CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have adopted a written policy requiring that any related person transaction that would require disclosure under Item 404(a) of Regulation S-K under the Exchange Act be reviewed and approved by our audit committee or, if the audit committee is not able to review the transaction for any reason, the chairman of the audit committee. Compensation matters regarding our executive officers or directors are reviewed and approved by our compensation committee. All relevant factors with respect to a proposed related person transaction will be considered, and such a transaction will only be approved if it is in our and our stockholders’ best interests. Related persons include our major stockholders and directors and officers, as well as immediate family members of directors and officers.
Exela participated in the following transactions with related persons that are required to be reported under the SEC’s rules:
Relationship with HandsOn Global Management
The Company incurred reimbursable travel expenses to HOVS LLC and HandsOn Fund 4 I, LLC (collectively, and together with certain of their affiliated entities managed by HandsOn Global Management LLC, including such entity, “HGM”) of $0 and less than $0.1 million for the three months ended June 30, 2023 and 2022, respectively, and less than $0.1 million for each of the six months ended June 30, 2023 and 2022. Certain members of our Board, including our Executive Chairman, Par Chadha, Sharon Chadha, Ron Cogburn, and James Reynolds are, have been, or may be deemed to be affiliated with HGM.
Pursuant to a master agreement dated January 1, 2015 between Rule 14, LLC and a subsidiary of the Company, the Company incurs marketing fees to Rule 14, LLC, a portfolio company of HGM. Similarly, the Company is party to ten master agreements with entities affiliated with HGM’s managed funds, each of which were entered into during 2015 and 2016. Each master agreement provides the Company with use of certain technology and includes a reseller arrangement pursuant to which the Company is entitled to sell these services to third parties. Any revenue earned by the Company in such third-party sale is shared 75%/25% with each of HGM’s venture affiliates in favor of the Company. The brands Zuma, Athena, Peri, BancMate, Spring, Jet, Teletype, CourtQ and Rewardio are part of the HGM managed funds. The Company has the license to use and resell such brands, as described therein. The Company incurred fees of $2.1 million and $1.6 million relating to these agreements for the three months ended June 30, 2023 and 2022, respectively. The Company incurred fees of $4.5 million and $3.1 million relating to these agreements for the six months ended June 30, 2023 and 2022, respectively.
Certain operating companies lease their operating facilities from HOV RE, LLC and HOV Services Limited, which are affiliates under common control with HGM. The rental expense for these operating leases was less than $0.1 million for each of the three months ended June 30, 2023 and 2022, and $0.1 million for each of the six months ended June 30, 2023 and 2022. In addition, HOV Services, Ltd. provides the Company data capture and technology services. The expense recognized for these services was approximately $0.5 million and $0.4 million for the three months ended June 30, 2023 and 2022, respectively, and $0.8 million and $0.7 million for the six months ended June 30, 2023 and 2022, respectively. These expenses are included in cost of revenue in the condensed consolidated statements of operations.
Consulting Agreement
The Company receives services from Oakana Holdings, Inc. The Company and Oakana Holdings, Inc. are related through a family relationship between certain stockholders and the president of Oakana Holdings, Inc. The expense recognized for these services was approximately less than $0.1 million, $0.2 million and $0.2 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Subscription Agreements
During the year ended December 31, 2021, the Company entered into separate subscription agreements with five of its directors. Pursuant to these subscription agreements, the Company issued and sold 15, 39, 15, 19 and 9 shares of Common Stock to Sharon Chadha, Par Chadha, Martin Akins, J. Coley Clark