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Stockholders' Equity
 6 Months Ended
Jun. 30, 2024
Stockholders' Equity  
Stockholders' Equity

11.   Stockholders’ Equity

The following description summarizes the material terms and provisions of the securities that the Company has authorized.

Common Stock

The Company is authorized to issue 1,600,000,000 shares of Common Stock. Except as otherwise required by law or as otherwise provided in any certificate of designation for any series of preferred stock, the holders of the Company’s Common Stock and Tandem Preferred Stock (that provides a vote to holders of the Company’s Series B Preferred Stock, as described below) possess all voting power for the election of the Company’s board of directors (the “Board”) and all other matters requiring stockholder action and will at all times vote together as one class on all matters submitted to a vote of Exela stockholders. Holders of the Company’s Common Stock are entitled to one vote per share on matters to be voted on by stockholders. Holders of the Company’s Common Stock will be entitled to receive such dividends and other distributions, if any, as may be declared from time to time by the Board in its discretion out of funds legally available therefor and shall share equally on a per share basis in such dividends and distributions. The holders of the Common Stock have no conversion, preemptive or other subscription rights and there are no sinking fund or redemption provisions applicable to the Common Stock. As of June 30, 2024, there were 6,365,363 shares of Common Stock outstanding.

Share Buyback Program

On August 10, 2022, the Board authorized a share buyback program (the “2022 Share Buyback Program”), pursuant to which the Company is permitted to repurchase up to 50,000 shares of Common Stock over the next two-year period. The 2022 Share Buyback Program does not obligate the Company to repurchase any shares of Common Stock. No shares were repurchased under the 2022 Share Buyback Program during the six months ended June 30, 2024 and 2023. As of June 30, 2024, the Company had repurchased and concurrently retired 1,787 shares of Common Stock pursuant to the 2022 Share Buyback Program.

The Company records such stock repurchases as a reduction to stockholders’ equity. The Company allocates the excess of the repurchase price over the par value of shares acquired to accumulated deficit and additional paid-in capital. The portion allocated to additional paid-in capital is determined by dividing the number of shares to be retired by the number of shares issued multiplied by the balance of additional paid-in capital as of the retirement date.

Series A Preferred Stock

The Company is authorized to issue 20,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Board. The Company has designated 2,800,000 shares of its authorized preferred stock as Series A Preferred Stock. The rights and preferences of the Series A Preferred Stock are defined in the Certificate of Designations, Preferences, Rights and Limitations of Series A Perpetual Convertible Preferred Stock of the Company, dated July 12, 2017 (the "Series A Certificate of Designations"). At June 30, 2024, the Company had 2,778,111 shares of Series A Preferred Stock outstanding. The par value of the Series A Preferred Stock is $0.0001 per share. Each share of Series A Preferred Stock is convertible at the holder’s option, at any time into the number of shares of Common Stock determined as of the date of conversion using a certain conversion formula that takes into account the amount of Liquidation Preference per share as adjusted for accrued but unpaid dividends, as described below. As of June 30, 2024, after taking into account the effect of the Reverse Stock Split, each outstanding share of Series A Preferred Stock was convertible into 0.000152 shares of Common Stock using this conversion formula. Accordingly, as of June 30, 2024, 424 shares of Common Stock were issuable upon conversion of 2,778,111 shares of outstanding Series A Preferred Stock.

Holders of the Series A Preferred Stock are entitled to receive cumulative dividends at a rate per annum of 10% of the dollar amount of per share liquidation preference (plus accumulated but unpaid dividends, the “Series A Liquidation Preference”) per share of Series A Preferred Stock, paid or accrued quarterly in arrears on the 15th day of each March, June, September and December. From the issue date through June 30, 2024, the amount of all accrued but

unpaid dividends on the Series A Preferred Stock have been added to the Series A Liquidation Preference. The Company shall add the amount of all accrued but unpaid dividends on each quarterly dividend payment date to the Series A Liquidation Preference, except to the extent the Company elects to make all or any portion of such payment in cash on or prior to the applicable dividend payment date, in which case, the amount of the accrued but unpaid dividends that is added to the Series A Liquidation Preference shall be reduced on a dollar-for-dollar basis by the amount of any such cash payment. The aggregate Series A Liquidation Preference amount was $44.2 million as of June 30, 2024 (at $8 per share inclusive of accrued dividends as of such date as described below). The Company is not required to make any payment or allowance for unpaid dividends, whether or not in arrears, on converted shares of Series A Preferred Stock or for dividends on the shares of Common Stock issued upon conversion of such shares. The gross dividend accumulation for the three and six months ended June 30, 2024 was $1.1 million and $2.1 million, respectively. The gross dividend accumulation for the three and six months ended June 30, 2023 was $1.0 million and $1.9 million, respectively. As of June 30, 2024, the total accumulated but unpaid dividends on the Series A Preferred Stock since inception on July 12, 2017 was $22.0 million. The per share average of cumulative preferred dividends for the three and six months ended June 30, 2024 was $0.38 and $0.76, respectively. The per share average of cumulative preferred dividends for the three and six months ended June 30, 2023 was $0.35 and $0.69, respectively.

In addition, holders of the Series A Preferred Stock will participate in any dividend or distribution of cash or other property paid in respect of the Common Stock pro rata with the holders of the Common Stock (other than certain dividends or distributions that trigger an adjustment to the conversion rate, as described in the Series A Certificate of Designations), as if all shares of Series A Preferred Stock had been converted into Common Stock immediately prior to the date on which such holders of the Common Stock became entitled to such dividend or distribution.

Following the occurrence of a "Fundamental Change," as defined in the Series A Certificate of Designations, if the Company does not redeem the Series A Preferred Stock, holders of the Series A Preferred Stock may convert their entire accumulated Series A Liquidation Preference into Common Stock for fifteen days following the effective date of the Fundamental Change based on the greater of (i) the price to be paid (or deemed paid) per share of Common Stock in such transaction or the average closing price of the Common Stock on the 20 consecutive trading days immediately preceding the effective date of the Fundamental Change (or, such lesser number of trading days as shall follow the public announcement of such transaction) and (ii) $0.10. The maximum number of shares of Common Stock issuable upon such conversion will not exceed 85% of the total number of shares of Common Stock outstanding on a fully-diluted basis.

Series B Preferred Stock and Tandem Preferred Stock

The Company has designated 8,100,000 shares of its authorized preferred stock as Series B Preferred Stock. The rights and preferences of the Series B Preferred Stock are defined in the Certificate of Designations, Preferences, Rights and Limitations of Series B Cumulative Convertible Perpetual Preferred Stock of the Company, dated March 10, 2022 (the "Series B Certificate of Designations"). At June 30, 2024, the Company had 3,029,900 shares of Series B Preferred Stock outstanding. The par value of the Series B Preferred Stock is $0.0001 per share. Each share of Series B Preferred Stock is convertible at the holder’s option, at any time into the number of shares of Common Stock determined as of the date of conversion using a certain conversion formula that takes into account the amount of liquidation preference per share as adjusted for accrued but unpaid dividends, as described below. As of June 30, 2024, after taking into account the effect of the Reverse Stock Split and payment of the accrued dividend, each outstanding share of Series B Preferred Stock was convertible into 0.00555 of one share of Common Stock using this conversion formula. Accordingly, as of June 30, 2024, 16,814 shares of Common Stock were issuable upon conversion of 3,029,900 shares of outstanding Series B Preferred Stock. The shares of Series B Preferred Stock are listed on the Nasdaq under the symbol “XELAP.”

Holders of the Series B Preferred Stock are entitled to receive cumulative dividends at a rate per annum of 6% of the dollar amount of per share liquidation preference (plus accumulated but unpaid dividends, the “Series B Liquidation Preference”) per share of Series B Preferred Stock, paid or accrued quarterly in arrears on the last day of each of March, June, September and December. The Company shall add the amount of all accrued but unpaid dividends on each quarterly dividend payment date to the Series B Liquidation Preference, except to the extent the Company elects to make all or any portion of such payment in cash on or prior to the applicable dividend payment date, in which case,

the amount of the accrued but unpaid dividends that is added to the Series B Liquidation Preference shall be reduced on a dollar-for-dollar basis by the amount of any such cash payment. The aggregate Series B Liquidation Preference was $84.1 million as of June 30, 2024 (at $25 per share inclusive of accrued dividends as of such date as described below). The Company is not required to make any payment or allowance for unpaid dividends, whether or not in arrears, on converted shares of Series B Preferred Stock or for dividends on the shares of Common Stock issued upon conversion of such shares. The gross dividend accumulation was $1.2 million and $2.5 million for the three and six months ended June 30, 2024, respectively, as reflected on the condensed consolidated statements of operations. The gross dividend accumulation was $1.2 million and $2.3 million for the three and six months ended June 30, 2023, respectively, as reflected on the condensed consolidated statements of operations. As of June 30, 2024, the total accumulated but unpaid dividends on the Series B Preferred Stock since inception on March 23, 2022 was $8.3 million. The per share average of cumulative preferred dividends for the three and six months ended June 30, 2024 was $0.41 and $0.81, respectively. The per share average of cumulative preferred dividends for the three and six months ended June 30, 2023 was $0.39 and $0.77, respectively.

In addition, holders of the Series B Preferred Stock will participate in any dividend or distribution of cash or other property paid in respect of the Common Stock pro rata with the holders of the Common Stock (other than certain dividends or distributions that trigger an adjustment to the conversion rate, as described in the Series B Certificate of Designations), as if all shares of Series B Preferred Stock had been converted into Common Stock immediately prior to the date on which such holders of the Common Stock became entitled to such dividend or distribution. Holders of Series B Preferred Stock also have rights to vote for the election of one additional director to serve on the Board, if dividends on Series B Preferred Stock are in arrears for eight or more consecutive quarters, until all unpaid and accumulated dividends on the Series B Preferred Stock have been paid or declared and a sum sufficient for payment is set aside for such payment.

On May 17, 2022, the Company issued one share of tandem preferred stock, par value $0.0001 per share (the “Tandem Preferred Stock”), as a dividend on its existing shares of outstanding Series B Preferred Stock. The rights and preferences of the Tandem Preferred Stock are defined in the Certificate of Designations, Preferences, Rights and Limitations of the Tandem Preferred Stock of the Company, dated May 17, 2022 (the "Tandem Certificate of Designations"). Any issuance of Series B Preferred Stock after this date shall be automatically accompanied by an equal number of shares of Tandem Preferred Stock. Tandem Preferred Stock are embedded in the Series B Preferred Stock and they provide voting rights to the existing shares of Series B Preferred Stock. Each share of Series B Preferred Stock disclosed in the condensed consolidated balance sheet, the condensed consolidated statements of stockholders’ deficit and the notes to the condensed consolidated financial statements embeds one share of Tandem Preferred Stock.

On all matters submitted to a vote of the stockholders of the Company, the holders of the Series B Preferred Stock through their holdings of Tandem Preferred Stock will be entitled to vote with the holders of the Common Stock as a single class. Each share of Tandem Preferred Stock entitles the holder to one vote per share, subject to adjustment for issuance of any shares of Common Stock pursuant to any dividend or distribution on shares of Common Stock, share split or share combination or other transactions as specified in the Tandem Certificate of Designations.

Shares of Tandem Preferred Stock are not entitled to receive dividends of any kind. In the case of a transfer of the underlying Series B Preferred Stock by a holder to any transferee, the Tandem Preferred Stock shall be automatically transferred simultaneously to such transferee without any further action by such Holder. Upon the redemption of a holder’s shares of Series B Preferred Stock or the conversion of shares of Series B Preferred Stock into Common Stock, an equal number of such holder’s shares of Tandem Preferred Stock shall, without any further action required by the holder, be automatically transferred to the Company for cancellation without the payment of any additional consideration by the Company. In the event of any liquidation, winding-up or dissolution of the Company each holder of the Tandem Preferred Stock shall be entitled to receive and to be paid out of the assets of the Company available for distribution to its stockholders an amount in cash equal to the par value of such Tandem Preferred Stock with respect to each share of Tandem Preferred Stock held by such holder.

Special Voting Preferred Stock

On October 9, 2023, the Company entered into the Subscription, Voting and Redemption Agreement with GP-HGM LLC, an entity affiliated to the Executive Chairman of the Company, pursuant to which GP-HGM LLC purchased 1,000,000 shares of a new class of preferred stock designated as “Special Voting Stock” for an aggregate purchase price of $100 and agreed to vote all of the shares of Special Voting Stock at the annual meeting of stockholders, held on June 13, 2024 (the “Annual Meeting"), in proportion to the votes cast at the Annual Meeting. Each share of Special Voting Stock was entitled to 20,000 votes per share. The Special Voting Stock were deemed redeemed for an aggregate price of $100 on the first business day following the Annual Meeting. There were no Special Voting Stock outstanding as of June 30, 2024.

Warrants

At June 30, 2024, there were warrants outstanding to purchase 1,978 shares of the Company’s Common Stock, consisting of 7,913,637 warrants to purchase one-four thousandth of one share of Common Stock from the private placement that was completed in March 2021. Each private placement warrant entitles the holder to purchase one-four thousandth of one share of Common Stock, at an exercise price of $16,000.00 per share and will expire on September 19, 2026. The private placement warrants are not listed or traded as of June 30, 2024, and are not subject to mandatory redemption by the Company.