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EX-31 - EXHIBIT 31.2 - XPLORE TECHNOLOGIES CORPex31-2.htm
EX-31 - EXHIBIT 31.1 - XPLORE TECHNOLOGIES CORPex31-1.htm


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 December 31, 2013

 

or

 

 

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

 

For the transition period from                to               

 

Commission file number: 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)

   

 

14000 Summit Drive, Suite 900, Austin, Texas

 

78728

(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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐

Accelerated filer ☐

   

Non-accelerated filer ☐

Smaller reporting company ☒

(Do not check if a smaller reporting company)

 

 

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 January 31, 2013, the registrant had 8,400,539 shares of common stock outstanding.

 



 

 

 
 

 

 

Xplore Technologies Corp.

FORM 10-Q

For the Quarterly Period Ended December 31, 2013

Table of Contents

 

   

Page

     

Part I.

Financial Information

 
     
 

Item 1. Financial Statements

 
     
 

a) Consolidated Balance Sheets as at December 31, 2013 and March 31, 2013

3

     
 

b) Consolidated Statements of Income (Loss) for the Three and Nine Months Ended December 31, 2013 and 2012

4

     
 

c) Consolidated Statements of Cash Flows for the Three and Nine Months Ended December 31, 2013 and 2012

5

     
 

d) Notes to the Unaudited Consolidated Financial Statements

6

     
 

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

13

     
 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

21

     
 

Item 4. Controls and Procedures

21

     

Part II.

Other Information

 
     
 

Item 1. Legal Proceedings

21

     
 

Item 1A. Risk Factors

21

     
 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

22

     
 

Item 3. Defaults Upon Senior Securities

22

     
 

Item 4. Mine Safety Disclosures

22

     
 

Item 5. Other Information

22

     
 

Item 6. Exhibits

22

     
 

Signature

23

 

 
2

 

 

PART I—FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

XPLORE TECHNOLOGIES CORP.

Consolidated Balance Sheets

(in thousands)

 

   

December 31,
2013

   

March 31,
2013

 
   

(unaudited)

         

ASSETS

               

CURRENT ASSETS:

               

Cash and cash equivalents

  $ 5,302     $ 10,280  

Accounts receivable, net

    10,738       5,046  

Inventory, net

    7,427       3,836  

Prepaid expenses and other current assets

    446       352  

Total current assets

    23,913       19,514  

Fixed assets, net

    1,004       697  
    $ 24,917     $ 20,211  

LIABILITIES AND STOCKHOLDERS’ EQUITY

               

CURRENT LIABILITIES:

               

Accounts payable and accrued liabilities

  $ 8,806     $ 4,689  

Total current liabilities

    8,806       4,689  
                 

Commitments and contingencies

           
                 

STOCKHOLDERS’ EQUITY:

               

Preferred Stock, par value $0.001 per share; authorized 5,000 and none, respectively; shares issued none and none, respectively

           

Common Stock, par value $0.001 per share; authorized 15,000; shares issued 8,398 and 8,389, respectively

    8       8  

Additional paid-in capital

    154,553       153,604  

Accumulated deficit

    (138,450

)

    (138,090

)

      16,111       15,522  
    $ 24,917     $ 20,211  

 

See accompanying notes to unaudited consolidated financial statements.

 

 
3

 

 

XPLORE TECHNOLOGIES CORP.

Consolidated Statements of Income (Loss)—Unaudited

(in thousands of dollars, except share and per share amounts)

 

   

Three Months Ended

   

Nine Months Ended

 
   

December 31,
2013

   

December 31,
2012

   

December 31,
2013

   

December 31,
2012

 
                                 

Revenue

  $ 13,981     $ 5,927     $ 27,240     $ 23,350  

Cost of revenue

    9,136       3,864       17,493       15,676  

Gross profit

    4,845       2,063       9,747       7,674  
                                 

Expenses:

                               

Sales, marketing and support

    1,675       1,022       4,496       2,840  

Product research, development and engineering

    1,360       695       3,324       1,609  

General administration

    917       965       2,957       2,655  
      3,952       2,682       10,777       7,104  

Income (loss) from operations

    893       (619

)

    (1,030

)

    570  
                                 

Other income (expense):

                               

Interest expense

          (1

)

    (3

)

    (65

)

Other

    (3

)

    (6

)

    661       (35

)

      (3

)

    (7

)

    658       (100

)

Income (loss) before income taxes

    890       (626

)

    (372

)

    470  

Income tax benefit

                12        

Net income (loss)

  $ 890     $ (626 )   $ (360 )   $ 470  
                                 

Dividends attributable to Preferred Stock

          (281

)

          (2,292

)

Net income (loss) attributable to common stockholders

    890       (907

)

    (360

)

    (1,822

)

Income (loss) per common share

    0.11       (0.11

)

    (0.04

)

    0.20  

Dividends attributable to Preferred Stock

          (0.05

)

          (0.97

)

Net income (loss) per share attributable to common stockholders, basic and fully diluted

  $ 0.11     $ (0.16

)

  $ (0.04

)

  $ (0.77

)

Weighted average number of common shares outstanding, basic

    8,397,695       5,816,851       8,393,832       2,372,678  

Weighted average number of common shares outstanding, fully diluted

    8,414,312       5,816,851       8,393,832       2,372,678  

 

See accompanying notes to unaudited consolidated financial statements.

 

 
4

 

 

XPLORE TECHNOLOGIES CORP.

Consolidated Statements of Cash Flows—Unaudited

(in thousands)

 

   

Three Months Ended
December 31,

   

Nine Months Ended
December 31,

 
   

2013

   

2012

   

2013

   

2012

 
                                 

CASH FLOWS FROM OPERATING ACTIVITIES:

                               

Cash provided by (used in) operations:

                               

Net income (loss)

  $ 890     $ (626

)

  $ (360

)

  $ 470  

Items not affecting cash:

                               

Depreciation and amortization

    217       129       530       380  

Allowance for doubtful accounts

    (3

)

    11       (5

)

    14  

Stock-based compensation expense

    266       164       910       531  

Equity issued in exchange for services

    8             8        
                                 

Changes in operating assets and liabilities:

                               

Accounts receivable

    (5,229

)

    (118

)

    (5,687

)

    5,003  

Inventory

    (3,211

)

    449       (3,591

)

    98  

Prepaid expenses and other current assets

    (215

)

    977       (94

)

    (128

)

Accounts payable and accrued liabilities

    5,209       (757

)

    4,117       (3,482

)

Net cash provided by (used in) operating activities

    (2,068

)

    229       (4,172

)

    2,886  
                                 

CASH FLOWS FROM INVESTING ACTIVITIES:

                               

Additions to fixed assets

    (280

)

    (238

)

    (837

)

    (649

)

Net cash used in investing activities

    (280

)

    (238

)

    (837

)

    (649

)

                                 

CASH FLOWS FROM FINANCING ACTIVITIES:

                               

Proceeds from short-term borrowings

                      9,455  

Repayment of short-term indebtedness

                      (9,455

)

Net proceeds from issuance of Common Stock

    12       7,856       31       7,882  

Net cash provided by financing activities

    12       7,856       31       7,882  
                                 

CHANGE IN CASH AND CASH EQUIVALENTS

    (2,336

)

    7,847       (4,978

)

    10,119  

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

    7,638       2,471       10,280       199  

CASH AND CASH EQUIVALENTS, END OF PERIOD

  $ 5,302     $ 10,318     $ 5,302     $ 10,318  
                                 

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:

                               

Payments for interest

  $     $ 1     $ 3     $ 65  

Payments for (refunds of) income taxes

  $ (12

)

  $     $ 24     $  

Payments of liabilities through issuance of stock

  $     $     $     $ 204  

Preferred Stock dividends issued in the form of stock

  $     $ 717     $     $ 2,776  

 

See accompanying notes to unaudited consolidated financial statements.

 

 
5

 

 

XPLORE TECHNOLOGIES CORP.

Notes to the Unaudited Consolidated Financial Statements

(In thousands of dollars, except share and per share amounts)

 

1. DESCRIPTION OF BUSINESS

 

Xplore Technologies Corp. (the “Company”), incorporated under the laws of the State of Delaware, is engaged in the development, integration and marketing of rugged mobile personal computer (“PC”) systems. The Company’s rugged tablet PCs are designed to withstand hazardous conditions such as extreme temperatures, driving rain, repeated vibrations, dirt, dust and concussive shocks. The intrinsically safe, ruggedized and reliable nature of the Company’s products enable the extension of traditional computing systems to a range of field personnel, including oil field pipeline inspectors, public safety personnel, warehouse workers and pharmaceutical scientists. The Company’s tablets are fitted with a range of performance-matched accessories, including multiple docking station solutions, wireless connectivity alternatives, global positioning system modules, biometric and smartcard modules, as well as traditional peripherals, such as keyboards and cases. Additionally, the Company’s tablets are waterproof for up to 30 minutes in a depth of up to three feet, impervious to drops from as high as seven feet, readable in direct sunlight, can be mounted on vehicles and include LTE and Wi-Fi connectivity options for real-time data access. The Company’s customers include major telecommunications companies, leading heavy equipment manufacturers, oil and gas companies, the military and first responders.

 

2. SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and in accordance with the instructions for Form 10-Q. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, these financial statements contain all normal and recurring adjustments considered necessary to present fairly the financial position, results of operations and cash flows for the periods presented. The results for the three and nine months ended December 31, 2013 are not necessarily indicative of the results to be expected for the full year.

 

The consolidated balance sheet at March 31, 2013 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These accompanying unaudited consolidated financial statements should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the audited consolidated financial statements and related notes included in the Company’s fiscal 2013 Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 26, 2013.

 

Basis of consolidation and presentation

 

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Xplore Technologies Corporation of America.

 

Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. These estimates and assumptions are affected by management’s application of accounting policies. Estimates are deemed critical when a different estimate could have reasonably been used or where changes in the estimates are reasonably likely to occur from period to period, and would materially impact the Company’s financial condition, changes in financial condition or results of operations. On an ongoing basis, the Company evaluates the estimates, including those related to its revenue recognition, allowance for doubtful accounts, inventory valuation, warranty reserves, tooling amortization, financial instruments, stock-based compensation and income taxes. The estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from management’s estimates and assumptions.

 

At December 31, 2013, the Company had cash and cash equivalents of approximately $5,302, working capital of approximately $15,107 and total equity of approximately $16,111. The Company had cash flows from operations for the year ended March 31, 2013 of approximately $2,991. The Company’s management believes that it has adequate cash and cash equivalents on hand and cash flow from operations to finance its operations for at least 12 months.

 

 
6

 

 

3. INVENTORY

 

   

December 31,
2013

   

March 31,
2013

 

Finished goods

  $ 5,969     $ 2,437  

Computer components

    1,458       1,399  

Total inventory

  $ 7,427     $ 3,836  

 

4. EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS

 

Basic earnings (loss) per share attributable to common stockholders has been computed based on the weighted-average number of shares of common stock issued and outstanding during the period, and is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share for the three months ended December 31, 2013 is calculated by dividing net income by the weighted-average number of common shares used in the basic earnings per share calculation plus the number of common shares that would be issued assuming exercise or conversion of all potentially dilutive common shares outstanding, which were 16,617 shares related to dilutive options and warrants for the three months ended December 31, 2013. The effects of the options granted under the Company’s option plans, the exercise of outstanding options, the exercise of outstanding warrants and the conversion of the Company’s convertible Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock prior to their actual conversion on October 31, 2012 were excluded from the loss per share attributable to common stockholders calculations for the nine months ended December 31, 2013 and 2012 and the three months period ended December 31, 2012 as their inclusion is anti-dilutive. Accordingly, diluted loss per share attributable to common stockholders has not been presented for these periods.

 

The following securities were not considered in the earnings (loss) per share attributable to common stockholders calculations for the following periods:

 

   

Three Months

Ended

December 31,
2013

   

Nine Months

Ended

December 31,
2013

   

Three and Nine Months Ended

December 31,
2012

 

Warrants

    137,500       137,500       529,731  

Options

    1,053,022       1,293,022       150,089  
      1,190,522       1,430,522       679,820  

 

5. SHORT-TERM INDEBTEDNESS

 

On December 10, 2009, the Company’s wholly-owned subsidiary entered into an Accounts Receivable Purchasing Agreement (as amended to date, the “ARPA”) with DSCH Capital Partners, LLC d/b/a Far West Capital (“FWC”). Pursuant to the ARPA, FWC may purchase, in its sole discretion, eligible accounts receivable of the Company’s subsidiary on a revolving basis, up to a maximum of $8,500. Under the terms of the ARPA, FWC purchases eligible receivables from the subsidiary with full recourse for the face amount of such eligible receivables. FWC retains 15% of the purchase price of the purchased receivables as a reserve amount. The subsidiary is required to pay FWC a monthly cost of funds fee equal to the net funds employed by FWC (i.e., the daily balance of the purchase price of all purchased receivables less the reserve amount, plus any unpaid fees and expenses due from the subsidiary to FWC under the ARPA) multiplied by the annual prime lending rate reported in The Wall Street Journal plus 10%, which fees accrue daily. In June 2012, in connection with the reduction of the cost of funds rate from the annual prime lending rate plus 11.50% and the elimination of a 0.52% discount to the amount FWC paid in connection with its purchase of eligible receivables, the Company agreed to a financial covenant requiring that, as of the last day of each fiscal quarter, the Company’s subsidiary’s net worth (defined as assets minus liabilities) will not be less than $4,000. In the event the Company is unable to maintain the minimum net worth requirement, the monthly cost of funds fee required to be paid to FWC will be increased to equal the net funds employed by FWC multiplied by the lesser of (a) the maximum rate allowed under applicable law and (b) the annual prime lending rate plus 16%. On August 26, 2011, the Company’s subsidiary and FWC entered into an inventory finance rider to the ARPA (the “Rider”) to provide for advances up to $700 based upon eligible finished goods tablet PC inventory, provided that total funds advanced on such inventory does not exceed 30% of all eligible inventory and provided further that the advances shall at no time exceed 40% of the sum of (1) total funds advanced by FWC under the ARPA and (2) products scheduled to be shipped in satisfaction of customer purchase orders within 90 days. Eligible inventory is valued at the lower of cost or market value. Prior to the execution of the Rider, which gave the Company’s subsidiary the ability to receive advances on its inventory, FWC had the ability to purchase eligible purchase orders from the subsidiary, less a discount of 1%, under the ARPA.

 

 
7

 

 

The ARPA also provides that FWC has the right to require the subsidiary to repurchase any purchased accounts receivable: (a) if there is a dispute as to the validity of such receivable by the account debtor, (b) if certain covenants, warranties or representations made by the subsidiary with respect to such receivables are breached, (c) upon and during the continuance of an event of default under the ARPA or upon the termination of the ARPA, or (d) if such receivable remains unpaid 90 days after the invoice date. The ARPA has an initial term of one year with automatic renewals for successive one-year periods. Notwithstanding that, FWC may terminate the ARPA at any time upon 150 days prior written notice or without prior notice upon and during the continuance of an event of default.

 

The ARPA contains standard representations, warranties, covenants, indemnities and releases for agreements governing financing arrangements of this type. The Company has guaranteed the obligations of its subsidiary under the ARPA pursuant to a corporate guaranty and suretyship. In addition, pursuant to the ARPA, the subsidiary’s obligations under the ARPA are secured by a first priority security interest on all assets of the subsidiary. On December 31, 2013, there were no borrowings under the ARPA.

 

6. SHARE CAPITAL

 

On November 1, 2012, the Company filed its second amended and restated certificate of incorporation with the Secretary of State of the State of Delaware, which integrated the then-in-effect provisions of the Company’s amended and restated certificate of incorporation and further amended those provisions by decreasing the Company’s authorized common and preferred stock. The second amended and restated certificate of incorporation became effective on the date of filing. As a result of the second amended and restated certificate of incorporation, the number of authorized shares of common stock of the Company was reduced from 1,350,000,000 to 15,000,000 and the number of authorized shares of preferred stock of the Company was reduced from 150,000,000 to 5,000,000.

 

On September 13, 2012, the Company filed a certificate of amendment to the Company’s amended and restated certificate of incorporation with the Secretary of State of the State of Delaware to effect a 1-for-400 reverse split of common stock. The reverse split became effective at 12:01 a.m. on September 13, 2012. In addition, on September 13, 2012, the Company received a written consent from holders representing a majority of the voting power of the then outstanding shares of the Company’s Series A Preferred Stock agreeing to the conversion, upon the consummation of the public offering referenced below, of each share of Series A Preferred Stock then outstanding into shares of common stock. Under the terms of the Company’s amended and restated certificate of incorporation, the conversion of the Series A Preferred Stock triggered the automatic conversion of each of the Company’s other outstanding series of Preferred Stock.

 

All of the historical common stock share numbers, common stock share prices and exercise prices with respect to options and warrants to purchase common stock have been adjusted within these consolidated financial statements, on a retroactive basis, to reflect the 1-for-400 reverse split of common stock.

 

On October 31, 2012, the Company completed the closing of the public offering of 2,000,000 shares of common stock at an offering price of $5.00 per share and received gross proceeds of $10,000. The Company issued to the underwriters of the offering warrants to purchase up to a total of 100,000 shares of the Company’s common stock at an exercise price of $6.25 per share. The warrants expire on October 24, 2017. In connection with the closing of the public offering, each series of the Company’s then outstanding Preferred Stock was automatically converted into shares of the Company’s common stock.

 

On June 1, 2013, the Company entered into a business advisory services agreement with an unrelated party, which included as compensation the issuance of a warrant to purchase 20,000 shares of the Company’s common stock (the “Warrant”). The Warrant vests quarterly, over a twelve-month period beginning September 1, 2013. The strike price for the first set of 5,000 shares to vest is $5.00 per share, the strike price for the second set of 5,000 shares to vest is $5.25 per share, the strike price for the third set of 5,000 shares to vest is $5.50 per share and the strike price for the fourth set of 5,000 shares to vest is $5.75 per share. Should the agreement be terminated prior to the complete vesting of the Warrant, the vesting ceases on the date on which notice of termination is given. The Warrant expires on May 31, 2016.

 

Preferred Stock Dividends

 

Prior to its conversion on October 31, 2012, the Company’s outstanding shares of Preferred Stock accrued cumulative dividends, which were paid quarterly on the first day of June, September, December and March, with the exception of the last dividends, which were paid upon conversion on October 31, 2012. The dividend rate for the Company’s Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock was 7.5% per annum of the original issue price of the Preferred Stock. The dividends for the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock were paid in the number of shares of common stock determined by dividing (i) the aggregate amount of the dividend then payable by (ii) the volume weighted average trading price of the common stock over the 10 trading days ending on the third trading day immediately preceding the dividend payment date, less a discount of 25% of the volume weighted average trading price of the common stock.

 

 
8

 

 

The dividend rate for the Series D Preferred Stock was 10% per annum of the original issue price of the Series D Preferred Stock. The dividends for the Series D Preferred Stock were paid at the Company’s option in cash or additional shares of Series D Preferred Stock valued at $1.00 per share. The Company paid the dividends in shares of Series D Preferred Stock.

 

The values for dividends paid and dividends accrued and unpaid were determined based on the market prices of the Company’s common stock as of the dates of share issuances and accrual multiplied by the respective equivalent common shares.

 

Paid dividends for the three and nine months ended December 31, 2012 were $717 and $2,776, respectively.

 

On October 31, 2012, all of the Company’s then outstanding shares of Preferred Stock, including accrued and unpaid dividends, were converted into 5,525,015 shares of the Company’s common stock.

 

Warrants Outstanding

 

At December 31, 2013, there were warrants to purchase an aggregate of 137,500 shares of common stock outstanding, of which 127,500 were fully exercisable, as detailed in the table below:

 

Number of Warrants/Number Exercisable

 

Exercise Price (1)

 

Expiration Date

6,250 /

6,250

    $11.86    

October 13, 2014

7,500 /

7,500

    $19.98    

June 10, 2014

3,750 /

3,750

    $17.33    

May 13, 2015

20,000 /

10,000

  $5.00 to $5.75  

May 31, 2016

100,000 /

100,000

    $6.25    

October 24, 2017


 

(1)

Exercise price may change subject to anti-dilutive terms.

 

7. STOCK-BASED COMPENSATION PLAN

 

a) Stock Options

 

In 1995, the Company’s board of directors (the “Board of Directors”) approved a Share Option Plan, which was amended and restated in December 2004, and amended thereafter (the “Amended Share Option Plan”). The Amended Share Option Plan is administered by the Board of Directors and provides that options may be granted to employees, officers, directors and consultants to the Company. The exercise price of an option is determined at the date of grant and is based on the closing price of the common stock on the stock exchange or quotation system where the common stock is listed or traded, on the day preceding the grant. Unless otherwise provided for, the options are exercisable only during the term of engagement of the employee, officer or consultant or during the period of service as a director of the Company.

 

On July 28, 2009, the Board of Directors adopted the 2009 Stock Incentive Plan (the “2009 Stock Plan”). The 2009 Stock Plan provides for equity-based awards in the form of incentive stock options and non-statutory options, restricted shares, stock appreciation rights and restricted stock units. Awards are made to selected employees, directors and consultants to promote stock ownership among award recipients, encourage their focus on strategic long-range corporate objectives, and attract and retain exceptionally qualified personnel. The 2009 Stock Plan became effective as of June 10, 2009 and was approved by the Company’s stockholders on January 14, 2010. The Company did not grant any additional options under the Amended Share Option Plan after the adoption of the 2009 Stock Plan.

 

On September 24, 2013, the Company’s stockholders approved amendments to the 2009 Stock Plan to increase the maximum number of shares of our common stock issuable under the plan from 187,500 to 1,687,500 and to increase the number of shares of the Company’s common stock relating to awards under that plan that any single participant may receive in any calendar year from 20,000 to 500,000.

 

At September 30, 2013, the maximum aggregate number of shares of common stock reserved for issuance upon the exercise of all options granted under the Amended Share Option Plan and the 2009 Stock Plan may not exceed an aggregate of 1,689,759 shares. This amount consists of 1,687,500 shares under the 2009 Stock Plan and 2,259 shares under the Amended Share Option Plan, the number of shares issuable under remaining outstanding options under the Amended Share Option Plan on that date. The options granted under the plans, except as described below, generally vest over a three-year period in equal annual installments and expire five years after the issuance date.

 

 
9

 

 

In June 2013, the Board of Directors approved a grant of options to purchase a total of 797,000 shares of the Company’s common stock to the members of the Board of Directors and certain officers, with an exercise price of $5.00. The options vest in three equal annual installments beginning on October 31, 2013 and have a term of seven and a half years from the grant date. In addition, the Board of Directors also approved grants of options to purchase a total of 275,000 shares of the Company’s common stock to certain non-officer employees, with an exercise price of $3.44. Those options vest in three equal annual installments, beginning on the first anniversary of the date of grant, and have a term of five years from the date of grant. The grant date fair value of these option awards to be recognized as stock compensation expense was $1,401, of which $107 and $462 was recorded for the three and nine months ended December 31, 2013, respectively.

 

In November 2013, the Board of Directors approved a grant of options to purchase a total of 185,000 shares of the Company’s common stock to three new employees, of which options to purchase 175,000 shares were granted to two new officers of the Company, with an exercise price of $4.66. The options vest in three equal annual installments, beginning on the first anniversary of the date of grant, and have a term of five years from the date of the grant. The grant date fair value of these option awards to be recognized as stock compensation expense was $289.

 

A summary of the activity in the Company’s Amended Share Option Plan and 2009 Stock Plan during the nine months ended December 31, 2013 was as follows:

 

   

Nine months ended December, 2013

 
   

Options

   

Weighted
Average
Exercise Price
(US$)

 

Outstanding at March 31, 2013

    146,878     $ 24.22  

Granted

    1,257,000       4.61  

Exercised

           

Forfeited

    (110,856

)

    8.28  

Outstanding at end of period

    1,293,022     $ 6.52  

 

At December 31, 2013, the total number of shares of common stock issued in connection with the exercise of options since the inception of the Amended Share Option Plan was 1,678 and the total number of shares of common stock issued in connection with the vesting of restricted stock awards was 4,268.

 

A summary of the options outstanding and exercisable as at December 31, 2013, was as follows:

 

         

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

 
$3.44 7.50       1,177,750       5.7       270,250       6.3  
$7.51 26.99       105,802       2.3       78,471       2.3  
$27.00 124.00       9,470       1.0       8,616       0.7  
            1,293,022       5.4       357,337       5.3  

 

The weighted average exercise price of options exercisable at December 31, 2013 was $10.26.

 

The options have been valued separately using the Black-Scholes methodology. The options issued to the Board of Directors, officers and non-officer employees in fiscal 2014 have different expected terms and, accordingly, different volatility and discount rates. The calculations for issuances to the Board of Directors in June 2013, to officers in June 2013, to other grantees in fiscal 2014 and to all grantees in fiscal 2013 assumed discount rates of approximately 2.11%, 1.51%, 0.71% and 0.35%, respectively, volatility of approximately 57%, 55%, 49% and 62%, respectively, and expected terms of approximately seven years, approximately four and half years, approximately three years and approximately three years, respectively. There were no dividends paid to holders of the Company’s common stock for either year. The Company recorded stock compensation cost of $266 and $164 for the three months ended December 31, 2013 and 2012, respectively, and $910 and $531 for the nine months ended December 31, 2013 and 2012, respectively. This expense was recorded in the employee related functional classification.

 

Compensation expense has been determined based on the fair value at the grant date for options granted in the current fiscal year. The aggregate intrinsic value of options exercisable at December 31, 2013 was $333, based upon the fair value of the Company’s common stock on that date of $6.25, which was greater than the exercise prices of certain options. The future compensation expense to be recognized for unvested option grants at December 31, 2013 was $1,280, which is to be recognized over the next three years.

 

 
10

 

  

b)  2009 Employee Stock Purchase Plan

 

The Board of Directors approved an employee stock purchase plan, which was implemented on January 1, 2009 and approved by the Company’s stockholders on November 4, 2009. The offering price per common share and number of common shares purchased for the nine months ended December 31, 2013 and 2012 are as follows:

 

   

Nine Months Ended December 31,

 
   

2013

   

2012

 

Offering Price per Common Share

  $ 3.69     $ 22.23  

Common Shares Purchased

    11,176       674  

 

8. RELATED PARTY TRANSACTIONS

 

On June 12, 2012, the Board of Directors approved the payment to each member of the Board of Directors of an annual fee of $10, to be paid quarterly in the amount of $2.5. On November 4, 2013, the Board of Directors approved the payment of an additional annual fee to each member of the Board of Director’s audit committee and compensation committee, in the amount of $4 for each committee on which such member serves, to be paid quarterly in the amount of $1, effective October 1, 2013. General administration expense includes an expense of $21 and $15 for the three months ended December 31, 2013 and 2012, respectively, and $51 and $45 for the nine months ended December 31, 2013 and 2012 respectively, relating to these fees.

 

On June 12, 2012, the Board of Directors approved the payment to SG Phoenix LLC, an affiliate of the Company, of an annual fee of $150, to be paid monthly in the amount of $12.5, for services rendered during the year ended March 31, 2013. On February 6, 2013, the Board of Directors approved an increase in this annual fee from $150 to $200, effective February 1, 2013, for additional services to be rendered by SG Phoenix LLC. General administration expense includes an expense of $50 and $38 for the three months ended December 31, 2013 and 2012, respectively, and $150 and $113 for the nine months ended December 31, 2013 and 2012, respectively, for these fees.

 

During the nine months ended December 31, 2013 and 2012, the Company purchased approximately $76 and $231, respectively, of components for the Company’s tablet PCs from Ember Industries, Inc., a contract manufacturer.  Thomas F. Leonardis, a member of the Board of Directors, is the Chairman and Chief Executive Officer of Ember Industries.  The Company purchased the components from Ember Industries pursuant to standard purchase orders at Ember Industries’ standard prices.  The disinterested members of the Board of Directors reviewed, approved and ratified the Company’s purchase of component parts from Ember Industries on the described terms.

 

9. SEGMENTED INFORMATION

 

The Company operates in one segment, the sale of rugged mobile tablet PC systems. The United States accounted for approximately 80% of the Company’s total revenue for the three months ended December 31, 2013. The United States accounted for approximately 75% of the Company’s total revenue for the nine months ended December 31, 2013. The United States, Germany and England accounted for approximately 51%, 13% and 10%, respectively, of the Company’s total revenue for the three months ended December 31, 2012. The United States and Canada accounted for approximately 65% and 14%, respectively, of the Company’s total revenue for the nine months ended December 31, 2012.

 

The distribution of revenue by country is segmented as follows:

 

   

Three Months Ended

   

Nine Months Ended

 
   

December 31,
2013

   

December 31,
2012

   

December 31,
2013

   

December 31,
2012

 

Revenue by country:

                               

United States

  $ 11,122     $ 3,044     $ 20,304     $ 15,083  

Canada

    474       377       1,436       3,159  

Germany

    795       754       1,797       1,621  

England

    114       610       800       956  

Other

    1,476       1,142       2,903       2,531  
    $ 13,981     $ 5,927     $ 27,240     $ 23,350  

 

 
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The Company has a variety of customers, and in any given year a single customer can account for a significant portion of sales. For the three months ended December 31, 2013, the Company had three customers located in the United States who accounted for more than 10% of total revenue. For the nine months ended December 31, 2013, the Company had three customers located in the United States who accounted for more than 10% of total revenue. For the three months ended December 31, 2012, the Company had two customers located in the United States and one customer located in Germany who accounted for more than 10% of total revenue. For the nine months ended December 31, 2012, the Company had one customer located in the United States who accounted for more than 10% of total revenue.

 

Three Months Ended

 

Total
Revenue
(in millions)

   

Number of
Customers with
Revenue
> 10% of Total
Revenue

   

Customer
Share as a
Percent of Total
Revenue

 

December 31, 2013

  $ 14.0       3       57

%

December 31, 2012

  $ 5.9       3       38

%

 

 

Nine Months Ended

 

Total
Revenue
(in millions)

   

Number of
Customers with
Revenue
> 10% of Total
Revenue

   

Customer
Share as a
Percent of Total
Revenue

 

December 31, 2013

  $ 27.2       3       39

%

December 31, 2012

  $ 23.4       1       36

%

 

At December 31, 2013, the Company had two customers that accounted for more than 10% of the outstanding net receivables.

 

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, 2013

  $ 10.7       2       57

%

 

The receivables representing 57% of the accounts receivable balance at December 31, 2013 were subsequently collected.

 

The Company relies on two suppliers for the majority of its finished goods. The suppliers also provide the Company with engineering services related to product development. At December 31, 2013 and 2012, the Company owed these suppliers $5,933 and $1,302, respectively, which is recorded in accounts payable and accrued liabilities.

 

Substantially all of the Company’s capital assets are owned by its wholly-owned subsidiary, Xplore Technologies Corporation of America, a Delaware corporation. No more than 10% of the Company’s assets were located in any country, other than the United States, during each of the nine months ended December 31, 2013 and 2012.

 

10. COMMITMENTS AND CONTINGENT LIABILITIES

 

a)            Premises

 

The Company leases facilities in Austin, Texas. The current annual lease commitment is $228 and the lease expires on August 31, 2014. Rent expense for the three months ended December 31, 2013 and 2012, was $62 and $64, respectively. Rent expense for the nine months ended December 31, 2013 and 2012, was $170 and $195, respectively.

 

Minimum annual payments by fiscal year required under all of the Company’s operating leases are:

 

2014

  $ 65  

2015

    124  

2016

    16  
    $ 205  

 

 
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b)            Purchase commitment

 

At December 31, 2013, the Company had purchase obligations for fiscal 2014 of approximately $18,256 related to inventory and product development items.

 

c)             Litigation

 

The Company and its subsidiaries are involved in various claims and legal actions arising in the ordinary course of business. None of these actions, individually or in the aggregate, are expected to have a material adverse effect on the Company’s consolidated financial position or results of operations.

 

On May 3, 2013, the Company and Deloitte LLP, formerly Deloitte & Touche LLP (“Deloitte”), entered into a Full and Final Mutual Release and a Minutes of Settlement (collectively, the “Settlement Agreement”). Under the terms of the Settlement Agreement, the parties agreed to dismiss all claims and counterclaims that were brought, or could have been brought, in the court proceeding between the Company, as plaintiff (defendant by counterclaim), and Deloitte, as defendant (plaintiff by counterclaim), in the Ontario Superior Court of Justice, captioned Xplore Technologies Corp. and Deloitte & Touche LLP. The Settlement Agreement contains releases of claims by the parties, a consent to dismiss the proceeding and other provisions that are typical for similar settlement agreements.

 

Under the terms of the Settlement Agreement, Deloitte made a payment to the Company in the amount of CAD$700 (Canadian dollars) in full and final satisfaction of all claims made by the Company, and the Company agreed to destroy certain confidential information in the possession of the Company and its expert witness in the proceeding.

 

During the nine months ended December 31, 2013, the settlement amount of $694 was recorded as other income.

 

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

 

Certain statements in our Management’s Discussion and Analysis of Financial Condition and Results of Operations, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2013 and elsewhere in this Form 10-Q. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

 

Overview

 

We are engaged in the development, integration and marketing of rugged mobile personal computer, or PC, systems. Our rugged tablet PCs are designed to withstand hazardous conditions such as extreme temperatures, driving rain, repeated vibrations, dirt, dust and concussive shocks. The intrinsically safe, ruggedized and reliable nature of our products enable the extension of traditional computing systems to a range of field personnel, including energy pipeline inspectors, public safety responders, warehouse workers and pharmaceutical scientists. Our tablets are fitted with a range of performance-matched accessories, including multiple docking solutions, wireless connectivity alternatives, global positioning system modules, biometric and smartcard options, as well as traditional peripherals, such as keyboards and cases. Additionally, our tablets are waterproof for up to 30 minutes in water up to a depth of three feet, impervious to drops from as high as seven feet, are readable in direct sunlight, can be mounted on vehicles and include LTE and Wi-Fi connectivity options for real-time data access. Our end user customers include major telecommunications companies, leading heavy equipment manufacturers, oil and gas companies, the military and first responders.

 

Our revenue has been derived primarily through the sale of our iX104 systems in the ultra-rugged, tablet PC market. We are dependent upon the market acceptance of our iX104 systems. Our iX104C5, or C5, introduced what we believe are “industry firsts” and differentiating features, including a tool-less removable dual solid state drive module, tool-less access to the SIM and MicroSD ports and an ingress protection rating of IP 67 for submersion in water. The C5 family also features an Intel® Core™ i7 processor and Windows® 7 operating system. Our specially designed AllVueTM screen is viewable in challenging lighting conditions, including direct sunlight and dimly lit environments, and also features a superior screen contrast ratio of 600:1.

 

 
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We launched our fifth generation iX104C line of rugged tablet PCs in May 2011 and have received favorable responses from our end user customers, based on annual revenue growth of approximately 11% and approximately 55% for fiscal years 2013 and 2012, respectively. Since the iX104C5 launch, we have announced the receipt of significant orders for our iX104C5 from a major U.S. telecommunications provider, the U.S. military, one of the largest oil and natural gas producers in North America and a medical device company. These orders contributed significantly to the increase in our annual revenue.

 

Historically, we have competed in a subset of the market for large rugged PCs, given the ultra-rugged attributes of the iX104C5 product, which weighs approximately 5.4 pounds. To broaden the market for our products and increase our revenue growth opportunities, we are developing multiple new fully-rugged tablets that are lighter and less expensive than the iX104C5, which will allow us to compete in significantly larger segments of the rugged PC market. On July 10, 2013, we announced the first of these tablets with the launch of RangerX, our first fully-rugged Android tablet, which weighs approximately 2.2 pounds. We believe the lighter RangerX tablet is ideal for field service applications and more mobile market opportunities, as compared to the iX104. The RangerX uniquely offers functionality that allows telecommunications providers to consolidate the equipment used by their field service engineers into a single device, the RangerX, eliminating the need for troublesome and costly external dongles currently used by these providers to test HD video signals and Internet connectivity during home and business installations. On December 11, 2013, we announced the receipt of the first major purchase order for our RangerX rugged Android tablet, in the amount of approximately $4 million, from a major U.S. telecommunications provider. We completed and shipped the order in December 2013. We believe RangerX and our other new tablets under development will significantly broaden our addressable markets.

 

The timing of the aforementioned large orders, and the related shipping dates of the ordered products, creates variability in our reported revenues. While we may experience some variability in our quarterly operating results as a consequence of the impact of large orders, we believe we will continue to grow our year-over-year revenues. Our year-to-date revenue for the nine months ended December 31, 2013 was approximately 17% higher than the same period in our prior fiscal year.

 

In the fall of 2012, we received gross proceeds of $10 million from an underwritten public offering of two million shares of our common stock, which resulted in the automatic conversion of each series of our outstanding preferred stock into shares of our common stock. We believe these actions strengthened our financial position. We generated net cash from operations for the year ended March 31, 2013. However, we intend to use the net proceeds from the offering for the product development efforts described above, as well as to expand our sales and marketing efforts to generate more awareness of our products and deepen our sales penetration into new markets. Consequently, our operating expenses have increased, and we expect them to increase further in the future. As a result, we may not generate net cash from operations in the current fiscal year. We currently estimate that development of our other new tablets will be completed, and the products launched, during 2014.

 

Looking forward, our strategy is to build increased marketplace awareness of our iX104, RangerX and new product families, in an effort that we believe will enable us to increase our revenue and to expand our market share.

 

You should read the following discussion and analysis in conjunction with our financial statements and notes included in this quarterly report on Form 10-Q.

 

Critical Accounting Policies

 

Our unaudited interim consolidated financial statements and accompanying notes included in this quarterly report are prepared in accordance with U.S. generally accepted accounting principles. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. These estimates and assumptions are affected by management’s application of accounting policies. Estimates are deemed critical when a different estimate could have reasonably been used or where changes in the estimates are reasonably likely to occur from period to period, and would materially impact our financial condition, changes in financial condition or results of operations. Our significant accounting policies are discussed in Note 2 of the Notes to our audited Annual Consolidated Financial Statements as of and for the years ended March 31, 2013 and 2012 included in our annual report on Form 10-K filed with the SEC on June 26, 2013. On an ongoing basis, we evaluate our estimates, including those related to our revenue recognition, allowance for doubtful accounts, inventory valuation, warranty reserves, tooling amortization, financial instruments, stock based compensation and income taxes. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

 

 
14

 

 

Our critical accounting policies are as follows:

 

Revenue Recognition. Our revenue is derived from the sale of rugged mobile technology, which includes rugged mobile tablet PC computers and related accessories. Our customers are predominantly resellers. However, we also sell directly to end-users. We recognize revenue, net of an allowance for estimated returns, when title and risks of ownership are transferred to the customer, all significant contractual obligations have been satisfied, the sales price is fixed or determinable and the ability to collect is reasonably assured. Our revenue recognition criteria have generally been met when the product has been shipped. Shipments are based on firm purchase orders from our customers with stated terms. The shipping terms are F.O.B. shipping point. We do not have installation, training or other commitments subsequent to shipment that are other than incidental. Our prices are determined based on negotiations with our customers and are not subject to adjustment. Generally, we do not hold inventory at our resellers and we do not expect resellers to hold inventories of our products other than in limited circumstances in which such inventory is monitored by us. As a result, we expect returns to be minimal. We have not had material adjustments, as our returns have been minimal.

 

Allowance for Doubtful Accounts. We regularly review and monitor collections of our accounts receivables and make estimated provisions, generally monthly, based on our experience, aging attributes, results of collection efforts and current market conditions. If our estimate for allowance for doubtful accounts is too low, additional charges will be incurred in future periods, which additional charges could have a material adverse effect on our financial position and results of operations. Historically, our estimates have not required significant adjustment due to actual experience.

 

Warranty Reserves. We make provisions for warranties at the time of sale, which are based on our experience and monitored regularly. The revenue related to warranty is recognized when our obligations are generally covered by a warranty coverage agreement provided by a third party. Warranty obligations related to revenue recognized are primarily covered by warranty coverage agreements provided by our primary contract manufacturer, Wistron Corporation; however, we also provide the coverage on some of our obligations, for which we establish related reserves at the time of sale. If our estimates for warranties and returns are too low, additional charges will be incurred in future periods and these additional charges could have a material adverse effect on our financial position and results of operations. Historically, our estimates have not required significant adjustment due to actual experience.

 

Inventory Valuation. We adjust our inventory values so that the carrying value does not exceed net realizable value. The valuation of inventory at the lower of average cost or net realizable value requires us to use estimates regarding the amount of current inventory that will be sold and the prices at which it will be sold, and our assessment of expected orders from our customers. Additionally, the estimates reflect changes in our products or changes in demand because of various factors, including the market for our products, obsolescence, production discontinuation, technology changes and competition. While the estimates are subject to revisions and actual results could differ materially, our estimates have not required significant adjustment due to actual experience.

 

Tooling Amortization. We amortize tooling costs over a two year period or estimated life, whichever is shorter. Those costs are recorded as a cost of revenue, subject to an assessment that future revenue will be sufficient to fully recover the cost of the tooling. This assessment requires an assessment of the market for our products and our future revenue expectations. On a quarterly basis, this assessment is reviewed and the cost of tooling is written down to its net realizable value if its recoverability is not reasonably expected based on estimates of future revenue. There have been no instances in which we determined that useful life was significantly less than two years. Accordingly, we have not recorded material adjustments.

 

Income Taxes. We have a significant valuation allowance that we intend to maintain until it is more likely than not that our deferred tax assets will be realized. Our income tax expense recorded in the future will be reduced to the extent of decreases in our valuation allowances. Changes in the tax laws and rates could also affect recorded deferred tax assets and liabilities in the future. We are not aware of any such changes that would have a material effect on our results of operations, cash flows or financial position.

 

Financial Instruments. The warrants we issued in connection with the issuance of stock or for services have been valued separately using the Black-Scholes methodology. The determination of the values attributed to the warrants required the use of estimates and judgments particularly related to the assumptions used in the Black-Scholes calculation. In addition, options and warrants to acquire common stock issued to employees, directors and consultants have been valued using a Black-Scholes calculation and their valuations are impacted by the assumptions used in this calculation.

 

Stock-Based Compensation Expense. We apply the fair value method of accounting for all of our employee stock-based compensation. We use the Black-Scholes option pricing model to determine the fair value of stock option awards at the date of the issuance of the award. The value is expensed over the vesting period, which is generally three years. See Note 8 to our Annual Consolidated Financial Statements for the year ended March 31, 2013 for required disclosures.

 

 
15

 

 

Our estimates of stock-based compensation expense require a number of complex and subjective assumptions, including our stock price volatility, employee exercise patterns, future forfeitures, dividend yield, related tax effects and the selection of an appropriate fair value model. In addition, we have estimated volatility on shares issued in the three and nine months ended December 31, 2013 based on an average volatility of a set of companies considered comparable to the Company. We use historical data to estimate pre-vesting forfeitures, and we record stock-based compensation expense only for those awards that are expected to vest. The dividend yield assumption is based on our history and future expectations of dividend payouts.

 

The assumptions used in calculating the fair value of stock-based compensation expense and related tax effects represent management's best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, or if we decide to use a different valuation model, our stock-based compensation expense could be materially different in the future from what we have recorded in the current period, which could materially affect our results of operations.

 

Recent Accounting Pronouncements

 

We have implemented all new accounting pronouncements that are in effect and that may impact our consolidated financial statements.  We do not believe that there are any new accounting pronouncements that have been issued that might have a material impact on our consolidated financial position or results of operations.

 

Results of Operations

 

Revenue. We derive revenue from sales of our rugged wireless tablet PC systems, which encompass a family of active pen and touch tablet PC computers, embedded wireless, desktop, vehicle, fork-lift or truck docking stations and a range of supporting performance-matched accessories, peripherals and support services. Our revenue also includes service revenue derived from out-of-warranty repairs.

 

Cost of Revenue. Cost of revenue consists of the costs associated with manufacturing, assembling and testing our products, related overhead costs, maintenance, compensation, freight and other costs related to manufacturing support, including depreciation of tooling assets and logistics. We use contract manufacturers to manufacture our products and supporting components, which represents a significant majority of our cost of revenue. In addition, the costs associated with providing warranty repairs, as well as the costs associated with generating service revenue, are included in cost of revenue.

 

Gross Profit. Gross profit has been, and will continue to be, affected by a variety of factors, including competition, product mix and average selling prices of products, maintenance, new product introductions and enhancements, the cost of components and manufacturing labor, fluctuations in manufacturing volumes, component shortages, the mix of distribution channels through which our products are sold, and warranty costs.

 

Sales, Marketing and Support. Sales, marketing and support expenses include salaries, commissions, agent fees and costs associated with co-operative marketing programs, as well as other personnel-related costs, travel expenses, advertising programs, trade shows and other promotional activities associated with the marketing and selling of our products. We also believe part of our future success will be dependent upon establishing and maintaining successful relationships with a variety of resellers.

 

Product Research, Development and Engineering. Product research, development and engineering expenses consist of salaries and related expenses for development and engineering personnel, and non-recurring engineering costs, including prototype costs, related to the design, development, testing and enhancement of our product families. We expense our research and development costs as they are incurred. There may be components of our research and development efforts that require significant expenditures, the timing of which can cause quarterly fluctuation in our expenses.

 

General Administration. General administration expenses consist of salaries and related expenses for finance, accounting, procurement and information technology personnel, investor relations, professional fees, including legal fees for litigation defense and litigation settlement payments, corporate expenses, and costs associated with being a U.S. public company, including regulatory compliance costs.

 

Interest. Interest expense includes interest on borrowings or transaction processing fees related to our credit facility.

 

Other Income and Expense. Other income and expense includes gains and/or losses on dispositions of assets and other miscellaneous income and expense.

 

Inflation. During the three and nine months ended December 31, 2013 and 2012, we believe inflation and changing prices have not had a material impact on our revenue or on net income (loss) from continuing operations.

 

 
16

 

 

Three and Nine Months Ended December 31, 2013 vs. Three and Nine Months Ended December 31, 2012

 

Revenue. Total revenue for the three months ended December 31, 2013, was $13,981,000, as compared to $5,927,000 for the three months ended December 31, 2012, an increase of $8,054,000, or approximately 136%. Sales of our new RangerX Android tablet, which was launched in the current year, accounted for approximately 50% of the increase in revenue over the prior year. When excluding the RangerX sales, an increase in iX104 unit sales, primarily associated with the aforementioned large orders, accounted for approximately 64% of the increase in revenue for the three months ended December 31, 2013, compared to the prior year period and an increase in our iX104 average sales price due to changes in the product mix sold accounted for approximately 4% of the increase in revenue for the three months ended December 31, 2013, compared to the prior year period. Total revenue for the nine months ended December 31, 2013 was $27,240,000, as compared to $23,350,000 for the nine months ended December 31, 2012, an increase of $3,890,000, or approximately 17%. The increase was primarily due to sales of our new RangerX Android tablet launched in the current year.

 

We operate in one segment, the sale of rugged mobile wireless tablet PC computing systems. The United States accounted for approximately 80% of our total revenue for the three months ended December 31, 2013. The United States, Germany and England accounted for approximately 51%, 13%, and 10%, respectively, of our total revenue for the three months ended December 31, 2012. The United States accounted for approximately 75% of our total revenue for the nine months ended December 31, 2013. The United States and Canada accounted for approximately 65% and 14%, respectively, of our total revenue for the nine months ended December 31, 2012.

 

We have a number of customers and, in any given period, a single customer may account for a significant portion of our sales. For the three months ended December 31, 2013, we had three customers located in the United States who accounted for approximately 57% of our revenue. For the nine months ended December 31, 2013, we had three customers located in the United States who accounted for approximately 39% of our revenue. For the three months ended December 31, 2012, we had two customers located in the United States and one customer located in Germany who accounted for approximately 27% and 11%, respectively, of our revenue. For the nine months ended December 31, 2012, we had one customer located in the United States who accounted for approximately 36% of our revenue. At December 31, 2013, we had two customers with accounts receivable balances that totaled approximately 57% of our outstanding receivables. At December 31, 2012, we had two customers with receivable balances that totaled approximately 40% of our outstanding receivables, all of which were subsequently collected.

 

Cost of Revenue. Total cost of revenue for the three months ended December 31, 2013, was $9,136,000, compared to $3,864,000 for the three months ended December 31, 2012, an increase of $5,272,000, or approximately 136%. The increase was due to the increase in revenue of approximately 136%. Total cost of revenue for the nine months ended December 31, 2013 was $17,493,000, compared to $15,676,000 for the nine months ended December 31, 2012, an increase of $1,817,000, or approximately 12%. The increase in cost of revenue in the current year was due to the increase in revenue of approximately 17%, which was partially offset by a more favorable product mix.

 

We rely on two suppliers for the majority of our finished goods. The inventory purchases and engineering services from these suppliers for the nine months ended December 31, 2013 and 2012 were $18,683,000 and $12,094,000, respectively. At December 31, 2013 and 2012, we owed the suppliers $5,933,000 and $1,302,000, respectively, which amounts are recorded in accounts payable and accrued liabilities.

 

Gross Profit. Total gross profit increased by $2,782,000 to $4,845,000 (34.7% of revenue) for the three months ended December 31, 2013, from $2,063,000 (34.8% of revenue) for the three months ended December 31, 2012. The increase in gross profit for the three months ended December 31, 2013 was due primarily to an increase in revenue and unit sales. Total gross profit increased by $2,073,000 to $9,747,000 (35.8% of revenue) for the nine months ended December 31, 2013, from $7,674,000 (32.9% of revenue) for the nine months ended December 31, 2012. The increase in gross profit for the nine months ended December 31, 2013 was due primarily to the increase in unit sales and the increase in gross profit margin percentage was due to a more favorable product mix.

 

Sales, Marketing and Support Expenses. Sales, marketing and support expenses for the three months ended December 31, 2013, were $1,675,000, compared to $1,022,000 for the three months ended December 31, 2012. The increase of $653,000, or approximately 64%, is consistent with our previously announced plans to generate more awareness of our products through expanded sales and marketing initiatives. This increase primarily consists of an increase in commission expense of $188,000 commensurate with the increase in revenue, an increase in marketing expenses of $169,000, primarily associated with lead generation and awareness activities, an increase in demonstration unit related expenses of $122,000, mostly related to the launch of our new, lighter weight rugged tablet, the RangerX, on July 10, 2013, costs of $104,000 related to the hiring of new sales and marketing personnel, and an increase in travel related expenses of $78,000. Sales, marketing and support expenses for the nine months ended December 31, 2013, were $4,496,000, compared to $2,840,000 for the nine months ended December 31, 2012, an increase of $1,656,000, or approximately 58%. This increase primarily consists of an increase in marketing expenses of $513,000, primarily associated with lead generation and awareness activities, costs of $506,000 related to the hiring of new sales and marketing personnel, an increase in demonstration unit related expenses of $272,000, mostly related to the launch of the RangerX on July 10, 2013, an increase in travel related expenses of $228,000, and an increase in commission expense of $106,000 commensurate with the increase in revenue.

 

 
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Product Research, Development and Engineering Expenses. Product research, development and engineering expenses for the three months ended December 31, 2013 were $1,360,000, compared to $695,000 for the three months ended December 31, 2012. The increase of $665,000, or approximately 96%, is consistent with our previously announced plans to develop new products to broaden our addressable markets. In the current fiscal year, we are developing three new products, the first of which is our lighter weight rugged Android tablet, the Ranger X, which was launched on July 10, 2013. We did not have any major development projects in the prior fiscal year. The increase in these expenses was due primarily to an increase in product development costs of $610,000 associated with three new products and an increase in headcount related expenses of $61,000 for new engineering personnel. Product research, development and engineering expenses for the nine months ended December 31, 2013 were $3,324,000, an increase of $1,715,000, or approximately 107%, compared to $1,609,000 for the nine months ended December 31, 2012. The increase was primarily due to an increase in product development costs of $1,379,000 and an increase in headcount related expenses of $302,000 for new engineering personnel.

 

General Administration Expenses. General administration expenses for the three months ended December 31, 2013 were $917,000, compared to $965,000 for the three months ended December 31, 2012, a decrease of $48,000, or approximately 5%. The decrease consists primarily of a decrease in professional fees of $93,000, primarily legal related, and a decrease in headcount related expenses of $26,000, offset by an increase in stock-based compensation of $72,000 associated with the June 2013 option grants described below. General administration expenses for the nine months ended December 31, 2013 were $2,957,000, compared to $2,655,000 for the nine months ended December 31, 2012, an increase of $302,000, or approximately 11%. The increase was primarily due to an increase in stock-based compensation of $316,000 associated with the June 2013 option grants, an increase in headcount related expenses of $59,000, offset by a decrease in professional fees of $72,000, primarily legal related.

 

For the three months ended December 31, 2013 and 2012, the fair value of employee stock-based compensation expense was $266,000 and $164,000, respectively. In June 2013, our board of directors approved a grant of options to purchase 797,000 shares of our common stock at an exercise price of $5.00 per share to members of our board of directors and certain of our executive officers. These options vest in three equal annual installments, beginning on October 31, 2013, and have a term of seven and a half years from the date of grant. In addition, our board of directors also approved grants of options to purchase 275,000 shares of our common stock to certain non-officer employees, with an exercise price of $3.44. We recorded stock-based compensation expense related to the June 2013 grants of $107,000 and $462,000, respectively, during the three and nine months ended December 31, 2013. In November 2013, the board of directors approved a grant of options to purchase a total of 185,000 shares of our common stock to three new employees, of which options to purchase 175,000 shares were granted to two officers, with an exercise price of $4.66. The options with exercise prices of $3.44 and $4.66 vest in three equal annual installments, beginning on the first anniversary of the date of grant, and have a term of five years from the date of grant. For the nine months ended December 31, 2013 and 2012, the recorded employee stock-based compensation expense was $910,000 and $531,000, respectively. The fluctuation in this expense is attributable to the timing of the granting of new awards and employee turnover. Stock compensation expense was recorded in the employee related functional classification.

 

Depreciation and amortization expenses for the three months ended December 31, 2013 and 2012 were $217,000 and $129,000, respectively. Depreciation and amortization expenses for the nine months ended December 31, 2013 and 2012 were $530,000 and $380,000, respectively. The increase in depreciation expense consists primarily of the increase of depreciation expense for the RangerX and C5 demonstration units of $66,000 and $122,000, respectively, along with an increase in tooling amortization associated with our new RangerX and C5 Tablet PC of approximately $20,000 and $21,000, respectively, for the three and nine months ended December 31, 2013, as compared to the same periods in the prior year. Depreciation and amortization is recorded in the related functional classification.

 

Interest Expense. There was no interest expense for the three months ended December 31, 2013, compared to $1,000 for the three months ended December 31, 2012, a decrease of $1,000. Interest expense for the nine months ended December 31, 2013 was $3,000, compared to $65,000 for the nine months ended December 31, 2012, a decrease of $62,000. This decrease was principally attributable to the elimination of discount fees of 0.52% charged under our credit facility on eligible receivables arising from North American revenue prior to June 29, 2012, when the agreement related to our credit facility was amended to eliminate the discount fees.

 

Other Income/Expense. Other expense for the three months ended December 31, 2013 was $3,000, compared to $6,000 for the three months ended December 31, 2012. Other income for the nine months ended December 31, 2013 was $661,000, resulting from a litigation settlement payment to us referenced below, compared to other expense of $35,000 for the nine months ended December 31, 2012.

 

 
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On May 3, 2013, we entered into a Full and Final Mutual Release and a Minutes of Settlement, which we refer to collectively as the Settlement Agreement, with Deloitte LLP, formerly Deloitte & Touche LLP, or Deloitte. Under the terms of the Settlement Agreement, Deloitte made a payment to us in the amount of CAD$700,000 (Canadian dollars) in full and final satisfaction of all claims made by us, and we agreed to destroy certain confidential information in our possession, as well as the possession of our expert witness in the proceeding.

 

During the nine months ended December 31, 2013, we recorded the settlement amount of $694,000 as other income.

 

Income Taxes. The income tax benefit of $12,000 during the nine months ended December 31, 2013 is a result of a true-up of the accrual of income tax expense of $35,000 for our fiscal year 2013 to reflect the actual amount of such taxes reflected in the return filed for that fiscal year.

 

Net Income (Loss). Our net income for the three months ended December 31, 2013, was $890,000, compared to a net loss of $626,000 for the three months ended December 31, 2012, a favorable variance in net income (loss) of $1,516,000. The favorable variance was primarily due to an increase in gross profit of $2,782,000, partially offset by an increase in operating expenses of $1,270,000. The net loss for the nine months ended December 31, 2013, was $360,000, as compared to net income of $470,000, for the nine months ended December 31, 2012, an unfavorable variance in net income (loss) of $830,000. The unfavorable variance was due primarily to an increase in operating expenses of $3,673,000, partially offset by increases in gross profit of $2,073,000 and a positive variance in other income (expenses) of $758,000.

 

Net Income (Loss) Attributable to Common Stockholders. Net income attributable to common stockholders for the three months ended December 31, 2013 was $890,000, compared to net loss of $907,000 for the three months ended December 31, 2012, a favorable variance in net income (loss) of $1,797,000. Net loss attributable to common stockholders for the nine months ended December 31, 2013 was $360,000, compared to $1,822,000 for the nine months ended December 31, 2012, a favorable variance in net income (loss) of $1,462,000. The prior year periods include dividends attributable to our then outstanding preferred stock, which were not applicable in the current year periods. In connection with the closing of the public offering of our common stock on October 31, 2012, each series of our outstanding preferred stock was automatically converted into shares of our common stock. The dividends attributable to these shares for the three and nine months ended December 31, 2012, were $281,000 and $2,292,000, respectively. The dividend rate for the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock was 7.5% per annum, which were paid in shares of common stock determined by dividing (i) the aggregate amount of the dividend then payable by (ii) the volume weighted average trading price of the common stock over the ten trading days ending on the third trading day immediately preceding the dividend payment date, less a discount of 25% of the volume weighted average trading price of the common stock.  The dividend rate for the Series D Preferred Stock was 10% per annum, payable in additional shares of Series D Preferred Stock valued at $1.00 per share.  The values for dividends paid and dividends accrued and unpaid were determined based on the market prices of our common stock as of the dates of share issuances or accrual multiplied by the equivalent common shares.

 

Liquidity and Capital Resources

 

Until fairly recently, the rate of growth in the market for our tablet products and our success in gaining market share has been less than we anticipated. Prior to fiscal 2013, we incurred net losses in each full fiscal year since our inception. From inception, we have financed our operations and met our capital expenditure requirements primarily from the gross proceeds of private and public sales of debt and equity securities totaling approximately $112.8 million. As of December 31, 2013, our working capital was $15,107,000 and our cash and cash equivalents were $5,302,000.  

 

An additional source of capital available to us is our credit facility with a specialty finance company.

 

On December 10, 2009, we entered into an Accounts Receivable Purchasing Agreement, the ARPA, with DSCH Capital Partners, LLC d/b/a Far West Capital, or FWC. Pursuant to the ARPA, FWC may purchase, in its sole discretion, our eligible accounts receivable on a revolving basis, up to a maximum of $8,500,000. Under the terms of the ARPA, FWC purchases eligible receivables from our subsidiary with full recourse for the face amount of such eligible receivables. FWC retains 15% of the purchase price of the purchased receivables as a reserve amount. We are required to pay FWC a monthly cost of funds fee equal to the net funds employed by FWC (i.e., the daily balance of the purchase price of all purchased receivables less the reserve amount, plus any unpaid fees and expenses due to FWC under the ARPA) multiplied by the annual prime lending rate reported in The Wall Street Journal plus 10.00%, which fees accrue daily. In June 2012, in connection with the reduction of our cost of funds rate and the elimination of the discount to FWC in connection with its purchase of eligible receivables, we agreed to a net worth financial covenant requiring, as of the last day of each fiscal quarter, our subsidiary to have a net worth (defined as assets minus liabilities) of not less than $4,000,000. In the event we are unable to maintain the minimum net worth requirement, the monthly cost of funds fee required to be paid to FWC will be increased to equal the net funds employed by FWC multiplied by the lesser of (a) the maximum rate allowed under applicable law and (b) the annual prime lending rate reported in The Wall Street Journal plus 16.0%. On August 26, 2011, we entered into an amendment to the ARPA to provide for advances up to $700,000 based upon eligible finished goods Tablet PC inventory, provided that total funds advanced on such inventory does not exceed 30% of all eligible inventory and provided further that the advances will at no time exceed 40% of the sum of (1) total funds advanced by FWC under the ARPA and (2) products scheduled to be shipped in satisfaction of customer purchase orders within 90 days. Eligible inventory is valued at the lower of cost or market value.

 

 
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The ARPA also provides that FWC has the right to require the subsidiary to repurchase any purchased accounts receivable: (a) if there is a dispute as to the validity of such receivable by the account debtor, (b) if certain covenants, warranties or representations made by the subsidiary with respect to such receivables are breached, (c) upon and during the continuance of an event of default under the ARPA or upon the termination of the ARPA, or (d) if such receivable remains unpaid 90 days after the invoice date. The ARPA has an initial term of one year with automatic renewals for successive one-year periods. Notwithstanding that, FWC may terminate the ARPA at any time upon 150 days prior written notice or without prior notice upon and during the continuance of an event of default.

 

The ARPA contains standard representations, warranties, covenants, indemnities and releases for agreements governing financing arrangements of this type. We have guaranteed the obligations of our subsidiary under the ARPA pursuant to a corporate guaranty and suretyship. In addition, pursuant to the ARPA, our obligations under the ARPA are secured by a first priority security interest on all our assets.

 

As of February 12, 2014, we had no borrowings outstanding under the ARPA.

 

We believe that our current cash, including remaining proceeds from our public offering that was completed in October 2012, and cash flow from operations, together with our borrowing capacity under the ARPA, will be sufficient to fund our anticipated operations, working capital and capital spending for the next 12 months.

 

Cash Flow Results

 

The table set forth below provides a summary statement of cash flows for the periods indicated:

 

   

Three Months Ended

December 31,

   

Nine Months Ended

December 31,

 
   

2013

   

2012

   

2013

   

2012

 

Net cash provided by (used in) operating activities

  $ (2,068,000 )   $ 229,000     $ (4,172,000 )   $ 2,886,000  

Net cash used in investing activities

    (280,000 )     (238,000 )     (837,000 )     (649,000 )

Net cash provided by financing activities

    12,000       7,856,000       31,000       7,882,000  

Cash and cash equivalents at end of period

    5,302,000       10,318,000       5,302,000       10,318,000  

 

Our operating activities used $2,068,000 of net cash for the three months ended December 31, 2013, as compared to $229,000 of net cash provided by operating activities for the three months ended December 31, 2012, an unfavorable variance in net cash from operating activities of $2,297,000. The unfavorable variance in net cash from operating activities was due to an unfavorable variance resulting from the timing of accounts receivable billings and collections of $5,111,000, an unfavorable variance due to the increase in inventory of $3,660,000, an unfavorable variance in prepaid expenses of $1,192,000 arising from the prior year recapitalization, partially offset by a favorable variance in the timing of accounts payable of $5,966,000, and a favorable variance in net income (loss), net of items not affecting cash, of $1,700,000. Our operating activities used $4,172,000 of net cash for the nine months ended December 31, 2013, as compared to $2,886,000 of net cash provided by operating activities for the nine months ended December 31, 2012, an unfavorable variance of $7,058,000. The unfavorable variance in net cash from operating activities was primarily due to an unfavorable variance resulting from the timing of accounts receivable billings and collections of $10,690,000, an unfavorable increase in the net use of cash for inventory of $3,689,000, and an unfavorable variance in net income (loss), net of items not affecting cash of $312,000, partially offset by a favorable decrease in the use of cash arising from the timing of accounts payable of $7,599,000, and a favorable reduction in prepaid expenses and other current assets of $34,000.

 

Net cash used in investment activities for the three and nine months ended December 31, 2013, consists of investments in tooling costs of $188,000 and $506,000, respectively, investments in demonstration units of $67,000 and $264,000, respectively, and investments in computer equipment of $25,000 and $67,000, respectively. Net cash used in investment activities for the three months ended December 31, 2012 consists primarily of investments in tooling costs related to new products being developed. Net cash used in investment activities for the nine months ended December 31, 2012 consists of tooling costs of $472,000, investments in demonstration units of $150,000 and $27,000 for a new phone system and other assets.

 

 
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Our financing activities provided $12,000 of net cash for the three months ended December 31, 2013, as compared to $7,856,000 of net cash provided by financing activities for the three months ended December 31, 2012. For the nine months ended December 31, 2013, our financing activities provided $31,000 of net cash, as compared to $7,882,000 of net cash for the nine months ended December 31, 2012. Net cash provided by financing activities for the three and nine months ended December 31, 2013, consisted solely of proceeds from the issuances of capital stock through our employee stock purchase plan. Net cash provided by financing activities for the three and nine months ended December 31, 2012, consisted of net proceeds from the public offering of our common stock of $7,856,000 and, for the nine months ended December 31, 2012, the issuance of capital stock by the employee stock purchase plan of $26,000.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable.

 

Item 4. Controls and Procedures.

 

(a)          Evaluation of disclosure controls and procedures.

 

As of the end of the period covered by this Quarterly Report on Form 10-Q, we conducted under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, an evaluation of the effectiveness of our “disclosure controls and procedures” (as that term is defined under the Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act). Based on that evaluation, our chief executive officer and chief financial officer concluded as of the period covered by this report that our disclosure controls and procedures were effective in recording, processing, summarizing and reporting information required to be disclosed within the time periods specified in the Securities and Exchange Commission’s rules and forms and to ensure that information required to be disclosed in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding the required disclosure.

 

(b)         Changes in internal control over financial reporting.

 

During the three months ended December 31, 2013, there have been no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II—OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

The Company and its subsidiaries are involved in various claims and legal actions arising in the ordinary course of business. None of these actions, individually or in the aggregate, are expected to have a material adverse effect on the Company’s consolidated financial position or results of operations.

 

Item 1A. Risk Factors

 

Our Annual Report on Form 10-K for the year ended March 31, 2013 includes a detailed discussion of our risk factors. The information presented below updates and should be read in conjunction with the risk factors and information disclosed in the Annual Report on Form 10-K for the year ended March 31, 2013.

 

Risks Relating to our Business

 

For the three months ended December 31, 2013, we had three customers that accounted for more than 10% of our total revenue. If we are unable to replace revenue generated from one of our major resellers or end-user customers with revenue from others in future periods, our revenue may decrease and our growth would be limited.

 

Historically, in any given quarter a single customer, either reseller or end-user customer, could account for more than 10% of our revenue. For the three months ended December 31, 2013, we had three customers located in the United States who accounted for approximately 57% of our total revenue. If we are unable to replace revenue generated from our major customers, including resellers, with revenue from others our revenue may decrease and our growth would be limited.

 

 
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

Exhibit
Number

 

Description of Exhibit

     

31.1*

 

Certification of Philip S. Sassower, 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 Michael J. Rapisand, 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 Philip S. Sassower, Chief Executive Officer, and Michael J. Rapisand, 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

 


*Filed herewith.

 

 
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SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

XPLORE TECHNOLOGIES CORP.

   
   

Dated: February 12, 2014

By:

/s/ MICHAEL J. RAPISAND

   

Michael J. Rapisand

   

Chief Financial Officer

   

(Principal Financial Officer and Duly Authorized Officer)

 

 

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