xpel-20210331

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 March 31, 2021


☐			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 001-38858

XPEL, INC.

(Exact name of registrant as specified in its charter)

Nevada

20-1117381

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

618 W. Sunset Road

San Antonio

Texas

78216

(Address of Principal Executive Offices)

(Zip Code)

Registrant's telephone number, including area code: (210) 678-3700

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.001 per share	XPEL	The Nasdaq Stock Market LLC

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 x 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x 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	☐
Emerging growth company	☒

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

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

The registrant had 27,612,597 shares of common stock outstanding as of May 10, 2021.

TABLE OF CONTENTS


			Page
Part I - Financial Information
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets			1
Condensed Consolidated Statements of Income			2
Condensed Consolidated Statements of Comprehensive Income			3
Condensed Consolidated Statement of Changes in Equity			4
Condensed Consolidated Statement of Cash Flows			5
Notes to Condensed Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			15
Item 3. Quantitative and Qualitative Disclosures About Market Risk			25
Item 4. Controls and Procedures			26

Part II - Other Information
Item 1. Legal Proceedings			26
Item 1A. Risk Factors			26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			27
Item 3. Defaults Upon Senior Securities			27
Item 4. Mine Safety Disclosures			27
Item 5. Other Information			27
Item 6. Exhibits			27
Signatures			28

Part I. Financial Information

Item 1. Financial Statements

XPEL, INC.

Condensed Consolidated Balance Sheets


	(Unaudited)		(Audited)
	March 31, 2021		December 31, 2020
Assets
Current
Cash and cash equivalents	$	35,615,477	$	29,027,124
Accounts receivable, net	9,903,238		9,944,213
Inventory, net	24,909,271		22,364,126
Prepaid expenses and other current assets	2,121,327		1,441,749
Total current assets	72,549,313		62,777,212
Property and equipment, net	5,711,937		4,706,248
Right-of-Use lease assets	6,792,636		5,973,702
Intangible assets, net	5,287,809		5,423,980
Other non-current assets	487,983		486,472
Goodwill	4,509,419		4,472,217
Total assets	$	95,339,097	$	83,839,831
Liabilities
Current
Current portion of notes payable	$	2,514,391	$	2,568,172
Current portion lease liabilities	1,792,164		1,650,749
Accounts payable and accrued liabilities	21,358,360		16,797,462
Income tax payable	444,437		183,961
Total current liabilities	26,109,352		21,200,344
Other long-term liabilities	676,940		729,408
Deferred tax liability, net	657,210		627,806
Non-current portion of lease liabilities	4,958,742		4,331,214
Non-current portion of notes payable	2,917,061		3,568,191
Total liabilities	35,319,305		30,456,963
Commitments and Contingencies (Note 11)
Stockholders’ equity
Preferred stock, $0.001 par value; authorized 10,000,000; none issued and outstanding	—		—
Common stock, $0.001 par value; 100,000,000 shares authorized; 27,612,597 issued and outstanding	27,613		27,613
Additional paid-in-capital	10,412,471		10,412,471
Accumulated other comprehensive (loss) income	(143,920)		66,215
Retained earnings	49,723,628		42,876,569
Total stockholders’ equity	60,019,792		53,382,868
Total liabilities and stockholders’ equity	$	95,339,097	$	83,839,831

See notes to condensed consolidated financial statements.

XPEL, INC.

Condensed Consolidated Statements of Income (Unaudited)


	Three Months Ended March 31,
		2021		2020
Revenue
Product revenue		$	44,931,353	$	23,749,917
Service revenue		6,934,761		4,638,546
Total revenue		51,866,114		28,388,463

Cost of Sales
Cost of product sales		31,546,547		16,761,413
Cost of service		2,033,136		1,330,162
Total cost of sales		33,579,683		18,091,575
Gross Margin		18,286,431		10,296,888

Operating Expenses
Sales and marketing		3,387,830		2,743,249
General and administrative		6,351,491		5,069,771
Total operating expenses		9,739,321		7,813,020

Operating Income		8,547,110		2,483,868

Interest expense		52,719		30,558
Foreign currency exchange loss		35,612		415,577

Income before income taxes		8,458,779		2,037,733
Income tax expense		1,611,720		426,379
Net income		6,847,059		1,611,354

Earnings per share
Basic and diluted		$	0.25	$	0.06
Weighted Average Number of Common Shares
Basic and diluted		27,612,597		27,612,597

See notes to condensed consolidated financial statements.

XPEL, INC.

Condensed Consolidated Statements of Comprehensive Income (Unaudited)


	Three Months Ended March 31,
		2021		2020
Other comprehensive income
Net income		$	6,847,059	$	1,611,354
Foreign currency translation		(210,135)		(760,055)
Total comprehensive income		6,636,924		851,299
Total comprehensive income attributable to:
Stockholders of the Company		6,636,924		855,832
Non-controlling interest		—		(4,533)
Total comprehensive income		$	6,636,924	$	851,299

See notes to condensed consolidated financial statements.

XPEL, INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)


Stockholders' Equity - Three Months Ended March 31
	Common Stock			Additional Paid-in-Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Equity Attributable to Stockholders of the Company		Non-Controlling Interest		Total Stockholders’ Equity
	Shares	Amount
Balance as of December 31, 2019	27,612,597	$	27,613	$	11,348,163	$	24,594,878	$	(908,764)	$	35,061,890	$	(168,680)	$	34,893,210
Net income	—	—		—		1,611,354		—		1,611,354		—		1,611,354
Foreign currency translation	—	—		—		—		(755,522)		(755,522)		(4,533)		(760,055)
Purchase of minority interest	—	—		(935,692)		—		—		(935,692)		173,213		(762,479)
Balance as of March 31, 2020	27,612,597	27,613		10,412,471		26,206,232		(1,664,286)		34,982,030		—		34,982,030

Balance as of December 31, 2020	27,612,597	27,613		10,412,471		42,876,569		66,215		53,382,868		—		53,382,868
Net income	—	—		—		6,847,059		—		6,847,059		—		6,847,059
Foreign currency translation	—	—		—		—		(210,135)		(210,135)				(210,135)
Balance as of March 31, 2021	27,612,597	$	27,613	$	10,412,471	$	49,723,628	$	(143,920)	$	60,019,792	$	—	$	60,019,792

See notes to condensed consolidated financial statements.

XPEL, INC.

Condensed Consolidated Statements of Cash Flows (Unaudited)


	Three Months Ended March 31,
	2021		2020
Cash flows from operating activities
Net income	$	6,847,059	$	1,611,354
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment	383,090		270,317
Amortization of intangible assets	262,606		233,896
Loss on sale of property and equipment	2,031		3,121
Bad debt expense	93,030		22,832
Deferred income tax	23,655		(31,764)
Accretion on notes payable	8,945		11,017

Changes in assets and liabilities:
Accounts receivable	(124,628)		(157,943)
Inventory, net	(2,612,306)		(3,932,654)
Prepaid expenses and other current assets	(685,955)		(18,366)
Income tax receivable	—		94,729
Other assets	(113,145)		(326,798)
Accounts payable and accrued liabilities	4,571,640		2,201,806
Income tax payable	270,946		290,610
Net cash provided by operating activities	8,926,968		272,157
Cash flows used in investing activities
Purchase of property, plant and equipment	(1,405,376)		(776,057)
Proceeds from sale of property and equipment	238		24,659
Acquisition of a business, net of cash acquired	—		(1,247,843)
Development of intangible assets	(114,048)		(109,414)
Net cash used in investing activities	(1,519,186)		(2,108,655)
Cash flows from financing activities
Borrowings on revolving credit agreement	—		6,000,000

Repayments of notes payable	(723,236)		(143,293)
Purchase of minority interest	—		(784,653)

Net cash provided by (used in) financing activities	(723,236)		5,072,054
Net change in cash and cash equivalents	6,684,546		3,235,556
Foreign exchange impact on cash and cash equivalents	(96,193)		51,216
Increase in cash and cash equivalents during the period	6,588,353		3,286,772
Cash and cash equivalents at beginning of period	29,027,124		11,500,973
Cash and cash equivalents at end of period	$	35,615,477	$	14,787,745

Supplemental schedule of non-cash activities
Notes payable issued for acquisitions	$	—	$	893,317



Supplemental cash flow information
Cash paid for income taxes	$	1,356,299	$	77,026
Cash paid for interest	$	45,003	$	2,290

See notes to condensed consolidated financial statements.

XPEL, Inc.

Notes to Condensed Consolidated Financial Statements

March 31, 2021 and 2020

(Unaudited)

1. INTERIM FINANCIAL INFORMATION

The accompanying (a) condensed consolidated balance sheet as of December 31, 2020, which has been derived from audited financial statements, and (b) unaudited interim condensed consolidated financial statements as of and for the three months ended March 31, 2021 and 2020 have been prepared by XPEL, Inc. (“XPEL” or the “Company”) in accordance with accounting principles generally accepted in the United States of America for interim financial information, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Pursuant to these rules and regulations, certain financial information and footnote disclosures normally included in the financial statements have been condensed or omitted. However, in the opinion of management, the financial statements include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the financial position, results of operations and cash flows of the interim periods presented. Operating results for the interim periods presented are not necessarily indicative of results to be expected for the full year or for any other interim period, due to variability in customer purchasing patterns and seasonal, operating and other factors.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s annual report on Form 10-K as filed with the SEC on March 11, 2021. These condensed consolidated financial statements also should be read in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations section appearing in this Report.

XPEL, Inc.

Notes to Condensed Consolidated Financial Statements

March 31, 2021 and 2020

(Unaudited)

2. SIGNIFICANT ACCOUNTING POLICIES

Nature of Business - The Company is based in San Antonio, Texas and sells, distributes, and installs protective films and coatings, including automotive paint protection film, surface protection film, automotive and architectural window films and ceramic coatings.

The Company was incorporated in the state of Nevada, U.S.A. in October 2003 and its registered office is 618 W. Sunset Road, San Antonio, Texas, 78216.

Basis of Presentation - The condensed consolidated financial statements are prepared in conformity with United States Generally Accepted Accounting Principles ("U.S. GAAP") and include the accounts of the Company and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated.

The functional currency for the Company is the United States dollar. The assets and liabilities of each of its foreign subsidiaries are translated into U.S dollars using the exchange rate as of the balance sheet date. Revenues and expenses are translated at the average exchange rates for the period. Gains and losses from translations are recognized in foreign currency translation included in accumulated other comprehensive income in the accompanying consolidated balance sheets. Foreign currency exchange gains and losses are presented as foreign currency exchange loss in the accompanying condensed consolidated statements of income. The ownership percentages and functional currencies of the entities included in these condensed consolidated financial statements are follows:


Subsidiaries	Functional Currency	% Owned by XPEL, Inc.
XPEL, Ltd.	UK Pound Sterling	100	%
Armourfend CAD, LLC	US Dollar	100	%
XPEL Canada Corp.	Canadian Dollar	100	%
XPEL B.V.	Euro	100	%
XPEL Germany GmbH	Euro	100	%
XPEL de Mexico S. de R.L. de C.V.	Peso	100	%
XPEL Acquisition Corp.	Canadian Dollar	100	%
Protex Canada, Inc.	Canadian Dollar	100	%
Apogee Corp.	New Taiwan Dollar	100	%
XPEL Slovakia	Euro	100	%
XPEL France	Euro	100	%

Segment Reporting - Management has concluded that our chief operating decision maker (“CODM”) is our chief executive officer. The Company’s CODM reviews the entire organization’s consolidated results on a monthly basis to evaluate performance and make resource allocation decisions. Management views the Company’s operations and manages its business as one operating segment.

Use of Estimates - The preparation of these condensed consolidated financial statements in conformity to U.S. GAAP requires management to make judgments and estimates and form assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and underlying assumptions are reviewed on an ongoing basis. Actual outcomes may differ from these estimates under different assumptions and conditions.

Accounts Receivable - Accounts receivable are shown net of an allowance for doubtful accounts of $97,366 and $90,844 as of March 31, 2021 and December 31, 2020, respectively. The Company evaluates the adequacy of its allowances by analyzing the aging of receivables, customer financial condition, historical collection experience, the value of any collateral and other economic and industry factors. Actual collections may differ from historical experience, and if economic, business or customer

XPEL, Inc.

Notes to Condensed Consolidated Financial Statements

March 31, 2021 and 2020

(Unaudited)

conditions deteriorate significantly, adjustments to these reserves may be required. When the Company becomes aware of factors that indicate a change in a specific customer’s ability to meet its financial obligations, the Company records a specific reserve for credit losses. The Company had no significant accounts receivable concentration as of March 31, 2021. At December 31, 2020, receivable balances from two large customers accounted for 24.7% of the Company's total trade receivables.

Provisions and Warranties - We provide a warranty on our products. Liability under the warranty policy is based on a review of historical warranty claims. Adjustments are made to the accruals as claims and data experience warrant. Our liability for warranties as of March 31, 2021 and December 31, 2020 was $48,786 and $52,006, respectively. The following tables present a summary of our accrued warranty liabilities for the three months ended March 31, 2021 and the twelve months ended December 31, 2020:


	2021
Warranty liability, January 1	$	52,006
Warranties assumed in period	57,535
Payments	(60,755)
Warranty liability, March 31	$	48,786


	2020
Warranty liability, January 1	$	65,591
Warranties assumed in period	283,458
Payments	(297,043)
Warranty liability, December 31	$	52,006

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The ASU removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This ASU was effective for fiscal years beginning after December 15, 2020, including interim periods within that fiscal year. The Company has adopted this ASU without a material change to its condensed consolidated financial statements.

Recent Accounting Pronouncements Issued and Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments — Measurement of Credit Losses on Financial Instruments”, which requires measurement and recognition of expected credit losses for financial assets held. ASU 2016-13 is effective for the Company beginning January 1, 2023 and is required to be applied prospectively. We are currently evaluating the impact that ASU 2016-13 will have on our consolidated financial statements.

XPEL, Inc.

Notes to Condensed Consolidated Financial Statements

March 31, 2021 and 2020

(Unaudited)

3. REVENUE

Revenue recognition

The Company recognizes revenue when it satisfies a performance obligation by transferring control of the promised goods and services to a customer, in an amount that reflects the consideration that it expects to receive in exchange for those goods or services. This is achieved through applying the following five-step model:

•Identification of the contract, or contracts, with a customer

•Identification of the performance obligations in the contract

•Determination of the transaction price

•Allocation of the transaction price to the performance obligations in the contract

•Recognition of revenue when, or as, the Company satisfies a performance obligation

The Company generates substantially all of its revenue from contracts with customers, whether formal or implied. Sales taxes collected from customers are remitted to the appropriate taxing jurisdictions and are excluded from sales revenue as the Company considers itself a pass-through conduit for collecting and remitting sales taxes, with the exception of taxes assessed during the procurement process of select inventories. Shipping and handling costs are included in cost of sales.

Revenue from product and services sales is recognized when control of the goods is transferred to the customer which occurs at a point in time typically upon shipment to the customer or completion of the service. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments.

Based upon the nature of the products the Company sells, its customers have limited rights of return which are immaterial. Discounts provided by the Company to customers at the time of sale are recognized as a reduction in sales as the products are sold.

Warranty obligations associated with the sale of our products are assurance-type warranties that are a guarantee of the product’s intended functionality and, therefore, do not represent a distinct performance obligation within the context of the contract. Warranty expense is included in cost of sales.

We apply a practical expedient to expense direct costs of obtaining a contract when incurred because the amortization period would have been one year or less.

Under its contracts with customers, the Company stands ready to deliver product upon receipt of a purchase order. Accordingly, the Company has no performance obligations under its contracts until its customers submit a purchase order. The Company does not enter into commitments to provide goods or services that have terms greater than one year. In limited cases, the Company does require payment in advance of shipping product. Typically, product is shipped within a few days after prepayment is received. These prepayments are recorded as contract liabilities on the consolidated balance sheet and are included in accounts payable and accrued liabilities (Note 9). As the performance obligation is part of a contract that has an original expected duration of less than one year, the Company has applied the practical expedient under the Accounting Standards Codification Topic 606 ("ASC 606") to omit disclosures regarding remaining performance obligations.

When the Company transfers goods or provides services to a customer, payment is due, subject to normal terms, and is not conditional on anything other than the passage of time. Typical payment terms range from due upon receipt to 30 days, depending on the type of customer and relationship. At contract inception, the Company expects that the period of time between the transfer of goods to the customer and

XPEL, Inc.

Notes to Condensed Consolidated Financial Statements

March 31, 2021 and 2020

(Unaudited)

when the customer pays for those goods will be less than one year, which is consistent with the Company’s standard payment terms. Accordingly, the Company has elected the practical expedient under ASC 606 to not adjust for the effects of a significant financing component. As such, these amounts are recorded as receivables and not contract assets.

The following table summarizes transactions within contract liabilities for the three months ended March 31, 2021:


Balance, December 31, 2020	$	244,837
Revenue recognized related to payments included in the December 31, 2019 balance	(167,868)
Payments received for which performance obligations have not been satisfied	2,508,251
Balance, Effect of foreign currency translation	(480)
Balance, March 31, 2021	$	2,584,740

The table below sets forth the disaggregation of revenue by product category for the periods indicated below:


	Three Months Ended March 31,
		2021		2020
Product Revenue
Paint protection film		$	35,784,433	$	19,771,119
Window film		7,159,291		3,090,106
Other		1,987,629		888,692
Total		44,931,353		23,749,917

Service Revenue
Software		$	978,019	$	851,571
Cutbank credits		2,635,835		1,613,264
Installation labor		3,114,502		2,021,450
Training		206,405		152,261
Total		6,934,761		4,638,546

Total		$	51,866,114	$	28,388,463

Because many of our international customers require us to ship their orders to freight forwarders located in the United States, we cannot be certain about the ultimate destination of the product. The following table represents our estimate of sales by geographic regions based on our understanding of

XPEL, Inc.

Notes to Condensed Consolidated Financial Statements

March 31, 2021 and 2020

(Unaudited)

ultimate product destination based on customer interactions, customer locations and other factors:


	Three Months Ended March 31,
		2021		2020
United States		$	25,604,612	$	15,553,037
China		10,705,495		2,024,510
Canada		4,946,175		4,175,196
Continental Europe		4,324,510		2,793,742
United Kingdom		1,785,796		1,116,428
Asia Pacific		1,591,575		770,043
Latin America		916,578		477,694
Middle East/Africa		1,962,630		1,289,056
Other		28,743		188,757
Total		$	51,866,114	$	28,388,463

Our largest customer accounted for 20.6% and 7.1% of our net sales during the three months ended March 31, 2021 and 2020, respectively.

4. PROPERTY AND EQUIPMENT, NET

Property and equipment consists of the following:


	March 31, 2021		December 31, 2020
Furniture and fixtures	$	1,450,654		$	1,349,037
Computer equipment	1,569,340			1,482,911
Vehicles	759,967			760,335
Equipment	1,992,864			1,955,254
Leasehold improvements	2,054,500			2,055,798
Plotters	1,312,228			1,282,630
Construction in Progress	1,427,875			321,764
Total property and equipment	10,567,428			9,207,729
Less: accumulated depreciation	4,855,491			4,501,481
Property and equipment, net	$	5,711,937		$	4,706,248

Depreciation expense for the three months ended March 31, 2021 and 2020 was $383,090 and $270,317, respectively.

XPEL, Inc.

Notes to Condensed Consolidated Financial Statements

March 31, 2021 and 2020

(Unaudited)

5. INTANGIBLE ASSETS, NET

Intangible assets consists of the following:


	March 31, 2021		December 31, 2020
Trademarks	$	421,094	$	373,374
Software	2,665,186		2,598,985
Trade name	500,127		497,545
Contractual and customer relationships	5,066,998		5,043,915
Non-compete	461,957		458,536
Other	213,827		213,218
Total cost	9,329,189		9,185,573
Less: Accumulated amortization	4,041,380		3,761,593
Intangible assets, net	$	5,287,809	$	5,423,980

Amortization expense for the three months ended March 31, 2021 and 2020 was $262,606 and $233,896, respectively.

6. GOODWILL

The following table summarizes goodwill transactions for the three months ended March 31, 2021 and 2020:


Balance at December 31, 2019	$	2,406,512
Additions	1,184,774
Foreign Exchange	(194,574)
Balance at March 31, 2020	$	3,396,712

Balance at December 31, 2020	$	4,472,217
Additions	—
Foreign Exchange	37,202
Balance at March 31, 2021	$	4,509,419

7. INVENTORIES

The components of inventory are summarized as follows:


	March 31, 2021		December 31, 2020
Film and film based products	$	22,559,577	$	20,170,756
Other products	1,937,016		1,717,236
Packaging and supplies	512,398		589,225
Inventory reserve	(99,720)		(113,091)
	$	24,909,271	$	22,364,126

XPEL, Inc.

Notes to Condensed Consolidated Financial Statements

March 31, 2021 and 2020

(Unaudited)

8. DEBT

REVOLVING FACILITIES

The Company has a $8,500,000 revolving line of credit agreement with The Bank of San Antonio, now known as Texas Partners Bank, to support its continuing working capital needs. This line of credit is secured by a security interest in substantially all of the Company’s current and future assets. Borrowings under the credit agreement bear interest at a variable rate of the Wall Street Journal prime rate minus 1.00% with a floor of 3.50%. This line of credit matures on June 5, 2022. As of both March 31, 2021 and December 31, 2020, the interest rate was 3.50%. As of March 31, 2021 and December 31, 2020, there were no borrowings outstanding on this line.

The credit agreement contains customary covenants including covenants relating to complying with applicable laws, delivery of financial statements, payment of taxes and maintaining insurance. The credit agreement also requires that XPEL must maintain certain debt coverage ratios, and it contains customary events of default including the failure to make payments of principal and interest, the breach of any covenants, the occurrence of a material adverse change, and certain bankruptcy and insolvency events.

As of March 31, 2021 and December 31, 2020, the Company was in compliance with all debt covenants.

On May 11, 2020, the Company borrowed $6,000,000 pursuant to a 36-month term-loan with Texas Partners Bank. The term-loan bears interest at a rate of 3.50% per annum, requires monthly payments of $176,373 and matures in June 2023.

XPEL Canada Corp., a wholly owned subsidiary of XPEL, Inc., also has a CAD $4,500,000 revolving line of credit agreement with HSBC Bank Canada to support its continuing working capital needs. The line has a variable interest rate of the HSBC Canada Bank’s prime rate plus 0.25%. As of both March 31, 2021 and December 31, 2020, the interest rate on this line was 2.70%. As of March 31, 2021 and December 31, 2020, no balance was outstanding on this line of credit. This facility is guaranteed by the Company.

NOTES PAYABLE

As part of its acquisition strategy, the Company may use a combination of cash and unsecured non-interest bearing promissory notes payable to fund its business acquisitions. The Company discounts the promissory note to fair value using market interest rates at the time of the acquisition.

Notes payable are summarized as follows:


	Weighted Average Interest Rate	Matures	March 31, 2021		December 31, 2020
Term-loan	3.50%	2023	$	4,569,999	$	5,056,240
Face value of acquisition notes payable	2.68%	2023	$	1,084,581	$	1,428,384
Total face value of notes payable			5,654,580		6,484,624
Unamortized discount			(223,128)		(348,261)
Current portion			(2,514,391)		(2,568,172)
Total long-term debt			$	2,917,061	$	3,568,191

XPEL, Inc.

Notes to Condensed Consolidated Financial Statements

March 31, 2021 and 2020

(Unaudited)

9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

The following table presents significant accounts payable and accrued liability balances as of the periods ending:


	March 31, 2021		December 31, 2020
Trade payables	$	16,151,655	$	12,987,487
Payroll liabilities	1,619,032		2,266,643
Contract liabilities	2,584,740		244,837

SEC Form 10-Q filed by XPEL, Inc.