Xwell adopts tax benefits preservation plan

XWELL announced that its Board of Directors has adopted a Tax Benefits Preservation Plan intended to preserve the value of certain of the Company’s tax attributes related to previously recorded net operating losses. As of August 16, 2024, the Company has Tax Attributes which may entitle the Company to reduce taxable income with respect to the Company’s current 2024 tax year. The Company currently has approximately $67.3 million of net operating losses available to offset taxable income. However, these Tax Attributes may be materially reduced or eliminated by a “change of ownership” of the Company under Section 382 of the Internal Revenue Code. In general, a change of ownership would occur if stockholders that own at least 5% or more of the Company’s outstanding common stock increased their cumulative ownership in the Company by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. As part of the Plan, the Company’s Board of Directors declared a dividend of one Series A Junior Participating Preferred Stock purchase right on each outstanding share of the Company’s Common Stock. The dividend will be payable on August 26, 2024 to holders of record as of the close of business on August 26, 2024. Shares of the Company’s Common Stock issued after the record date will be issued together with the Rights. The Rights are not currently exercisable and initially will trade only with the Company’s Common Stock. However, if any person or group acquires 4.99% or more of the Company’s Common Stock, or if a person or group that already owns 4.99% or more of the Company’s Common Stock acquires one or more additional shares of Common Stock, then, subject to certain exceptions, the Rights would separate from the Common Stock and become exercisable for shares of the Company’s Common Stock having a market value equal to twice the exercise price, resulting in significant dilution to the ownership interests of the acquiring person or group. The Plan includes a procedure pursuant to which the Company’s Board of Directors may consider requests to exempt acquisitions of the Company’s Common Stock from the Plan if it determines that doing so would not limit or impair the availability of the Tax Attributes. The Rights will expire on August 16, 2027. The Rights may also expire on an earlier date upon the occurrence of other events, including a determination by the Company’s Board of Directors that the Tax Attributes have been utilized or are no longer available, or that the Plan is no longer necessary to protect the Tax Attributes. The Plan also may be terminated at any time by the Company’s Board of Directors before the Rights become exercisable.