PROPOSAL 1 — APPROVAL OF THE ADOPTION OF THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO EFFECT THE REVERSE STOCK SPLIT
At the Special Meeting, stockholders will be asked to adopt an amendment to our certificate of incorporation (“COI”) to effect a reverse stock split of our issued and outstanding Common Stock by a numerical ratio of not less than 1-for-100 and not more than 1-for-200, with the exact ratio, if approved and effected at all, to be set within that range at the discretion of the board of directors and publicly announced by Exela during 2023, following approval at the Special Meeting (the “Reverse Stock Split”); however, it is expected that such determination and announcement shall promptly follow the Special Meeting to align with the timing of our requested exception from Nasdaq, as discussed further below. The proposed amendment to the COI reflecting the Reverse Stock Split is included in Annex A to this Proxy Statement. By approving this proposal, stockholders would give the board of directors the authority, but not the obligation, to effect the Reverse Stock Split and full discretion to approve the ratio at which shares of Common Stock will be reclassified, from and including a ratio of 1-for-100 and up to and including a ratio of 1-for-200. The ratio (if any) selected by the board of directors for the Reverse Stock Split would be publicly disclosed by Exela to the stockholders during 2023, following approval at the Special Meeting.
We are requesting stockholder approval to effect the Reverse Stock Split at a ratio of not less than 1-for-100 and not more than 1-for-200, with the exact ratio determined by the board of directors and publicly announced by Exela during 2023, following approval at the Special Meeting, to provide the board of directors with the flexibility to determine the appropriate ratio for the Reverse Stock Split based upon our financial results, long-term outlook, corporate strategy, market factors and our perception in the market. However, the board of directors reserves the right to elect not to proceed with the Reverse Stock Split, even if approved, and to abandon the Reverse Stock Split if it determines, in its sole discretion, that the Reverse Stock Split is no longer in the best interests of our stockholders. No further action by the stockholders will be required for the board of directors to either implement or abandon the Reverse Stock Split. For the avoidance of doubt, except as otherwise specified herein, all share and dollar amounts set forth in this proxy statement are on a pre-Reverse Stock Split basis.
If the board of directors does not effect the Reverse Stock Split during 2023, any authority granted to the board of directors by our stockholders pursuant to this Proposal 1 will terminate.
Reasons for the Reverse Stock Split
Our Common Stock is publicly traded and listed on The Nasdaq Capital Market under the symbol “XELA”.
On October 12, 2022, we received a letter from the Listing Qualifications Staff (the “Staff”) of Nasdaq notifying us that we were not in compliance with Nasdaq Listing Rule 5550(a)(2) (the “Rule”), as the minimum bid price for our listed securities was less than $1 for the previous 30 consecutive business days. Our Common Stock is listed on The Nasdaq Capital Market, which imposes, among other requirements, a minimum bid requirement
On January 5, 2023, we received notice from the Staff that as of January 4, 2023, our securities had a closing bid price of $0.10 or less for eleven consecutive trading days triggering application of Nasdaq Listing Rule 5810(c)(3)(A)(iii) which states in part: if during any compliance period specified in Rule 5810(c)(3)(A) a Company’s security has a closing bid price of $0.10 or less for ten consecutive trading days, the Listing Qualifications Department shall issue a Staff Delisting Determination under Rule 5810 with respect to that security. As a result, we are at risk of being delisted from Nasdaq and have submitted a timely appeal to a Hearings Panel.
On March 2, 2023, we met with the Nasdaq Hearings Panel (the “Panel”) and requested an exception through May 19, 2023, to evidence compliance with the minimum bid price and demonstrate compliance with all applicable requirements for continued listing on The Nasdaq Capital Market.
On March 14, 2023, we received a decision from the Panel granting our requested exception to the Rule until May 19, 2023, by which point we must demonstrate compliance with the Rule. The exception granted by the Panel is expected to maintain the trading of our securities on Nasdaq until at least May 19, 2023, though there can be no assurances that we will remain listed on Nasdaq through such date.