##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended June 30, 2010
 or
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission File Number: 0-27166
 XATA Corporation
 
  Minnesota
    
    41-1641815(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification Number)
  
   
 þ o
 o o
 o þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)




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##### 



Index
 Page No.PART I. FINANCIAL INFORMATIONItem 1. Consolidated Financial Statements (Unaudited):Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 2010 and 2009
    
    
    3Consolidated Balance Sheets as of June 30, 2010
and September 30, 2009
    
    
    4Consolidated Statements of Changes in Shareholders Equity for the Nine Months Ended June 30,
2010 and the Twelve Months Ended September 30, 2009
    
    
    5Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2010 and 2009
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis
of Financial Condition and Results of Operation
    
    
    27Item 4. Controls and Procedures
    
    
    33PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    34Item 1A. Risk Factors
    
    
    34Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    34Item 3. Defaults upon Senior Securities
    
    
    34Item 4. Reserved
    
    
    34Item 5. Other Information
    
    
    34Item 6. Exhibits
    
    
    34SIGNATURESEXHIBITSEX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



Item 1. Consolidated Financial Statements (Unaudited).
 XATA CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Three Months Ended
    
    
    For the Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenue
    
    $
    17,954
    
    
    $
    17,589
    
    
    $
    53,582
    
    
    $
    49,127Costs and expensesCost of goods sold
    
    
    8,912
    
    
    
    10,085
    
    
    
    27,669
    
    
    
    26,943Selling, general and administrative
    
    
    6,627
    
    
    
    5,712
    
    
    
    19,702
    
    
    
    17,364Research and development
    
    
    1,759
    
    
    
    1,407
    
    
    
    4,692
    
    
    
    4,218Acquisition related costs
    
    
    
    
    
    
    
    
    
    
    837
    
    
    
    Total costs and expenses
    
    
    17,298
    
    
    
    17,204
    
    
    
    52,900
    
    
    
    48,525Operating income
    
    
    656
    
    
    
    385
    
    
    
    682
    
    
    
    602Interest expense on financing activities
    
    
    
    
    
    
    
    
    
    
    (1,358
    )
    
    
    Acquisition related interest and mark to market
    
    
    (2
    )
    
    
    
    
    
    
    (356
    )
    
    
    Net interest and other expense
    
    
    (28
    )
    
    
    (351
    )
    
    
    (392
    )
    
    
    (1,148
    )Income (loss) before income taxes
    
    
    626
    
    
    
    34
    
    
    
    (1,424
    )
    
    
    (546
    )Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    
    626
    
    
    
    34
    
    
    
    (1,424
    )
    
    
    (546
    )Preferred stock dividends
    
    
    (52
    )
    
    
    (50
    )
    
    
    (155
    )
    
    
    (149
    )Preferred stock deemed dividends
    
    
    (23
    )
    
    
    (46
    )
    
    
    (1,691
    )
    
    
    (525
    )Net income (loss) to common shareholders
    
    $
    551
    
    
    $
    (62
    )
    
    $
    (3,270
    )
    
    $
    (1,220
    )Net income (loss) per common share:Basic
    
    $
    0.06
    
    
    $
    (0.01
    )
    
    $
    (0.36
    )
    
    $
    (0.14
    )Diluted
    
    $
    0.02
    
    
    $
    (0.01
    )
    
    $
    (0.36
    )
    
    $
    (0.14
    )Weighted average common and
common share equivalents:Basic
    
    
    9,718
    
    
    
    8,588
    
    
    
    9,170
    
    
    
    8,530Diluted
    
    
    26,359
    
    
    
    8,588
    
    
    
    9,170
    
    
    
    8,530
  3




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##### Table of Contents



XATA CORPORATION


CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    September 30,2010
    
    
    2009ASSETSCurrent assetsCash and cash equivalents
    
    $
    15,551
    
    
    $
    3,440Accounts receivable, less allowances
of $544 at June 30, 2010 and $368 at September 30, 2009
    
    
    10,044
    
    
    
    9,323Inventories
    
    
    2,538
    
    
    
    4,104Deferred product costs
    
    
    2,161
    
    
    
    2,060Prepaid expenses and other current assets
    
    
    740
    
    
    
    1,064Total current assets
    
    
    31,034
    
    
    
    19,991Equipment, leased equipment and leasehold improvements, net
    
    
    5,487
    
    
    
    3,980Intangible assets, net
    
    
    15,474
    
    
    
    10,725Goodwill
    
    
    15,459
    
    
    
    3,011Deferred product costs, net of current portion
    
    
    1,849
    
    
    
    2,470Other assets
    
    
    275
    
    
    
    487Total assets
    
    $
    69,578
    
    
    $
    40,664LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of debt obligations
    
    $
    852
    
    
    $
    84Accounts payable
    
    
    5,753
    
    
    
    5,366Accrued expenses
    
    
    4,927
    
    
    
    5,914Deferred revenue
    
    
    4,902
    
    
    
    5,280Total current liabilities
    
    
    16,434
    
    
    
    16,644Debt obligations, net of current portion
    
    
    397
    
    
    
    8,534Deferred revenue, net of current portion
    
    
    4,113
    
    
    
    6,101Other long-term liabilities
    
    
    682
    
    
    
    820Total liabilities
    
    
    21,626
    
    
    
    32,099Shareholders equityPreferred stock, no par, 50,000 shares authorized:Series B, 4% convertible, 2,250 shares designated;
shares issued and outstanding: 2,085 at June 30, 2010
and 2,004 at September 30, 2009
    
    
    5,033
    
    
    
    4,790Series C, convertible, 1,400 shares designated;
shares issued and outstanding: 1,269 at June 30, 2010
and September 30, 2009
    
    
    4,426
    
    
    
    4,426Series D, convertible, 1,600 shares designated;
shares issued and outstanding: 1,567 at June 30, 2010
and September 30, 2009
    
    
    5,279
    
    
    
    5,279Series F, convertible, 1,400 shares designated;
shares issued and outstanding: 1,356 at June 30, 2010
and September 30, 2009
    
    
    2,365
    
    
    
    2,365Series G, convertible, 10,100 shares designated;
shares issued and outstanding: 10,067 at June 30, 2010
    
    
    26,877
    
    
    
    Common stock, par value $0.01 per share; 100,000 shares
authorized; shares issued and outstanding: 9,815 at
June 30, 2010 and 8,789 at September 30, 2009
    
    
    98
    
    
    
    88Contingent common stock earn-out
    
    
    6,452
    
    
    
    Additional paid-in capital
    
    
    41,355
    
    
    
    32,536Accumulated deficit
    
    
    (44,189
    )
    
    
    (40,919
    )Accumulated other comprehensive income
    
    
    256
    
    
    
    Total shareholders equity
    
    
    47,952
    
    
    
    8,565Total liabilities and shareholders equity
    
    $
    69,578
    
    
    $
    40,664
  4




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##### Table of Contents



CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
 AccumulatedSeries B
    
    
    Series C
    
    
    Series D
    
    
    Series F
    
    
    Series G
    
    
    
    
    
    
    
    
    
    
    Contingent
    
    
    Additional
    
    
    
    
    
    
    OtherPreferred Stock
    
    
    Preferred Stock
    
    
    Preferred Stock
    
    
    Preferred Stock
    
    
    Preferred Stock
    
    
    Common Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    Accumulated
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Earn-Out
    
    
    Capital
    
    
    Deficit
    
    
    Income
    
    
    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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,026
    
    
    
    
    
    
    
    
    
    
    
    1,026Issuance of common stock for share based
compensation awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    218
    
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    4Issuance of common stock for acquisition of
Turnpike Global Technologies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    810
    
    
    
    8
    
    
    
    
    
    
    
    2,422
    
    
    
    
    
    
    
    
    
    
    
    2,430Forfeiture of restricted shares of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Contingent common stock earn-out
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,452
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,452Issuance of preferred stock and warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,067
    
    
    
    26,877
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,715
    
    
    
    
    
    
    
    
    
    
    
    30,592Record the beneficial conversion feature
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,654
    
    
    
    (1,654
    )
    
    
    
    
    
    
    Preferred stock dividends
    
    
    81
    
    
    
    206
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (155
    )
    
    
    
    
    
    
    51Preferred stock deemed dividends
    
    
    
    
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37
    )
    
    
    
    
    
    
    Comprehensive loss:Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    256
    
    
    
    256Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,424
    )
    
    
    
    
    
    
    (1,424
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,168
    )Balance at June 30, 2010
    
    
    2,085
    
    
    $
    5,033
    
    
    
    1,269
    
    
    $
    4,426
    
    
    
    1,567
    
    
    $
    5,279
    
    
    
    1,356
    
    
    $
    2,365
    
    
    
    10,067
    
    
    $
    26,877
    
    
    
    9,815
    
    
    $
    98
    
    
    $
    6,452
    
    
    $
    41,355
    
    
    $
    (44,189
    )
    
    $
    256
    
    
    $
    47,952
  5




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##### Table of Contents



XATA CORPORATION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Nine Months EndedJune 30,2010
    
    
    2009Operating activitiesNet loss
    
    $
    (1,424
    )
    
    $
    (546
    )Adjustments to reconcile net loss to net cash provided by
operating activities:Depreciation and amortization of intangibles
    
    
    3,707
    
    
    
    2,250Amortization of debt financing costs
    
    
    458
    
    
    
    188Non-cash interest expense on convertible debt
    
    
    892
    
    
    
    Non-cash charges for issuance of equity securities related to the
acquisition of Turnpike Global Technologies
    
    
    357
    
    
    
    Stock based compensation
    
    
    1,026
    
    
    
    1,195Changes in assets and liabilities, net of impact of acquisition:Accounts receivable, net
    
    
    141
    
    
    
    2,290Inventories
    
    
    1,566
    
    
    
    (1,491
    )Deferred product costs
    
    
    521
    
    
    
    (539
    )Prepaid expenses and other assets
    
    
    356
    
    
    
    690Accounts payable
    
    
    (226
    )
    
    
    833Accrued expenses
    
    
    (1,634
    )
    
    
    (1,830
    )Deferred revenue
    
    
    (2,365
    )
    
    
    (731
    )Net cash provided by operating activities
    
    
    3,375
    
    
    
    2,309Investing activitiesPurchase of equipment and leasehold improvements
    
    
    (2,063
    )
    
    
    (892
    )Acquisition of Turnpike Global Technologies, net of cash acquired
    
    
    (9,451
    )
    
    
    Net cash used in investing activities
    
    
    (11,514
    )
    
    
    (892
    )Financing activitiesBorrowings on long-term obligations, net of costs
    
    
    29,709
    
    
    
    18,077Payments on long-term obligations
    
    
    (9,460
    )
    
    
    (27,622
    )Proceeds from issuance of preferred stock and warrants
    
    
    
    
    
    
    2,865Proceeds from options exercised
    
    
    4
    
    
    
    Net cash provided by (used in) financing activities
    
    
    20,253
    
    
    
    (6,680
    )Effects of exchange rate on cash
    
    
    (3
    )
    
    
    Increase (decrease) in cash and cash equivalents
    
    
    12,111
    
    
    
    (5,263
    )Cash and cash equivalentsBeginning
    
    
    3,440
    
    
    
    8,904Ending
    
    $
    15,551
    
    
    $
    3,641Supplemental disclosures of cash flow informationCash payments for interest
    
    $
    406
    
    
    $
    883Supplemental schedule of noncash investing and financing activitiesAssets acquired under capital lease obligation
    
    $
    161
    
    
    $
    Preferred stock deemed dividends
    
    $
    1,691
    
    
    $
    525Preferred stock dividends
    
    $
    155
    
    
    $
    17Preferred stock dividends paid
    
    $
    206
    
    
    $
    197Conversion of debt into Series G preferred stock and warrants
    
    $
    30,592
    
    
    $
    Contingent common stock earnout related to purchase of Turnpike Global
Technologies
    
    $
    6,452
    
    
    $
    Issuance of common stock related to purchase of Turnpike Global Technologies
    
    $
    2,430
    
    
    $
    
  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




---



##### Table of Contents



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




---



##### Table of Contents



Use of Estimates
  Subsequent Events
  Cash and Cash Equivalents
  Fair Value of Financial Instruments
 Fair Value Hierarchy
 Fair Value Measurement and Disclosures,
 Level 1 
 Level 2 
 Level 3 
   9




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##### Table of Contents



Fair Value Measurements at Reporting Date UsingJune 30, 2010
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Liabilities:Contingent earn out
    
    $
    179
    
    
    $
    
    
    
    $
    
    
    
    $
    179Total
    
    $
    179
    
    
    $
    
    
    
    $
    
    
    
    $
    179
  Inventories
  Investment in Sales-Type Leases
  Years ending September 30,2010
    
    $
    272011
    
    
    38Total minimum lease payments
    
    
    65Less: amount representing interest (at 11.71%)
    
    
    (12
    )Present value of net minimum sales-type lease payments (current)
    
    
    53
  Debt Financing Costs
  10




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##### Table of Contents



Equipment, Leased Equipment and Leasehold Improvements
   June 30,
    
    
    September 30,2010
    
    
    2009Office furniture and equipment
    
    $
    6,201
    
    
    $
    4,464Leased equipment
    
    
    2,352
    
    
    
    520Engineering and manufacturing equipment
    
    
    915
    
    
    
    900Leasehold improvements
    
    
    2,435
    
    
    
    2,65011,903
    
    
    
    8,534Less: accumulated depreciation
    
    
    (6,416
    )
    
    
    (4,554
    )Equipment and leasehold improvements, net
    
    $
    5,487
    
    
    $
    3,980
  Capitalized Software Development Costs
 Software  Costs
to Be Sold, Leased, or Otherwise Marketed
  Long-Lived Assets
  11




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##### Table of Contents



Goodwill
 Intangibles  Goodwill and Others,
  Balance at September 30, 2009
    
    $
    3,011Goodwill from acquisition of Turnpike
    
    
    12,301Foreign currency translation adjustment
    
    
    147Balance at June 30, 2010
    
    $
    15,459
 Intangible Assets
 Property, Plant, and Equipment  Overall,
 12




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##### Table of Contents



Weighted
    
    
    
    
    
    
    
    
    
    
    Foreign CurrencyAverage Life
    
    
    
    
    
    
    Accumulated
    
    
    Translation(years)
    
    
    Cost
    
    
    Amortization
    
    
    Adjustment
    
    
    NetAcquired customer contracts
    
    
    7.8
    
    
    $
    14,900
    
    
    $
    (4,217
    )
    
    $
    20
    
    
    $
    10,703Acquired technology
    
    
    7.0
    
    
    
    2,700
    
    
    
    (230
    )
    
    
    38
    
    
    
    2,508Reseller relationships
    
    
    6.0
    
    
    
    1,500
    
    
    
    (149
    )
    
    
    21
    
    
    
    1,372Trademark
    
    
    10.0
    
    
    
    900
    
    
    
    (54
    )
    
    
    13
    
    
    
    859Other intangibles
    
    
    7.0
    
    
    
    49
    
    
    
    (17
    )
    
    
    
    
    
    
    32Total
    
    
    7.7
    
    
    $
    20,049
    
    
    $
    (4,667
    )
    
    $
    92
    
    
    $
    15,474
  Years ending September 30,2010
    
    $
    6742011
    
    
    2,6942012
    
    
    2,6942013
    
    
    2,6942014
    
    
    2,694Thereafter
    
    
    4,024Total expected amortization expense
    
    $
    15,474
 Product Warranties
   Shipping Costs
  13




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##### Table of Contents



Advertising Costs
  Income taxes
 Income Taxes -
Overall
 Recently Issued Accounting Standards
 Fair Value Measurement and Disclosures (ASU 2010-06)
  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 Ended
    
    
    For the Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenue:Software
    
    $
    11,586
    
    
    $
    8,976
    
    
    $
    33,194
    
    
    $
    25,441Systems
    
    
    5,385
    
    
    
    6,804
    
    
    
    17,176
    
    
    
    19,215Services
    
    
    983
    
    
    
    1,809
    
    
    
    3,212
    
    
    
    4,471Total revenue
    
    $
    17,954
    
    
    $
    17,589
    
    
    $
    53,582
    
    
    $
    49,127
 For the Three Months Ended
    
    
    For the Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Cost of goods sold:Software
    
    $
    2,988
    
    
    $
    2,495
    
    
    $
    8,676
    
    
    $
    7,258Systems
    
    
    5,004
    
    
    
    6,470
    
    
    
    16,541
    
    
    
    16,725Services
    
    
    920
    
    
    
    1,120
    
    
    
    2,452
    
    
    
    2,960Total cost of goods sold
    
    $
    8,912
    
    
    $
    10,085
    
    
    $
    27,669
    
    
    $
    26,943
   15




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##### Table of Contents



Note 3. Turnpike Global Technologies, Inc. and Turnpike Global Technologies LLC Acquisition
    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
    
    
    1,419Accounts payable
    
    
    (609
    )Accrued expenses
    
    
    (546
    )Capital lease obligations
    
    
    (1,681
    )Net liabilities
    
    
    
    
    
    
    (27
    )Acquired customer contracts and other intangible assets (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. 16




---



##### Table of Contents



(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
   For the Three
    
    
    For the Nine MonthsMonths Ended June
    
    
    Ended June 30,30, 2009
    
    
    2010
    
    
    2009(unaudited pro forma)
    
    
    (unaudited pro forma)Revenue
    
    $
    19,002
    
    
    $
    55,236
    
    
    $
    53,166Net income (loss) to common shareholders
    
    $
    130
    
    
    $
    (2,353
    )
    
    $
    (2,994
    )Net income (loss) per common share:Basic
    
    $
    0.01
    
    
    $
    (0.25
    )
    
    $
    (0.32
    )Diluted
    
    $
    0.01
    
    
    $
    (0.25
    )
    
    $
    (0.32
    )Weighted
average common and common share equivalents  basic and dilutedBasic
    
    
    9,421
    
    
    
    9,585
    
    
    
    9,363Diluted
    
    
    26,077
    
    
    
    9,585
    
    
    
    9,363
 Note 4. Stock-Based Compensation
  17




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##### Table of Contents



Stock Options
 Compensation  Stock Compensation,
  For the Three Months Ended
    
    
    For the Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Number of shares granted
    
    
    9
    
    
    
    
    
    
    
    468
    
    
    
    725Fair value per share
    
    $
    1.41
    
    
    
    
    
    
    $
    1.31
    
    
    $
    0.86Risk-free interest rate
    
    
    3.07
    %
    
    
    
    
    
    
    3.06
    %
    
    
    2.28
    %Expected volatility
    
    
    39.50
    %
    
    
    
    
    
    
    42.35
    %
    
    
    40.26
    %Expected life (in years)
    
    
    6.00
    
    
    
    
    
    
    
    5.94
    
    
    
    5.73Dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 Compensation  Stock Compensation  Overall,
 18




---



##### Table of Contents



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
    
    
    468
    
    
    
    2.91Exercised
    
    
    (2
    )
    
    
    2.00Cancelled:Expired
    
    
    (25
    )
    
    
    5.23Forfeited
    
    
    (59
    )
    
    
    2.83Options outstanding at June 30, 2010
    
    
    2,287
    
    
    $
    3.57
    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
    
    
    1,263
    
    
    
    8.7
    
    
    $
    2.46
    
    
    
    389
    
    
    
    8.2
    
    
    $
    2.393.00 - 3.99
    
    
    163
    
    
    
    8.5
    
    
    
    3.51
    
    
    
    82
    
    
    
    8.5
    
    
    
    3.404.33 - 4.98
    
    
    35
    
    
    
    6.2
    
    
    
    4.64
    
    
    
    35
    
    
    
    6.2
    
    
    
    4.645.03 - 5.40
    
    
    826
    
    
    
    6.4
    
    
    
    5.23
    
    
    
    826
    
    
    
    6.4
    
    
    
    5.232,287
    
    
    
    7.8
    
    
    
    3.57
    
    
    
    1,332
    
    
    
    7.1
    
    
    
    4.27
 19




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##### Table of Contents



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
    
    
    
    3.93Granted
    
    
    15
    
    
    
    3.00Vested
    
    
    (83
    )
    
    
    3.67Forfeited
    
    
    (2
    )
    
    
    3.20Restricted stock outstanding at June 30, 2010
    
    
    86
    
    
    $
    4.03
   Restricted Stock Units
  20




---



##### Table of Contents



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
    
    
    152
    
    
    
    2.91Settled
    
    
    (200
    )
    
    
    2.20Cancelled:Expired
    
    
    
    
    
    
    Forfeited
    
    
    (17
    )
    
    
    2.30Restricted stock outstanding at June 30, 2010
    
    
    176
    
    
    $
    2.53
    Note 5. Commitments
 Leases
   Years ending September 30,2010
    
    $
    3212011
    
    
    8512012
    
    
    5562013
    
    
    5412014
    
    
    551Thereafter
    
    
    147Total
    
    $
    2,967
 21




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##### Table of Contents



401(k) Plan
  Purchase Commitments
  Note 6. Financing Arrangements
  June 30,
    
    
    September 30,2010
    
    
    2009Contingent earn out
    
    $
    179
    
    
    $
    Senior secured revolving credit facility
    
    
    
    
    
    
    500Secured term loan
    
    
    
    
    
    
    8,000Capitalized leases
    
    
    1,070
    
    
    
    118Total debt obligations
    
    
    1,249
    
    
    
    8,618Less current portion of debt obligations
    
    
    852
    
    
    
    84Total debt obligations, net of current portion
    
    $
    397
    
    
    $
    8,534
   22




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##### Table of Contents



Note 7. Shareholders Equity
 Common Stock
  Preferred Stock
  Series B
  Series C
  23




---



##### Table of Contents



Series D
  Series E and Series F
  Series G
     24




---



##### Table of Contents



Common Stock Warrants
    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
    
    
    
    4.0Granted
    
    
    3,020Cancelled
    
    
    (10
    )Warrants outstanding at June 30, 2010
    
    
    4,951
    
    
    $
    3.13
    
    
    
    5.3
 Note 8. Net Income (Loss) Per Common Share
   Three months ended
    
    
    Nine months endedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Numerator:Net income (loss) to common shareholders
    
    $
    551
    
    
    $
    (62
    )
    
    $
    (3,270
    )
    
    $
    (1,220
    )Denominator:Weighted average common shares  basic
    
    
    9,718
    
    
    
    8,588
    
    
    
    9,170
    
    
    
    8,530Effect of preferred stock
    
    
    16,316
    
    
    
    Effect of dilutive options, RSUs, RSAs,
and warrants
    
    
    325
    
    
    
    
    
    
    
    
    
    
    
    Weighted average common shares  diluted
    
    
    26,359
    
    
    
    8,588
    
    
    
    9,170
    
    
    
    8,530Basic earnings (loss) per share
    
    $
    0.06
    
    
    $
    (0.01
    )
    
    $
    (0.36
    )
    
    $
    (0.14
    )Diluted earnings (loss) per share
    
    $
    0.02
    
    
    $
    (0.01
    )
    
    $
    (0.36
    )
    
    $
    (0.14
    )
 25




---



##### Table of Contents



26




---



##### 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 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
    27




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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.
 28




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##### Table of Contents



Critical Accounting Policies
   Results of Operations for the three and nine months ended June 30, 2010 and 2009
  For the Three Months Ended
    
    
    For the Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009SoftwareRevenue
    
    $
    11,586
    
    
    $
    8,976
    
    
    $
    33,194
    
    
    $
    25,441Cost of goods sold
    
    
    2,988
    
    
    
    2,495
    
    
    
    8,676
    
    
    
    7,258Gross margin
    
    $
    8,598
    
    
    $
    6,481
    
    
    $
    24,518
    
    
    $
    18,183Gross margin %
    
    
    74.2
    %
    
    
    72.2
    %
    
    
    73.9
    %
    
    
    71.5
    %SystemsRevenue
    
    $
    5,385
    
    
    $
    6,804
    
    
    $
    17,176
    
    
    $
    19,215Cost of goods sold
    
    
    5,004
    
    
    
    6,470
    
    
    
    16,541
    
    
    
    16,725Gross margin
    
    $
    381
    
    
    $
    334
    
    
    $
    635
    
    
    $
    2,490Gross margin %
    
    
    7.1
    %
    
    
    4.9
    %
    
    
    3.7
    %
    
    
    13.0
    %ServicesRevenue
    
    $
    983
    
    
    $
    1,809
    
    
    $
    3,212
    
    
    $
    4,471Cost of goods sold
    
    
    920
    
    
    
    1,120
    
    
    
    2,452
    
    
    
    2,960Gross margin
    
    $
    63
    
    
    $
    689
    
    
    $
    760
    
    
    $
    1,511Gross margin %
    
    
    6.4
    %
    
    
    38.1
    %
    
    
    23.7
    %
    
    
    33.8
    %TotalRevenue
    
    $
    17,954
    
    
    $
    17,589
    
    
    $
    53,582
    
    
    $
    49,127Cost of goods sold
    
    
    8,912
    
    
    
    10,085
    
    
    
    27,669
    
    
    
    26,943Gross margin
    
    $
    9,042
    
    
    $
    7,504
    
    
    $
    25,913
    
    
    $
    22,184Gross margin %
    
    
    50.4
    %
    
    
    42.7
    %
    
    
    48.4
    %
    
    
    45.2
    %
 29




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##### Table of Contents



Revenue
     Cost of Goods Sold and Gross Margin
 Cost of software
 Cost of systems
 30




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##### Table of Contents



Cost of services
 Selling, General and Administrative Expenses
  Research & Development Expenses
  Acquisition Related Costs
 Business Combinations
 Interest Expense on Financing Activities
  31




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##### Table of Contents



Acquisition Related Interest and Mark to Market Expense
  Net Interest and Other Expense
  Income Taxes
 Income Tax
  Net Income (Loss) to Common Shareholders
  Liquidity and Capital Resources
  32




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##### Table of Contents



Recently Issued Accounting Standards
  
 Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures and Internal Control over Financial Reporting
   33




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##### Table of Contents



Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Reserved
 
 Item 5. Other Information.
  
 Item 6. Exhibits.
 31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 32.1
    
    Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
 32.2
    
    Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
 34




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##### Table of Contents



Dated:  August 13, 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) 35