XL Hybrids, Inc.
Notes to Consolidated Financial Statements
For the
years ended December 31, 2019 and 2018
(Amounts in thousands, except share and per share data)
$133. This accrued interest was exchanged for 231 shares. As part of this issuance, $3,183 in convertible promissory notes, plus accrued interest of $182, was converted into 501,795 shares of
Series D-1, 1,465,110 shares of Series D-2, 223,254 shares of Series D-3, and 5,522,960 shares of Series D-4 (Note 7). In addition, $3,000 in outstanding bridge loans was converted to 5,194,805 shares of Series D-1 (Note 7).
In January 2018, the Company issued 5,252,830 shares of Series D-1 at a price per share of $0.5775, for total proceeds
of $3,034. In addition, the Company issued 115,676 in exchange for services rendered with a value of $67. As part of this transaction, the outstanding principal of the investor term loan of $2,500 was converted into 4,329,005 shares of Series D-1.
The Company amended its Certificate of Incorporation effective September 28, 2017. Prior to this date, the
Junior Preferred was redeemable by the Company at any time after August 14, 2020, in three annual installments, commencing 60 days after receipt of notice from holders of at least 66 2/3% of the then-outstanding shares of Junior Preferred.
During the period that the Junior Preferred was redeemable on or after the date noted above, the Company was accreting its Junior Preferred up to the redemption values through a charge to additional paid in capital. Subsequent to the amendment, the
Company ceased recording any accretion adjustments to the Junior Preferred or the Series D as redemption related to any deemed liquidation event was not considered probable. Due to the contingently redeemable nature of the preferred stock, the
Company has classified the Series D and Junior Preferred in temporary equity in the consolidated balances sheets as of December 31, 2019 and 2018.
The established rights and privileges of the designated series of preferred stock are as follows:
Dividends: Before any dividend is declared or paid to the holders of the Junior Preferred or common stock, Series D holders are entitled to receive,
when and if declared by the Board of Directors, non-cumulative dividends at the stated dividend rate per share, defined as $0.03465 for Series D-1, $0.030318 for Series D-2, $0.02772 for Series D-3, and $0.024258 for Series D-4. Before any dividend is declared or paid to the holders of the common stock,
Junior Preferred holders are entitled to receive, when and if declared by the Board of Directors, non-cumulative dividends at the stated dividend rate per share, defined as $0.023238 for Series A, $0.031998
for Series B, $0.0624 for Series B-1, and $0.0366 for Series C. To date, no dividends have been declared by the Board of Directors.
Conversion: Holders of Series D and Junior Preferred may convert their shares into common stock of the Company at any time, at the option of the
holder. Each share of preferred stock converts into common stock at a ratio equal to the original issuance price (as defined below) of the Series A, Series B, Series B-1, Series C, Series D-1, Series D-2, Series D-3, and Series D-4, divided by the Series A, Series B, Series B-1, Series C, Series D-1, Series D-2, Series D-3, and Series
D-4 conversion price of $0.3873, $0.5333, $1.04, $0.6046, $0.5775, $0.5053, $0.4620, and $0.4043, respectively; the conversion price may be adjusted in the event of future equity financing transactions with a
purchase price that less than the conversion price then in effect for any series of Preferred Stock. Conversion is mandatory upon the closing of a public offering of stock with minimum proceeds of $50,000 and an offering price per common share of
not less than three times the Series D-1 Original Issue Price, or upon the election by vote or written consent of at least 50% of the Series D holders.
Voting: The holders of Series D and Junior Preferred are entitled to vote on all matters with the common stock holders as if they were one class of
stock. The holders of Series D and Junior Preferred are entitled to the number of votes equal to the number of shares of common stock into which such holders shares of the Preferred Stock are then convertible.
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