These condensed consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements as of and for the year ended December 31, 2021 included in the Exela Technologies, Inc. (the "Company," "Exela," "we," "our" or "us") annual report on Form 10-K for such period (the “2021 Form 10-K”).

The accompanying condensed consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America ("GAAP") and with the instructions to Form 10-Q and Rule 10-01 of Securities and Exchange Commission ("SEC") Regulation S-X as they apply to interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. These accounting principles require us to use estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results may differ from our estimates.

The condensed consolidated financial statements are unaudited, but in our opinion include all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the results for the interim period. The interim financial results are not necessarily indicative of results that may be expected for any other interim period or the fiscal year.

On July 25, 2022, we effected a one-for-twenty reverse split (the “Reverse Stock Split”) of our issued and outstanding shares of common stock, par value $0.0001 per share (“Common Stock”). As a result of the Reverse Stock Split every twenty (20) shares of Common Stock issued and outstanding were automatically combined into one (1) share of issued and outstanding Common Stock, without any change in the par value per share. All information related to Common Stock, stock options, restricted stock units, warrants and earnings per share have been retroactively adjusted to give effect to the Reverse Stock Split for all periods presented.

Under ASC Subtopic 205-40, Presentation of Financial Statements—Going Concern (“ASC 205-40”), the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its obligations as they become due within one year after the date that the financial statements are issued. As required under ASC 205-40, management’s evaluation should initially not take into consideration the potential mitigating effects of management’s plans that have not been fully implemented as of the date the financial statements are issued. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

In performing this evaluation, we concluded that under the standards of ASC 205-40 the following conditions raised substantial doubt about our ability to continue as a going concern: a history of net losses, net operating cash outflows, working capital deficits and significant cash payments for interest on our long-term debt. The Company also has cash obligations related to the remaining payments for the guarantee in the form of a true-up mechanism related to the Exchange Notes issued in connection with the Revolver Exchange (described in Note 5) and 2023 Notes and senior secured term loan both of which mature in July 2023. Management considered the Company’s current financial condition and liquidity sources, including current funds available, forecasted future cash flows and the Company’s obligations due before August 10, 2023. As required under ASC 205-40, management’s evaluation does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented or are not within control of the Company, such as access to equity financing (despite the Company’s track record in raising nearly $595.0 million of such funds).

The Company has undertaken and completed the following plans and actions to improve our available cash balances, liquidity or cash generated from operations, over the twelve month period from the date these financial statements are issued:

Despite these actions, the Company will need to take further action to raise additional funds in the capital markets. In order to access the capital markets, the Company has filed shelf-registration statements on Form S-3 allowing the Company to raise an additional $750.0 million: a $500.0 million universal shelf registration statement filed in March 2022 providing for the sale of common stock, preferred stock, warrants, debt securities and/or units (of which $250.0 million remains available) and a $500.0 million shelf registration statement filed in October 2021 providing for the sale of preferred stock and debt securities. Based on our experience with the at-the-market programs and our knowledge of the Company and the financial market, we believe that we will be able to raise additional funds from the sale of equity and debt in the future. However, the Company’s ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including market and economic conditions, the Company’s performance and investor sentiment with respect to the Company and its industry and considering these factors are outside of the Company’s control, substantial doubt about the Company’s ability to continue as a going concern exists under the standards of ASC 205-40. The consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern.

Net Loss per Share

Earnings per share (“EPS”) is computed by dividing net loss attributable to common stockholders by the weighted average number of shares Common Stock outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to the potential dilution that could occur if securities or other contracts to issue Common Stock were exercised or converted into Common Stock, using the more dilutive of the two-class method and the if-converted method in periods of earnings. The two class method is an earnings allocation method that determines earnings per share (when there are earnings) for Common Stock and participating securities. The if-converted method assumes all convertible securities are converted into Common Stock. Diluted EPS excludes all dilutive potential shares of Common Stock if their effect is anti-dilutive.

As the Company experienced net losses for the periods presented, the impact of the Company’s Series A Perpetual Convertible Preferred Stock (“Series A Preferred Stock”) and Series B Cumulative Convertible Perpetual Preferred Stock (the “Series B Preferred Stock”), was calculated using the if-converted method. As of June 30, 2022, the outstanding shares of the Company’s Series A Preferred Stock and Series B Preferred Stock, if converted would have resulted in an additional 69,518 shares and 3,029,900 shares of Common Stock outstanding, respectively, however, they were not included in the computation of diluted loss per share as their effects were anti-dilutive (i.e., reduces the net loss per share).

Similarly, the Company also did not include the effect of 35,000,000 warrants sold in the Company’s Initial Public Offering (“IPO”), the effect of 9,731,819 warrants sold in a private placement of securities on March 18, 2021 or the effect of the aggregate number of shares issuable pursuant to outstanding restricted stock units, performance units

and options of 497,350 and 110,125 as of June 30, 2022 and 2021, respectively, in the calculation of diluted loss per share for the three and six months ended June 30, 2022 and 2021, because their effects were anti-dilutive.


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net loss attributable to common stockholders (A)	$	(81,392)	$	(20,165)	$	(139,287)	$	(58,469)
Weighted average common shares outstanding - basic and diluted (B)		25,288,449		3,073,701		21,259,929		2,804,508
Loss Per Share:
Basic and diluted (A/B)	$	(3.22)	$	(6.56)	$	(6.55)	$	(20.85)

Impact of COVID-19

The COVID-19 pandemic continues to persist throughout the world including the U.S., India, Canada, Europe and other locations where we operate. To date, the COVID-19 pandemic has negatively impacted the global economy, created significant financial market volatility, disrupted global supply chains, and resulted in a significant number of deaths and infections worldwide.

The safety and well-being of our associates, employees and our ability to fulfill our service commitments are our highest priorities. After addressing the initial surge of the COVID-19 pandemic, we are now focused on running our business effectively in the new work from home paradigm while preparing for a more flexible workplace model in the future. Accordingly, the Company has taken several measures and expects to take further actions designed to protect the health of our employees and to minimize our operational disruption and resulting provision of services to our customers from the COVID-19 pandemic, including adopting masking, social distancing and cleaning measures in our production facilities. We are compliant with applicable federal, state and local COVID-19 rules, restrictions, orders and guidance, and are promoting vaccination among our associates.

In fiscal year 2022 to date, we continue to see impacts of global supply chain challenges, availability of staff at some of our key operating centers and pending customers’ decision to resume work from office. However, all of our production-related facilities remain operational and are continuing to provide ongoing services to our customers. We continue to engage with our customers to assist with their service demands, including our their needs for any supplemental operational services and/or changes to existing service requirements in response to the COVID-19 pandemic.

Notwithstanding the foregoing, we are unable to precisely predict the impact that COVID-19 will have in the future due to numerous uncertainties, including the severity of the disease, the duration of the outbreak, actions that may be taken by governmental authorities, the impact to the business of our customers, and other factors identified in Part I, Item 1A. “Risk Factors” in our 2021 Form 10-K. Given these uncertainties, the global pandemic could disrupt the business of certain of our customers, decrease our their’ demand for our services, impact our business operations and our ability to execute on our associated business strategies and initiatives, and adversely impact our consolidated results of operations and/or our financial condition in the future. We will continue to closely monitor and evaluate the nature and extent of the impact of the global pandemic to our business, consolidated results of operations, and financial condition.

Network Outage

In late June 2022, the Company experienced a network security incident impacting certain of the Company’s operational and information technology systems. The Company immediately took steps to isolate the impact and prevent additional systems from being affected, including taking large parts of its network offline as a precaution and thereby disrupting some access to our applications and services by our employees and customers. Promptly upon our detection of this incident, we initiated response and containment protocols and our security teams, supplemented by leading cyber defense firms, worked to remediate this incident. We notified law enforcement, contacted our customers to apprise them of the situation and will provide any notices that may be required by applicable law.

We undertook extensive efforts to identify, contain and recover from this incident quickly and securely. We systematically brought our information systems back online in a controlled, phased approach. Our teams worked to maintain our business operations and minimize the impact on our customers, operating partners, and employees. The Company’s systems recovery efforts are substantially complete, and the Company’s operations are fully functional, however, the incident did result in some loss of revenue in the end of the second quarter as well as certain incremental costs, some of which is expected to continue.

We maintain a variety of insurance policies, including cyber insurance and business interruption insurance that may partially off-set the costs related to this incident.