term obligations
    
    $
    93
    
    
    $
    94Accounts payable
    
    
    1,787
    
    
    
    1,688Accrued expenses
    
    
    2,176
    
    
    
    2,674Deferred revenue
    
    
    4,916
    
    
    
    6,728Total current liabilities
    
    
    8,972
    
    
    
    11,184Long-term obligations, net of current portion
    
    
    44
    
    
    
    88Deferred revenue, net of current portion
    
    
    7,031
    
    
    
    5,261Total liabilities
    
    
    16,047
    
    
    
    16,533Shareholders EquityPreferred stock, no par, 5,000 shares authorized:Series B, 4% convertible, 2,250 shares designated;
shares issued and outstanding: 1,815 at March 31, 2007
and 1,779 at September 30, 2006
    
    
    4,765
    
    
    
    4,579Series C, convertible, 1,400 shares designated;
1,269 shares issued and outstanding at March 31, 2007
and September 30, 2006
    
    
    4,845
    
    
    
    4,845Common stock, par value $0.01 per share; 25,000 shares
authorized; shares issued and outstanding: 8,497 at March 31, 2007
and 7,963 at September 30, 2006
    
    
    85
    
    
    
    80Additional paid-in capital
    
    
    23,900
    
    
    
    23,246Unearned stock based compensation
    
    
    
    
    
    
    (900
    )Accumulated deficit
    
    
    (28,276
    )
    
    
    (26,660
    )Total shareholders equity
    
    
    5,319
    
    
    
    5,190Total liabilities and shareholders equity
    
    $
    21,366
    
    
    $
    21,723
  3




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##### Table of Contents



XATA CORPORATION
 
 STATEMENTS OF OPERATIONS
   Three months ended
    
    
    Six months endedMarch 31,
    
    
    March 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Net sales
    
    $
    8,162
    
    
    $
    8,418
    
    
    $
    15,936
    
    
    $
    14,841Costs and expensesCost of goods sold
    
    
    4,670
    
    
    
    4,530
    
    
    
    8,851
    
    
    
    8,302Selling, general and administrative
    
    
    3,438
    
    
    
    2,815
    
    
    
    6,495
    
    
    
    5,315Research and development
    
    
    1,024
    
    
    
    1,036
    
    
    
    2,198
    
    
    
    1,944Total costs and expenses
    
    
    9,132
    
    
    
    8,381
    
    
    
    17,544
    
    
    
    15,561Operating (loss) income
    
    
    (970
    )
    
    
    37
    
    
    
    (1,608
    )
    
    
    (720
    )Net interest income
    
    
    95
    
    
    
    26
    
    
    
    179
    
    
    
    34(Loss) income before income taxes
    
    
    (875
    )
    
    
    63
    
    
    
    (1,429
    )
    
    
    (686
    )Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net (loss) income
    
    
    (875
    )
    
    
    63
    
    
    
    (1,429
    )
    
    
    (686
    )Preferred stock dividends
    
    
    (46
    )
    
    
    (44
    )
    
    
    (92
    )
    
    
    (88
    )Preferred stock deemed dividends
    
    
    
    
    
    
    
    
    
    
    (95
    )
    
    
    (52
    )Net (loss) income to common shareholders
    
    $
    (921
    )
    
    $
    19
    
    
    $
    (1,616
    )
    
    $
    (826
    )Net (loss) income per common share  basic and diluted:
    
    $
    (0.12
    )
    
    $
    0.00
    
    
    $
    (0.20
    )
    
    $
    (0.11
    )Weighted average common and
common share equivalentsBasic
    
    
    7,921
    
    
    
    7,406
    
    
    
    7,883
    
    
    
    7,354Diluted
    
    
    7,921
    
    
    
    11,071
    
    
    
    7,883
    
    
    
    7,354
  4




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##### Table of Contents



XATA CORPORATION
 
 STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
 PERIODS ENDED MARCH 31, 2007 AND SEPTEMBER 30, 2006
   Series B
    
    Series C
    
    Additional
    
    UnearnedCommon Stock
    
    Preferred Stock
    
    Preferred Stock
    
    Paid-In
    
    Stock-Based
    
    AccumulatedShares
    
    Amount
    
    Shares
    
    Amount
    
    Shares
    
    Amount
    
    Capital
    
    Compensation
    
    Deficit
    
    TotalBalance, September 30, 2005
    
    
    7,549
    
    
    $
    76
    
    
    
    1,710
    
    
    $
    4,260
    
    
    
    1,269
    
    
    $
    4,845
    
    
    $
    21,458
    
    
    $
    (1,007
    )
    
    $
    (24,595
    )
    
    $
    5,037Common stock issued on exercise of options
    
    
    344
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,255
    
    
    
    
    
    
    
    
    
    
    
    1,258Common stock issued on exercise of warrants
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of restricted shares of common stock
    
    
    199
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    963
    
    
    
    (965
    )
    
    
    
    
    
    
    Amortization of unearned stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    566
    
    
    
    
    
    
    
    566Elimination of unearned compensation related to
terminated employees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (506
    )
    
    
    506
    
    
    
    
    
    
    
    Forfeiture of restricted shares of common stock
    
    
    (138
    )
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common stock warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75
    
    
    
    
    
    
    
    
    
    
    
    75Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    69
    
    
    
    175
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (178
    )
    
    
    (3
    )Preferred stock deemed dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    144
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (144
    )
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,743
    )
    
    
    (1,743
    )Balance, September 30, 2006
    
    
    7,963
    
    
    
    80
    
    
    
    1,779
    
    
    
    4,579
    
    
    
    1,269
    
    
    
    4,845
    
    
    
    23,246
    
    
    
    (900
    )
    
    
    (26,660
    )
    
    
    5,190Common stock issued on exercise of options
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    27Issuance of restricted shares of common stock
    
    
    430
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    Elimination of unearned compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (900
    )
    
    
    900
    
    
    
    
    
    
    
    Amortization of unearned stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    927
    
    
    
    
    
    
    
    
    
    
    
    927Forfeiture of restricted shares of common stock
    
    
    (16
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Direct purchase of common stock
    
    
    112
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    604
    
    
    
    
    
    
    
    
    
    
    
    605Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    91
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (92
    )
    
    
    (1
    )Preferred stock deemed dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (95
    )
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,429
    )
    
    
    (1,429
    )Balance, March 31, 2007
    
    
    8,497
    
    
    $
    85
    
    
    
    1,815
    
    
    $
    4,765
    
    
    
    1,269
    
    
    $
    4,845
    
    
    $
    23,900
    
    
    $
    
    
    
    $
    (28,276
    )
    
    $
    5,319
  5




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##### Table of Contents



XATA CORPORATION
 
 STATEMENTS OF CASH FLOWS
   Six months endedMarch 31,2007
    
    
    2006Cash provided by operating activitiesNet loss
    
    $
    (1,429
    )
    
    $
    (686
    )Adjustments to reconcile net loss to net cash provided by
operating activities:Depreciation and impairment costs
    
    
    491
    
    
    
    176Issuance of warrants for services rendered
    
    
    
    
    
    
    25Unearned compensation recognized
    
    
    927
    
    
    
    320Changes in assets and liabilities:Accounts receivable, net
    
    
    662
    
    
    
    959Inventories
    
    
    434
    
    
    
    (855
    )Deferred product costs
    
    
    1,416
    
    
    
    590Prepaid expenses
    
    
    (9
    )
    
    
    (133
    )Accounts payable
    
    
    99
    
    
    
    (878
    )Accrued expenses
    
    
    (499
    )
    
    
    574Deferred revenue
    
    
    (42
    )
    
    
    801Net cash provided by operating activities
    
    
    2,050
    
    
    
    893Cash used in investing activitiesPurchase of equipment and leasehold improvements
    
    
    (95
    )
    
    
    (548
    )Additions to software development costs
    
    
    (160
    )
    
    
    (475
    )Net cash used in investing activities
    
    
    (255
    )
    
    
    (1,023
    )Cash provided by financing activitiesBorrowings on bank line of credit
    
    
    
    
    
    
    200Payments on bank line of credit
    
    
    
    
    
    
    (1,500
    )Borrowings on long-term obligations
    
    
    
    
    
    
    49Payments on long-term obligations
    
    
    (45
    )
    
    
    (37
    )Proceeds from issuance of common stock
    
    
    605
    
    
    
    Proceeds from options and warrants exercised
    
    
    27
    
    
    
    300Net cash provided by (used in) financing activities
    
    
    587
    
    
    
    (988
    )Increase (decrease) in cash and cash equivalents
    
    
    2,382
    
    
    
    (1,118
    )Cash and cash equivalentsBeginning
    
    
    6,354
    
    
    
    6,473Ending
    
    $
    8,736
    
    
    $
    5,355Supplemental disclosures of cash flow informationCash payments for interest
    
    $
    13
    
    
    $
    64Supplemental schedule of noncash investing and financing activitiesIssuance of restricted stock
    
    $
    
    
    
    $
    836Preferred stock deemed dividends
    
    
    95
    
    
    
    52Unearned compensation for terminated employees
    
    
    
    
    
    
    76Preferred stock dividends payable
    
    
    62
    
    
    
    59Preferred stock dividends paid
    
    
    91
    
    
    
    87Equipment purchased under capital lease
    
    
    
    
    
    
    212
  6




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##### Table of Contents



NOTES TO FINANCIAL STATEMENTS
 Note 1. Significant Accounting Policies
 Presentation
   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



Use of Estimates
  Cash and Cash Equivalents
  Concentration of Credit Risk
   Fair Value of Financial Instruments
  Inventories
   8




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##### Table of Contents



March 31,
    
    
    September 30,2007
    
    
    2006Parts and accessories
    
    $
    923
    
    
    $
    786Finished goods
    
    
    855
    
    
    
    1,426Total inventories
    
    $
    1,778
    
    
    $
    2,212
 Equipment and Leasehold Improvements
   March 31,
    
    
    September 30,2007
    
    
    2006Office furniture and equipment
    
    $
    2,630
    
    
    $
    2,543Engineering and manufacturing equipment
    
    
    572
    
    
    
    564Leasehold improvements
    
    
    34
    
    
    
    343,236
    
    
    
    3,141Less: accumulated depreciation
    
    
    (2,142
    )
    
    
    (1,825
    )Equipment and leasehold improvements, net
    
    $
    1,094
    
    
    $
    1,316
  Capitalized System Development Costs
   Long-Lived Assets
  9




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##### Table of Contents



Product Warranties
   Shipping Costs
  Advertising Costs
  Research and Development Costs
 Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed
 Income taxes
 Accounting for
Income Taxes
  Reclassifications
  10




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##### Table of Contents



Recently Issued Accounting Standards
 Accounting Changes and Error Corrections (Statement 154)
 Accounting Changes and Error Corrections  a
replacement of APB Opinion No. 20 and FASB Statement No. 3 Accounting Changes
 Accounting for Uncertainty in Income Taxes (FIN 48)
 Accounting for Uncertainty in Income Taxes
 Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year
Financial Statement (SAB 108)
 Considering the Effects of
Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements
 Fair Value Measurements (FAS 157)
  Note 2. Stock-Based Compensation
 Stock Options
  11




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##### Table of Contents



Share Based Payment
 Accounting for Stock Issued to Employees,
   Three months ended
    
    
    Six months endedMarch 31, 2006
    
    
    March 31, 2006Net income (loss) to common shareholders, as reported
    
    $
    19
    
    
    $
    (826
    )Deduct: Total stock-based employee compensation
expense determined under fair value based methods
for all awards, net of related tax effects
    
    
    (59
    )
    
    
    (60
    )Pro forma net loss to common shareholders
    
    $
    (40
    )
    
    $
    (886
    )Basic and diluted net loss to common shareholders
per common shareAs reported
    
    $
    0.00
    
    
    $
    (0.11
    )Pro forma
    
    
    (0.01
    )
    
    
    (0.12
    )
  12




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##### Table of Contents



WeightedAverageShares
    
    
    Exercise PriceOptions outstanding at September 30, 2006
    
    
    388
    
    
    $
    4.60Granted
    
    
    854
    
    
    
    5.21Exercised
    
    
    (8
    )
    
    
    3.66Cancelled
    
    
    (21
    )
    
    
    4.89Options outstanding at March 31, 2007
    
    
    1,213
    
    
    $
    5.03
   Options Outstanding
    
    Options ExercisableWeighted
    
    
    
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    Weighted
    
    
    
    
    
    
    
    
    
    Average
    
    WeightedRange
    
    Number
    
    Remaining
    
    Average
    
    Aggregate
    
    Number
    
    Remaining
    
    Average
    
    Aggregateof
    
    of
    
    Contractual
    
    Exercise
    
    Intrinsic
    
    of
    
    Contractual
    
    Exercise
    
    Intrinsicexercise price
    
    Shares
    
    Life (Years)
    
    Price
    
    Value
    
    Shares
    
    Life (Years)
    
    Price
    
    Value$2.85 - $3.03
    
    
    20
    
    
    
    0.95
    
    
    $
    2.98
    
    
    
    
    
    
    
    20
    
    
    
    0.95
    
    
    $
    2.98$3.67 - $4.18
    
    
    115
    
    
    
    0.84
    
    
    
    3.91
    
    
    
    
    
    
    
    116
    
    
    
    0.84
    
    
    
    3.91$4.88 - $5.40
    
    
    1,078
    
    
    
    5.52
    
    
    
    5.19
    
    
    
    
    
    
    
    65
    
    
    
    6.86
    
    
    
    5.081,213
    
    
    
    5.00
    
    
    $
    5.03
    
    
    $
    145
    
    
    
    201
    
    
    
    2.81
    
    
    $
    4.20
    
    
    $
    145
  Three months ended
    
    Six months endedMarch 31,
    
    March 31,2007
    
    2006
    
    2007
    
    2006Number of shares granted
    
    
    544
    
    
    
    20
    
    
    
    854
    
    
    
    20Fair value
    
    $
    1.84
    
    
    $
    2.95
    
    
    $
    1.82
    
    
    $
    2.95Risk-free interest rate
    
    
    4.68
    %
    
    
    4.55
    %
    
    
    4.65
    %
    
    
    4.55
    %Expected volatility
    
    
    35.17
    %
    
    
    41.76
    %
    
    
    35.67
    %
    
    
    41.76
    %Expected life (in years)
    
    
    4.37
    
    
    
    10.0
    
    
    
    4.06
    
    
    
    10.0Dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  13




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##### Table of Contents



Restricted Stock Awards
  WeightedNumber of
    
    
    Average FairShares
    
    
    ValueRestricted stock outstanding at September 30, 2006
    
    
    213
    
    
    $
    4.95Granted
    
    
    430
    
    
    
    5.38Vested
    
    
    (88
    )
    
    
    4.97Cancelled
    
    
    (16
    )
    
    
    4.99Restricted stock outstanding at March 31, 2007
    
    
    539
    
    
    $
    5.29
    Note 3. Commitments
 Leases
  Reseller Commitment
  401(k) Plan
  14




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##### Table of Contents



Note 4. Bank Line of Credit
  Note 5. Shareholders Equity
 Common Stock
  Preferred Stock
  Series B
    15




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##### Table of Contents



Series C
  Common Stock Warrants
   WeightedWeighted
    
    AverageAverage
    
    Remaining
    
    AggregateNumber of
    
    Exercise
    
    Contractual
    
    IntrinsicShares
    
    Price
    
    Life (Years)
    
    ValueWarrants outstanding at September 30, 2006
    
    
    1,033
    
    
    $
    3.49
    
    
    
    2.99
    
    
    $
    1,983Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Cancelled
    
    
    
    
    
    
    Warrants outstanding at March 31, 2007
    
    
    1,033
    
    
    $
    3.49
    
    
    
    2.49
    
    
    $
    1,419
  Note 6. Income (Loss) Per Share
   16




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##### Table of Contents



Note 7. Legal Proceedings
  
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
    
    
    Mobile two-way messaging and real-time vehicle location.
    
    Automation of DOT driver log requirements and state fuel tax reporting.
    
    Comprehensive vehicle and driver performance reporting.
    
    Efficient routing, trip optimization and stop activity scheduling.
    
    Diagnostic and accident data capture.
  17




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##### Table of Contents



Critical Accounting Policies
 
 Revenue Recognition. Software Revenue Recognition Software Revenue Recognition with Respect to Certain Transactions Revenue Recognition in Financial
Statements
    Allowance for doubtful accounts and sales returns.
  18




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##### Table of Contents



Product Warranties
 Capitalized system development costs
 Research and development costs Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use
 Income taxes Accounting
for Income Taxes
 Results of Operations for the three and six months ended March 31, 2007 and 2006
  Three months ended
    
    Six months endedMarch 31,
    
    March 31,2007
    
    2006
    
    2007
    
    2006Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Gross profit
    
    
    42.8
    %
    
    
    46.2
    %
    
    
    44.5
    %
    
    
    44.1
    %Selling, general and
administrative.
    
    
    42.1
    %
    
    
    33.4
    %
    
    
    40.8
    %
    
    
    35.8
    %Research and development
    
    
    12.5
    %
    
    
    12.3
    %
    
    
    13.8
    %
    
    
    13.1
    %Operating (loss) income
    
    
    (11.9
    %)
    
    
    0.4
    %
    
    
    (10.1
    %)
    
    
    (4.9
    %)Net (loss) income
    
    
    (10.7
    %)
    
    
    0.7
    %
    
    
    (9.0
    %)
    
    
    (4.6
    %)
 Net Sales
  19




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##### Table of Contents



Cost of Goods Sold
   Selling, General and Administrative Expenses
   20




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##### Table of Contents



Research & Development Expenses
 .
  Net Interest Income
  Income Taxes
  Net Income (Loss) to Common Shareholders
  Liquidity and Capital Resources
   21




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##### Table of Contents



Related Party Transactions
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  22




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##### Table of Contents



Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures and Internal Control over Financial Reporting
   Forward-looking Statements
 This document includes forward-looking statements based on current expectations. Actual results
may differ materially. These forward-looking statements involve a number of risks and
uncertainties about us, our business, our customers, the economy and the business environment in
general. Risks and uncertainties about us include, but are not limited to, the following:
 
    
    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.
 
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
 Item 103
 23




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##### Table of Contents



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.
    
    The number of directors was set at six (6), and six (6) 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 2008.
 For
    
    WithheldStephen A. Lawrence
    
    
    9,520,929
    
    
    
    651,877John J. Coughlan
    
    
    9,987,053
    
    
    
    185,753
 24




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##### Table of Contents



For
    
    WithheldCarl M. Fredericks
    
    
    9,458,143
    
    
    
    714,663Roger W. Kleppe
    
    
    9,526,528
    
    
    
    646,288Charles R. Stamp, Jr.
    
    
    9,471,223
    
    
    
    701,583Christopher P. Marshall
    
    
    1,814,827
    
    
    
    -0
 2.
    
    Adoption of 2007 Long-Term Incentive and Stock Option Plan and to reserve 500,000
shares of Common Stock for issuance under the Plan.For   6,996,734     Against    1,082,050       Abstain    92,034    Broker Non-Vote   2,001,9883.
    
    Approval of amendment to Articles of Incorporation to increase the authorized
number of shares of Preferred Stock (with terms and preferences to be determined by the
Board of Directors) from 5,000,000 shares to 10,000,000 shares.For   6,985,103    Against   1,093,856     Abstain   91,859    Broker Non-Vote   2,001,988
 
 Item 5. Other Information
  
 Item 6. Exhibits
 Exhibit
 3.4
    
    Amendment to Restated Article of Incorporation *4.7
    
    2007 Long-term Incentive Stock Option Plan **31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *32.1
    
    Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 *32.2
    
    Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 *
 
 *
    
    Filed herewith.**
    
    Incorporated by reference to exhibit filed as part of Registration Statement on
Form S-8 on February 15, 2007 (Commission File No. 333-140741). 25




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##### Table of Contents



SIGNATURES
  Dated: May 10, 2007
    
    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)
 26