##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended June 30, 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)
 
  
 þ o
 o o
 o þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o(Do not check if a smaller reporting
company)
    
    Smaller reporting company þ




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##### 



Index
 Page No.PART I. FINANCIAL INFORMATIONItem 1. Consolidated Financial Statements:Consolidated Statements of Operations for the Three and Nine Months Ended June
30, 2009 and 2008
    
    
    3Consolidated Balance Sheets as of June 30, 2009
and September 30, 2008
    
    
    4Consolidated Statements of Changes in Shareholders Equity for the Nine Months
Ended June 30, 2009 and the Twelve Months Ended September 30, 2008
    
    
    5Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 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
    
    
    34Item 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
   For the Three Months Ended
    
    
    For the Nine Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenue
    
    $
    17,589
    
    
    $
    16,167
    
    
    $
    49,127
    
    
    $
    35,983Costs and expensesCost of goods sold
    
    
    10,085
    
    
    
    9,016
    
    
    
    26,943
    
    
    
    19,930Selling, general and administrative
    
    
    5,712
    
    
    
    6,064
    
    
    
    17,364
    
    
    
    15,057Research and development
    
    
    1,407
    
    
    
    1,279
    
    
    
    4,218
    
    
    
    3,393Total costs and expenses
    
    
    17,204
    
    
    
    16,359
    
    
    
    48,525
    
    
    
    38,380Operating income (loss)
    
    
    385
    
    
    
    (192
    )
    
    
    602
    
    
    
    (2,397
    )Interest income
    
    
    24
    
    
    
    86
    
    
    
    96
    
    
    
    327Interest expense
    
    
    (375
    )
    
    
    (531
    )
    
    
    (1,244
    )
    
    
    (918
    )Income (loss) before income taxes
    
    
    34
    
    
    
    (637
    )
    
    
    (546
    )
    
    
    (2,988
    )Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    
    34
    
    
    
    (637
    )
    
    
    (546
    )
    
    
    (2,988
    )Preferred stock dividends
    
    
    (50
    )
    
    
    (49
    )
    
    
    (149
    )
    
    
    (143
    )Preferred stock deemed dividends
    
    
    (46
    )
    
    
    (26
    )
    
    
    (525
    )
    
    
    (69
    )Net loss to common shareholders
    
    $
    (62
    )
    
    $
    (712
    )
    
    $
    (1,220
    )
    
    $
    (3,200
    )Net loss per common share  basic and diluted
    
    $
    (0.01
    )
    
    $
    (0.08
    )
    
    $
    (0.14
    )
    
    $
    (0.39
    )Weighted average common and
common share equivalentsBasic and diluted
    
    
    8,588
    
    
    
    8,411
    
    
    
    8,530
    
    
    
    8,293
  3




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##### Table of Contents



XATA CORPORATION
 
 CONSOLIDATED BALANCE SHEETS
  June 30,
    
    
    September 30,2009
    
    
    2008(Unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    $
    3,641
    
    
    $
    8,904Accounts receivable, less allowances
of $469 and $333
    
    
    9,075
    
    
    
    11,365Inventories
    
    
    4,226
    
    
    
    2,735Deferred product costs
    
    
    2,033
    
    
    
    1,474Current portion of investment in sales-type leases
    
    
    423
    
    
    
    768Prepaid expenses and other current assets
    
    
    599
    
    
    
    691Total current assets
    
    
    19,997
    
    
    
    25,937Equipment and leasehold improvements, net
    
    
    3,837
    
    
    
    3,925Intangible assets, net
    
    
    11,149
    
    
    
    12,420Goodwill
    
    
    3,011
    
    
    
    3,011Deferred product costs, net of current portion
    
    
    2,665
    
    
    
    2,685Investment in sales-type leases, net of current portion
    
    
    57
    
    
    
    310Debt financing costs, net
    
    
    520
    
    
    
    708Total assets
    
    $
    41,236
    
    
    $
    48,996LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term obligations
    
    $
    95
    
    
    $
    1,845Accounts payable
    
    
    5,227
    
    
    
    4,394Accrued expenses
    
    
    4,639
    
    
    
    6,574Deferred revenue
    
    
    5,283
    
    
    
    4,996Total current liabilities
    
    
    15,244
    
    
    
    17,809Long-term obligations, net of current portion
    
    
    8,546
    
    
    
    16,342Deferred revenue, net of current portion
    
    
    6,830
    
    
    
    7,848Other long-term liabilities
    
    
    862
    
    
    
    805Total liabilities
    
    
    31,482
    
    
    
    42,804Shareholders equityPreferred stock, no par, 10,000 shares authorized:Series B, 4% convertible, 2,250 shares designated;
shares issued and outstanding: 2,004 at June 30, 2009
and 1,926 at September 30, 2008
    
    
    4,790
    
    
    
    5,181Series C, convertible, 1,400 shares designated;
1,269 shares issued and outstanding at June 30, 2009
and September 30, 2008
    
    
    4,426
    
    
    
    4,845Series D, convertible, 1,600 shares designated;
1,567 shares issued and outstanding at June 30, 2009
and September 30, 2008
    
    
    5,279
    
    
    
    5,937Series F, convertible, 1,400 shares designated;
1,356 shares issued and outstanding at June 30, 2009
    
    
    2,365
    
    
    
    Common stock, par value $0.01 per share; 25,000 shares
authorized; shares issued and outstanding: 8,790 at June 30, 2009
and 8,745 at September 30, 2008
    
    
    88
    
    
    
    87Additional paid-in capital
    
    
    32,118
    
    
    
    28,234Accumulated deficit
    
    
    (39,312
    )
    
    
    (38,092
    )Total shareholders equity
    
    
    9,754
    
    
    
    6,192Total liabilities and shareholders equity
    
    $
    41,236
    
    
    $
    48,996
  4




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##### Table of Contents



XATA CORPORATION
 
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
   Series B
    
    
    Series C
    
    
    Series D
    
    
    Series F
    
    
    
    
    
    
    
    
    
    
    AdditionalPreferred Stock
    
    
    Preferred Stock
    
    
    Preferred Stock
    
    
    Preferred Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    TotalBalance at September 30, 2007
    
    
    1,851
    
    
    $
    4,921
    
    
    
    1,269
    
    
    $
    4,845
    
    
    
    1,567
    
    
    $
    5,937
    
    
    
    
    
    
    $
    
    
    
    
    8,516
    
    
    $
    85
    
    
    $
    25,760
    
    
    $
    (34,470
    )
    
    $
    7,078Common stock issued on exercise of options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    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
    
    
    1,926
    
    
    
    5,181
    
    
    
    1,269
    
    
    
    4,845
    
    
    
    1,567
    
    
    
    5,937
    
    
    
    
    
    
    
    
    
    
    
    8,745
    
    
    
    87
    
    
    
    28,234
    
    
    
    (38,092
    )
    
    
    6,192Issuance of restricted shares of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,195
    
    
    
    
    
    
    
    1,195Forfeiture of restricted shares of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of preferred stock and warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,356
    
    
    
    2,365
    
    
    
    
    
    
    
    
    
    
    
    500
    
    
    
    
    
    
    
    2,865Record the beneficial conversion feature
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (484
    )
    
    
    
    
    
    
    
    
    
    
    484
    
    
    
    
    
    
    
    Preferred stock dividends
    
    
    78
    
    
    
    197
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (149
    )
    
    
    48Preferred stock deemed dividends
    
    
    
    
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    484
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (525
    )
    
    
    Adjustment to reflect value of beneficial conversion feature
    
    
    
    
    
    
    (629
    )
    
    
    
    
    
    
    (419
    )
    
    
    
    
    
    
    (658
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,706
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (546
    )
    
    
    (546
    )Balance at June 30, 2009
    
    
    2,004
    
    
    $
    4,790
    
    
    
    1,269
    
    
    $
    4,426
    
    
    
    1,567
    
    
    $
    5,279
    
    
    
    1,356
    
    
    $
    2,365
    
    
    
    8,790
    
    
    $
    88
    
    
    $
    32,118
    
    
    $
    (39,312
    )
    
    $
    9,754
  5




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##### Table of Contents



XATA CORPORATION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
   For the Nine Months EndedJune 30,2009
    
    
    2008Operating activitiesNet loss
    
    $
    (546
    )
    
    $
    (2,988
    )Adjustments
to reconcile net loss to net cash provided by operating activities:Depreciation and amortization
    
    
    2,250
    
    
    
    1,701Amortization of debt financing costs
    
    
    188
    
    
    
    104Stock based compensation
    
    
    1,195
    
    
    
    1,238Changes in assets and liabilities, net of impact of acquisition:Accounts receivable, net
    
    
    2,290
    
    
    
    (2,711
    )Inventories
    
    
    (1,491
    )
    
    
    2,101Deferred product costs
    
    
    (539
    )
    
    
    (1,044
    )Prepaid expenses and other assets
    
    
    92
    
    
    
    (618
    )Lease equipment receivable
    
    
    598
    
    
    
    429Accounts payable
    
    
    833
    
    
    
    (1,205
    )Accrued expenses
    
    
    (1,830
    )
    
    
    (913
    )Deferred revenue
    
    
    (731
    )
    
    
    1,741Net cash provided by (used in) operating activities
    
    
    2,309
    
    
    
    (2,165
    )Investing activitiesPurchase of equipment and leasehold improvements
    
    
    (892
    )
    
    
    (2,757
    )Purchase of GeoLogic Solutions, Inc., net of cash acquired
    
    
    
    
    
    
    (16,277
    )Net cash used in investing activities
    
    
    (892
    )
    
    
    (19,034
    )Financing activitiesBorrowings on long-term obligations
    
    
    18,077
    
    
    
    16,224Payments on long-term obligations
    
    
    (27,622
    )
    
    
    (128
    )Payments on financing costs
    
    
    
    
    
    
    (339
    )Proceeds from issuance of preferred stock and warrants
    
    
    2,865
    
    
    
    Proceeds from options and warrants exercised
    
    
    
    
    
    
    51Net cash (used in) provided by financing activities
    
    
    (6,680
    )
    
    
    15,808Decrease in cash and cash equivalents
    
    
    (5,263
    )
    
    
    (5,391
    )Cash and cash equivalentsBeginning
    
    
    8,904
    
    
    
    13,675Ending
    
    $
    3,641
    
    
    $
    8,284Supplemental disclosures of cash flow informationCash payments for interest
    
    $
    883
    
    
    $
    627Supplemental schedule of noncash investing and financing activitiesPreferred stock deemed dividends
    
    $
    525
    
    
    $
    69Preferred stock dividends payable
    
    $
    17
    
    
    $
    16Preferred stock dividends paid
    
    $
    197
    
    
    $
    191Issuance 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




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##### Table of Contents



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




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##### Table of Contents



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




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##### Table of Contents



As Previously
    
    
    
    
    
    As CurrentlyReported
    
    Reclassification
    
    ReportedFor the three months ended June 30, 2008:Cost of goods sold
    
    $
    8,542
    
    
    $
    474
    
    
    $
    9,016Selling, general and administrative expenses
    
    
    6,218
    
    
    
    (154
    )
    
    
    6,064Research and development expenses
    
    
    1,599
    
    
    
    (320
    )
    
    
    1,279For the nine months ended June 30, 2008:Cost of goods sold
    
    $
    18,609
    
    
    $
    1,321
    
    
    $
    19,930Selling, general and administrative expenses
    
    
    15,693
    
    
    
    (636
    )
    
    
    15,057Research and development expenses
    
    
    4,078
    
    
    
    (685
    )
    
    
    3,393
  Cash and Cash Equivalents
  Fair Value of Financial Instruments
 Fair Value Hierarchy
 Fair Value Measurement,
 Level 1 
 Level 2 
 Level 3 
   9




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##### Table of Contents



Inventories
  Investment in Sales-Type Leases
  Years ending September 30,2009
    
    $
    1792010
    
    
    2962011
    
    
    42Total minimum lease payments
    
    
    517Less: amount representing interest (at 11.71%)
    
    
    (37
    )Present value of net minimum sales-type lease payments
    
    
    480Less: current portion of investment in sales-type leases
    
    
    (423
    )Investment in sales-type leases, excluding current portion
    
    $
    57
  Debt Financing Costs
  Equipment and Leasehold Improvements
   10




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##### Table of Contents



June 30,
    
    
    September 30,2009
    
    
    2008Office furniture and equipment
    
    $
    4,809
    
    
    $
    4,003Engineering and manufacturing equipment
    
    
    900
    
    
    
    831Leasehold improvements
    
    
    2,462
    
    
    
    2,4738,171
    
    
    
    7,307Less: accumulated depreciation
    
    
    (4,334
    )
    
    
    (3,382
    )Equipment and leasehold improvements, net
    
    $
    3,837
    
    
    $
    3,925
  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,
 11




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##### Table of Contents



Accounting for the Impairment or Disposal of Long-Lived Assets
  Weighted Average
    
    
    
    
    
    
    AccumulatedLife (years)
    
    
    Cost
    
    
    Amortization
    
    
    NetAcquired customer contracts
    
    
    8
    
    
    $
    13,500
    
    
    $
    (2,390
    )
    
    $
    11,110Other intangibles
    
    
    7
    
    
    
    49
    
    
    
    (10
    )
    
    
    39Total
    
    
    8
    
    
    $
    13,549
    
    
    $
    (2,400
    )
    
    $
    11,149
  Years Ending September 30,2009
    
    $
    4242010
    
    
    1,6952011
    
    
    1,6952012
    
    
    1,6952013
    
    
    1,695Thereafter
    
    
    3,945Total expected amortization expense
    
    $
    11,149
 Product Warranties
   12




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##### Table of Contents



Shipping Costs
  Advertising Costs
  Income taxes
 Accounting for
Income Taxes
 Recently Issued Accounting Standards
 Fair Value Measurements (SFAS 157)
 Fair Value Measurements Effective Date of FASB
No. 157,
 Business Combinations  Revised (SFAS 141R)
 Business Combinations
 13




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##### Table of Contents



The Hierarchy of Generally Accepted Accounting Principles (SFAS 162)
 The Hierarchy of Generally Accepted Accounting
Principles
 The FASB Accounting Standards Codification TM and the Hierarchy of Generally Accepted
Accounting Principlesa replacement of FASB Statement No. 162 (SFAS 168)
 The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principlesa replacement of FASB Statement No. 162
 Subsequent Events (SFAS 165)
  Note 2. Revenue and Cost of Goods Sold Information
  Three months ended
    
    
    Nine months endedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenue:Software
    
    $
    8,976
    
    
    $
    7,328
    
    
    $
    25,441
    
    
    $
    16,089Systems
    
    
    6,804
    
    
    
    7,637
    
    
    
    19,215
    
    
    
    16,985Services
    
    
    1,809
    
    
    
    1,202
    
    
    
    4,471
    
    
    
    2,909Total revenue
    
    $
    17,589
    
    
    $
    16,167
    
    
    $
    49,127
    
    
    $
    35,983
 Three months ended
    
    
    Nine months endedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Cost of goods sold:Software
    
    $
    2,495
    
    
    $
    2,272
    
    
    $
    7,258
    
    
    $
    4,982Systems
    
    
    6,470
    
    
    
    5,925
    
    
    
    16,725
    
    
    
    12,757Services
    
    
    1,120
    
    
    
    819
    
    
    
    2,960
    
    
    
    2,191Total cost of goods sold
    
    $
    10,085
    
    
    $
    9,016
    
    
    $
    26,943
    
    
    $
    19,930
 14




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##### Table of Contents



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




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##### Table of Contents



For the Nine MonthsEnded June 30, 2008Net sales
    
    $
    42,936Net loss to common shareholders
    
    $
    (6,977
    )Net loss per common share  basic and diluted
    
    $
    (0.84
    )Weighted
average common and common share equivalents  basic and diluted
    
    
    8,293
  Note 4. Stock-Based Compensation
  Stock Options
 Share-Based Payment,
  16




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##### Table of Contents



For the Three Months Ended
    
    For the Nine Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Number of shares granted
    
    
    
    
    
    
    27
    
    
    
    725
    
    
    
    323Fair value
    
    
    
    
    
    $
    0.87
    
    
    $
    0.86
    
    
    $
    0.81Risk-free interest rate
    
    
    
    
    
    
    2.47
    %
    
    
    2.28
    %
    
    
    2.24
    %Expected volatility
    
    
    
    
    
    
    29.88
    %
    
    
    40.26
    %
    
    
    30.88
    %Expected life (in years)
    
    
    
    
    
    
    3.50
    
    
    
    5.73
    
    
    
    3.70Dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
   WeightedAverageShares
    
    Exercise PriceOptions outstanding at September 30, 2007
    
    
    1,232
    
    
    $
    5.01Granted
    
    
    323
    
    
    
    3.05Exercised
    
    
    (15
    )
    
    
    2.98Cancelled
    
    
    (301
    )
    
    
    4.43Options outstanding at September 30, 2008
    
    
    1,239
    
    
    
    4.66Granted
    
    
    725
    
    
    
    2.17Cancelled
    
    
    (58
    )
    
    
    4.17Options outstanding at June 30, 2009
    
    
    1,906
    
    
    
    3.73
   17




---



##### Table of Contents



Options Outstanding
    
    Options ExercisableWeighted
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    Weighted
    
    
    
    
    
    Average
    
    WeightedRemaining
    
    Average
    
    
    
    
    
    Remaining
    
    AverageRange of
    
    Number
    
    Contractual
    
    Exercise
    
    Number
    
    Contractual
    
    Exerciseexercise price
    
    of Shares
    
    Life (Years)
    
    Price
    
    of Shares
    
    Life (Years)
    
    Price$2.00  $2.99
    
    
    887
    
    
    
    9.3
    
    
    $
    2.25
    
    
    
    123
    
    
    
    8.9
    
    
    $
    2.75$3.15  $3.99
    
    
    124
    
    
    
    8.9
    
    
    
    3.63
    
    
    
    23
    
    
    
    8.6
    
    
    
    3.47$4.33  $4.98
    
    
    38
    
    
    
    7.2
    
    
    
    4.62
    
    
    
    33
    
    
    
    7.1
    
    
    
    4.66$5.03  $5.40
    
    
    857
    
    
    
    7.2
    
    
    
    5.23
    
    
    
    684
    
    
    
    7.2
    
    
    
    5.241,906
    
    
    
    8.3
    
    
    
    3.73
    
    
    
    863
    
    
    
    7.4
    
    
    
    4.81
  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
    
    
    (148
    )
    
    
    4.33Cancelled
    
    
    (3
    )
    
    
    2.99Restricted stock outstanding at June 30, 2009
    
    
    182
    
    
    
    4.12
  18




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##### Table of Contents



Restricted Stock Units
   WeightedNumber of
    
    Average GrantShares
    
    Date Fair ValueRestricted stock outstanding at September 30, 2008
    
    
    
    
    
    
    Granted
    
    
    241
    
    
    $
    2.00Restricted stock outstanding at June 30, 2009
    
    
    241
    
    
    
    2.00
  Note 5. Commitments
 Leases
   19




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##### Table of Contents



Years ending September 30,2009
    
    $
    2702010
    
    
    1,0842011
    
    
    7482012
    
    
    5272013
    
    
    540Thereafter
    
    
    698Total
    
    $
    3,867
  401(k) Plan
  Note 6. Financing Arrangements
      20




---



##### Table of Contents



June 30, 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
    
    
    141
    
    
    
    214Total long-term obligations
    
    
    8,641
    
    
    
    18,187Less current portion of long-term obligations
    
    
    95
    
    
    
    1,845Total long-term obligations, net of current portion
    
    $
    8,546
    
    
    $
    16,342
 Note 7. Shareholders Equity
 Common Stock
  Preferred Stock
  Series B
    21




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##### Table of Contents



Series C
  Series D
  Series E and Series F
  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 June 30, 2009
    
    
    1,951
    
    
    
    3.35
    
    
    
    4.3
 23




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##### Table of Contents



Note 8. Net Loss Per Common Share
   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




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##### Table of Contents



Application of AICPA Statement of Position 97-2 to Arrangements That Include the Right to Use
Software Stored on Another Entitys Hardware
 Allowance for doubtful accounts.
 Goodwill. Goodwill and Other Intangible Assets,
  27




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##### 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




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##### Table of Contents



Results of Operations for the three and nine months ended June 30, 2009 and 2008
  Three months ended June 30,
    
    
    Nine months ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008SoftwareRevenue
    
    $
    8,976
    
    
    $
    7,328
    
    
    $
    25,441
    
    
    $
    16,089Cost of goods sold
    
    
    2,495
    
    
    
    2,272
    
    
    
    7,258
    
    
    
    4,982Gross margin
    
    $
    6,481
    
    
    $
    5,056
    
    
    $
    18,183
    
    
    $
    11,107Gross margin %
    
    
    72.2
    %
    
    
    69.0
    %
    
    
    71.5
    %
    
    
    69.0
    %SystemsRevenue
    
    $
    6,804
    
    
    $
    7,637
    
    
    $
    19,215
    
    
    $
    16,985Cost of goods sold
    
    
    6,470
    
    
    
    5,925
    
    
    
    16,725
    
    
    
    12,757Gross margin
    
    $
    334
    
    
    $
    1,712
    
    
    $
    2,490
    
    
    $
    4,228Gross margin %
    
    
    4.9
    %
    
    
    22.4
    %
    
    
    13.0
    %
    
    
    24.9
    %ServicesRevenue
    
    $
    1,809
    
    
    $
    1,202
    
    
    $
    4,471
    
    
    $
    2,909Cost of goods sold
    
    
    1,120
    
    
    
    819
    
    
    
    2,960
    
    
    
    2,191Gross margin
    
    $
    689
    
    
    $
    383
    
    
    $
    1,511
    
    
    $
    718Gross margin %
    
    
    38.1
    %
    
    
    31.9
    %
    
    
    33.8
    %
    
    
    24.7
    %TotalRevenue
    
    $
    17,589
    
    
    $
    16,167
    
    
    $
    49,127
    
    
    $
    35,983Cost of goods sold
    
    
    10,085
    
    
    
    9,016
    
    
    
    26,943
    
    
    
    19,930Gross margin
    
    $
    7,504
    
    
    $
    7,151
    
    
    $
    22,184
    
    
    $
    16,053Gross margin %
    
    
    42.7
    %
    
    
    44.2
    %
    
    
    45.2
    %
    
    
    44.6
    %
 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




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##### 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




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##### Table of Contents



Liquidity and Capital Resources
           32




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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.
    
    Approval of Articles of Amendment of Second Restated Articles of Incorporation.
  
 Item 5. Other Information.
  34




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##### Table of Contents



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).10.1
    
    Severance Agreement between XATA Corporation and David Gagne dated May 7, 2009
(incorporated by reference to Exhibit 10.1 of the Companys Current Report on Form 8-K
filed with the SEC on May 11, 2009).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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##### Table of Contents



Dated:  August 5, 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) 36