##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended March 31, 2008 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 þ
  Large accelerated filer oAccelerated filer oNon-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 and Six Months Ended March 31, 2008 and 2007
    
    
    3Consolidated Balance Sheets as of March 31, 2008 and September 30, 2007
    
    
    4Consolidated Statements of Changes in Shareholders Equity for the Six Months Ended March 31, 2008 and the Twelve Months Ended September 30, 2007
    
    
    5Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2008 and 2007
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    22Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    30Item 4.
    
    Controls and Procedures
    
    
    30PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    31Item 1A.
    
    Risk Factors
    
    
    31Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    31Item 3.
    
    Defaults upon Senior Securities
    
    
    31Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    32Item 5.
    
    Other Information
    
    
    32Item 6.
    
    Exhibits
    
    
    32SIGNATURESEXHIBITSSection 302 CertificationSection 302 CertificationSection 906 CertificationSection 906 Certification
  2




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##### Table of Contents



Item 1. Consolidated Financial Statements.
 
 XATA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
 Three months ended
    
    
    Six months endedMarch 31,
    
    
    March 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales
    
    $
    12,129
    
    
    $
    8,162
    
    
    $
    19,816
    
    
    $
    15,936Costs and expensesCost of goods sold
    
    
    6,009
    
    
    
    4,670
    
    
    
    10,067
    
    
    
    8,851Selling, general and administrative
    
    
    5,759
    
    
    
    3,438
    
    
    
    9,475
    
    
    
    6,495Research and development
    
    
    1,439
    
    
    
    1,024
    
    
    
    2,479
    
    
    
    2,198Total costs and expenses
    
    
    13,207
    
    
    
    9,132
    
    
    
    22,021
    
    
    
    17,544Operating loss
    
    
    (1,078
    )
    
    
    (970
    )
    
    
    (2,205
    )
    
    
    (1,608
    )Interest income
    
    
    110
    
    
    
    101
    
    
    
    241
    
    
    
    192Interest expense
    
    
    (370
    )
    
    
    (6
    )
    
    
    (387
    )
    
    
    (13
    )Loss before income taxes
    
    
    (1,338
    )
    
    
    (875
    )
    
    
    (2,351
    )
    
    
    (1,429
    )Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    (1,338
    )
    
    
    (875
    )
    
    
    (2,351
    )
    
    
    (1,429
    )Preferred stock dividends
    
    
    (47
    )
    
    
    (46
    )
    
    
    (94
    )
    
    
    (92
    )Preferred stock deemed dividends
    
    
    
    
    
    
    
    
    
    
    (43
    )
    
    
    (95
    )Net loss to common shareholders
    
    $
    (1,385
    )
    
    $
    (921
    )
    
    $
    (2,488
    )
    
    $
    (1,616
    )Net loss per common share  basic and diluted
    
    $
    (0.17
    )
    
    $
    (0.12
    )
    
    $
    (0.30
    )
    
    $
    (0.20
    )Weighted average common and
common share equivalents   basic and diluted
    
    
    8,306
    
    
    
    7,921
    
    
    
    8,234
    
    
    
    7,883
  3




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##### Table of Contents



XATA CORPORATION
CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    September 30,2008
    
    
    2007(Unaudited)ASSETSCurrent AssetsCash and cash equivalents
    
    $
    8,036
    
    
    $
    13,675Accounts receivable, less allowances for doubtful accounts and sales
returns of $773 at March 31, 2008 and $256 at September 30, 2007
    
    
    9,196
    
    
    
    3,280Inventories
    
    
    3,876
    
    
    
    2,672Deferred product costs
    
    
    1,098
    
    
    
    752Current portion of investment in sales-type leases
    
    
    955
    
    
    
    Prepaid expenses and other current assets
    
    
    1,596
    
    
    
    393Total current assets
    
    
    24,757
    
    
    
    20,772Equipment and leasehold improvements, net
    
    
    4,070
    
    
    
    1,583Intangible assets
    
    
    13,372
    
    
    
    Goodwill
    
    
    1,303
    
    
    
    Deferred product costs, net of current portion
    
    
    1,936
    
    
    
    1,798Investment in sales-type leases, net of current portion
    
    
    759
    
    
    
    Other assets
    
    
    676
    
    
    
    Total assets
    
    $
    46,873
    
    
    $
    24,153LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesAccounts payable
    
    $
    5,194
    
    
    $
    3,419Current portion of long-term obligations and deferred rent
    
    
    2,237
    
    
    
    161Accrued expenses
    
    
    4,821
    
    
    
    3,548Deferred revenue
    
    
    4,382
    
    
    
    3,105Total current liabilities
    
    
    16,634
    
    
    
    10,233Long-term obligations, net of current portion
    
    
    16,387
    
    
    
    220Deferred rent, net of current portion
    
    
    854
    
    
    
    98Deferred revenue, net of current portion
    
    
    6,502
    
    
    
    6,524Total liabilities
    
    
    40,377
    
    
    
    17,075Shareholders EquityPreferred stock, no par, 10,000 shares authorized:Series B, 4% convertible, 2,250 shares designated; 
shares issued and outstanding: 1,888 at March 31, 2008
and 1,851 at September 30, 2007
    
    
    5,058
    
    
    
    4,921Series C, convertible, 1,400 shares designated; 

1,269 shares issued and outstanding at March 31, 2008
and September 30, 2007
    
    
    4,845
    
    
    
    4,845Series D, convertible, 1,600 shares designated; 

1,567 shares issued and outstanding at March 31, 2008
and September 30, 2007
    
    
    5,937
    
    
    
    5,937Common stock, par value $0.01 per share; 25,000 shares
authorized; shares issued and outstanding: 8,749 at March 31, 2008
and 8,516 at September 30, 2007
    
    
    87
    
    
    
    85Additional paid-in capital
    
    
    27,527
    
    
    
    25,760Accumulated deficit
    
    
    (36,958
    )
    
    
    (34,470
    )Total shareholders equity
    
    
    6,496
    
    
    
    7,078Total liabilities and shareholders equity
    
    $
    46,873
    
    
    $
    24,153
  4




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##### Table of Contents



XATA CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
 Series B
    
    Series C
    
    Series D
    
    
    
    
    
    
    
    
    
    Additional
    
    UnearnedPreferred Stock
    
    Preferred Stock
    
    Preferred Stock
    
    Common Stock
    
    Paid-In
    
    Stock-Based
    
    AccumulatedShares
    
    Amount
    
    Shares
    
    Amount
    
    Shares
    
    Amount
    
    Shares
    
    Amount
    
    Capital
    
    Compensation
    
    Deficit
    
    TotalBalance at September 30, 2006
    
    
    1,779
    
    
    $
    4,579
    
    
    
    1,269
    
    
    $
    4,845
    
    
    
    
    
    
    $
    
    
    
    
    7,963
    
    
    $
    80
    
    
    $
    23,246
    
    
    $
    (900
    )
    
    $
    (26,660
    )
    
    $
    5,190Common stock issued on exercise of options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    54Issuance of restricted shares of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    450
    
    
    
    4
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    Elimination of unearned compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (900
    )
    
    
    900
    
    
    
    
    
    
    
    Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,021
    
    
    
    
    
    
    
    
    
    
    
    2,021Forfeiture of restricted shares of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112
    
    
    
    1
    
    
    
    604
    
    
    
    
    
    
    
    
    
    
    
    605Issuance of preferred stock and warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,567
    
    
    
    5,279
    
    
    
    
    
    
    
    
    
    
    
    739
    
    
    
    
    
    
    
    
    
    
    
    6,018Preferred stock dividends
    
    
    72
    
    
    
    183
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (185
    )
    
    
    (2
    )Preferred stock deemed dividends
    
    
    
    
    
    
    159
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    658
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (817
    )
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,808
    )
    
    
    (6,808
    )Balance at September 30, 2007
    
    
    1,851
    
    
    
    4,921
    
    
    
    1,269
    
    
    
    4,845
    
    
    
    1,567
    
    
    
    5,937
    
    
    
    8,516
    
    
    
    85
    
    
    $
    25,760
    
    
    
    
    
    
    
    (34,470
    )
    
    
    7,078Common stock issued on exercise of options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    43Issuance of restricted shares of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    138
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    882
    
    
    
    
    
    
    
    
    
    
    
    882Forfeiture of restricted shares of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    91
    
    
    
    1
    
    
    
    843
    
    
    
    
    
    
    
    
    
    
    
    844Preferred stock dividends
    
    
    37
    
    
    
    94
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (94
    )
    
    
    Preferred stock deemed dividends
    
    
    
    
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43
    )
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,351
    )
    
    
    (2,351
    )Balance at March 31, 2008
    
    
    1,888
    
    
    $
    5,058
    
    
    
    1,269
    
    
    $
    4,845
    
    
    
    1,567
    
    
    $
    5,937
    
    
    
    8,749
    
    
    $
    87
    
    
    $
    27,527
    
    
    $
    
    
    
    $
    (36,958
    )
    
    $
    6,496
  5




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##### Table of Contents



XATA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months Ended March 31,2008
    
    
    2007Cash flows from operating activitiesNet loss
    
    $
    (2,351
    )
    
    $
    (1,429
    )Adjustments to reconcile net loss to net cash provided by
operating activities:Depreciation of fixed assets and amortization of intangibles
    
    
    882
    
    
    
    491Amortization of debt financing costs
    
    
    42
    
    
    
    Stock based compensation
    
    
    883
    
    
    
    927Changes in assets and liabilities, net of the impact of acquisitions:Accounts receivable, net
    
    
    (1,636
    )
    
    
    662Inventories
    
    
    1,591
    
    
    
    434Deferred product costs
    
    
    (484
    )
    
    
    1,416Prepaid expenses and other assets
    
    
    (727
    )
    
    
    (9
    )Lease equipment receivable
    
    
    110
    
    
    
    Accounts payable
    
    
    (1,213
    )
    
    
    99Accrued expenses
    
    
    (1,220
    )
    
    
    (499
    )Deferred rent
    
    
    59
    
    
    
    Deferred revenue
    
    
    1,254
    
    
    
    (42
    )Net cash (used in) provided by operating activities
    
    
    (2,810
    )
    
    
    2,050Cash flows from investing activitiesPurchase of equipment and leasehold improvements
    
    
    (2,506
    )
    
    
    (95
    )Additions to system development costs
    
    
    
    
    
    
    (160
    )Purchase of GeoLogic Solutions, Inc., net of cash acquired
    
    
    (16,171
    )
    
    
    Net cash (used in) investing activities
    
    
    (18,677
    )
    
    
    (255
    )Cash flows from financing activitiesBorrowings on bank line of credit
    
    
    16,224
    
    
    
    Payments on long-term obligations
    
    
    (89
    )
    
    
    (45
    )Payments on financing costs
    
    
    (339
    )
    
    
    Proceeds from issuance of common stock
    
    
    
    
    
    
    605Proceeds from options exercised and warrants issued
    
    
    52
    
    
    
    27Net cash provided by financing activities
    
    
    15,848
    
    
    
    587(Decrease) increase in cash and cash equivalents
    
    
    (5,639
    )
    
    
    2,382Cash and cash equivalentsBeginning
    
    
    13,675
    
    
    
    6,354Ending
    
    $
    8,036
    
    
    $
    8,736Supplemental disclosures of cash flow informationCash payments for interest
    
    $
    251
    
    
    $
    13Supplemental schedule of noncash investing and financing activitiesPreferred stock deemed dividends
    
    
    43
    
    
    
    95Preferred stock dividends payable
    
    
    64
    
    
    
    62Preferred stock dividends paid
    
    
    94
    
    
    
    92Issuance of warrants in consideration for financing fees
    
    
    535
    
    
    
    Issuance of sellers note
    
    
    2,000
    
    
    
    Issuance of common stock in consideration for GeoLogic purchase
    
    
    300
    
    
    
    
  6




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##### Table of Contents



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




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##### Table of Contents



Application of AICPA Statement of Position 97-2 to Arrangements That Include the
Right to Use Software Stored on Another Entitys Hardware
 Use of Estimates
  Basis of Presentation
  Cash and Cash Equivalents
  Concentration of Credit Risk
   8




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##### Table of Contents



Fair Value of Financial Instruments
  Inventories
  March 31,
    
    
    September 30,2008
    
    
    2007Parts and accessories
    
    $
    1,025
    
    
    $
    1,021Finished goods
    
    
    2,629
    
    
    
    1,651Repair and refurbished
    
    
    222
    
    
    
    Total inventories
    
    $
    3,876
    
    
    $
    2,672
 Investment in Sales-Type Leases
  9




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##### Table of Contents



Years ending September 30,2008
    
    $
    5862009
    
    
    9322010
    
    
    3472011
    
    
    53Total minimum lease payments
    
    
    1,918Less: amount representing interest (at 11.71%)
    
    
    (204
    )Present value of net minimum sales-type lease payments
    
    
    1,714Less: current installments of investment in sales-type leases
    
    
    (955
    )Investment in sales-type leases, excluding current installments
    
    $
    759
  Other Assets
  Equipment and Leasehold Improvements
   March 31,
    
    
    September 30,2008
    
    
    2007Office furniture and equipment
    
    $
    3,886
    
    
    $
    3,353Leasehold improvements
    
    
    2,055
    
    
    
    78Engineering and manufacturing equipment
    
    
    683
    
    
    
    574Operating-lease equipment
    
    
    124
    
    
    
    6,748
    
    
    
    4,005Less: accumulated depreciation
    
    
    (2,678
    )
    
    
    (2,422
    )Equipment and leasehold improvements, net
    
    $
    4,070
    
    
    $
    1,583
 Long-Lived Assets
  10




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##### Table of Contents



Goodwill and Intangible Assets
 Goodwill and Other Intangible Assets, Accounting for the Impairment or
Disposal of Long-Lived Assets
   WeightedAverage
    
    
    
    
    
    
    AccumulatedLife (years)
    
    
    Cost
    
    
    Amortization
    
    
    NetAcquired customer contracts
    
    
    8.0
    
    
    $
    13,500
    
    
    $
    (281
    )
    
    $
    13,219Other intangibles
    
    
    6.3
    
    
    
    158
    
    
    
    (5
    )
    
    
    153Total
    
    
    
    
    
    $
    13,658
    
    
    $
    (286
    )
    
    $
    13,372
 11




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##### Table of Contents



Years Ending September 30,2008
    
    $
    8572009
    
    
    1,7132010
    
    
    1,7132011
    
    
    1,7132012
    
    
    1,713Thereafter
    
    
    5,663Total expected amortization expense
    
    $
    13,372
 Product Warranties
   Shipping Costs
  Advertising Costs
  Research and Development Costs
 Accounting for the Costs of Computer Software to Be Sold, Leased,
or Otherwise Marketed
 Income taxes
 Accounting for
Income Taxes
 12




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##### Table of Contents



Recently Issued Accounting Standards
 Accounting for Uncertainty in Income Taxes (FIN 48)
 Accounting for Uncertainty in Income Taxes
 Fair Value Measurements (SFAS 157)
  The Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159)
 The Fair Value Option for Financial Assets and
Financial Liabilities,
 Note 2. GeoLogic Solutions, Inc. Acquisition
  13




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##### Table of Contents



Cash
    
    
    
    
    
    $
    15,277Debt obligations
    
    
    
    
    
    
    2,000Common stock
    
    
    
    
    
    
    300Transaction costs
    
    
    
    
    
    
    1,420Total purchase price
    
    
    
    
    
    $
    18,997Cash
    
    
    557Other current assets
    
    
    6,777Property and equipment
    
    
    578Other assets
    
    
    1,690Current liabilities
    
    
    (5,408
    )Net assets
    
    
    
    
    
    
    4,194Acquired customer contracts
    
    
    
    
    
    
    13,500Goodwill
    
    
    
    
    
    
    1,303Total
    
    
    
    
    
    $
    18,997
  For the Three Months
    
    For the Six Months EndedEnded March 31,
    
    March 31,2008
    
    2007
    
    2008
    
    2007Net sales
    
    $
    13,628
    
    
    $
    13,560
    
    
    $
    26,102
    
    
    $
    26,870Net loss to common shareholders
    
    $
    (2,860
    )
    
    $
    (3,991
    )
    
    $
    (6,419
    )
    
    $
    (10,412
    )Net loss per common share  basic and diluted
    
    $
    (0.34
    )
    
    $
    (0.50
    )
    
    $
    (0.77
    )
    
    $
    (1.31
    )Weighted average common and common
share equivalents  basic and diluted
    
    
    8,397
    
    
    
    8,012
    
    
    
    8,325
    
    
    
    7,974
  14




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##### Table of Contents



Note 3. Stock-Based Compensation
  Stock Options
 Share-Based Payment,
  15




---



##### Table of Contents



For the Three Months Ended
    
    For the Six Months EndedMarch 31,
    
    March 31,2008
    
    2007
    
    2008
    
    2007Number of shares granted
    
    
    275
    
    
    
    544
    
    
    
    296
    
    
    
    854Fair value
    
    $
    0.80
    
    
    $
    1.84
    
    
    $
    0.80
    
    
    $
    1.82Risk-free interest rate
    
    
    2.12
    %
    
    
    4.68
    %
    
    
    2.22
    %
    
    
    4.65
    %Expected volatility
    
    
    31.13
    %
    
    
    35.17
    %
    
    
    30.97
    %
    
    
    35.67
    %Expected life (in years)
    
    
    3.7
    
    
    
    4.4
    
    
    
    3.7
    
    
    
    4.1Dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
   WeightedAverageShares
    
    Exercise PriceOptions outstanding at September 30, 2007
    
    
    1,232
    
    
    $
    5.01Granted
    
    
    296
    
    
    
    3.01Exercised
    
    
    (15
    )
    
    
    2.98Cancelled
    
    
    (158
    )
    
    
    4.29Options outstanding at March 31, 2008
    
    
    1,355
    
    
    $
    4.68
 16




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##### Table of Contents



Options Outstanding
    
    
    
    
    
    Options ExercisableWeighted Average
    
    
    
    
    
    
    
    
    
    Weighted AverageRange of
    
    
    
    
    
    Remaining
    
    
    
    
    
    
    
    
    
    Remainingexercise
    
    Number of
    
    Contractual Life
    
    Weighted Average
    
    Number of
    
    Contractual Life
    
    Weighted Averageprice
    
    Shares
    
    (Years)
    
    Exercise Price
    
    Shares
    
    (Years)
    
    Exercise Price$2.85  $2.99
    
    
    270
    
    
    
    5.3
    
    
    $
    2.99
    
    
    
    25
    
    
    
    9.7
    
    
    $
    2.99$3.03  $3.99
    
    
    56
    
    
    
    3.5
    
    
    
    3.70
    
    
    
    31
    
    
    
    1.2
    
    
    
    3.78$4.33  $4.98
    
    
    96
    
    
    
    4.8
    
    
    
    4.79
    
    
    
    37
    
    
    
    6.0
    
    
    
    4.92$5.03  $5.40
    
    
    933
    
    
    
    4.5
    
    
    
    5.22
    
    
    
    392
    
    
    
    4.5
    
    
    
    5.201,355
    
    
    
    4.7
    
    
    $
    4.68
    
    
    
    485
    
    
    
    4.7
    
    
    $
    4.98
  Restricted Stock Awards
   Weighted AverageGrant Date FairShares
    
    ValueRestricted stock outstanding at September 30, 2007
    
    
    361
    
    
    $
    5.22Granted
    
    
    138
    
    
    
    3.00Vested
    
    
    (127
    )
    
    
    4.95Forfeited
    
    
    (10
    )
    
    
    5.03Restricted stock outstanding at March 31, 2008
    
    
    362
    
    
    $
    4.47
  17




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##### Table of Contents



Note 4. Commitments
 Leases
   Years ending September 30,2008
    
    $
    1,0172009
    
    
    7812010
    
    
    7952011
    
    
    6042012
    
    
    421Thereafter
    
    
    993Total
    
    $
    4,611
  401(k) Plan
  Note 5. Financing Arrangements
  18




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##### Table of Contents



March 31, 2008
    
    
    September 30, 2007Senior secured revolving credit facility
    
    $
    8,223
    
    
    $
    Secured term loan
    
    
    8,000
    
    
    
    Capitalized leases
    
    
    292
    
    
    
    38116,515
    
    
    
    381Less current maturities
    
    
    128
    
    
    
    161Total long-term obligations
    
    $
    16,387
    
    
    $
    220Subordinated notes
    
    $
    1,475
    
    
    $
    Subordinated convertible notes
    
    
    525
    
    
    
    Total notes payable
    
    $
    2,000
    
    
    $
    
 Note 6. Shareholders Equity
 Common Stock
  Preferred Stock
  19




---



##### Table of Contents



Series B
    Series C
  20




---



##### Table of Contents



Series D
  Common Stock Warrants
   Weighted AverageRemainingWeighted Average
    
    Contractual Life
    
    Aggregate IntrinsicNumber of Shares
    
    Exercise Price
    
    (Years)
    
    ValueWarrants outstanding at September 30,
2007
    
    
    1,538
    
    
    $
    3.61
    
    
    
    2.89
    
    
    $
    44Granted
    
    
    457
    
    
    
    3.31
    
    
    
    4.84
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cancelled
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Warrants outstanding at March 31, 2008
    
    
    1,995
    
    
    $
    3.54
    
    
    
    2.95
    
    
    $
    261
  21




---



##### Table of Contents



Note 7. Net Loss Per Share
   
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Forward-looking Statements
  
    
    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 operations during periods in which
we incur operating losses;
    
    we may encounter unexpected costs or difficulties relating to the
integration of the XATA and GeoLogic businesses;
    
    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
 22




---



##### Table of Contents



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
     Technology, People, Processes
  
    
    Technology.Our web-based, on-demand scalable software includes a variety of web-based
enterprise applications, including XATANET®, our flagship application. 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.
    
    People.Several XATA employees have been with our company for more than 15 years,
providing a thorough understanding of the trucking industry. With employee expertise in
safety, fleet management and technology, XATA is able to provide consultation services to
help organizations implement best practices for fleet productivity and develop specific
 23




---



##### Table of Contents



customer hardware and reporting requirements.
    
    Processes.All XATA processes are designed to make managing fleets easier. Drawing on
hundreds of successful implementations with a wide variety of fleets including
multibillion-dollar organizations, XATA carefully plans each phase of the implementation
and follows well established methodologies. The process begins with assessing our
customers objectives. Then, we develop a detailed implementation schedule that includes
all aspects of the project, from implementation to conversion, integration, training and
problem solving.
 Critical Accounting Policies
  Revenue Recognition. Software Revenue Recognition Software Revenue Recognition with Respect to Certain Transactions Revenue Recognition in Financial
Statements
  24




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##### Table of Contents



Application of AICPA Statement of Position 97-2 to Arrangements That Include the
Right to Use Software Stored on Another Entitys Hardware
 Allowance for doubtful accounts and sales returns.
  Goodwill and Intangible Assets. Goodwill and Other Intangible Assets, Accounting for the Impairment or Disposal of Long-Lived Assets
 25




---



##### Table of Contents



Product Warranties
 Capitalized system development costs Accounting for the Costs of
Computer Software to Be Sold, Leased, or Otherwise Marketed
 Research and development costs. Accounting for the Costs of Computer
Software to Be Sold, Leased, or Otherwise Marketed.
 Income taxes Accounting for
Income Taxes
 26




---



##### Table of Contents



Results of Operations for the three months and six months ended March 31, 2008 and 2007
  Three months ended
    
    Six months endedMarch 31,
    
    March 31,2008
    
    2007
    
    2008
    
    2007Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of goods sold
    
    
    50.5
    %
    
    
    42.8
    %
    
    
    49.2
    %
    
    
    44.5
    %Selling, general and administrative
    
    
    47.5
    %
    
    
    42.1
    %
    
    
    47.8
    %
    
    
    40.8
    %Research and development
    
    
    11.9
    %
    
    
    12.5
    %
    
    
    12.5
    %
    
    
    13.8
    %Operating loss
    
    
    (8.9
    %)
    
    
    (11.9
    %)
    
    
    (11.1
    %)
    
    
    (10.1
    %)Net loss
    
    
    (11.0
    %)
    
    
    (10.7
    %)
    
    
    (11.9
    %)
    
    
    (9.0
    %)
 Net Sales
   Cost of Goods Sold
  27




---



##### Table of Contents



Selling, General and Administrative Expenses
  Research & Development Expenses
  Interest Income and Expense
   Income Taxes
  28




---



##### Table of Contents



Net Loss to Common Shareholders
  Liquidity and Capital Resources
      29




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk.
   
 Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures and Internal Control over Financial Reporting
   30




---



##### Table of Contents



Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  Our acquisition of GeoLogic is accompanied by a variety of risks, any of which may adversely
affect our business.
  
    
    failure to achieve the financial and strategic goals for the acquired and combined
business;
    
    additional balance sheet leverage in connection with financing the acquisition;
    
    overpayment for the acquired companies or assets;
    
    difficulty and unexpected costs in assimilating the operations and personnel of the
acquired businesses;
    
    product liability and other exposure associated with acquired businesses or the sale of
their products;
    
    disruption of our ongoing business;
    
    dilution of our existing stockholders and earnings per share;
    
    unanticipated liabilities, legal risks and costs;
    
    retention of key personnel;
    
    distraction of management from our ongoing business; and
    
    impairment of relationships with employees and customers as a result of integration of
new management personnel.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  31




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##### Table of Contents



Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
   1.
    
    The number of directors was set at seven (7), and seven (7) directors (including
Christopher P. Marshall, who was elected by the holders of the Series B Preferred Stock,
voting separately by ballot as a class) were elected to serve for a one-year term expiring
when their successors are elected and qualified at the annual meeting in 2008.
 For
    
    WithheldJohn J. Coughlan
    
    
    11,557,012
    
    
    
    629,067Carl M. Fredericks
    
    
    11,603,688
    
    
    
    582,391Roger W. Kleppe
    
    
    11,603,688
    
    
    
    582,391Charles R. Stamp Jr.
    
    
    11,585,788
    
    
    
    600,291Thomas G. Hudson
    
    
    11,606,079
    
    
    
    580,000Chad M. Lindbloom
    
    
    11,608,479
    
    
    
    577,600Christopher P. Marshall
    
    
    1,888,147
    
    
    
    - 0 -
 
 Item 5. Other Information.
  
 Item 6. Exhibits.
 31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
 32




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##### Table of Contents



Dated:  May 14, 2008
    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) 33