##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended December 31, 2009
 or
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission File Number: 0-27166
 XATA Corporation
 
 Minnesota
    
    41-1641815(State or Other Jurisdiction of
Incorporation or Organization)
    
    (I.R.S. Employer Identification
Number)
 
 (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:Consolidated Statements of Operations for the Three Months Ended
December 31, 2009 and 2008
    
    
    3Consolidated Balance Sheets as of December 31, 2009
and September 30, 2009
    
    
    4Consolidated Statements of Changes in Shareholders Equity for the
Three Months Ended December 31, 2009 and the Twelve Months Ended
September 30, 2009
    
    
    5Consolidated Statements of Cash Flows for the Three Months Ended
December 31, 2009 and 2008
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis
of Financial Condition and Results of Operation
    
    
    26Item 4.
    
    Controls and Procedures
    
    
    34PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    35Item 1A.
    
    Risk Factors
    
    
    35Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    35Item 3.
    
    Defaults upon Senior Securities
    
    
    35Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    35Item 5.
    
    Other Information
    
    
    35Item 6.
    
    Exhibits
    
    
    36SIGNATURES
    
    
    37EXHIBITSEX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



Item 1. Consolidated Financial Statements.
 
 XATA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Three Months EndedDecember 31,2009
    
    
    2008Revenue
    
    $
    17,523
    
    
    $
    14,643Costs and expensesCost of goods sold
    
    
    9,692
    
    
    
    7,595Selling, general and administrative
    
    
    6,150
    
    
    
    5,901Research and development
    
    
    1,333
    
    
    
    1,407Acquisition related costs
    
    
    779
    
    
    
    Total costs and expenses
    
    
    17,954
    
    
    
    14,903Operating loss
    
    
    (431
    )
    
    
    (260
    )Interest expense on financing activities
    
    
    (779
    )
    
    
    Acquisition related interest and mark to market
    
    
    (162
    )
    
    
    Net interest and other expense
    
    
    (276
    )
    
    
    (412
    )Loss before income taxes
    
    
    (1,648
    )
    
    
    (672
    )Income tax expense
    
    
    
    
    
    
    Net loss
    
    
    (1,648
    )
    
    
    (672
    )Preferred stock dividends
    
    
    (51
    )
    
    
    (49
    )Preferred stock deemed dividends
    
    
    (14
    )
    
    
    5Net loss to common shareholders
    
    $
    (1,713
    )
    
    $
    (716
    )Net loss per common share  basic and diluted
    
    $
    (0.20
    )
    
    $
    (0.08
    )Weighted average common and
common share equivalentsBasic and diluted
    
    
    8,646
    
    
    
    8,468
  3




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##### Table of Contents



XATA CORPORATION
CONSOLIDATED BALANCE SHEETS
 December 31,
    
    
    September 30,2009
    
    
    2009ASSETSCurrent assetsCash and cash equivalents
    
    $
    11,754
    
    
    $
    3,440Accounts receivable, less allowances
of $522 and $368
    
    
    12,119
    
    
    
    9,323Inventories
    
    
    3,140
    
    
    
    4,104Deferred product costs
    
    
    2,207
    
    
    
    2,060Prepaid expenses and other current assets
    
    
    667
    
    
    
    1,064Total current assets
    
    
    29,887
    
    
    
    19,991Equipment, leased equipment and leasehold improvements, net
    
    
    5,261
    
    
    
    3,980Intangible assets, net
    
    
    16,798
    
    
    
    10,725Goodwill
    
    
    15,444
    
    
    
    3,011Deferred product costs, net of current portion
    
    
    2,243
    
    
    
    2,470Other assets
    
    
    113
    
    
    
    487Total assets
    
    $
    69,746
    
    
    $
    40,664LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of debt obligations
    
    $
    36,572
    
    
    $
    84Accounts payable
    
    
    4,655
    
    
    
    5,366Accrued expenses
    
    
    5,518
    
    
    
    5,914Deferred revenue
    
    
    5,223
    
    
    
    5,280Total current liabilities
    
    
    51,968
    
    
    
    16,644Debt obligations, net of current portion
    
    
    4,552
    
    
    
    8,534Deferred revenue, net of current portion
    
    
    5,473
    
    
    
    6,101Other long-term liabilities
    
    
    772
    
    
    
    820Total liabilities
    
    
    62,765
    
    
    
    32,099Shareholders equityPreferred stock, no par, 10,000 shares authorized:Series B, 4% convertible, 2,250 shares designated;
shares issued and outstanding: 2,044 at December 31, 2009
and 2,004 at September 30, 2009
    
    
    4,906
    
    
    
    4,790Series C, convertible, 1,400 shares designated;
1,269 shares issued and outstanding at December 31, 2009
and September 30, 2009
    
    
    4,426
    
    
    
    4,426Series D, convertible, 1,600 shares designated;
1,567 shares issued and outstanding at December 31, 2009
and September 30, 2009
    
    
    5,279
    
    
    
    5,279Series F, convertible, 1,400 shares designated;
1,356 shares issued and outstanding at December 31, 2009
and September 30, 2009
    
    
    2,365
    
    
    
    2,365Common stock, par value $0.01 per share; 25,000 shares
authorized; shares issued and outstanding: 8,788 at
December 31, 2009 and 8,789 at September 30, 2009
    
    
    88
    
    
    
    88Additional paid-in capital
    
    
    32,323
    
    
    
    32,536Accumulated deficit
    
    
    (42,632
    )
    
    
    (40,919
    )Accumulated other comprehensive income
    
    
    226
    
    
    
    Total shareholders equity
    
    
    6,981
    
    
    
    8,565Total liabilities and shareholders equity
    
    $
    69,746
    
    
    $
    40,664
  4




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##### Table of Contents



XATA CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
 AccumulatedSeries B
    
    
    Series C
    
    
    Series D
    
    
    Series F
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    OtherPreferred Stock
    
    
    Preferred Stock
    
    
    Preferred Stock
    
    
    Preferred Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    Comprehensive
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Income
    
    
    Deficit
    
    
    TotalBalance at September 30, 2008
    
    
    1,926
    
    
    $
    5,181
    
    
    
    1,269
    
    
    $
    4,845
    
    
    
    1,567
    
    
    $
    5,937
    
    
    
    
    
    
    $
    
    
    
    
    8,745
    
    
    $
    87
    
    
    $
    28,234
    
    
    $
    
    
    
    $
    (38,092
    )
    
    $
    6,192Issuance of restricted shares
of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,613
    
    
    
    
    
    
    
    
    
    
    
    1,613Forfeiture of restricted shares
of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of preferred stock and
warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,356
    
    
    
    2,365
    
    
    
    
    
    
    
    
    
    
    
    500
    
    
    
    
    
    
    
    
    
    
    
    2,865Record the beneficial
conversion feature
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (484
    )
    
    
    
    
    
    
    
    
    
    
    484
    
    
    
    
    
    
    
    
    
    
    
    Preferred stock dividends
    
    
    78
    
    
    
    197
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (200
    )
    
    
    (3
    )Preferred stock deemed dividends
    
    
    
    
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    484
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (525
    )
    
    
    Adjustment to reflect value of
beneficial conversion feature
    
    
    
    
    
    
    (629
    )
    
    
    
    
    
    
    (419
    )
    
    
    
    
    
    
    (658
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,706
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,102
    )
    
    
    (2,102
    )Balance 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    287
    
    
    
    
    
    
    
    
    
    
    
    287Forfeiture of restricted shares
of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cost related to issuance of
convertible debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (500
    )
    
    
    
    
    
    
    
    
    
    
    (500
    )Preferred stock dividends
    
    
    40
    
    
    
    102
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (51
    )
    
    
    51Preferred stock deemed dividends
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14
    )
    
    
    Comprehensive loss:Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    226
    
    
    
    
    
    
    
    226Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,648
    )
    
    
    (1,648
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,422
    )Balance at December 31, 2009
    
    
    2,044
    
    
    $
    4,906
    
    
    
    1,269
    
    
    $
    4,426
    
    
    
    1,567
    
    
    $
    5,279
    
    
    
    1,356
    
    
    $
    2,365
    
    
    
    8,788
    
    
    $
    88
    
    
    $
    32,323
    
    
    $
    226
    
    
    $
    (42,632
    )
    
    $
    6,981
  5




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##### Table of Contents



XATA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Three Months EndedDecember 31,2009
    
    
    2008Operating activitiesNet loss
    
    $
    (1,648
    )
    
    $
    (672
    )Adjustments to reconcile net loss to net cash provided by
operating activities:Depreciation and amortization
    
    
    935
    
    
    
    733Amortization of debt financing costs
    
    
    458
    
    
    
    63Non-cash interest expense on convertible debt
    
    
    313
    
    
    
    Non-cash charges for issuance of equity securities related to the
acquisition of Turnpike Global Technologies
    
    
    162
    
    
    
    Stock based compensation
    
    
    287
    
    
    
    343Changes in assets and liabilities, net of impact of acquisition:Accounts receivable, net
    
    
    (1,941
    )
    
    
    2,547Inventories
    
    
    964
    
    
    
    (534
    )Deferred product costs
    
    
    80
    
    
    
    (486
    )Prepaid expenses and other assets
    
    
    418
    
    
    
    440Accounts payable
    
    
    (1,322
    )
    
    
    (751
    )Accrued expenses
    
    
    (1,366
    )
    
    
    (1,584
    )Deferred revenue
    
    
    (685
    )
    
    
    308Net cash (used in) provided by operating activities
    
    
    (3,345
    )
    
    
    407Investing activitiesPurchase of equipment and leasehold improvements
    
    
    (381
    )
    
    
    (157
    )Acquisition of Turnpike Global Technologies, net of cash acquired
    
    
    (9,451
    )
    
    
    Net cash used in investing activities
    
    
    (9,832
    )
    
    
    (157
    )Financing activitiesBorrowings on long-term obligations
    
    
    30,200
    
    
    
    12,076Payments on long-term obligations
    
    
    (8,636
    )
    
    
    (12,328
    )Payments on financing costs
    
    
    (75
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    21,489
    
    
    
    (252
    )Effects of exchange rate on cash
    
    
    2
    
    
    
    Increase (decrease) in cash and cash equivalents
    
    
    8,314
    
    
    
    (2
    )Cash and cash equivalentsBeginning
    
    
    3,440
    
    
    
    8,904Ending
    
    $
    11,754
    
    
    $
    8,902Supplemental disclosures of cash flow informationCash payments for interest
    
    $
    1,171
    
    
    $
    398Supplemental schedule of noncash investing and financing activitiesAssets acquired under capital lease obligation
    
    $
    10
    
    
    $
    Preferred stock deemed dividends
    
    $
    14
    
    
    $
    (5
    )Preferred stock dividends
    
    $
    51
    
    
    $
    17Preferred stock dividends paid
    
    $
    102
    
    
    $
    98
  6




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##### Table of Contents



Note 1. Significant Accounting Policies
 Presentation
   Principles of Consolidation
  Revenue Recognition
 Software  Revenue Recognition, Revenue Recognition  Overall, and Revenue Recognition  Multiple Element Arrangements
   7




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##### Table of Contents



Third-Party Reseller Agreements
 Revenue Recognition Principal Agent Considerations
 Allowance for Doubtful Accounts
  Foreign Currency Translation
  8




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##### Table of Contents



Use of Estimates
  Basis of Presentation
  As Previously
    
    
    
    
    
    As CurrentlyReported
    
    Reclassification
    
    ReportedFor the three months ended December 31, 2008:Cost of goods sold
    
    $
    6,688
    
    
    $
    907
    
    
    $
    7,595Selling, general and administrative expenses
    
    
    6,931
    
    
    
    (1,030
    )
    
    
    5,901Research and development expenses
    
    
    1,284
    
    
    
    123
    
    
    
    1,407
 Subsequent Events
  Cash and Cash Equivalents
  Fair Value of Financial Instruments
 Fair Value Hierarchy
 Fair Value Measurement and Disclosures,
 9




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##### Table of Contents



Level 1 
 Level 2 
 Level 3 
   December 31,
    
    
    Fair Value Measurements at Reporting Date Using2009
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Liabilities:Contingent earn out
    
    $
    6,451
    
    
    $
    
    
    
    $
    
    
    
    $
    6,451Common shares to be issued
    
    
    2,485
    
    
    
    2,485
    
    
    
    
    
    
    
    Total
    
    $
    8,936
    
    
    $
    2,485
    
    
    $
    
    
    
    $
    6,451
  Inventories
  Investment in Sales-Type Leases
  10




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##### Table of Contents



Years ending September 30,2010
    
    $
    1542011
    
    
    42Total minimum lease payments
    
    
    196Less: amount representing interest (at 11.71%)
    
    
    (22
    )Present value of net minimum sales-type lease payments
    
    
    174Less: current portion of investment in sales-type leases
    
    
    (161
    )Investment in sales-type leases, excluding current portion
    
    $
    13
  Debt Financing Costs
  Equipment, Leased Equipment and Leasehold Improvements
   December 31,
    
    
    September 30,2009
    
    
    2009Office furniture and equipment
    
    $
    4,687
    
    
    $
    4,464Leased equipment
    
    
    1,799
    
    
    
    520Engineering and manufacturing equipment
    
    
    903
    
    
    
    900Leasehold improvements
    
    
    2,857
    
    
    
    2,65010,246
    
    
    
    8,534Less: accumulated depreciation
    
    
    (4,985
    )
    
    
    (4,554
    )Equipment and leasehold improvements, net
    
    $
    5,261
    
    
    $
    3,980
  11




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##### Table of Contents



Capitalized Software Development Costs
 Software  Costs
to Be Sold, Leased, or Otherwise Marketed
  Long-Lived Assets
  Goodwill
 Intangibles  Goodwill and
Others,
  Balance at September 30, 2009
    
    $
    3,011Goodwill from acquisition
    
    
    12,301Translation adjustment
    
    
    132Balance at December 31, 2009
    
    $
    15,444
 Intangible Assets
  12




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##### Table of Contents



Property, Plant, and Equipment  Overall,
  Weighted Average
    
    
    
    
    
    
    AccumulatedLife (years)
    
    
    Cost
    
    
    Amortization
    
    
    NetAcquired customer contracts
    
    
    7.8
    
    
    $
    14,917
    
    
    $
    (3,253
    )
    
    $
    11,664Acquired technology
    
    
    7.0
    
    
    
    2,732
    
    
    
    (33
    )
    
    
    2,699Reseller relationships
    
    
    6.0
    
    
    
    1,518
    
    
    
    (21
    )
    
    
    1,497Trademark
    
    
    10.0
    
    
    
    911
    
    
    
    (8
    )
    
    
    903Other intangibles
    
    
    7.0
    
    
    
    49
    
    
    
    (14
    )
    
    
    35Total
    
    
    7.7
    
    
    $
    20,127
    
    
    $
    (3,329
    )
    
    $
    16,798
  Years ending September 30,2010
    
    $
    1,9992011
    
    
    2,6662012
    
    
    2,6662013
    
    
    2,6662014
    
    
    2,666Thereafter
    
    
    4,135Total expected amortization expense
    
    $
    16,798
 Product Warranties
   13




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##### Table of Contents



Shipping Costs
  Advertising Costs
  Income taxes
 Income Taxes 
Overall
 Recently Issued Accounting Standards
 Revenue Recognition (ASU 2009-13 and ASU 2009-14)
  ASU No. 2009-13:
 ASU No. 2009-14:
  14




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##### Table of Contents



Note 2. Revenue and Cost of Goods Sold Information
  For the Three Months EndedDecember 31,2009
    
    
    2008Revenue:Software
    
    $
    10,236
    
    
    $
    8,053Systems
    
    
    6,197
    
    
    
    5,554Services
    
    
    1,090
    
    
    
    1,036Total revenue
    
    $
    17,523
    
    
    $
    14,643
 For the Three Months EndedDecember 31,2009
    
    
    2008Cost of goods sold:Software
    
    $
    2,639
    
    
    $
    2,364Systems
    
    
    6,309
    
    
    
    4,433Services
    
    
    744
    
    
    
    798Total cost of goods sold
    
    $
    9,692
    
    
    $
    7,595
   Note 3. Turnpike Global Technologies, Inc. and Turnpike Global Technologies LLC Acquisition
  15




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##### Table of Contents



Cash
    
    
    
    
    
    $
    10,000Common stock of XATA (1)
    
    
    
    
    
    
    2,477Potential earn-out in additional common stock of XATA (2)
    
    
    
    
    
    
    6,297Total purchase price
    
    
    
    
    
    $
    18,774Cash
    
    $
    548Accounts receivable, less allowances for doubtful accounts
    
    
    838Prepaid expenses
    
    
    4Equipment and leasehold improvements, net
    
    
    1,419Accounts payable
    
    
    (609
    )Accrued expenses
    
    
    (546
    )Capital lease obligations
    
    
    (1,681
    )Net liabilities
    
    
    
    
    
    
    (27
    )Acquired customer contracts and other intangible assets, net (3)
    
    
    
    
    
    
    6,500Goodwill
    
    
    
    
    
    
    12,301Total
    
    
    
    
    
    $
    18,774
 
 (1)
    
    Stock amount calculated using the fair market value on the date of acquisition based on
the present value of the 833,333 shares of common stock at a stated value of $3.00.(2)
    
    Earn-out potential of an additional 833,333 shares of common stock after the end of
each of the 2010, 2011, and 2012 fiscal years. The amount was calculated using the
estimated fair market value on the date of acquisition based on stock price and estimated
probability of earn-out target achievements.(3)
    
    Intangible assets: Fair Value
    
    
    Est. Useful LifeAcquired customer contracts
    
    $
    1,400
    
    
    6 yearsAcquired technology
    
    
    2,700
    
    
    7 yearsReseller relationships
    
    
    1,500
    
    
    6 yearsTrademark
    
    
    900
    
    
    10 yearsTotal intangible assets
    
    $
    6,500
  16




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##### Table of Contents



For the Three Months EndedDecember 31,2009
    
    2008(unaudited)
    
    (unaudited)Revenue
    
    $
    19,178
    
    
    $
    15,907Net loss to common shareholders
    
    $
    (3,222
    )
    
    $
    (2,965
    )Net loss per common share  basic and diluted
    
    $
    (0.34
    )
    
    $
    (0.32
    )Weighted average common and common
share equivalents  basic and diluted
    
    
    9,479
    
    
    
    9,301
 Note 4. Stock-Based Compensation
  Stock Options
 Compensation  Stock Compensation,
 17




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##### Table of Contents



For the Three Months EndedDecember 31,2009
    
    2008Number of shares granted
    
    
    420
    
    
    
    67Fair value per share
    
    $
    1.31
    
    
    $
    0.97Risk-free interest rate
    
    
    3.05
    %
    
    
    2.12
    %Expected volatility
    
    
    42.70
    %
    
    
    30.60
    %Expected life (in years)
    
    
    6.00
    
    
    
    3.50Dividend yield
    
    
    
    
    
    
    
 Compensation  Stock Compensation  Overall,
  WeightedAverageShares
    
    Exercise PriceOptions outstanding at September 30, 2008
    
    
    1,239
    
    
    $
    4.66Granted
    
    
    732
    
    
    
    2.18Cancelled:Expired
    
    
    (25
    )
    
    
    3.99Forfeited
    
    
    (41
    )
    
    
    4.24Options outstanding at September 30, 2009
    
    
    1,905
    
    
    
    3.73Granted
    
    
    420
    
    
    
    2.89Cancelled:Forfeited
    
    
    (14
    )
    
    
    3.65Options outstanding at December 31, 2009
    
    
    2,311
    
    
    $
    3.58
  18




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##### Table of Contents



Options Outstanding
    
    Options ExercisableWeighted
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    Weighted
    
    
    
    
    
    Average
    
    WeightedRemaining
    
    Average
    
    
    
    
    
    Remaining
    
    AverageRange of
    
    Number
    
    Contractual
    
    Exercise
    
    Number
    
    Contractual
    
    Exerciseexercise price
    
    of Shares
    
    Life (Years)
    
    Price
    
    of Shares
    
    Life (Years)
    
    Price$2.00 - $2.99
    
    
    1,300
    
    
    
    9.2
    
    
    $
    2.46
    
    
    
    122
    
    
    
    8.3
    
    
    $
    2.75$3.15 - $3.99
    
    
    125
    
    
    
    8.5
    
    
    
    3.67
    
    
    
    51
    
    
    
    4.4
    
    
    
    1.96$4.33 - $4.98
    
    
    35
    
    
    
    6.6
    
    
    
    4.64
    
    
    
    30
    
    
    
    6.5
    
    
    
    4.70$5.03 - $5.40
    
    
    851
    
    
    
    6.7
    
    
    
    5.23
    
    
    
    766
    
    
    
    6.7
    
    
    
    5.252,311
    
    
    
    8.2
    
    
    
    3.58
    
    
    
    969
    
    
    
    6.8
    
    
    
    4.75
  Restricted Stock Awards
   WeightedNumber of
    
    Average GrantShares
    
    Date Fair ValueRestricted stock outstanding at September 30, 2008
    
    
    285
    
    
    $
    4.37Granted
    
    
    48
    
    
    
    3.24Vested
    
    
    (173
    )
    
    
    4.48Forfeited
    
    
    (4
    )
    
    
    2.99Restricted stock outstanding at September 30, 2009
    
    
    156
    
    
    
    3.93Vested
    
    
    (17
    )
    
    
    4.38Forfeited
    
    
    (1
    )
    
    
    2.99Restricted stock outstanding at December 31, 2009
    
    
    138
    
    
    $
    3.88
 19




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##### Table of Contents



Restricted Stock Units
   WeightedNumber of
    
    
    Average GrantShares
    
    
    Date Fair ValueRestricted stock outstanding at September 30, 2008
    
    
    
    
    
    $
    Granted
    
    
    241
    
    
    
    2.00Restricted stock outstanding at September 30, 2009
    
    
    241
    
    
    
    2.00Granted
    
    
    140
    
    
    
    2.89Restricted stock outstanding at December 31, 2009
    
    
    381
    
    
    $
    2.33
  Note 5. Commitments
 Leases
   20




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##### Table of Contents



Years ending September 30,2010
    
    $
    9132011
    
    
    8302012
    
    
    5582013
    
    
    5452014
    
    
    551Thereafter
    
    
    147Total
    
    $
    3,544
  401(k) Plan
  Note 6. Financing Arrangements
     21




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##### Table of Contents



December 31,
    
    
    September 30,2009
    
    
    2009Convertible debt
    
    $
    30,513
    
    
    $
    Contingent earn out
    
    
    6,451
    
    
    
    Common shares to be issued
    
    
    2,485
    
    
    
    Senior secured revolving credit facility
    
    
    
    
    
    
    500Secured term loan
    
    
    
    
    
    
    8,000Capitalized leases
    
    
    1,675
    
    
    
    118Total debt obligations
    
    
    41,124
    
    
    
    8,618Less current portion of debt obligations
    
    
    36,572
    
    
    
    84Total debt obligations, net of current portion
    
    $
    4,552
    
    
    $
    8,534
 Note 7. Shareholders Equity
 Common Stock
  Preferred Stock
  Series B
   22




---



##### Table of Contents



Series C
  Series D
  23




---



##### Table of Contents



Series E and Series F
     Common Stock Warrants
   24




---



##### Table of Contents



WeightedWeighted
    
    
    AverageNumber of
    
    
    Average
    
    
    RemainingWarrants
    
    
    Exercise Price
    
    
    Life (years)Warrants outstanding at September 30, 2008
    
    
    1,995
    
    
    $
    3.54
    
    
    
    2.6Granted
    
    
    407Cancelled
    
    
    (461
    )Warrants outstanding at September 30, 2009
    
    
    1,941
    
    
    
    3.34
    
    
    
    4.0Cancelled
    
    
    (10
    )Warrants outstanding at December 31, 2009
    
    
    1,931
    
    
    
    3.33
    
    
    
    3.8
 Note 8. Net Loss Per Common Share
   25




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Forward-looking Statements
  
    
    although we have generated operating income and net income recently,
operating losses may occur in the future and may be in excess of
amounts that could be funded from operations and thus we may be
dependent upon external investment to support our operations during
these periods;
    
    we will continue to be dependent upon positioning systems and
communication networks owned and controlled by others, and
accordingly, their problems may adversely impact us;
    
    for the foreseeable future, we are dependent upon the continued
receipt and fulfillment of new orders for our current products;
    
    our growth and profitability depend on our timely introduction and
market acceptance of new products, our ability to continue to fund
research and development activities, and our ability to establish and
maintain strategic partner relationships.
  Overview
     26




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##### Table of Contents



Technology, People, Processes
  
    
    Technology.XATA provides a total fleet management solution, including hardware,
software 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.
    
    RouteTracker 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). RouteTracker interacts with various
handheld devices using Bluetooth as a wireless in-cab communication medium. The
information collected by RouteTracker 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 hardware and reporting requirements.
    
    Processes.All XATA processes are designed to make managing fleets easier. Drawing on
hundreds of successful implementations with a wide variety of fleets 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.
 27




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##### Table of Contents



Critical Accounting Policies
  Revenue Recognition. Software  Revenue Revenue Recognition  Overall
    Allowance for doubtful accounts.
 Goodwill.
 28




---



##### Table of Contents



Intangibles  Goodwill and
Others,
 Property, Plant, and Equipment  Overall,
 Product Warranties.
 Income taxes
 Income Tax
 29




---



##### Table of Contents



Results of Operations for the three months ended December 31, 2009 and 2008
  For the Three Months EndedDecember 31,2009
    
    
    2008SoftwareRevenue
    
    $
    10,236
    
    
    $
    8,053Cost of goods sold
    
    
    2,639
    
    
    
    2,364Gross margin
    
    $
    7,597
    
    
    $
    5,689Gross margin %
    
    
    74.2
    %
    
    
    70.6
    %SystemsRevenue
    
    $
    6,197
    
    
    $
    5,554Cost of goods sold
    
    
    6,309
    
    
    
    4,433Gross margin
    
    $
    (112
    )
    
    $
    1,121Gross margin %
    
    
    -1.8
    %
    
    
    20.2
    %ServicesRevenue
    
    $
    1,090
    
    
    $
    1,036Cost of goods sold
    
    
    744
    
    
    
    798Gross margin
    
    $
    346
    
    
    $
    238Gross margin %
    
    
    31.7
    %
    
    
    23.0
    %TotalRevenue
    
    $
    17,523
    
    
    $
    14,643Cost of goods sold
    
    
    9,692
    
    
    
    7,595Gross margin
    
    $
    7,831
    
    
    $
    7,048Gross margin %
    
    
    44.7
    %
    
    
    48.1
    %
 Revenue
    30




---



##### Table of Contents



Cost of Goods Sold and Gross Margin
 Cost of software
 Cost of systems
 Cost of services
 Selling, General and Administrative Expenses
  Research & Development Expenses
  31




---



##### Table of Contents



Acquisition Related Costs
 Business Combinations
 Interest Expense on Financing Activities
  Acquisition Related Interest and Mark to Market Expense
  Net Interest and Other Expense
  Income Taxes
 Income Tax
 32




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##### Table of Contents



Net Loss to Common Shareholders
  Liquidity and Capital Resources
       33




---



##### Table of Contents



Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures and Internal Control over Financial Reporting
   34




---



##### Table of Contents



Item 1. Legal Proceedings.
   
 Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
  35




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##### Table of Contents



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
 36




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##### Table of Contents



Dated:  February 16, 2010
    XATA Corporation
(Registrant)by:
    /s/ Mark E. TiesMark E. TiesChief Financial Officer
(Signing as Principal Financial and Accounting
Officer, and as Authorized Signatory of
Registrant) 37