UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~December 3031, 2017

☐

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: 000-52697

XPLORE TECHNOLOGIES CORP.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		26-0563295
(State or Other Jurisdiction of Incorporation		(IRS Employer Identification No.)
or Organization)

8601 Ranch Road 2222, Building II, Austin, Texas		78730
(Address of Principal Executive Offices)		(Zip Code)

(512) 336-7797

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company ☒

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~October~~January 31, ~~2017~~2018, the registrant had 11,~~020~~034,~~905~~404 shares of common stock outstanding.

Xplore Technologies Corp.

FORM 10-Q

For the Quarterly Period Ended ~~September~~December 3031, 2017

Table of Contents

		Page
Part I.	Financial Information
	Item 1. Financial Statements
	a) Consolidated Balance Sheets as at September 30, 2017 and March 31, 2017	3
	a) Consolidated Balance Sheets as at December 31, 2017 and March 31, 2017	3
	b) Consolidated Statements of Profit and Loss for the Six Months Ended September 30, 2017 and 2016	4
	b) Consolidated Statements of Profit and Loss for the Three and Nine Months Ended December 31, 2017 and 2016	4
	c) Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2017 and 2016	5
	c) Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2017 and 2016	5
	d) Notes to the Unaudited Consolidated Financial Statements	6
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1415
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	1920
	Item 4. Controls and Procedures	1920
Part II.	Other Information
	Item 1. Legal Proceedings	2021
	Item 1A. Risk Factors	2021
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	2021
	Item 3. Defaults Upon Senior Securities	2021
	Item 4. Mine Safety Disclosures	2021
	Item 5. Other Information	2021
	Item 6. Exhibits	2022
	Signature	2123

	September 30, 2017			March 31, 2017
	December 31, 2017			March 31, 2017
ASSETS	(unaudited)
CURRENT ASSETS:
Cash and cash equivalents	$	~~260~~18		$	3,460
Accounts receivable, net		1923,~~315~~233			10,452
Inventory, net		2226,~~513~~726			12,858
Prepaid expenses and other current assets		~~505~~473			469
Total current assets		4250,~~593~~450			27,239
Fixed assets, net		1,~~970~~681			1,862
Intangible assets, net		1,~~245~~155			1,425
Goodwill		15,159			15,159
	$	60,967		$	45,685
Total assets	$	68,445		$	45,685
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Short-term indebtedness with bank	$	8,371		$	—
Short-term indebtedness	$	14,318		$	—
Accounts payable		1210,~~674~~228			7,342
Accrued liabilities		36,~~126~~670			2,266
Deferred revenue and current warranty liabilities		2,~~915~~913			3,145
Total current liabilities		2734,~~086~~129			12,753
Deferred revenue and non-current warranty liabilities		3,~~682~~661			3,650
Total liabilities		3037,~~768~~790			16,403
Commitments and contingencies		—			—
STOCKHOLDERS’ EQUITY:
Preferred Stock, par value $0.001 per share; authorized 5,000; no shares issued		—			—
Common Stock, par value $0.001 per share; authorized 15,000; shares issued and outstanding 11,005 and 10,908, respectively		11			11
Common Stock, par value $0.001 per share; authorized 15,000; shares issued and outstanding 11,021 and 10,908, respectively		11			11
Additional paid-in capital		172,~~066~~219			171,784
Accumulated deficit		(141,~~878~~575	)		(142,513	)
		30,199			29,282
Total stockholders’ equity		30,655			29,282
	$	60,967		$	45,685
Total liabilities and stockholders’ equity	$	68,445		$	45,685

	Three Months Ended						~~Six~~Nine Months Ended
	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016
	December 31, 2017			December 31, 2016			December 31, 2017			December 31, 2016
Revenue	$	2223,~~748~~853		$	2024,~~007~~499		$	4266,~~746~~599		$	3660,~~480~~979
Cost of revenue		16,~~395~~233			1417,~~371~~784			3046,~~207~~440			2543,~~980~~764
Gross profit		67,~~353~~620			56,~~636~~715			1220,~~539~~159			1017,~~500~~215
Expenses:
Sales, marketing and support		3,~~166~~803			23,~~896~~153			610,~~367~~170			69,~~331~~484
Product research, development and engineering		~~922~~779			1,~~317~~303			12,~~729~~508			23,~~270~~573
General administration		12,~~786~~577			1,~~868~~816			36,~~736~~313			35,~~907~~723
		5,874			6,081			11,832			12,508
		7,159			6,272			18,991			18,780
Income (loss) from operations		~~479~~461			~~(445~~443	)		~~707~~1,168			(21,~~008~~565	)
Other income (expense):
Other		72			(2296	)		4345			(77214	)
Interest expense		(79143	)		(6979	)		(~~104~~247	)		(~~118~~156	)
		(72	)		(91	)		(61	)		(195	)
		(141	)		(175	)		(202	)		(370	)
Income (loss) before income taxes		~~407~~320			~~(536~~268	)		~~646~~966			(21,~~203~~935	)
Income tax (expense) benefit		(1018	)		—(49	)		(1028	)		(80129	)
Net income (loss)	$	~~397~~302		$	~~(536~~219	)	$	~~636~~938		$	(2,~~283~~064	)
Income (loss) per common share, basic	$	0.0403		$	(0.0502	)	$	0.0609		$	(0.2119	)
Income (loss) per common share, fully diluted	$	0.0403		$	(0.0502	)	$	0.0609		$	(0.2119	)
Weighted average number of common shares outstanding, basic		11,~~005~~020,~~189~~905			10,~~926~~947,~~542~~329			1011,~~997~~005,~~526~~347			10,~~917~~927,~~498~~477
Weighted average number of common shares outstanding, fully diluted		11,~~010~~026,~~159~~ 977			10,~~926~~950,~~542~~390			11,~~002~~011,~~496~~419			10,~~917~~927,~~498~~477

	Six Months Ended September 30,
	Nine Months Ended December 31,
	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash (used in) provided by operations:
Net loss	$	~~636~~938		$	(2,~~283~~064	)
Items not affecting cash:
Depreciation and amortization		~~927~~1,365			~~804~~1,168
Provision for doubtful accounts		61217			(5244	)
Stock-based compensation expense		215			302
Loss on disposal of asset		—			28
Stock-based compensation expense		337			413
Changes in operating assets and liabilities:
Accounts receivable		(812,~~924~~998	)		(~~224~~1,892	)
Inventory		(913,~~655~~868	)		(~~4,293~~303	)
Prepaid expenses and other current assets		(364	)		~~469~~325
Accounts payable and accrued liabilities		57,~~994~~070			(52,~~211~~421	)
Net cash used in operating activities		(1016,~~782~~943	)		(104,~~488~~790	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Change in liabilities assumed in purchase of business		—			(287	)
Additions to fixed assets		(~~855~~914	)		(~~652~~1,626	)
Net cash provided by (used in) investing activities		(855	)		(939	)
Net used in investing activities		(914	)		(1,913	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings		3459,~~185~~444			2744,~~600~~976
Repayment of short-term indebtedness		(2545,~~814~~126	)		(1839,~~354~~880	)
Net proceeds from issuance of Common Stock		66			42
Net proceeds from issuance of common stock		97			112
Net cash provided by (used in) financing activities		8,437			9,288
Net cash provided by financing activities		14,415			5,208
CHANGE IN CASH AND CASH EQUIVALENTS		(3,~~200~~442	)		(21,~~139~~495	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		3,460			5,594
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	~~260~~18		$	34,~~455~~099
NONCASH INVESTING AND FINANCING ACTIVITIES:
Net assets acquired with debt in purchase transaction	$	—		$	—
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:
Payments for interest	$	~~104~~247		$	77156
Payments for income taxes	$	—		$	80129

	~~Three Months Ended~~	Three Months Ended					~~Six Months Ended~~	Nine Months Ended
	September 30,						September 30,
		December 31,						December 31,
	~~2017~~	2017		~~2016~~	2016		~~2017~~	2017		~~2016~~	2016
Warrants			~~100,000~~—			100,000			~~100,000~~—			100,000
Options			12,~~895~~115,~~874~~390			1,~~912~~908,~~124~~374			12,~~895~~115,~~874~~390			1,~~912~~908,~~124~~374
			1,995,874			2,012,124			1,995,874			2,012,124
			2,115,390			2,008,374			2,115,390			2,008,374

Number of Exercisable Warrants				Exercise Price (1)				Expiration Date
		100,000			$	6.25		October 24, 2017

	Options			Weighted Average Exercise Price (US$)
Outstanding at March 31, 2017		1,907,124		$	5.29
Granted		—30,000			—2.40
Exercised		—			—
Forfeited		(1115,~~250~~734	)		6.5641
Outstanding at end of period		1,~~895~~921,~~874~~390		$	5.2824

	Restricted Stock Units			Weighted Average Issue Date Value Per Share
Outstanding at March 31, 2017		164,000		$	1.99
Granted		50,000			3.21
Converted to Shares		—			—
Forfeited		(20,000	)		1.99
Outstanding at end of period		194,000		$	2.30

	Restricted Stock Units			Weighted Average Issue Date Value Per Share
Outstanding at March 31, 2017		164,000		$	1.99
Granted		—			—
Converted to Shares		—			—
Forfeited		(13,000	)		1.99
Outstanding at end of period		151,000		$	1.99

		Options Outstanding and Expected to Vest				Options Exercisable
Range of Exercise Prices US$		Number Outstanding		Weighted Average Remaining Contractual Life		Number Exercisable		Weighted Average Remaining Contractual Life
$	2.40— 3.43		90,000		5.9		—		—
$	3.44— 5.00		896,403		1.8		896,403		1.8
$	5.01— 6.69		934,987		4.0		801,719		4.1
			1,921,390		3.1		1,698,122		2.9

		Options Outstanding and Expected to Vest				Options Exercisable
Range of Exercise Prices US$		Number Outstanding		Weighted Average Remaining Contractual Life		Number Exercisable		Weighted Average Remaining Contractual Life
$	2.40 — 3.43	$	60,000	$	7.0	$	—	$	—
$	3.44 — 6.69		1,835,874		3.2		1,623,359		3.2
			1,895,874		3.3		1,623,359		3.2

	~~Three Months Ended~~	Three Months Ended									~~Six Months Ended~~	Nine Months Ended
	September 30, 2017					September 30, 2016					September 30, 2017					September 30, 2016
		December 31, 2017					December 31, 2016					December 31, 2017					December 31, 2016
Revenue by country:
United States		$	1615,~~992~~743	7566	%		$	1419,~~671~~787	7381	%		$	3046,~~608~~351	7270	%		$	2645,~~143~~930	7275	%
Other			5,756	25	%			5,336	27	%			12,138	28	%			10,337	28	%
Germany			4,034	17	%			1,370	6	%			7,704	12	%			4,186	7	%
		$	22,748	100	%		$	20,007	100	%		$	42,746	100	%		$	36,480	100	%
Other			4,076	17	%			3,342	13	%			12,544	18	%			10,863	18	%
		$	23,853	100	%		$	24,499	100	%		$	66,599	100	%		$	60,979	100	%

2018	$	~~378~~190
2019		767
2020		504
	$	1,~~649~~461

Exhibit Number		Description of Exhibit
31.1*		Certification of Tom Wilkinson, ~~Acting~~ Chief Executive Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of Tom Wilkinson, Chief Financial Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*		Certifications of Tom Wilkinson, ~~Acting~~ Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema Document
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

	XPLORE TECHNOLOGIES CORP.
Dated: November 14, 2017	By:	/s/ TOM WILKINSON
Dated: February 13, 2018	By:	/s/ TOM WILKINSON
		Tom Wilkinson
		Chief Financial Officer
		(Principal Financial Officer and Duly Authorized Officer)

Three Months Ended	Total Revenue (in millions)		Number of Customers with Revenue > 10% of Total Revenue		Customer Share as a Percent of Total Revenue
September 30, 2017	$	23.0		3		52	%
December 31, 2017	$	24.0		4		49	%
September 30, 2016	$	20.0		2		53	%
December 31, 2016	$	24.5		2		39	%

Six Months Ended	Total Revenue (in millions)		Number of Customers with Revenue > 10% of Total Revenue		Customer Share as a Percent of Total Revenue
Nine Months Ended	Total Revenue (in millions)		Number of Customers with Revenue > 10% of Total Revenue		Customer Share as a Percent of Total Revenue
September 30, 2017	$	43.0		3		48	%
December 31, 2017	$	67.0		3		46	%
September 30, 2016	$	36.5		2		41	%
December 31, 2016	$	61.0		2		41	%

Nine Months Ended		Accounts Receivable (in millions)				Number of Customers with Account Balance > 10% of Total Receivables				Customer Share as a Percent of Total Receivables
December 31, 2017		$	23.2				3				41	%

Six Months Ended		Accounts Receivable (in millions)				Number of Customers with Account Balance > 10% of Total Receivables				Customer Share as a Percent of Total Receivables
September 30, 2017		$	19.3				2				35	%

Filing Compare · XPLORE TECHNOLOGIES CORP