##### Table of Contents



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




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##### 



Index
 Page No.PART I. FINANCIAL INFORMATIONItem 1. Consolidated Financial Statements (Unaudited):Consolidated Statements of Operations for the Three Months Ended December 31, 2010 and 2009
    
    
    3Consolidated Balance Sheets as of December 31, 2010 and September 30, 2010
    
    
    4Consolidated Statements of Changes in Shareholders Equity for the Three Months Ended December 31, 2010 and the Twelve Months Ended September 30, 2010
    
    
    5Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2010 and 2009
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operation
    
    
    26Item 4. Controls and Procedures
    
    
    34PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    35Item 1A. Risk Factors
    
    
    35Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    35Item 3. Defaults upon Senior Securities
    
    
    35Item 4. Reserved
    
    
    35Item 5. Other Information
    
    
    35Item 6. Exhibits
    
    
    35SIGNATURES
    
    
    36EXHIBITSEX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



Item 1. Consolidated Financial Statements
 XATA Corporation
 
 Consolidated Statements of Operations (Unaudited)
 For the Three Months EndedDecember 31,In thousands, except per-share data
    
    2010
    
    
    2009Revenue
    
    $
    13,978
    
    
    $
    17,523Costs and expensesCost of goods sold
    
    
    5,658
    
    
    
    9,692Selling, general and administrative
    
    
    6,113
    
    
    
    6,150Research and development
    
    
    2,224
    
    
    
    1,333Acquisition related costs
    
    
    
    
    
    
    779Total costs and expenses
    
    
    13,995
    
    
    
    17,954Operating loss
    
    
    (17
    )
    
    
    (431
    )Net interest and other expense
    
    
    (83
    )
    
    
    (276
    )Interest expense on financing activities
    
    
    
    
    
    
    (779
    )Acquisition related interest and mark to market
    
    
    
    
    
    
    (162
    )Loss before income taxes
    
    
    (100
    )
    
    
    (1,648
    )Income tax benefit
    
    
    (15
    )
    
    
    Net loss
    
    
    (85
    )
    
    
    (1,648
    )Preferred stock dividends
    
    
    (53
    )
    
    
    (51
    )Preferred stock deemed dividends
    
    
    18
    
    
    
    (14
    )Net loss to common shareholders
    
    $
    (120
    )
    
    $
    (1,713
    )Net loss per common share:Basic and diluted
    
    $
    (0.01
    )
    
    $
    (0.20
    )Weighted average common and
common share equivalents:Basic and diluted
    
    
    9,740
    
    
    
    8,646
 The accompanying notes are an integral part of the consolidated financial statements (unaudited).
 3




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##### Table of Contents



XATA Corporation
 
 Consolidated Balance Sheets (Unaudited)
 December 31,
    
    
    September 30,In thousands
    
    2010
    
    
    2010ASSETSCurrent assetsCash and cash equivalents
    
    $
    14,030
    
    
    $
    13,374Accounts receivable, less allowances
of $273 at December 31, 2010 and $444 at September 30, 2010
    
    
    6,493
    
    
    
    11,392Inventories
    
    
    4,107
    
    
    
    3,047Deferred product costs
    
    
    1,875
    
    
    
    2,042Prepaid expenses and other current assets
    
    
    1,134
    
    
    
    1,260Total current assets
    
    
    27,639
    
    
    
    31,115Equipment, leased equipment and leasehold improvements, net
    
    
    6,651
    
    
    
    5,798Intangible assets, net
    
    
    14,417
    
    
    
    14,901Goodwill
    
    
    17,525
    
    
    
    17,048Deferred product costs, net of current portion
    
    
    1,491
    
    
    
    1,757Deferred tax assets
    
    
    348
    
    
    
    337Other assets
    
    
    410
    
    
    
    420Total assets
    
    $
    68,481
    
    
    $
    71,376LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of debt obligations
    
    $
    973
    
    
    $
    839Accounts payable
    
    
    3,842
    
    
    
    5,138Accrued expenses
    
    
    3,917
    
    
    
    4,872Deferred revenue
    
    
    3,878
    
    
    
    5,070Total current liabilities
    
    
    12,610
    
    
    
    15,919Debt obligations, net of current portion
    
    
    688
    
    
    
    485Deferred revenue, net of current portion
    
    
    2,976
    
    
    
    3,591Deferred tax liabilities
    
    
    2,317
    
    
    
    2,242Other long-term liabilities
    
    
    592
    
    
    
    638Total liabilities
    
    
    19,183
    
    
    
    22,875Shareholders equityPreferred stock, no par, 50,000 shares authorized:Series B, 4% convertible, 2,250 shares designated;
shares issued and outstanding: 2,127 at December 31, 2010
and 2,085 at September 30, 2010
    
    
    5,121
    
    
    
    5,033Series C, convertible, 1,400 shares designated;
shares issued and outstanding: 1,269 at December 31, 2010
and September 30, 2010
    
    
    4,426
    
    
    
    4,426Series D, convertible, 1,600 shares designated;
shares issued and outstanding: 1,567 at December 31, 2010
and September 30, 2010
    
    
    5,279
    
    
    
    5,279Series F, convertible, 1,400 shares designated;
shares issued and outstanding: 1,356 at December 31, 2010
and September 30, 2010
    
    
    2,365
    
    
    
    2,365Series G, convertible, 10,100 shares designated;
shares issued and outstanding: 10,067 at December 31, 2010
and September 30, 2010
    
    
    26,877
    
    
    
    26,877Common stock, par value $0.01 per share; 100,000 shares
authorized; shares issued and outstanding: 10,626 at
December 31, 2010 and 9,816 at September 30, 2010
    
    
    106
    
    
    
    98Contingent common stock earn-out
    
    
    4,062
    
    
    
    6,452Additional paid-in capital
    
    
    44,126
    
    
    
    41,539Accumulated deficit
    
    
    (44,249
    )
    
    
    (44,129
    )Accumulated other comprehensive income
    
    
    1,185
    
    
    
    561Total shareholders equity
    
    
    49,298
    
    
    
    48,501Total liabilities and shareholders equity
    
    $
    68,481
    
    
    $
    71,376
 The accompanying notes are an integral part of the consolidated financial statements (unaudited).
 4




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##### Table of Contents



XATA Corporation
 
 Consolidated Statements of Changes in Shareholders Equity (Unaudited)
 AccumulatedSeries B
    
    
    Series C
    
    
    Series D
    
    
    Series F
    
    
    Series G
    
    
    
    
    
    
    
    
    
    
    Contingent
    
    
    Additional
    
    
    
    
    
    
    OtherPreferred Stock
    
    
    Preferred Stock
    
    
    Preferred Stock
    
    
    Preferred Stock
    
    
    Preferred Stock
    
    
    Common Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    Accumulated
    
    
    ComprehensiveIn thousands
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Earn-Out
    
    
    Capital
    
    
    Deficit
    
    
    Income
    
    
    TotalBalance at September 30, 2009
    
    
    2,004
    
    
    $
    4,790
    
    
    
    1,269
    
    
    $
    4,426
    
    
    
    1,567
    
    
    $
    5,279
    
    
    
    1,356
    
    
    $
    2,365
    
    
    
    
    
    
    $
    
    
    
    
    8,789
    
    
    $
    88
    
    
    $
    
    
    
    $
    32,536
    
    
    $
    (40,919
    )
    
    $
    
    
    
    $
    8,565Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,210
    
    
    
    
    
    
    
    
    
    
    
    1,210Issuance of common stock for share based
compensation awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    221
    
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    4Issuance of common stock for
acquisition of
Turnpike Global Technologies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    810
    
    
    
    8
    
    
    
    
    
    
    
    2,422
    
    
    
    
    
    
    
    
    
    
    
    2,430Forfeiture of restricted shares of
common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Contingent common stock earn-out
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,452
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,452Issuance of preferred stock and warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,067
    
    
    
    26,877
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,715
    
    
    
    
    
    
    
    
    
    
    
    30,592Record the beneficial conversion feature
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,654
    
    
    
    (1,654
    )
    
    
    
    
    
    
    Preferred stock dividends
    
    
    81
    
    
    
    206
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (208
    )
    
    
    
    
    
    
    (2
    )Preferred stock deemed dividends
    
    
    
    
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37
    )
    
    
    
    
    
    
    Comprehensive loss:Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    561
    
    
    
    561Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,311
    )
    
    
    
    
    
    
    (1,311
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (750
    )Balance at September 30, 2010
    
    
    2,085
    
    
    
    5,033
    
    
    
    1,269
    
    
    
    4,426
    
    
    
    1,567
    
    
    
    5,279
    
    
    
    1,356
    
    
    
    2,365
    
    
    
    10,067
    
    
    
    26,877
    
    
    
    9,816
    
    
    
    98
    
    
    
    6,452
    
    
    
    41,539
    
    
    
    (44,129
    )
    
    
    561
    
    
    
    48,501Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    205
    
    
    
    
    
    
    
    
    
    
    
    205Contingent common stock earn-out
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    810
    
    
    
    8
    
    
    
    (2,390
    )
    
    
    2,382
    
    
    
    
    
    
    
    
    
    
    
    Preferred stock dividends
    
    
    42
    
    
    
    106
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (53
    )
    
    
    
    
    
    
    53Preferred stock deemed dividends
    
    
    
    
    
    
    (18
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    Comprehensive income:Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    624
    
    
    
    624Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (85
    )
    
    
    
    
    
    
    (85
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    539Balance at December 31, 2010
    
    
    2,127
    
    
    $
    5,121
    
    
    
    1,269
    
    
    $
    4,426
    
    
    
    1,567
    
    
    $
    5,279
    
    
    
    1,356
    
    
    $
    2,365
    
    
    
    10,067
    
    
    $
    26,877
    
    
    
    10,626
    
    
    $
    106
    
    
    $
    4,062
    
    
    $
    44,126
    
    
    $
    (44,249
    )
    
    $
    1,185
    
    
    $
    49,298
 The accompanying notes are an integral part of the consolidated financial statements (unaudited).
 5




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##### Table of Contents



XATA Corporation
 
 Consolidated Statements of Cash Flows (Unaudited)
 For the Three Months Ended December 31,In thousands
    
    2010
    
    
    2009Operating activitiesNet loss
    
    $
    (85
    )
    
    $
    (1,648
    )Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:Depreciation and amortization of intangibles
    
    
    1,440
    
    
    
    935Amortization of debt financing costs
    
    
    
    
    
    
    458Non-cash interest expense on convertible debt
    
    
    
    
    
    
    313Non-cash charges for issuance of equity securities related to the
acquisition of Turnpike Global Technologies
    
    
    
    
    
    
    162Stock based compensation
    
    
    205
    
    
    
    287Changes in assets and liabilities, net of impact of acquisition:Accounts receivable, net
    
    
    4,932
    
    
    
    (1,941
    )Inventories
    
    
    (1,011
    )
    
    
    964Deferred product costs
    
    
    433
    
    
    
    80Prepaid expenses and other assets
    
    
    101
    
    
    
    418Accounts payable
    
    
    (1,728
    )
    
    
    (1,322
    )Accrued expenses
    
    
    (973
    )
    
    
    (1,366
    )Deferred revenue
    
    
    (1,807
    )
    
    
    (685
    )Net cash provided by (used in) operating activities
    
    
    1,507
    
    
    
    (3,345
    )Investing activitiesPurchase of equipment and leasehold improvements
    
    
    (553
    )
    
    
    (381
    )Acquisition of Turnpike Global Technologies, net of cash acquired
    
    
    
    
    
    
    (9,451
    )Net cash used in investing activities
    
    
    (553
    )
    
    
    (9,832
    )Financing activitiesBorrowings on long-term obligations, net of costs
    
    
    
    
    
    
    30,200Payments on long-term obligations
    
    
    (342
    )
    
    
    (8,636
    )Payments on financing costs
    
    
    
    
    
    
    (75
    )Net cash (used in) provided by financing activities
    
    
    (342
    )
    
    
    21,489Effects of exchange rate on cash
    
    
    44
    
    
    
    2Increase in cash and cash equivalents
    
    
    656
    
    
    
    8,314Cash and cash equivalentsBeginning
    
    
    13,374
    
    
    
    3,440Ending
    
    $
    14,030
    
    
    $
    11,754Supplemental disclosures of cash flow informationCash payments for interest
    
    $
    40
    
    
    $
    1,171Supplemental schedule of noncash investing and financing activitiesAssets acquired under capital lease obligation
    
    $
    679
    
    
    $
    10Preferred stock deemed dividends
    
    $
    (18
    )
    
    $
    14Preferred stock dividends
    
    $
    53
    
    
    $
    51Preferred stock dividends paid
    
    $
    106
    
    
    $
    102Issuance of shares for settlement of contingent earn-out
    
    $
    2,390
    
    
    $
    
 The accompanying notes are an integral part of the consolidated financial statements (unaudited).
 6




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##### Table of Contents



XATA Corporation
 
 Notes to consolidated financial statements (unaudited)
 (Dollars in thousands)
 Note 1. Significant Accounting Policies
 Presentation
   Principles of Consolidation
  Revenue Recognition
 Adoption of New Accounting Principles
 Revenue Recognition (Topic 605)
Multiple-Deliverable Revenue Arrangements Software (Topic 985)Certain Revenue Arrangements that Include Software Elements Software-Revenue Recognition,
 7




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##### Table of Contents



Revenue Recognition
     Software-Revenue Recognition
 Revenue Recognition for Arrangements with Multiple Deliverables
   8




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##### Table of Contents



Revenue Recognition for Software Products
  Other Revenue Recognition Policies Applicable to Software and Nonsoftware Elements
   9




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##### Table of Contents



Revenue Recognition  Principal Agent
Considerations
 Allowance for Doubtful Accounts
  Foreign Currency Translation
  Use of Estimates
  Cash and Cash Equivalents
  Fair Value of Financial Instruments
 Fair Value Measurements and Disclosures
 10




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##### Table of Contents



Level 1 
 Level 2 
 Level 3 
  Assets and Liabilities Measured at Fair Value
  Money market funds 
 Contingent earn out liability
 Balances as of September 30, 2010
    
    $
    181Payments of earn out
    
    
    (70
    )Balance as of December 31, 2010
    
    $
    111
 Inventories
  11




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##### Table of Contents



Equipment, Leased Equipment and Leasehold Improvements
  December 31,
    
    
    September 30,2010
    
    
    2010Office furniture and equipment
    
    $
    5,764
    
    
    $
    5,558Leased equipment
    
    
    3,605
    
    
    
    2,959Engineering and manufacturing equipment
    
    
    902
    
    
    
    919Leasehold improvements
    
    
    3,239
    
    
    
    2,45213,510
    
    
    
    11,888Less: accumulated depreciation
    
    
    (6,859
    )
    
    
    (6,090
    )Equipment and leasehold improvements, net
    
    $
    6,651
    
    
    $
    5,798
  Capitalized Software Development Costs
 Internal-Use Computer Software Marketed Costs
  Intangible Assets
  ForeignWeighted
    
    
    
    
    
    
    
    
    
    
    CurrencyAverage Life
    
    
    
    
    
    
    Accumulated
    
    
    Translation(years)
    
    
    Cost
    
    
    Amortization
    
    
    Adjustment
    
    
    NetAcquired customer
contracts
    
    
    7.8
    
    
    $
    14,900
    
    
    $
    (5,182
    )
    
    $
    81
    
    
    $
    9,799Acquired technology
    
    
    7.0
    
    
    
    2,700
    
    
    
    (430
    )
    
    
    159
    
    
    
    2,429Reseller relationships
    
    
    6.0
    
    
    
    1,500
    
    
    
    (279
    )
    
    
    86
    
    
    
    1,307Trademark
    
    
    10.0
    
    
    
    900
    
    
    
    (100
    )
    
    
    54
    
    
    
    854Other intangibles
    
    
    7.0
    
    
    
    49
    
    
    
    (21
    )
    
    
    
    
    
    
    28Total
    
    
    7.7
    
    
    $
    20,049
    
    
    $
    (6,012
    )
    
    $
    380
    
    
    $
    14,417
 12




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##### Table of Contents



Years ending September 30,2011
    
    $
    2,0362012
    
    
    2,7152013
    
    
    2,7152014
    
    
    2,7152015
    
    
    2,710Thereafter
    
    
    1,526Total expected amortization expense
    
    $
    14,417
 Long-Lived Assets
   Goodwill
  Balance at September 30, 2010
    
    $
    17,048Foreign currency translation adjustment
    
    
    477Balance at December 31, 2010
    
    $
    17,525
  Intangibles  Goodwill and Others,
  13




---



##### Table of Contents



Product Warranties
   Shipping Costs
  Advertising Costs
  Income taxes
 Income Taxes -
Overall
 Recently Issued Accounting Standards
 Performing Step 2 of the Goodwill Impairment Test: When to Perform Step 2 of
the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (Topic
350)Intangibles
Goodwill and Other
 14




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##### Table of Contents



Disclosure Requirements Related to Fair Value Measurements: Improving Disclosures about Fair Value Measurements (Topic
820) Fair Value Measurements and Disclosures
 Note 2. Revenue and Cost of Goods Sold Information
  For the Three Months EndedDecember 31,2010
    
    
    2009Revenue:Software
    
    $
    11,341
    
    
    $
    9,676Hardware systems
    
    
    1,733
    
    
    
    6,197Services
    
    
    904
    
    
    
    1,090Other
    
    
    
    
    
    
    560Total revenue
    
    $
    13,978
    
    
    $
    17,523
 For the Three Months EndedDecember 31,2010
    
    
    2009Cost of goods sold:Software
    
    $
    2,773
    
    
    $
    2,390Hardware systems
    
    
    2,041
    
    
    
    6,309Services
    
    
    865
    
    
    
    744Other
    
    
    (21
    )
    
    
    249Total cost of goods sold
    
    $
    5,658
    
    
    $
    9,692
  15




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##### Table of Contents



Note 3. Turnpike Global Technologies, Inc. and Turnpike Global Technologies LLC Acquisition
    Cash
    
    
    
    
    
    $
    10,000Stock (1)
    
    
    
    
    
    
    2,477Earn-Out (2)
    
    
    
    
    
    
    6,297Total purchase price
    
    
    
    
    
    $
    18,774Cash
    
    $
    548Accounts receivable, less allowances for doubtful accounts
    
    
    943Prepaid expenses
    
    
    348Equipment and leasehold improvements, net
    
    
    1,419Deferred tax asset
    
    
    328Accounts payable
    
    
    (609
    )Accrued expenses
    
    
    (510
    )Deferred tax liabilities
    
    
    (2,177
    )Capital lease obligations
    
    
    (1,681
    )Net liabilities
    
    
    
    
    
    
    (1,391
    )Acquired customer contracts and other intangible assets, net (3)
    
    
    
    
    
    
    6,500Goodwill
    
    
    
    
    
    
    13,665Total
    
    
    
    
    
    $
    18,774
 16




---



##### Table of Contents



(1)
    
    Stock amount calculated using the fair market value on the date of acquisition based on
the present value of the 833,333 shares of common stock at a stated value of $3.00.(2)
    
    Earn-out potential of an additional 833,333 shares of common stock after the end of
each of the 2010, 2011, and 2012 fiscal years. The amount was calculated using the
estimated fair market value on the date of acquisition based on stock price and estimated
probability of earn-out target achievements.(3)
    
    Intangible assets: Fair Value
    
    
    Est. Useful LifeAcquired customer contracts
    
    $
    1,400
    
    
    6 yearsAcquired technology
    
    
    2,700
    
    
    7 yearsReseller relationships
    
    
    1,500
    
    
    6 yearsTrademark
    
    
    900
    
    
    10 yearsTotal intangible assets
    
    $
    6,500
   Revenue
    
    $
    19,178Net loss to common shareholders
    
    $
    (3,222
    )Net loss per common share  basic and diluted
    
    $
    (0.34
    )Weighted average common and common share equivalents  basic and diluted
    
    
    9,479
 Note 4. Stock-Based Compensation
  Stock Options
 Compensation  Stock Compensation,
 17




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##### Table of Contents



Number of shares granted
    
    
    420Fair value per share
    
    $
    1.31Risk-free interest rate
    
    
    3.05
    %Expected volatility
    
    
    42.70
    %Expected life (in years)
    
    
    6.00Dividend yield
    
    
    
 Compensation  Stock Compensation  Overall,
  WeightedAverageExerciseShares
    
    
    PriceOptions outstanding at September 30, 2009
    
    
    1,905
    
    
    $
    3.73Granted
    
    
    503
    
    
    
    2.89Exercised
    
    
    (2
    )
    
    
    2.00Cancelled:Expired
    
    
    (25
    )
    
    
    5.23Forfeited
    
    
    (154
    )
    
    
    3.42Options outstanding at September 30, 2010
    
    
    2,227
    
    
    
    3.55Cancelled:Expired
    
    
    (27
    )
    
    
    3.09Forfeited
    
    
    (93
    )
    
    
    3.35Options outstanding at December 31, 2010
    
    
    2,107
    
    
    $
    3.59
   18




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##### Table of Contents



Options Outstanding
    
    
    Options ExercisableWeightedWeighted
    
    
    
    
    
    
    
    
    
    
    AverageAverage
    
    
    Weighted
    
    
    
    
    
    
    Remaining
    
    
    WeightedNumber
    
    
    Remaining
    
    
    Average
    
    
    Number
    
    
    Contractual
    
    
    AverageRange of
    
    of
    
    
    Contractual
    
    
    Exercise
    
    
    of
    
    
    Life
    
    
    Exerciseexercise price
    
    Shares
    
    
    Life (Years)
    
    
    Price
    
    
    Shares
    
    
    (Years)
    
    
    Price$2.00 - $2.99
    
    
    1,161
    
    
    
    8.2
    
    
    $
    2.48
    
    
    
    500
    
    
    
    8.0
    
    
    $
    2.523.00 - 3.99
    
    
    141
    
    
    
    8.1
    
    
    
    3.47
    
    
    
    113
    
    
    
    8.0
    
    
    
    3.514.33 - 4.98
    
    
    35
    
    
    
    5.6
    
    
    
    4.64
    
    
    
    35
    
    
    
    5.6
    
    
    
    4.645.03 - 5.40
    
    
    770
    
    
    
    5.9
    
    
    
    5.24
    
    
    
    770
    
    
    
    5.9
    
    
    
    5.242,107
    
    
    
    7.3
    
    
    
    3.59
    
    
    
    1,418
    
    
    
    6.8
    
    
    
    4.13
  Restricted Stock Awards
   WeightedAverageNumber of
    
    
    Grant DateShares
    
    
    Fair ValueRestricted stock outstanding at September 30, 2009
    
    
    156
    
    
    $
    3.93Granted
    
    
    18
    
    
    
    3.06Vested
    
    
    (92
    )
    
    
    3.75Forfeited
    
    
    (4
    )
    
    
    3.21Restricted stock outstanding at September 30, 2010
    
    
    78
    
    
    
    3.96Vested
    
    
    (26
    )
    
    
    4.05Restricted stock outstanding at December 31, 2010
    
    
    52
    
    
    $
    3.92
  19




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##### Table of Contents



Restricted Stock Units
   WeightedAverageNumber of
    
    
    Grant DateShares
    
    
    Fair ValueRestricted stock outstanding at September 30, 2009
    
    
    241
    
    
    
    2.00Granted
    
    
    174
    
    
    
    2.87Settled
    
    
    (201
    )
    
    
    2.20Cancelled:Forfeited
    
    
    (29
    )
    
    
    2.31Restricted stock outstanding at September 30, 2010
    
    
    185
    
    
    $
    2.55Cancelled:Forfeited
    
    
    (17
    )
    
    
    2.44Restricted stock outstanding at December 31, 2010
    
    
    168
    
    
    $
    2.56
    Note 5. Commitments
 Leases
  20




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##### Table of Contents



Years ending September 30,2011
    
    $
    5492012
    
    
    5692013
    
    
    5412014
    
    
    5512015
    
    
    147Thereafter
    
    
    Total
    
    $
    2,357
  401(k) Plan
  Purchase Commitments
  Note 6. Financing Arrangements
  December 31,
    
    
    September 30,2010
    
    
    2010Capitalized leases
    
    $
    1,550
    
    
    $
    1,143Contingent earn out
    
    
    111
    
    
    $
    181Total debt obligations
    
    
    1,661
    
    
    
    1,324Less current portion of debt obligations
    
    
    973
    
    
    
    839Total debt obligations, net of current portion
    
    $
    688
    
    
    $
    485
  21




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##### Table of Contents



Note 7. Shareholders Equity
 Common Stock
   Preferred Stock
  Series B
  22




---



##### Table of Contents



Series C
  Series D
  Series E and Series F
  Series G
    23




---



##### Table of Contents



Common Stock Warrants
    Weighted
    
    
    WeightedAverage
    
    
    AverageNumber of
    
    
    Exercise
    
    
    RemainingWarrants
    
    
    Price
    
    
    Life (years)Warrants outstanding at September 30, 2009
    
    
    1,941
    
    
    $
    3.34
    
    
    
    4.0Granted
    
    
    3,020Cancelled
    
    
    (10
    )Warrants outstanding at September 30, 2010
    
    
    4,951
    
    
    
    3.13
    
    
    
    5.1Cancelled
    
    
    (147
    )Warrants outstanding at December 31, 2010
    
    
    4,804
    
    
    $
    3.14
    
    
    
    5.0
 Note 8. Net Loss Per Common Share
   24




---



##### Table of Contents



Note 9. Legal Proceedings
  25




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-looking Statements
  
    
    as we have generated operating losses recently, additional 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 hardware systems and
communication networks owned and controlled by others, and
accordingly, their problems may adversely impact us;
    
    for the foreseeable future, we are dependent upon the continued
receipt and fulfillment of new orders for our current products;
    
    our growth and profitability depend on our timely introduction and
market acceptance of new products, our ability to continue to fund
research and development activities, and our ability to establish and
maintain strategic partner relationships.
  Overview
     26




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##### Table of Contents



Technology, People, Processes
  
    
    Technology.XATA provides a total fleet management solution, including software,
hardware systems and services through the following solutions:
 
    
    XATANET, our web-based, on-demand scalable software, includes a variety
of web-based enterprise applications. XATANET provides critical real-time
information about our customers fleets, allows for paperless driver logs and
provides summary and granular reports on driver and vehicle performance. XATANET
can also integrate with back-office applications, for a seamless flow of
information, and our software works with a variety of in-cab communications devices.
    
    MobileMax helps for-hire trucking companies track and manage nearly every
aspect of their fleets activities to help control costs and increase ROI. The
MobileMax solution features Multi-Mode communication capabilities that automatically
switch between land-based and satellite communications to take advantage of the
cost-savings and reliability of both terrestrial and satellite communication.
MobileMax integrates with dispatching and routing applications for a seamless flow
of information.
    
    Turnpike has been recognized as one of the first solutions to fully
automate, from end-to-end, the fuel and mileage tax process required by the
International Fuel Tax Agreement (IFTA). Turnpike interacts with various handheld
devices using Bluetooth as a wireless in-cab communication medium. The information
collected by Turnpike is made available to the end-user via web-based reporting.
 
    
    People.With employee expertise in safety, fleet management and technology, XATA is
able to provide consultation services to help organizations implement best practices for
fleet productivity and develop specific customer solutions and reporting requirements.
    
    Processes.All XATA processes are designed to make managing fleets easier. Drawing on
hundreds of successful implementations with a wide variety of fleets from
multibillion-dollar organizations to small, single owner operations, XATA carefully plans
each phase of the implementation and follows well established methodologies. The process
begins with assessing our customers objectives. Then, we develop a detailed
implementation schedule that includes all aspects of the project, from implementation to
conversion, integration, training and problem solving.
 Critical Accounting Policies
  27




---



##### Table of Contents




    
    Revenue Recognition
    
    Allowance for Doubtful Accounts
    
    Goodwill and Intangible Assets  Impairment Assessments
    
    Product Warranties
    
    Accounting for Income Taxes
  Revenue Recognition (Topic 605) Multiple-Deliverable
Revenue Arrangements Software (Topic
985)Certain Revenue Arrangements that Include Software Elements Software-Revenue Recognition,
 Revenue Recognition
    28




---



##### Table of Contents



Software-Revenue Recognition
 Revenue Recognition for Arrangements with Multiple Deliverables
    29




---



##### Table of Contents



Revenue Recognition for Software Products
  Revenue Recognition for Revenue Recognized under Partnership Agreements
  Other Revenue Recognition Policies Applicable to Software and Nonsoftware Elements
   30




---



##### Table of Contents



Results of Operations for the Three Months Ended December 31, 2010 and 2009
  For the Three MonthsEnded December 31,2010
    
    
    2009SoftwareRevenue
    
    $
    11,341
    
    
    $
    9,676Cost of goods sold
    
    
    2,773
    
    
    
    2,390Gross margin
    
    $
    8,568
    
    
    $
    7,286Gross margin %
    
    
    75.5
    %
    
    
    75.3
    %Hardware systemsRevenue
    
    $
    1,733
    
    
    $
    6,197Cost of goods sold
    
    
    2,041
    
    
    
    6,309Gross deficit
    
    $
    (308
    )
    
    $
    (112
    )Gross deficit %
    
    
    (17.8
    %)
    
    
    (1.8
    %)ServicesRevenue
    
    $
    904
    
    
    $
    1,090Cost of goods sold
    
    
    865
    
    
    
    744Gross margin
    
    $
    39
    
    
    $
    346Gross margin %
    
    
    0.0
    %
    
    
    31.7
    %OtherRevenue
    
    $
    
    
    
    $
    560Cost of goods sold
    
    
    (21
    )
    
    
    249Gross margin
    
    $
    21
    
    
    $
    311Gross margin %
    
    
    0.0
    %
    
    
    55.5
    %TotalRevenue
    
    $
    13,978
    
    
    $
    17,523Cost of goods sold
    
    
    5,658
    
    
    
    9,692Gross margin
    
    $
    8,320
    
    
    $
    7,831Gross margin %
    
    
    59.5
    %
    
    
    44.7
    %
 Revenue
   31




---



##### Table of Contents



Cost of Goods Sold and Gross Margin
 Cost of software
 Cost of hardware systems
 Cost of services
 Selling, General and Administrative Expenses
  Research & Development Expenses
  32




---



##### Table of Contents



Acquisition Related Costs
 Business Combinations
 Interest Expense on Financing Activities
  Acquisition Related Interest and Mark to Market Expense
  Net Interest and Other Expense
  Income Taxes
 Income Tax
 Net Loss to Common Shareholders
  Liquidity and Capital Resources
  33




---



##### Table of Contents



Recently Issued Accounting Standards
  
 Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures and Internal Control over Financial Reporting
   34




---



##### 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. Reserved
 
 Item 5. Other Information.
 Submission of Matters to a Vote of Security Holders
   1.
    
    Nine (9) directors (including Donald R. Dixon, who was elected by the holders
of the Series B Preferred Stock, voting separately by ballot as a class) were elected
to serve for a one-year term expiring when their successors are elected and qualified
at the annual meeting in 2012.
 For
    
    
    WithheldJohn J. Coughlan
    
    
    21,477,649
    
    
    
    257,873Thomas G. Hudson
    
    
    21,479,759
    
    
    
    255,763Roger W. Kleppe
    
    
    21,479,759
    
    
    
    255,763Chad M. Lindbloom
    
    
    21,406,999
    
    
    
    328,523Christopher P. Marshall
    
    
    21,232,859
    
    
    
    502,663Michael J. Paxton
    
    
    21,478,659
    
    
    
    256,863Bharat S. Vedak
    
    
    21,471,559
    
    
    
    263,963Karen T. Beckwith
    
    
    21,478,659
    
    
    
    256,863Donald R. Dixon
    
    
    2,126,362
    
    
    
    -0-
 2.
    
    Approval of the resolution related to the Companys Executive Officer
Compensation Plan.
 For: 21,479,745    Against: 253,170    Withheld: 2,607    Broker Non-Vote:
-0-
 3.
    
    Approval of the frequency of required approval of the Companys Executive
Officer Compensation Plan.
 1 Year: 733,330    2 Years: 20,971,526
   3 Years: 11,325    Withheld: 19,341    Broker Non-Vote: -0-
 
 Item 6. Exhibits.
 31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
 35




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Dated:  February 4, 2011
    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) 36