##### 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, 2011 or
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission File Number: 0-27166
 Xata Corporation
  Minnesota
    
    41-1641815(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification Number)
 
  (952) 707-5600
 
  þ o
 o o
 o þ
  Large accelerated filer 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 (Unaudited):Consolidated Statements of Operations for the Three and Six Months Ended March 31, 2011 and 2010
    
    
    3Consolidated Balance Sheets as of March 31, 2011
and September 30, 2010
    
    
    4Consolidated Statements of Changes in Shareholders Equity for the Six months ended March 31,
2011 and the Twelve Months Ended September 30, 2010
    
    
    5Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2011 and 2010
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis
of Financial Condition and Results of Operation
    
    
    25Item 4.
    
    Controls and Procedures
    
    
    31PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    33Item 1A.
    
    Risk Factors
    
    
    33Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    33Item 3.
    
    Defaults upon Senior Securities
    
    
    33Item 4.
    
    Reserved
    
    
    33Item 5.
    
    Other Information
    
    
    33Item 6.
    
    Exhibits
    
    
    33SIGNATURES
    
    
    34EXHIBITSEX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



Xata Corporation
 Consolidated Statements of Operations (Unaudited)
 For the Three Months Ended
    
    
    For the Six Months Ended MarchMarch 31,
    
    
    31,In thousands, except per-share data
    
    2011
    
    
    2010
    
    
    2011
    
    
    2010Revenue
    
    $
    16,741
    
    
    $
    18,104
    
    
    $
    30,719
    
    
    $
    35,628Cost of goods sold
    
    
    8,643
    
    
    
    9,065
    
    
    
    14,301
    
    
    
    18,757Selling, general and administrative
    
    
    6,664
    
    
    
    6,925
    
    
    
    12,777
    
    
    
    13,075Research and development
    
    
    2,248
    
    
    
    1,599
    
    
    
    4,472
    
    
    
    2,933Acquisition related costs
    
    
    
    
    
    
    58
    
    
    
    
    
    
    
    837Total costs and expenses
    
    
    17,555
    
    
    
    17,647
    
    
    
    31,550
    
    
    
    35,602Operating (loss) income
    
    
    (814
    )
    
    
    457
    
    
    
    (831
    )
    
    
    26Net interest and other expense
    
    
    (95
    )
    
    
    (88
    )
    
    
    (178
    )
    
    
    (364
    )Interest expense on financing activities
    
    
    
    
    
    
    (579
    )
    
    
    
    
    
    
    (1,358
    )Acquisition related interest and mark to market
    
    
    
    
    
    
    (192
    )
    
    
    
    
    
    
    (354
    )Loss before income taxes
    
    
    (909
    )
    
    
    (402
    )
    
    
    (1,009
    )
    
    
    (2,050
    )Income tax benefit
    
    
    (182
    )
    
    
    
    
    
    
    (197
    )
    
    
    Net loss
    
    
    (727
    )
    
    
    (402
    )
    
    
    (812
    )
    
    
    (2,050
    )Preferred stock dividends
    
    
    (54
    )
    
    
    (52
    )
    
    
    (107
    )
    
    
    (103
    )Preferred stock deemed dividends
    
    
    
    
    
    
    (1,654
    )
    
    
    18
    
    
    
    (1,668
    )Net loss to common shareholders
    
    $
    (781
    )
    
    $
    (2,108
    )
    
    $
    (901
    )
    
    $
    (3,821
    )Net loss per common share:Basic and diluted
    
    $
    (0.07
    )
    
    $
    (0.23
    )
    
    $
    (0.09
    )
    
    $
    (0.43
    )Weighted average common and
common share equivalents:Basic and diluted
    
    
    10,612
    
    
    
    9,146
    
    
    
    10,307
    
    
    
    8,896
 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)
 March 31,
    
    
    September 30,In thousands
    
    2011
    
    
    2010ASSETSCurrent assetsCash and cash equivalents
    
    $
    14,519
    
    
    $
    13,374Accounts receivable, less allowances
of $315 at March 31, 2011 and $444 at September 30, 2010
    
    
    8,505
    
    
    
    11,392Inventories
    
    
    2,498
    
    
    
    3,047Deferred product costs
    
    
    1,792
    
    
    
    2,042Prepaid expenses and other current assets
    
    
    1,009
    
    
    
    1,260Total current assets
    
    
    28,323
    
    
    
    31,115Equipment, leased equipment and leasehold improvements, net
    
    
    7,462
    
    
    
    5,798Intangible assets, net
    
    
    13,903
    
    
    
    14,901Goodwill
    
    
    17,866
    
    
    
    17,048Deferred product costs, net of current portion
    
    
    1,261
    
    
    
    1,757Other assets
    
    
    353
    
    
    
    420Total assets
    
    $
    69,168
    
    
    $
    71,039LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of debt obligations
    
    $
    1,070
    
    
    $
    839Accounts payable
    
    
    4,748
    
    
    
    5,138Accrued expenses
    
    
    4,402
    
    
    
    4,872Deferred revenue
    
    
    3,678
    
    
    
    5,070Total current liabilities
    
    
    13,898
    
    
    
    15,919Debt obligations, net of current portion
    
    
    905
    
    
    
    485Deferred revenue, net of current portion
    
    
    2,414
    
    
    
    3,591Deferred tax liabilities
    
    
    1,845
    
    
    
    1,905Other long-term liabilities
    
    
    600
    
    
    
    638Total liabilities
    
    
    19,662
    
    
    
    22,538Shareholders equityPreferred stock, no par, 50,000 shares authorized:Series B, 4% convertible, 2,250 shares designated;
shares issued and outstanding: 2,127 at March 31, 2011
and 2,085 at September 30, 2010
    
    
    5,121
    
    
    
    5,033Series C, convertible, 1,400 shares designated;
shares issued and outstanding: 1,269 at March 31, 2011
and September 30, 2010
    
    
    4,426
    
    
    
    4,426Series D, convertible, 1,600 shares designated;
shares issued and outstanding: 1,567 at March 31, 2011
and September 30, 2010
    
    
    5,279
    
    
    
    5,279Series F, convertible, 1,400 shares designated;
shares issued and outstanding: 1,354 at March 31, 2011
and 1,356 at September 30, 2010
    
    
    2,360
    
    
    
    2,365Series G, convertible, 10,100 shares designated;
shares issued and outstanding: 10,067 at March 31, 2011
and September 30, 2010
    
    
    26,877
    
    
    
    26,877Common stock, par value $0.01 per share; 100,000 shares
authorized; shares issued and outstanding: 10,681 at
March 31, 2011 and 9,816 at September 30, 2010
    
    
    107
    
    
    
    98Contingent common stock earn-out
    
    
    4,062
    
    
    
    6,452Additional paid-in capital
    
    
    44,549
    
    
    
    41,539Accumulated deficit
    
    
    (45,030
    )
    
    
    (44,129
    )Accumulated other comprehensive income
    
    
    1,755
    
    
    
    561Total shareholders equity
    
    
    49,506
    
    
    
    48,501Total liabilities and shareholders equity
    
    $
    69,168
    
    
    $
    71,039
 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35
    
    
    
    1
    
    
    
    
    
    
    
    587
    
    
    
    
    
    
    
    
    
    
    
    588Contingent common stock earn-out
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    810
    
    
    
    8
    
    
    
    (2,390
    )
    
    
    2,382
    
    
    
    
    
    
    
    
    
    
    
    Conversion of Series F preferred stock into
common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    Exercise of Options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    36Preferred stock dividends
    
    
    42
    
    
    
    106
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (107
    )
    
    
    
    
    
    
    (1
    )Preferred stock deemed dividends
    
    
    
    
    
    
    (18
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    Comprehensive income:Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,194
    
    
    
    1,194Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (812
    )
    
    
    
    
    
    
    (812
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    382Balance at March 31, 2011
    
    
    2,127
    
    
    $
    5,121
    
    
    
    1,269
    
    
    $
    4,426
    
    
    
    1,567
    
    
    $
    5,279
    
    
    
    1,354
    
    
    $
    2,360
    
    
    
    10,067
    
    
    $
    26,877
    
    
    
    10,681
    
    
    $
    107
    
    
    $
    4,062
    
    
    $
    44,549
    
    
    $
    (45,030
    )
    
    $
    1,755
    
    
    $
    49,506
 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 Six Months Ended March 31,In thousands
    
    2011
    
    
    2010Operating activitiesNet loss
    
    $
    (812
    )
    
    $
    (2,050
    )Adjustments
to reconcile net loss to net cash provided by (used in) operating activities:Depreciation and amortization of intangibles
    
    
    2,988
    
    
    
    2,320Amortization of debt financing costs
    
    
    
    
    
    
    458Non-cash interest expense on convertible debt
    
    
    
    
    
    
    892Non-cash charges for issuance of equity securities related to the acquisition of
Turnpike Global Technologies
    
    
    
    
    
    
    354Loss on disposal of assets
    
    
    8Stock based compensation
    
    
    588
    
    
    
    847Changes in assets and liabilities, net of impact of acquisition:Accounts receivable, net
    
    
    2,923
    
    
    
    (478
    )Inventories
    
    
    598
    
    
    
    1,616Deferred product costs
    
    
    746
    
    
    
    156Prepaid expenses and other assets
    
    
    304
    
    
    
    448Accounts payable
    
    
    (1,118
    )
    
    
    (742
    )Accrued expenses
    
    
    (731
    )
    
    
    (1,932
    )Deferred revenue
    
    
    (2,569
    )
    
    
    (1,584
    )Net cash provided by operating activities
    
    
    2,925
    
    
    
    305Investing activitiesPurchase of equipment and leasehold improvements
    
    
    (1,292
    )
    
    
    (1,073
    )Acquisition of Turnpike Global Technologies, net of cash acquired
    
    
    
    
    
    
    (9,451
    )Net cash used in investing activities
    
    
    (1,292
    )
    
    
    (10,524
    )Financing activitiesBorrowings on long-term obligations, net of costs
    
    
    
    
    
    
    29,709Payments on long-term obligations
    
    
    (600
    )
    
    
    (9,072
    )Proceeds from issuance of common stock
    
    
    36
    
    
    
    Net cash (used in) provided by financing activities
    
    
    (564
    )
    
    
    20,637Effects of exchange rate on cash
    
    
    76
    
    
    
    7Increase in cash and cash equivalents
    
    
    1,145
    
    
    
    10,425Cash and cash equivalentsBeginning
    
    
    13,374
    
    
    
    3,440Ending
    
    $
    14,519
    
    
    $
    13,865Cash payments for interest
    
    $
    70
    
    
    $
    329Supplemental schedule of noncash investing and financing activitiesAssets acquired under capital lease obligation
    
    $
    1,250
    
    
    $
    92Preferred stock deemed dividends
    
    $
    18
    
    
    $
    1,668Preferred stock dividends
    
    $
    107
    
    
    $
    103Preferred stock dividends paid
    
    $
    106
    
    
    $
    102Conversion of debt into Series G preferred stock and warrants
    
    $
    
    
    
    $
    30,592Conversion of Series F perferred stock into common stock
    
    $
    5
    
    
    $
    Contingent common stock earnout related to purchase of Turnpike Global Technologies
    
    $
    
    
    
    $
    6,452Issuance of shares for settlement of contingent earn-out
    
    $
    2,390
    
    
    $
    2,430
 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)
 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




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### 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




---



##### 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 March 31, 2011
    
    $
    111
 Inventories
  11




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##### Table of Contents



Equipment, Leased Equipment and Leasehold Improvements
  March 31,
    
    
    September 30,2011
    
    
    2010Office furniture and equipment
    
    $
    7,610
    
    
    $
    5,558Leased equipment
    
    
    4,182
    
    
    
    2,959Engineering and manufacturing equipment
    
    
    902
    
    
    
    919Leasehold improvements
    
    
    2,491
    
    
    
    2,45215,185
    
    
    
    11,888Less: accumulated depreciation
    
    
    (7,723
    )
    
    
    (6,090
    )Equipment and leasehold improvements, net
    
    $
    7,462
    
    
    $
    5,798
  Capitalized Software Development Costs
 Internal-Use Computer Software Marketed Costs
  12




---



##### Table of Contents



Intangible Assets
  ForeignWeighted
    
    
    
    
    
    
    
    
    
    
    CurrencyAverage Life
    
    
    
    
    
    
    Accumulated
    
    
    Translation(years)
    
    
    Cost
    
    
    Amortization
    
    
    Adjustment
    
    
    NetAcquired customer
contracts
    
    
    7.8
    
    
    $
    14,900
    
    
    $
    (5,666
    )
    
    $
    115
    
    
    $
    9,349Acquired technology
    
    
    7.0
    
    
    
    2,700
    
    
    
    (533
    )
    
    
    228
    
    
    
    2,395Reseller relationships
    
    
    6.0
    
    
    
    1,500
    
    
    
    (345
    )
    
    
    123
    
    
    
    1,278Trademark
    
    
    10.0
    
    
    
    900
    
    
    
    (124
    )
    
    
    79
    
    
    
    855Other intangibles
    
    
    7.0
    
    
    
    49
    
    
    
    (23
    )
    
    
    
    
    
    
    26Total
    
    
    7.7
    
    
    $
    20,049
    
    
    $
    (6,691
    )
    
    $
    545
    
    
    $
    13,903
   Years ending September 30,2011
    
    $
    1,3732012
    
    
    2,7452013
    
    
    2,7452014
    
    
    2,7452015
    
    
    2,369Thereafter
    
    
    1,926Total expected amortization expense
    
    $
    13,903
 Long-Lived Assets
   13




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##### Table of Contents



Goodwill
  Balance at September 30, 2010
    
    $
    17,048Foreign currency translation adjustment
    
    
    818Balance at March 31, 2011
    
    $
    17,866
  Intangibles  Goodwill and Others,
    Product Warranties
   Shipping Costs
  14




---



##### Table of Contents



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
 Disclosure Requirements Related to Fair Value Measurements: Improving Disclosures about Fair Value Measurements (Topic
820) Fair Value Measurements and Disclosures
 15




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##### Table of Contents



Note 2. Revenue and Cost of Goods Sold Information
  For the Three Months Ended
    
    
    For the Six Months EndedMarch 31,
    
    
    March 31,2011
    
    
    2010
    
    
    2011
    
    
    2010Revenue:Software
    
    $
    11,380
    
    
    $
    10,790
    
    
    $
    22,721
    
    
    $
    20,466Hardware systems
    
    
    4,899
    
    
    
    5,583
    
    
    
    6,632
    
    
    
    11,780Services
    
    
    462
    
    
    
    1,138
    
    
    
    1,366
    
    
    
    2,229Other
    
    
    
    
    
    
    593
    
    
    
    
    
    
    
    1,153Total revenue
    
    $
    16,741
    
    
    $
    18,104
    
    
    $
    30,719
    
    
    $
    35,628
 For the Three Months Ended
    
    
    For the Six Months EndedMarch 31,
    
    
    March 31,2011
    
    
    2010
    
    
    2011
    
    
    2010Cost of goods sold:Software
    
    $
    2,698
    
    
    $
    2,790
    
    
    $
    5,470
    
    
    $
    5,180Hardware systems
    
    
    5,168
    
    
    
    5,228
    
    
    
    7,210
    
    
    
    11,537Services
    
    
    777
    
    
    
    788
    
    
    
    1,642
    
    
    
    1,532Other
    
    
    
    
    
    
    259
    
    
    
    (21
    )
    
    
    508Total cost of goods sold
    
    $
    8,643
    
    
    $
    9,065
    
    
    $
    14,301
    
    
    $
    18,757
   Note 3. Stock-Based Compensation
  16




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##### Table of Contents



Stock Options
 Compensation  Stock Compensation,
  For the Three Months Ended
    
    For the Six Months EndedMarch 31,
    
    March 31,2011
    
    2010
    
    2011
    
    2010Number of shares granted
    
    
    756
    
    
    
    39
    
    
    
    756
    
    
    
    459Fair value per share
    
    $
    1.21
    
    
    $
    1.29
    
    
    $
    1.21
    
    
    $
    1.31Risk-free interest rate
    
    
    2.72
    %
    
    
    3.18
    %
    
    
    2.72
    %
    
    
    3.06
    %Expected volatility
    
    
    39.99
    %
    
    
    39.30
    %
    
    
    39.99
    %
    
    
    42.41
    %Expected life (in years)
    
    
    5.91
    
    
    
    5.23
    
    
    
    5.91
    
    
    
    5.93Dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 Compensation  Stock Compensation  Overall,
 17




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##### Table of Contents



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
    
    
    
    3.55Granted
    
    
    756
    
    
    
    2.85Exercised
    
    
    (18
    )
    
    
    2.00Cancelled:Expired
    
    
    (108
    )
    
    
    3.64Forfeited
    
    
    (167
    )
    
    
    2.61Options outstanding at March 31, 2011
    
    
    2,690
    
    
    $
    3.41
   Options Outstanding
    
    Options ExercisableWeighted
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    Weighted
    
    
    
    
    
    Average
    
    WeightedRemaining
    
    Average
    
    
    
    
    
    Remaining
    
    AverageRange of
    
    Number of
    
    Contractual
    
    Exercise
    
    Number of
    
    Contractual
    
    Exerciseexercise price
    
    Shares
    
    Life (Years)
    
    Price
    
    Shares
    
    Life (Years)
    
    Price$2.00   $2.99
    
    
    1,808
    
    
    
    8.7
    
    
    $
    2.63
    
    
    
    756
    
    
    
    7.9
    
    
    $
    2.493.00   3.99
    
    
    96
    
    
    
    8.1
    
    
    
    3.32
    
    
    
    72
    
    
    
    7.9
    
    
    
    3.304.33   4.98
    
    
    35
    
    
    
    5.4
    
    
    
    4.64
    
    
    
    35
    
    
    
    5.4
    
    
    
    4.645.03   5.40
    
    
    751
    
    
    
    5.7
    
    
    
    5.25
    
    
    
    751
    
    
    
    5.7
    
    
    
    5.252,690
    
    
    
    7.8
    
    
    
    3.41
    
    
    
    1,614
    
    
    
    6.6
    
    
    
    4.11
  18




---



##### Table of Contents



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
    
    
    
    3.96Granted
    
    
    35
    
    
    
    2.85Vested
    
    
    (95
    )
    
    
    3.34Restricted stock outstanding at March 31, 2011
    
    
    18
    
    
    $
    5.12
   Restricted Stock Units
  19




---



##### Table of Contents



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
    
    
    
    2.55Granted
    
    
    196
    
    
    
    2.85Settled
    
    
    (2
    )
    
    
    3.00Cancelled:Forfeited
    
    
    (39
    )
    
    
    2.54Restricted stock outstanding at March 31, 2011
    
    
    340
    
    
    $
    2.72
    Note 4. Commitments
 Leases
  20




---



##### Table of Contents



Years ending September 30,2011
    
    $
    4082012
    
    
    6012013
    
    
    5732014
    
    
    5842015
    
    
    160Thereafter
    
    
    Total
    
    $
    2,326
  401(k) Plan
  Purchase Commitments
  Note 5. Financing Arrangements
  March 31,
    
    
    September 30,2011
    
    
    2010Capitalized leases
    
    $
    1,864
    
    
    $
    1,143Contingent earn out
    
    
    111
    
    
    
    181Total debt obligations
    
    
    1,975
    
    
    
    1,324Less current portion of debt obligations
    
    
    1,070
    
    
    
    839Total debt obligations, net of current portion
    
    $
    905
    
    
    $
    485
  21




---



##### Table of Contents



Note 6. Shareholders Equity
 Common Stock
   Preferred Stock
  22




---



##### Table of Contents



Series B
    Series C
  Series D
  Series E and Series F
  Series G
   Common Stock Warrants
  23




---



##### Table of Contents



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 March 31, 2011
    
    
    4,804
    
    
    $
    3.14
    
    
    
    4.7
 Note 7. 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
  
    
    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, 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
     25




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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.
    
    Xata 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). Xata Turnpike interacts with various
handheld devices using Bluetooth as a wireless in-cab communication medium. The
information collected by Xata 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
  26




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##### Table of Contents




    
    Revenue Recognition
    
    Allowance for Doubtful Accounts
    
    Goodwill and Intangible Assets  Impairment Assessments
    
    Product Warranties
    
    Accounting for Income Taxes
  27




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##### Table of Contents



Results of Operations for the three and six months ended March 31, 2011 and 2010
  Three months ended March 31,
    
    
    Six months ended March 31,(Dollar amounts in thousands)
    
    2011
    
    
    2010
    
    
    2011
    
    
    2010SoftwareRevenue
    
    $
    11,380
    
    
    $
    10,790
    
    
    $
    22,721
    
    
    $
    20,466Cost of goods sold
    
    
    2,698
    
    
    
    2,790
    
    
    
    5,470
    
    
    
    5,180Gross margin
    
    $
    8,682
    
    
    $
    8,000
    
    
    $
    17,251
    
    
    $
    15,286Gross margin %
    
    
    76.3
    %
    
    
    74.1
    %
    
    
    75.9
    %
    
    
    74.7
    %Hardware systemsRevenue
    
    $
    4,899
    
    
    $
    5,583
    
    
    $
    6,632
    
    
    $
    11,780Cost of goods sold
    
    
    5,168
    
    
    
    5,228
    
    
    
    7,210
    
    
    
    11,537Gross margin
    
    $
    (269
    )
    
    $
    355
    
    
    $
    (578
    )
    
    $
    243Gross margin %
    
    
    (5.5
    %)
    
    
    6.4
    %
    
    
    (8.7
    %)
    
    
    2.1
    %ServicesRevenue
    
    $
    462
    
    
    $
    1,138
    
    
    $
    1,366
    
    
    $
    2,229Cost of goods sold
    
    
    777
    
    
    
    788
    
    
    
    1,642
    
    
    
    1,532Gross margin
    
    $
    (315
    )
    
    $
    350
    
    
    $
    (276
    )
    
    $
    697Gross margin %
    
    
    (68.2
    %)
    
    
    30.8
    %
    
    
    (20.2
    %)
    
    
    31.3
    %OtherRevenue
    
    $
    
    
    
    $
    593
    
    
    $
    
    
    
    $
    1,153Cost of goods sold
    
    
    
    
    
    
    259
    
    
    
    (21
    )
    
    
    508Gross margin
    
    $
    
    
    
    $
    334
    
    
    $
    21
    
    
    $
    645Gross margin %
    
    
    0.0
    %
    
    
    56.3
    %
    
    
    0.0
    %
    
    
    55.9
    %TotalRevenue
    
    $
    16,741
    
    
    $
    18,104
    
    
    $
    30,719
    
    
    $
    35,628Cost of goods sold
    
    
    8,643
    
    
    
    9,065
    
    
    
    14,301
    
    
    
    18,757Gross margin
    
    $
    8,098
    
    
    $
    9,039
    
    
    $
    16,418
    
    
    $
    16,871Gross margin %
    
    
    48.4
    %
    
    
    49.9
    %
    
    
    53.4
    %
    
    
    47.4
    %
 Revenue
   28




---



##### Table of Contents



Cost of Goods Sold and Gross Margin
    Selling, General and Administrative Expenses
  29




---



##### Table of Contents



Research & Development Expenses
  Net Interest and Other Expense
  Acquisition Related Costs
 Business Combinations
 Interest Expense on Financing Activities
  Acquisition Related Interest and Mark to Market Expense
  Income Taxes
 Income Tax
 30




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##### Table of Contents



Net Loss to Common Shareholders
  Liquidity and Capital Resources
       Recently Issued Accounting Standards
  
 Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures and Internal Control over Financial Reporting
  31




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##### Table of Contents



32




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##### 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.
  
 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
 33




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##### Table of Contents



Dated: May 6, 2011
    Xata Corporation
(Registrant)by:
    /s/ Scott G. ChristianScott G. ChristianChief Financial Officer
(Signing as Principal Financial and Accounting
Officer, and as Authorized Signatory of
Registrant) 34