<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-QSB

|X|   Quarterly report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

For the quarterly period ended March 31, 2003 or

| |   Transition report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

For the transition period from ___________ to ____________

Commission File Number: 0-27166

                                XATA Corporation
             (Exact Name of Registrant as Specified in its Charter)

             Minnesota                                   41-1641815
 (State or Other Jurisdiction of         (I.R.S. Employer Identification Number)
  Incorporation or Organization)

            151 E. Cliff Road, Suite 10, Burnsville, Minnesota 55337
               (Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code: (952) 707-5600


--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                 Yes |X| No | |

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

As of May 1, 2003, the following securities of the Registrant were outstanding:
6,933,825 shares of Common Stock, $.01 par value per share.


                                       1
<PAGE>
                                XATA Corporation
                                      Index

<TABLE>
<CAPTION>
PART I.   FINANCIAL INFORMATION                                                     Page No.
                                                                                    --------
<S>                                                                                 <C>
          Item 1. Financial Statements:
            Balance Sheets as of March 31, 2003
            and September 30, 2002                                                      3

            Statements of Operations for the Three and Six
            Months Ended March 31, 2003 and 2002                                        5

            Statements of Cash Flows for the Six Months
            Ended March 31, 2003 and 2002                                               6

            Notes to Financial Statements                                               7

          Item 2. Management's Discussion and Analysis
                  of Financial Condition and Results of Operations                     11

          Item 3. Controls and Procedures                                              15

PART II.  OTHER INFORMATION

          Item 1. Legal Proceedings                                                    17

          Item 2. Changes in Securities                                                17

          Item 3. Defaults upon Senior Securities                                      17

          Item 4. Submission of Matters to a Vote of Security Holders                  17

          Item 5. Other Information                                                    18

          Item 6. Exhibits and Reports on Form 8-K                                     18
</TABLE>

SIGNATURES

CERTIFICATIONS


                                       2
<PAGE>
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

XATA CORPORATION
BALANCE SHEETS
MARCH 31, 2003 AND SEPTEMBER 30, 2002

<TABLE>
<CAPTION>
                                                                             MARCH 31,              September 30,
                                                                               2003                      2002
ASSETS                                                                      (UNAUDITED)               (audited)
                                                                            -----------             -------------
<S>                                                                         <C>                      <C>
Current Assets
     Cash and cash equivalents                                              $   627,002              $ 1,058,119
     Accounts receivable, less allowances for doubtful accounts
         of $148,232 and $122,000                                             1,891,013                3,244,576
     Inventories                                                              1,603,537                1,193,871
     Deferred product costs                                                     111,255                       --
     Prepaid expenses                                                           169,873                  111,468
                                                                            -----------              -----------
                TOTAL CURRENT ASSETS                                          4,402,680                5,608,034

Equipment and Leasehold Improvements, at cost
     Engineering and manufacturing equipment                                    328,289                  258,289
     Office furniture and equipment                                             978,066                  968,568
     Leasehold improvements                                                      24,948                   24,948
                                                                            -----------              -----------
                                                                              1,331,303                1,251,805

     Less: accumulated depreciation and amortization                           (811,891)                (682,769)
                                                                            -----------              -----------
                TOTAL EQUIPMENT AND LEASEHOLD IMPROVEMENTS                      519,412                  569,036

Other Assets
     Capitalized software development costs, less accumulated
         amortization of $5,119,904 and $4,478,001                            2,015,167                2,791,615
                                                                            -----------              -----------
                TOTAL ASSETS                                                $ 6,937,259              $ 8,968,685
                                                                            ===========              ===========
</TABLE>

See Notes to Financial Statements


                                       3
<PAGE>
<TABLE>
<CAPTION>
                                                                                    MARCH 31,           September 30,
                                                                                      2003                   2002
LIABILITIES AND SHAREHOLDERS' EQUITY                                               (unaudited)            (audited)
                                                                                  ------------          -------------
<S>                                                                               <C>                    <C>
Current Liabilities
     Bank line of credit                                                          $    446,427           $         --
     Current maturities of long-term debt                                              255,199                269,331
     Accounts payable                                                                  588,178                922,625
     Accrued expenses                                                                  473,379                567,375
     Deferred revenue                                                                1,326,691              1,037,470
                                                                                  ------------           ------------
                TOTAL CURRENT LIABILITIES                                            3,089,874              2,796,801

Long-Term Debt, net of current maturities                                              249,753                373,176
                                                                                  ------------           ------------
                TOTAL LIABILITIES                                                    3,339,627              3,169,977

Commitments                                                                                 --                     --

Shareholders' Equity
     Common stock, par value $0.01 per share; 25,000,000 and 12,000,000
         shares authorized; 6,933,825 and 6,928,825 shares issued                       69,338                 69,288
     Additional paid-in capital                                                     17,754,171             17,748,440
     Accumulated deficit                                                           (14,225,877)           (12,019,020)
                                                                                  ------------           ------------
                TOTAL SHAREHOLDERS' EQUITY                                           3,597,632              5,798,708
                                                                                  ------------           ------------
                TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                        $  6,937,259           $  8,968,685
                                                                                  ============           ============
</TABLE>

See Notes to Financial Statements


                                       4
<PAGE>
XATA CORPORATION
STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED MARCH 31, 2003 AND 2002

<TABLE>
<CAPTION>
                                                                Three Months Ended                         Six Months Ended
                                                                     March 31,                                 March 31,
                                                         --------------------------------          --------------------------------
                                                             2003                2002                  2003                 2002
                                                         (UNAUDITED)          (unaudited)          (UNAUDITED)          (unaudited)
                                                         -----------          -----------          -----------          -----------
<S>                                                      <C>                  <C>                  <C>                  <C>
Net sales                                                $ 1,730,549          $ 3,327,945          $ 4,715,256          $ 7,624,036
Cost of goods sold                                         1,638,620            2,103,983            3,630,817            4,634,947
                                                         -----------          -----------          -----------          -----------
         GROSS PROFIT                                         91,929            1,223,962            1,084,439            2,989,089

Operating expenses
     Selling, general and administrative                     990,699            1,529,949            2,295,623            3,063,313
     Research and development                                450,783              542,496              975,431            1,121,533
                                                         -----------          -----------          -----------          -----------
                                                           1,441,482            2,072,445            3,271,054            4,184,846
                                                         -----------          -----------          -----------          -----------

         OPERATING LOSS                                   (1,349,553)            (848,483)          (2,186,615)          (1,195,757)

Non-operating income (expense)
     Interest income                                           2,054               10,262                4,127               21,727
     Interest expense                                        (19,084)             (15,466)             (28,396)             (45,179)
     Other                                                    13,764                 (906)               4,027               (6,792)
                                                         -----------          -----------          -----------          -----------
                                                              (3,266)              (6,110)             (20,242)             (30,244)
                                                         -----------          -----------          -----------          -----------

         NET LOSS BEFORE INCOME TAXES                     (1,352,819)            (854,593)          (2,206,857)          (1,226,001)

Income taxes                                                      --                   --                   --                   --
                                                         -----------          -----------          -----------          -----------
         Net loss                                        $(1,352,819)         $  (854,593)         $(2,206,857)         $(1,226,001)
                                                         ===========          ===========          ===========          ===========

Net loss per common share
     Basic & Diluted                                     $     (0.20)         $     (0.12)         $     (0.32)         $     (0.18)
                                                         ===========          ===========          ===========          ===========

Weighted average common and
common share equivalents
     Basic & Diluted                                       6,933,825            6,900,679            6,933,146            6,897,344
                                                         ===========          ===========          ===========          ===========
</TABLE>

See Notes to Financial Statements


                                       5
<PAGE>
XATA CORPORATION
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 2003 AND 2002

<TABLE>
<CAPTION>
                                                                                                         Six Months Ended
                                                                                                              March 31,
                                                                                                  ---------------------------------
                                                                                                     2003                   2002
                                                                                                  (UNAUDITED)           (unaudited)
                                                                                                  -----------           -----------
<S>                                                                                               <C>                   <C>
Cash provided by (used in) Operating Activities
Net loss                                                                                          $(2,206,857)          $(1,226,001)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
     Depreciation and amortization of equipment and leasehold improvements                            129,122                96,801
     Amortization of capitalized software development costs                                           727,854               956,850
     Allowance for doubtful accounts                                                                   26,232                    --
     Write-off of software product                                                                     48,594                    --
     Changes in assets and liabilities:
         Accounts receivable                                                                        1,327,331             1,435,579
         Inventories                                                                                 (409,666)             (149,942)
         Accounts payable                                                                            (334,447)             (915,912)
         Accrued expenses and deferred revenue                                                        195,225               549,697
         Prepaid expenses and deferred product costs                                                 (169,660)               66,263
                                                                                                  -----------           -----------
                NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                                  (666,272)              813,335

Cash used in Investing Activities
     Purchase of equipment                                                                            (79,498)              (94,167)
                                                                                                  -----------           -----------
                NET CASH USED IN INVESTING ACTIVITIES                                                 (79,498)              (94,167)

Cash provided by (used in) Financing Activities
     Net borrowings on bank line of credit                                                            446,427                    --
     Payments on long-term debt                                                                      (137,555)             (112,185)
     Proceeds from options and warrants exercised                                                       5,781                43,856
                                                                                                  -----------           -----------
                NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                                   314,653               (68,329)
                                                                                                  -----------           -----------

                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                     (431,117)              650,839

Cash and Cash Equivalents
     Beginning                                                                                      1,058,119             2,031,432
                                                                                                  -----------           -----------
     Ending                                                                                       $   627,002           $ 2,682,271
                                                                                                  ===========           ===========

Supplemental Disclosures of Cash Flow Information
     Cash payments for interest                                                                   $    28,396           $    41,313
</TABLE>

See Notes to Financial Statements


                                       6
<PAGE>
NOTES TO FINANCIAL STATEMENTS

NOTE 1. MANAGEMENT STATEMENT

In the opinion of management of the Company, the accompanying unaudited
financial statements contain all adjustments (consisting of only normal,
recurring accruals) necessary to present fairly the financial position of the
Company as of March 31, 2003 and the results of operations for the three and six
months and cash flows for the six months ended March 31, 2003 and 2002. The
results of operations for any interim period are not necessarily indicative of
the results for the fiscal year ending September 30, 2003. These interim
financial statements should be read in conjunction with the Company's annual
financial statements and related notes thereto included in the Company's Form
10-KSB and Annual Report to shareholders for the fiscal year ended September 30,
2002.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

REVENUE RECOGNITION. The Company derives its revenue from sales of hardware,
software and related services, and from application service contracts. The
Company recognizes revenue in accordance with Statement of Position (SOP) 97-2,
Software Revenue Recognition, as amended by SOP 98-9, Modification of SOP 97-2,
Software Revenue Recognition with Respect to Certain Transactions, and
Securities and Exchange Commission Staff Accounting Bulletin (SAB) 101, Revenue
Recognition in Financial Statements.

Hardware and software revenue is recognized under SOP 97-2 and SAB 101 when (i)
persuasive evidence of an arrangement exists, for example a signed agreement or
purchase order, (ii) delivery has occurred, as evidenced by shipping documents
and customer acceptance, (iii) the fee is fixed or determinable and payable
within twelve months, and (iv) collectibility is probable and supported by
credit checks or past payment history. Pursuant to certain contractual
arrangements, revenues are recognized for completed systems held at the
Company's warehouse pending the receipt of delivery instructions from the
customer.

Many of the Company's customers purchase software maintenance agreements
annually. Customers may also purchase extended warranty and service support
contracts. Revenue from maintenance agreements, extended warranty and service
support contracts are deferred and recognized ratably over the contract period.
Fees for professional services are recognized as they are performed, regardless
of when billed to the customer.

Application service revenue, which is composed of monthly fees, is recognized
ratably over the minimum service contract period, which commences upon the
activation of the mobile application module. When system products are sold in
conjunction with an application service contract, the Company defers the product
revenue and associated product cost at the time of shipment and recognizes both
the revenue and cost ratably over the minimum service contract, which is
generally one to five years.

CAPITALIZED SOFTWARE DEVELOPMENT COSTS. Software development costs incurred
after establishing technological feasibility are capitalized. These costs are
amortized to cost of goods sold beginning when the product is first released for
sale to the general public. Amortization is at the greater of the amount
computed using the ratio of current gross revenues for the product to the total
of current and anticipated future gross revenues or the straight-line method
over the estimated economic life of the product (two to five years). The Company
reviews its long-lived assets periodically to determine potential impairment by


                                       7
<PAGE>
comparing the carrying value of the long-lived assets with estimated future cash
flows expected to result from the use of the assets, including cash flows from
disposition. Should the sum of the expected future cash flows be less than the
carrying value, the Company would recognize an impairment loss. An impairment
loss would be measured by comparing the amount by which the carrying value
exceeds the fair value of the long-lived assets. In the three month period ended
March 31, 2003, the Company recorded an impairment loss of $48,594, included in
cost of sales, to write off the net balance of capitalized software development
costs related to a product line for which revenue is not expected to be realized
in the foreseeable future.

RESEARCH AND DEVELOPMENT COSTS. Expenditures for research and development
activities performed by the Company are charged to operations as incurred.

BASIC AND DILUTED NET LOSS PER SHARE. Basic and diluted net loss per common
share is computed by dividing the net loss by the weighted average common shares
outstanding for the period.

At March 31, 2003 and 2002, the Company had options and warrants outstanding to
purchase a total of 1,074,707 and 957,589 shares of common stock, at a
weighted-average exercise price of $3.60 and $3.58. Because the Company incurred
losses for the three and six months ended March 31, 2003 and 2002, the inclusion
of potential common shares in the calculation of diluted loss per common share
would have an antidilutive effect. Therefore, basic and diluted loss per common
share amounts are the same for the three and six month periods ending March 31,
2003 and 2002.

STOCK-BASED COMPENSATION. The Company utilizes the intrinsic value method of
accounting for its employee stock-based compensation plans. All stock options
pursuant to the Company's stock option plans have been granted at fair market
value at the date of grant, and accordingly, no compensation expense has been
recorded for all periods presented. The following table illustrates the effect
on net loss and net loss per share if the Company had applied the fair value
method of accounting, using the assumptions described below:

<TABLE>
<CAPTION>
                                                                 Three Months Ended                        Six Months Ended
                                                                      March 31,                                 March 31,
                                                           ------------------------------          --------------------------------
                                                               2003                2002                2003                 2002
                                                           -----------          ---------          -----------          -----------
<S>                                                        <C>                  <C>                <C>                  <C>
Net loss, as reported                                      $(1,352,819)         $(854,593)         $(2,206,857)         $(1,226,001)
Deduct: Total stock-based
     employee compensation expense
     determined under fair value based
     methods for all awards                                $  (124,000)         $(113,000)         $  (228,000)         $  (196,000)
                                                           -----------          ---------          -----------          -----------
Pro forma net loss                                          (1,476,819)          (967,593)          (2,434,857)          (1,422,001)

Basic and diluted net loss
per common share
     As reported                                           $     (0.20)         $   (0.12)         $     (0.32)         $     (0.18)
     Pro forma                                                   (0.21)             (0.14)               (0.35)               (0.21)
</TABLE>


                                       8
<PAGE>
For purposes of the aforementioned pro forma information, the fair value of each
option is estimated at the grant date using the Black-Scholes option-pricing
model with the following weighted-average assumptions for grants in 2003 and
2002: dividend rate of zero for both years; price volatility of 40% for 2003 and
45% for 2002; risk-free interest rate of 2.75% for 2003 and 3.90% for 2002; and
expected life of five years for 2003 and 2002. The weighted-average fair value
per option of options granted in the three and six months ended March 31, 2003
was $1.18 and $1.41, and the three and six months ended March 31, 2002 was $1.64
and $1.51.

COMMON STOCK WARRANTS: The Company has, on occasion, issued warrants for the
purchase of common stock to directors, consultants and placement agents.
Compensation expense associated with the warrants has not been material. At
March 31, 2003 and 2002, warrants were outstanding to purchase a total of 47,478
and 53,478 shares of common stock at a weighted-average exercise price of $2.19
and $2.54 per share, with a weighted-average remaining life of approximately
1.46 years and 2.26 years.

ESTIMATES. Preparing financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Accounting for Stock Based Compensation

In December 2002, the FASB issued SFAS 148, Accounting for Stock-Based
Compensation--Transition and Disclosure--an amendment of FAS 123. This statement
amends SFAS 123, Accounting for Stock-Based Compensation, to provide alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. It also amends the disclosure
requirements to SFAS 123 to require prominent disclosures in both annual and
interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results. The
transition and annual disclosure provisions of SFAS 148 are effective for
interim periods beginning after December 15, 2002. The Company adopted the
disclosure requirements of SFAS 148 for its second fiscal quarter which began
January 1, 2003 and ended March 31, 2003.

NOTE 3. COMMITMENTS

On October 11, 2002, the Company entered into a U.S. Value Added Reseller
Agreement with ORBCOMM LLC. Pursuant to this agreement, the Company is
authorized to resell certain satellite communication services in conjunction
with its products. In exchange for favorable pricing, the Company has committed
to certain volume minimums. On March 27, 2003, the Company and ORBCOMM amended
this agreement by revising certain commitment dates. Approximate future minimum
purchases are as follows:


                                       9
<PAGE>
<TABLE>
 Years ending September 30:
 --------------------------
<S>                                  <C>
      2003                           $        --
      2004                               700,000
      2005                             2,600,000
      2006                               900,000
                                     -----------
                                     $ 4,200,000
                                     ===========
</TABLE>

NOTE 4. CORPORATE LIQUIDITY

On December 23, 2002, the Company entered into a $2,000,000 credit line
agreement with a commercial lender. Advances under the line of credit accrue
interest at prime rate plus 2.90 percent. The terms of the credit agreement
include a provision for minimum monthly interest payments. The line is subject
to borrowing base requirements, based on eligible accounts receivable, and is
collateralized by substantially all Company assets. The agreement expires in
December 2003 and may be automatically renewed for successive thirty day periods
unless otherwise terminated by either the Company or the lender.

The Company believes its current cash balances, bank line of credit and vendor
terms will provide adequate cash to fund its operating needs for the foreseeable
future. However, a protracted decline in revenue, significant revenue growth or
an increase in product development in the near term may require external
funding. Moreover, it is possible that the Company's cash needs may vary
significantly from its predictions due to failure to generate anticipated cash
flow or other reasons. No assurance can be given that the Company's predictions
regarding its cash needs will prove accurate, that the Company will not require
additional financing, that the Company will be able to secure any required
additional financing when needed or at all, or that such financing, if obtained,
will be on terms favorable or acceptable to the Company.

NOTE 5. CAPITAL STOCK

On March 4, 2003, the shareholders of the Company approved an increase in the
authorized shares of common stock from 12,000,000 to 25,000,000 and the
authorized shares of preferred stock from 283,000 to 5,000,000. As of March 31,
2003, there were 6,933,825 shares of common stock and no shares of preferred
stock outstanding. The Company has no current plans to issue additional shares
of common or preferred stock.

NOTE 6. TRANSACTIONS WITH RELATED PARTY

The Company purchases certain components for its products from a subsidiary of
Deere & Company, one of its significant shareholders. Payments under this
relationship totaled $583,000 and $918,000 in the three and six month periods
ended March 31, 2003.


                                       10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

The following discussion and analysis provides information we believe is
relevant to an assessment and understanding of our results of operations and
financial condition. This discussion should be read in conjunction with the
financial statements in Item 1 and our report on Form 10-KSB for the year ended
September 30, 2002.

INVESTOR INFORMATION

Our primary Internet address is www.xata.com. We make our periodic SEC reports
(Forms 10-QSB and Forms 10-KSB) and other SEC filings available free of charge
through our website as soon as reasonably practicable after they are filed
electronically with the SEC. We may from time to time provide important
disclosures to investors by posting them in the investor relations section of
our website, as allowed by the SEC rules.

CRITICAL ACCOUNTING POLICIES

Accounting policies, methods and estimates are an integral part of our financial
statements and are based upon management's current judgments. Certain accounting
policies, methods and estimates are particularly important because of their
significance to the financial statements. Note 2 of the Notes to Financial
Statements includes a summary of the significant accounting policies and methods
we use. The following is a discussion of what we believe to be the most critical
of these policies and methods.

Revenue recognition. We derive our revenue from sales of hardware, software and
related services, and from application service contracts. We recognize revenue
for hardware and software revenue, in accordance with Statement of Position 97-2
and Securities and Exchange Commission Staff Accounting Bulletin 101, when (i)
persuasive evidence of an arrangement exists, for example a signed agreement or
purchase order, (ii) delivery has occurred, as evidenced by shipping documents
and customer acceptance, (iii) the fee is fixed or determinable and payable
within twelve months, and (iv) collectibility is probable and supported by
credit checks or past payment history. Pursuant to certain contractual
arrangements, we recognize revenue for completed systems held at our warehouse
pending the receipt of delivery instructions from the customer.

Many of our customers purchase software maintenance agreements annually.
Customers may also purchase extended warranty and service support contracts.
Revenue from maintenance agreements, extended warranty and service support
contracts are deferred and recognized ratably over the contract period. Fees for
professional services are recognized as they are performed, regardless of when
billed to the customer.

Application service revenue, which is composed of monthly fees, is recognized
ratably over the minimum service contract period, which commences upon the
activation of the mobile application module. When system products are sold in
conjunction with an application service contract, we defer the product revenue
and associated product cost at the time of shipment and recognize both the
revenue and cost ratably over the minimum service contract, which is generally
one to five years.

Capitalized software development costs. We capitalize software development costs
incurred after establishing technological feasibility. These costs are later
amortized to cost of goods sold beginning when the product is first released for
sale to the general public. Amortization is at the greater of the amount
computed using the ratio of current gross revenues for the product to the total
of current and anticipated future gross revenues or the straight-line method
over the estimated economic life of the product. We


                                       11
<PAGE>
review our long-lived assets periodically to determine potential impairment by
comparing the carrying value of the long-lived assets with estimated future cash
flows expected to result from the use of the assets, including cash flows from
disposition. Should the sum of the expected future cash flows be less than the
carrying value, we would recognize an impairment loss. An impairment loss would
be measured by comparing the amount by which the carrying value exceeds the fair
value of the long-lived assets.

Research and development costs. We charge expenditures for research and
development activities to operations as incurred.

Estimates. Preparing financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

Recently issued accounting pronouncements. Note 2 to the Financial Statements
discusses the adoption of a recently issued accounting pronouncement. We do not
believe the adoption of other recently issued accounting pronouncements will
have a material effect on our financial statements.

RESULTS OF OPERATIONS

Net Sales. Our net sales for the three months ended March 31, 2003 were $1.73
million, versus net sales of $3.33 million for the three months ended March 31,
2002. For the six months ended March 31, 2003, net sales were $4.72 million,
versus net sales of $7.62 million for the six months ended March 31, 2002. We
believe the decrease in sales in the current fiscal year was due to continuing
weak economic conditions for technology products coupled with unusually strong
sales in the prior year periods resulting from a previously placed significant
order. We currently anticipate that total revenue for fiscal 2003 will be
approximately equal to that of fiscal 2002.

Cost of Goods Sold. Cost of goods sold includes the direct product costs
associated with fulfilling customer orders as well as certain fixed expenses.
Such fixed expenses include costs relating to our system implementation and
support staff, expenses associated with the enhancement of released products,
and non-cash amortization expense of capitalized software development costs.
Cost of goods sold in the three months ended March 31, 2003 were $1.64 million
(95% of net sales), versus $2.10 million (63% of net sales) for the comparable
prior year period. For the six months ended March 31, 2003, cost of goods sold
were $3.63 million (77% of net sales), versus $4.63 million (61% of net sales)
for the comparable prior year period. Cost of goods sold decreased in the
current year period because of the decrease in net sales combined with lower
amortization expense. Cost of goods sold as a percent of net sales increased in
the current fiscal year due to the effect of spreading the fixed expense items,
including amortization, over a lower revenue amount. Our direct cost of filling
customer orders in the first six months of fiscal 2003, including the costs
associated with producing our mobile computing and communication units, was
comparable to that of the first six months of fiscal 2002.

Operating Expenses. Operating expenses include research and development
expenses, as well as selling, general and administrative expenses. Total
operating expenses were $1.44 million (83% of net sales) for the three months
ended March 31, 2003 compared to $2.07 million (62% of net sales) for the
comparable prior year period. For the six months ended March 31, 2003, total
operating expenses were $3.27 million (69% of net sales), versus $4.18 million
(55% of net sales) for the comparable prior year period.


                                       12
<PAGE>
Selling, general and administrative expenses were $991,000 (57% of net sales)
for the three months ended March 31, 2003, compared to $1.53 million (46% of net
sales) for the comparable prior year period. For the six months ended March 31,
2003, selling, general and administrative expenses were $2.30 million (49% of
net sales), versus $3.06 million (40% of net sales) for the comparable prior
year period. The decrease in selling, general and administrative expenses in the
current year was due to lower salary expenses combined with reduced sales
commissions and other selling expenses. We expect these expenses for fiscal 2003
to be lower than fiscal 2002 due to recently implemented actions to reduce
future operating expenses, including the elimination of several non-critical
positions.

Research and development expenses during the three months ended March 31, 2003
were $451,000, versus $542,000 in the comparable fiscal 2002 period. For the six
months ended March 31, 2003, research and development expenses were $975,000,
versus $1.12 million in the comparable fiscal 2002 period. Costs associated with
research and development activities are expensed in the period they are
incurred. We capitalize software development expenditures after we establish
technological feasibility of new products, and later amortize these capitalized
amounts to cost of goods sold based on the anticipated useful life of the
product. We determine the useful life of each product based upon its anticipated
future net revenues. In the three and six months ended March 31, 2003, we did
not capitalize any software development costs because the expenditures were
primarily on products that have not attained technological feasibility.

Overall product development expenses totaled $696,000 in the three months ended
March 31, 2003. These include $451,000 of research and development expense
associated with the development of new products, coupled with $245,000 expended
on the enhancement of released products (included as a component of cost of
goods sold). For the six months ended March 31, 2003, overall product
development expenses totaled $1.47 million, including $975,000 of research and
development expense associated with the development of new products and $497,000
expended on the enhancement of released products.

Non-operating Income and Expense. Interest expense for the three months ended
March 31, 2003 was $19,000 compared to $15,000 in the same prior year period.
For the six months ended March 31, 2003, interest expense was $28,000 compared
to $45,000 in the same prior year period. Interest expense in the current year
three month period increased because of utilization of our new bank line of
credit. Interest expense decreased in the current year six month period because
the prior year six month period included an annual minimum interest assessment
associated with a former bank line of credit, which we subsequently terminated.
Interest expense for both periods also included interest on a note payable.
Interest income for the three months ended March 31, 2003 was $2,000, versus
$10,000 in the comparable prior year period. For the six months ended March 31,
2003, interest income was $4,000, versus $22,000 in the comparable prior year
period. The decrease in the current year was due to our lower cash balance
combined with a lower rate of interest paid on our investment account.

Income Taxes. No income tax benefit or expense was recorded for the three or six
month periods ended March 31, 2003 or 2002. We periodically review the valuation
allowance we have established for our deferred tax assets. Realization of
deferred tax assets is dependent upon sufficient future taxable income during
periods when deductible temporary differences and carryforwards are expected to
be available to reduce taxable income. The amount of the net deferred tax asset
considered realizable could be increased in the future if we return to
profitability and actual future taxable income is higher than currently
estimated.

Net Loss. Net loss for the three months ended March 31, 2003 was $1.35 million,
compared to $855,000 for the three months ended March 31, 2002. For the six
months ended March 31, 2003, net loss was $2.21 million, compared to $1.23
million for the six months ended March 31, 2002. The increased net loss in the


                                       13
<PAGE>
current year was primarily caused by our lower net sales, partially offset by
reduced operating expenses and lower amortization expense.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2003, we had working capital of $1.31 million compared to working
capital of $2.81 million at September 30, 2002. The decrease in working capital
was primarily caused by our net loss for the period coupled with purchases of
equipment and payments on our long-term debt, partially off-set by non-cash
depreciation and amortization expenses.

Cash used in operating activities during the six months ended March 31, 2003
totaled $666,000 compared to cash provided by operating activities of $813,000
for the same period last year. Cash used in operating activities for the six
months ended March 31, 2003 primarily resulted from our net loss of $2.21
million, combined with a $410,000 increase in inventories, a $334,000 decrease
in accounts payable and an increase in prepaid expenses and deferred product
costs totaling $170,000, partially offset by a $1.33 million decrease in
accounts receivable, a $195,000 increase in accrued expenses and deferred
revenue, and non-cash amortization, software product write-off and depreciation
expenses totaling $906,000. The increase in deferred revenue in the current year
period was primarily due to sales of system products associated with application
service contracts. Deferred product costs relate to the manufacturing costs of
the system products for which revenue has been deferred. We expect non-cash
depreciation and amortization expenses to be less in fiscal 2003 than in 2002.

Cash used in investing activities was $79,000 for purchases of equipment in the
six months ended March 31, 2003 compared to $94,000 during the same period last
year.

Cash provided by financing activities was $315,000 in the six months ended March
31, 2003 compared to cash used in financing activities of $68,000 during the
same period a year ago. Cash provided by financing activities was due to our use
of our bank line of credit, offset by principal payments on long-term debt.

On December 23, 2002, we entered into a $2,000,000 credit line agreement with a
commercial lender. Advances under the line of credit accrue interest at prime
rate plus 2.90 percent. The terms of the credit agreement include a provision
for minimum monthly interest payments. The line is subject to borrowing base
requirements, based on eligible accounts receivable, and is collateralized by
substantially all Company assets. The agreement expires in December 2003 and may
be automatically renewed for successive thirty day periods unless otherwise
terminated by either us or the lender. As of September 30, 2002 we did not have
a line of credit in place.

We believe our current cash balances, bank line of credit and vendor terms will
provide adequate cash to fund our operating needs for the foreseeable future.
However, a protracted decline in revenue, significant revenue growth or an
increase in product development in the near term may require external funding.
Moreover, it is possible that our cash needs may vary significantly from our
predictions due to failure to generate anticipated cash flow or other reasons.
No assurance can be given that our predictions regarding our cash needs will
prove accurate, that we will not require additional financing, that we will be
able to secure any required additional financing when needed or at all, or that
such financing, if obtained, will be on terms favorable or acceptable to us.


                                       14
<PAGE>
TRANSACTIONS WITH RELATED PARTY

We purchase our new XATA Application Module (XAM) mobile computing and
communication devices from Phoenix International Corporation, a wholly owned
subsidiary of Deere & Company. Deere is one of our significant shareholders and
is currently represented by three individuals serving on our Board of Directors.
Phoenix International fabricates the XAM units to our detailed design
specifications. We retain full ownership to the intellectual property rights of
the XAM design. Our terms with Phoenix International are comparable to those we
have with non-affiliated vendors. Payments to Phoenix International in the three
and six month periods ended March 31, 2003 totaled $583,000 and $918,000. These
amounts may increase over time to the extent sales of our XAM units and related
products increase. We have no dependence on this vendor and are able to purchase
the fabrication of this product from other vendors if necessary or desirable.

ITEM 3. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Our Chief Executive Officer and Chief Financial Officer have concluded, based on
their evaluation within 90 days of the filing date of this report, that our
disclosure controls and procedures are adequately designed to ensure that
information required to be disclosed by us in the reports we file or submit
under the Securities and Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported, within the time periods specified in
applicable rules and forms. There have not been any significant changes in our
internal controls or in other factors that could significantly affect those
controls, subsequent to the date of such evaluation, including any corrective
actions taken with regard to significant deficiencies and material weaknesses.

FORWARD-LOOKING STATEMENTS

This document includes forward-looking statements based on current expectations.
Actual results may differ materially. These forward-looking statements involve a
number of risks and uncertainties about us, our business, our customers, and the
economy and business environment in general. Risks and uncertainties about us
include, for example, the following:

      -     although we expect to incur operating losses in the current fiscal
            year, these losses may continue beyond the expected timeframe or in
            excess of the expected magnitude, and we may be dependent upon
            external investment to support our growth during periods in which we
            incur operating losses;

      -     we may be unable to adapt to technological change quickly enough to
            grow or to retain our customer base;

      -     we will continue to be dependent upon positioning systems and
            communication networks owned and controlled by others, and
            accordingly, their problems may adversely impact us;

      -     for the foreseeable future, we are dependent upon the continued
            receipt and fulfillment of new orders for our current products;


                                       15
<PAGE>
      -     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.

You are encouraged to read more about the specific risks and uncertainties of
our business. We have described those which we currently consider most important
in our report on Form 10-KSB for our fiscal year ended September 30, 2002. We
undertake no obligation to update our disclosures in this regard.


                                       16
<PAGE>
PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

      None

ITEM 2. CHANGES IN SECURITIES

      None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

      None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      The annual meeting of shareholders of the Company was held on March 4,
      2003. As of the record date, January 28, 2003, there were 6,933,825 shares
      of Common Stock issued and outstanding. There were present and voting at
      the meeting, in person or by proxy, 6,850,033 shares of Common Stock
      (approximately 99% of the total issued and outstanding).

      Matters voted upon and the results thereof are as follows:

      1.    Election of Directors

<TABLE>
<CAPTION>
                                                For               Withheld
                                                ---               --------
<S>                                          <C>                   <C>
            Richard L. Bogen                 6,831,996             18,037
            Craig S. Fawcett                 6,831,678             18,355
            William P. Flies                 6,825,861             24,172
            Carl M. Fredericks               6,825,429             24,604
            James E. Heerin                  6,835,938             14,095
            Roger W. Kleppe                  6,825,429             24,604
            Stephen A. Lawrence              6,830,988             19,045
            David M. Purvis                  6,836,338             13,695
            Charles R. Stamp, Jr.            6,836,338             13,695
</TABLE>

      2.    Amendment of the Restated Articles of Incorporation to increase the
            authorized shares of common stock from 12,000,000 to 25,000,000 and
            the authorized shares of preferred stock from 283,000 to 5,000,000.

<TABLE>
<S>                        <C>            <C>            <C>             <C>            <C>       <C>                 <C>
                  For      2,889,724      Against        1,251,329       Abstain        20,191    Broker Non-Vote     2,688,789
                           ---------                     ---------                      ------                        ---------
</TABLE>

      3.    Ratification of the appointment of Grant Thornton LLP as the
            independent auditors of the Company for the fiscal year ending
            September 30, 2003.

<TABLE>
<S>                        <C>          <C>              <C>             <C>            <C>
                  For      6,826,842    Against          5,500           Abstain        17,691
                           ---------                     -----                          ------
</TABLE>


                                       17
<PAGE>
ITEM 5. OTHER INFORMATION

      None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>
      Exhibit
      -------
<S>               <C>
      3.4         Amendment of Articles of Incorporation, effective March 4,
                  2003

      10.27       Employment Agreement dated October 1, 2002 with William P.
                  Flies, Chief Technical Officer

      10.28       First Lease Amendment dated May 5, 2003 which amends Lease
                  dated December 27, 1996 with Hoyt Properties for Burnsville,
                  Minnesota corporate headquarters

      99.1        Certification pursuant to 18 U.S.C. Section 1350 as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

      99.2        Certification pursuant to 18 U.S.C. Section 1350 as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
</TABLE>

      Reports on Form 8-K

      1.          Report on Form 8-K dated April 10, 2003 concerning the
                  announcement of a product distribution agreement with a major
                  truck leasing company.

      2.          Report on Form 8-K dated May 1, 2003 concerning the press
                  release for financial results for the three month period
                  ending March 31, 2003.


                                       18
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act, the Registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

      Dated: May 15, 2003                 XATA Corporation
                                          (Registrant)


                                          by:  /s/  John G. Lewis
                                             -----------------------------------
                                             John G. Lewis
                                             Chief Financial Officer
                                             (Signing as Principal Financial and
                                             Accounting Officer and as
                                             Authorized Signatory of Registrant)


                                       19
<PAGE>
                                  CERTIFICATION

I, Craig S. Fawcett, certify that:

1.    I have reviewed this quarterly report on Form 10-QSB of XATA Corporation;

2.    Based on my knowledge, this quarterly report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this quarterly report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this quarterly report, fairly represent in all
      material respects the financial condition, results of operations and cash
      flows of the registrant as of, and for, the periods presented in this
      quarterly report;

4.    The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
      have:

      a)    Designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this
            quarterly report is being prepared;

      b)    Evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this quarterly report (the "Evaluation Date"); and

      c)    Presented in this quarterly report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

5.    The registrant's other certifying officers and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent functions):

      a)    All significant deficiencies in the design or operation of internal
            controls which could adversely affect the registrant's ability to
            record, process, summarize and report financial data and have
            identified for the registrant's auditors any material weaknesses in
            internal controls; and

      b)    Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and

6.    The registrant's other certifying officers and I have indicated in this
      quarterly report whether there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.

May 15, 2003


Signature:   /s/ Craig S. Fawcett
          ---------------------------
Name:        Craig S. Fawcett
    ---------------------------------
Print Title: Chief Executive Officer
            -------------------------


                                       20
<PAGE>
                                  CERTIFICATION

I, John G. Lewis, certify that:

1.    I have reviewed this quarterly report on Form 10-QSB of XATA Corporation;

2.    Based on my knowledge, this quarterly report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this quarterly report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this quarterly report, fairly represent in all
      material respects the financial condition, results of operations and cash
      flows of the registrant as of, and for, the periods presented in this
      quarterly report;

4.    The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
      have:

      a)    Designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this
            quarterly report is being prepared;

      b)    Evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this quarterly report (the "Evaluation Date"); and

      c)    Presented in this quarterly report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

5.    The registrant's other certifying officers and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent functions):

      a)    All significant deficiencies in the design or operation of internal
            controls which could adversely affect the registrant's ability to
            record, process, summarize and report financial data and have
            identified for the registrant's auditors any material weaknesses in
            internal controls; and

      b)    Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and

6.    The registrant's other certifying officers and I have indicated in this
      quarterly report whether there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.

May 15, 2003


Signature: /s/ John G. Lewis
         -------------------------------
Name: John G. Lewis
      ----------------------------------
Print Title: Chief Financial Officer
            ----------------------------


                                       21