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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2022

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: 001-36788

EXELA TECHNOLOGIES, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware

47-1347291

(State of or other Jurisdiction
Incorporation or Organization)

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

2701 E. Grauwyler Rd.
Irving, TX

75061

(Address of Principal Executive
Offices)

(Zip Code)

Registrant's Telephone Number, Including Area Code: (844) 935-2832

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 $0.0001 per share

XELA

The Nasdaq Stock Market LLC

6.00% Series B Cumulative Convertible
Perpetual Preferred Stock, par value $0.0001 per share

Tandem Preferred Stock, par value of $0.0001 per share

XELAP

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    No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes   No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth 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 Exchange Act). Yes   No 

As of August 5, 2022, the registrant had 64,967,633 shares of Common Stock outstanding.

Exela Technologies, Inc.

Form 10-Q

For the quarterly period ended June 30, 2022

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021

1

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2022 and 2021

2

Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2022 and 2021

3

Condensed Consolidated Statements of Stockholders’ Deficit for the three and six months ended June 30, 2022 and 2021

4

Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2022 and 2021

6

Notes to the Condensed Consolidated Financial Statements

7

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

38

Item 3. Quantitative and Qualitative Disclosures about Market Risk

56

Item 4. Internal Controls and Procedures

57

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

58

Item 1A. Risk Factors

59

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

60

Item 3. Defaults Upon Senior Securities

60

Item 4. Mine Safety Disclosures

60

Item 5. Other Information

60

Item 6. Exhibits

62

Exela Technologies, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

As of June 30, 2022 and December 31, 2021

(in thousands of United States dollars except share and per share amounts)

June 30, 

December 31, 

2022

    

2021

    

(Unaudited)

    

(Audited)

Assets

 

  

 

  

Current assets

 

  

 

  

Cash and cash equivalents

$

50,261

$

20,775

Restricted cash

 

42,916

 

27,285

Accounts receivable, net of allowance for doubtful accounts of $6,067 and $6,049, respectively

99,350

184,102

Related party receivables and prepaid expenses

715

715

Inventories, net

16,225

15,215

Prepaid expenses and other current assets

29,785

31,799

Total current assets

 

239,252

 

279,891

Property, plant and equipment, net of accumulated depreciation of $200,064 and $196,683, respectively

70,486

73,449

Operating lease right-of-use assets, net

49,124

53,937

Goodwill

358,172

358,323

Intangible assets, net

222,634

244,539

Deferred income tax assets

1,629

2,109

Other noncurrent assets

 

26,273

 

24,775

Total assets

$

967,570

$

1,037,023

Liabilities and Stockholders' Equity (Deficit)

 

  

 

  

Liabilities

 

  

 

  

Current liabilities

Accounts payable

$

70,093

$

61,744

Related party payables

1,460

1,484

Income tax payable

2,273

3,551

Accrued liabilities

96,341

113,519

Accrued compensation and benefits

54,618

60,860

Accrued interest

64,658

10,075

Customer deposits

20,070

17,707

Deferred revenue

15,448

16,617

Obligation for claim payment

60,001

46,902

Current portion of finance lease liabilities

5,270

6,683

Current portion of operating lease liabilities

14,355

15,923

Current portion of long-term debts

 

124,921

 

144,828

Total current liabilities

 

529,508

 

499,893

Long-term debt, net of current maturities

975,457

1,104,399

Finance lease liabilities, net of current portion

8,374

9,156

Pension liabilities, net

25,463

28,383

Deferred income tax liabilities

12,969

11,594

Long-term income tax liabilities

2,815

3,201

Operating lease liabilities, net of current portion

37,111

41,170

Other long-term liabilities

4,941

5,999

Total liabilities

1,596,638

1,703,795

Commitments and Contingencies (Note 8)

 

  

 

  

Stockholders' equity (deficit)

 

  

 

  

Common Stock, par value of $0.0001 per share; 1,600,000,000 shares authorized; 40,381,860 shares issued and 40,259,274 shares outstanding at June 30, 2022 and 13,382,333 shares issued and 13,259,748 shares outstanding at December 31, 2021

 

91

 

37

Preferred stock, $0.0001 par value per share, 20,000,000 shares authorized at June 30, 2022 and December 31, 2021, respectively

Series A Preferred Stock, 2,778,111 shares issued and outstanding at June 30, 2022 and December 31, 2021

1

1

Series B Preferred Stock, 3,029,900 shares issued and outstanding at June 30, 2022 and 0 shares issued and outstanding at December 31, 2021

Additional paid in capital

 

1,008,300

 

838,853

Less: Common Stock held in treasury, at cost; 122,585 shares at June 30, 2022 and December 31, 2021

(10,949)

(10,949)

Equity-based compensation

56,761

56,123

Accumulated deficit

 

(1,668,583)

 

(1,532,428)

Accumulated other comprehensive loss:

Foreign currency translation adjustment

(4,853)

(7,463)

Unrealized pension actuarial losses, net of tax

(9,836)

(10,946)

Total accumulated other comprehensive loss

(14,689)

(18,409)

Total stockholders’ deficit

 

(629,068)

 

(666,772)

Total liabilities and stockholders’ deficit

$

967,570

$

1,037,023

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

Exela Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

For the three and six months ended June 30, 2022 and 2021

(in thousands of United States dollars except share and per share amounts)

(Unaudited)

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2022

    

2021

    

2022

    

2021

Revenue

$

266,770

$

293,009

$

546,168

$

593,065

Cost of revenue (exclusive of depreciation and amortization)

 

217,277

 

209,080

 

440,781

 

441,667

Selling, general and administrative expenses (exclusive of depreciation and amortization)

50,195

36,390

93,235

78,275

Depreciation and amortization

17,993

19,420

36,205

39,019

Related party expense

2,186

2,748

4,173

4,455

Operating profit (loss)

(20,881)

25,371

(28,226)

29,649

Other expense (income), net:

Interest expense, net

42,271

42,867

82,031

85,998

Debt modification and extinguishment costs (gain), net

8,117

9,001

Sundry income, net

(741)

(787)

(434)

(574)

Other expense, net

7,375

651

13,534

803

Net loss before income taxes

(77,903)

(17,360)

(132,358)

(56,578)

Income tax expense

(1,296)

(2,007)

(3,797)

(1,989)

Net loss

$

(79,199)

$

(19,367)

$

(136,155)

$

(58,567)

Dividend equivalent on Series A Preferred Stock related to beneficial conversion feature

Cumulative dividends for Series A Preferred Stock

(876)

(798)

(1,740)

98

Cumulative dividends for Series B Preferred Stock

(1,317)

(1,392)

Net loss attributable to common stockholders

$

(81,392)

$

(20,165)

$

(139,287)

$

(58,469)

Loss per share:

Basic and diluted

$

(3.22)

$

(6.56)

$

(6.55)

$

(20.85)

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

Exela Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Loss

For the three and six months ended June 30, 2022 and 2021

(in thousands of United States dollars except share and per share amounts)

(Unaudited)

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2022

    

2021

    

2022

    

2021

Net loss

$

(79,199)

$

(19,367)

$

(136,155)

$

(58,567)

Other comprehensive income (loss), net of tax

Foreign currency translation adjustments

 

1,133

 

(1,444)

 

2,610

 

(1,344)

Unrealized pension actuarial gains (losses), net of tax

 

802

 

(85)

 

1,110

 

(242)

Total other comprehensive loss, net of tax

$

(77,264)

$

(20,896)

$

(132,435)

$

(60,153)

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

Exela Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Deficit

For the three and six months ended June 30, 2022 and 2021

(in thousands of United States dollars except share and per share amounts)

(Unaudited)

Accumulated Other
Comprehensive Loss

Unrealized

Foreign

Pension

Currency

Actuarial

Total

Common Stock

Series A Preferred Stock

Series B Preferred Stock

Treasury Stock

Additional

Equity-Based

Translation

Losses,

Accumulated

Stockholders'

  

Shares

  

Amount

  

Shares

  

Amount

  

Shares

  

Amount

  

Shares

  

Amount

  

Paid in Capital

  

Compensation

  

Adjustment

  

net of tax

  

Deficit

  

Deficit

Balances at January 1, 2021

2,462,111

$

15

3,290,050

$

1

$

122,585

$

(10,949)

$

446,739

$

52,183

$

(7,419)

$

(17,064)

$

(1,390,038)

$

(926,532)

Net loss January 1 to March 31, 2021

(39,200)

(39,200)

Equity-based compensation

387

387

Foreign currency translation adjustment

100

100

Net realized pension actuarial gains, net of tax

(157)

(157)

Series A Preferred Stock converted to Common Stock

11,171

(510,681)

Payment for fractional shares on Reverse Stock Split

(272)

(14)

(14)

Issuance of Common Stock

486,591

1

25,079

25,080

Balances at March 31, 2021

2,959,601

16

2,779,369

1

122,585

(10,949)

471,804

52,570

(7,319)

(17,221)

(1,429,238)

(940,336)

Net loss April 1, 2021 to June 30, 2021

(19,367)

(19,367)

Equity-based compensation

593

593

Foreign currency translation adjustment

(1,444)

(1,444)

Net realized pension actuarial gains, net of tax

(85)

(85)

Series A Preferred Stock converted to Common Stock

28

(1,258)

Issuance of Common Stock from at the market offerings, net of offering costs

560,835

1

17,372

17,373

Balances at June 30, 2021

3,520,464

$

17

2,778,111

$

1

$

122,585

$

(10,949)

$

489,176

$

53,163

$

(8,763)

$

(17,306)

$

(1,448,605)

$

(943,266)

4

Accumulated Other
Comprehensive Loss

Unrealized

Foreign

Pension

Currency

Actuarial

Total

Common Stock

Series A Preferred Stock

Series B Preferred Stock

Treasury Stock

Additional

Equity-Based

Translation

Losses,

Accumulated

Stockholders'

  

Shares

  

Amount

  

Shares

  

Amount

  

Shares

  

Amount

  

Shares

  

Amount

  

Paid in Capital

  

Compensation

  

Adjustment

  

net of tax

  

Deficit

  

Deficit

Balances at January 1, 2022

13,259,748

$

37

2,778,111

$

1

$

122,585

$

(10,949)

$

838,853

$

56,123

$

(7,463)

$

(10,946)

$

(1,532,428)

$

(666,772)

Net loss January 1 to March 31, 2022

(56,956)

(56,956)

Equity-based compensation

302

302

Foreign currency translation adjustment

1,477

1,477

Net realized pension actuarial gains, net of tax

308

308

Common Stock exchanged for Series B Preferred Stock

(900,328)

(2)

900,328

2

Issuance of Common Stock from at the market offerings, net of offering costs

11,814,075

24

114,509

114,533

Withholding of employee taxes on vested RSUs

(190)

(190)

Common Stock issued for vested RSUs

54,360

Balances at March 31, 2022

24,227,855

$

59

2,778,111

$

1

900,328

$

122,585

$

(10,949)

$

953,364

$

56,235

$

(5,986)

$

(10,638)

$

(1,589,384)

$

(607,298)

Net loss April 1 to June 30, 2022

(79,199)

(79,199)

Equity-based compensation

528

528

Foreign currency translation adjustment

1,133

1,133

Net realized pension actuarial gains, net of tax

802

802

Dividend declared and paid on Series B Preferred Stock ($0.46 per share)

(1,396)

(1,396)

Common Stock exchanged for Series B Preferred Stock

(2,129,572)

(4)

2,129,572

4

Issuance of Common Stock from at the market offerings, net of offering costs

18,189,580

36

56,328

56,364

Withholding of employee taxes on vested RSUs

(2)

(2)

Common Stock issued for vested RSUs

2,494

Agreed cancellation of Common Stock issued for Director's vested RSUs

(31,082)

Balances at June 30, 2022

40,259,275

$

91

2,778,111

$

1

3,029,900

$

122,585

$

(10,949)

$

1,008,300

$

56,761

$

(4,853)

$

(9,836)

$

(1,668,583)

$

(629,068)

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

Exela Technologies, Inc. and Subsidiaries

Condensed Consolidated Statement of Cash Flows

For the six months ended June 30, 2022 and 2021

(in thousands of United States dollars except share and per share amounts)

(Unaudited)

Six Months Ended June 30, 

    

2022

    

2021

Cash flows from operating activities

Net loss

$

(136,155)

$

(58,567)

Adjustments to reconcile net loss

Depreciation and amortization

36,205

39,019

Original issue discount and debt issuance cost amortization

5,804

7,829

Debt modification and extinguishment costs (gain), net

3,533

Provision for doubtful accounts