UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
For the transition period from ___ to ___
Commission file number:
(Exact Name of Registrant as Specified in its Charter)
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(State or other jurisdiction of |
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(Address of principal executive offices) |
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(Registrant’s Telephone Number, Including Area Code): (
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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| The |
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.
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).
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 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 | ☐ |
☒ | 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
As of May 15, 2025,
XWELL, Inc. and Subsidiaries
Table of Contents
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 25 | ||
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2
PART I - FINANCIAL INFORMATION
Item 1.Condensed Consolidated Financial Statements (Unaudited)
XWELL, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)
| March 31, |
| December 31, | |||
2025 | 2024 | |||||
Current assets |
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Cash and cash equivalents | $ | | $ | | ||
Marketable Securities | | | ||||
Accounts receivable | | | ||||
Inventory |
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Other current assets |
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Total current assets |
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Restricted cash |
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Property and equipment, net |
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Intangible assets, net |
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Operating lease right of use assets, net |
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Goodwill | | | ||||
Other assets |
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Total assets | $ | | $ | | ||
Current liabilities |
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Accounts payable | $ | | $ | | ||
Accrued expenses and other current liabilities | | | ||||
Current portion of operating lease liabilities | | | ||||
Deferred revenue | | | ||||
Total current liabilities |
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Long-term liabilities |
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Derivative liability |
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| — | ||
Warrant liabilities | |
| — | |||
Operating lease liabilities |
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Total liabilities | | | ||||
Commitments and contingencies (see Note 11) |
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Temporary equity |
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Series G Convertible Preferred Stock, $ |
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Equity | ||||||
Common Stock, $ | | | ||||
Additional paid-in capital |
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Accumulated deficit |
| ( |
| ( | ||
Accumulated other comprehensive loss |
| ( |
| ( | ||
Total deficit attributable to XWELL, Inc. |
| ( |
| ( | ||
Noncontrolling interests |
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Total equity |
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Total liabilities, temporary equity and equity | $ | | $ | | ||
The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.
3
XWELL, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(In thousands, except share and per share data)
Three months ended March 31, | ||||||
| 2025 |
| 2024 | |||
Revenue, net |
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Services | $ | | $ | | ||
Products |
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Total revenue, net |
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Cost of sales |
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Labor |
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Occupancy |
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Products and other operating costs |
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Total cost of sales |
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Gross Profit | | | ||||
Depreciation and amortization |
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Impairment of long-lived assets | — | | ||||
General and administrative |
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Total operating expenses |
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Operating loss |
| ( |
| ( | ||
Change in fair value of derivative liability | ( | — | ||||
Change in fair value of warrant liability | | — | ||||
Loss on issuance of Series G Preferred Stock | ( | — | ||||
Interest income, net |
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Foreign exchange loss | ( | ( | ||||
Gain on investments, realized and unrealized | ( | | ||||
Other non-operating expense, net |
| ( |
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Loss before income taxes |
| ( |
| ( | ||
Income tax expense |
| — |
| — | ||
Net loss | ( | ( | ||||
Net loss attributable to noncontrolling interests |
| ( |
| ( | ||
Net loss attributable to XWELL, Inc. | $ | ( | $ | ( | ||
Net loss | ( | ( | ||||
Other comprehensive income (loss) from operations |
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| ( | ||
Comprehensive loss | $ | ( | $ | ( | ||
Loss per share | ||||||
Preferred stock dividends | ( | — | ||||
Preferred stock accretion | ( | — | ||||
Net loss attributable to XWELL, Inc. common stockholders | $ | ( | ( | |||
Basic and diluted loss per share | $ | ( | $ | ( | ||
Weighted-average number of shares outstanding |
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Basic |
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Diluted |
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The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.
4
XWELL, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
(In thousands, except share and per share data)
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| Accumulated |
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Series G Convertible | Additional | other | Total | Non- | ||||||||||||||||||||||||||
Preferred stock | Common stock | paid- | Accumulated | comprehensive | Company | controlling | Total | |||||||||||||||||||||||
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| Shares |
| Amount |
| Shares |
| Amount | in capital |
| deficit |
| loss |
| equity |
| interests |
| equity | |||||||||||
January 1, 2025 | — | $ | — | | $ | | $ | | $ | ( | $ | ( | $ | ( | $ | | $ | | ||||||||||||
Stock-based compensation | — | — | — | — | | — | — | | | | ||||||||||||||||||||
Issuance of Series G Preferred Stock in private placement, net of transaction costs | | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||
Series G Preferred Stock accretion | — | | — | — | ( | — | — | ( | — | ( | ||||||||||||||||||||
Series G Preferred Stock dividends | — | | — | — | ( | — | — | ( | — | ( | ||||||||||||||||||||
Foreign currency translation | — | — | — | — | — | — | | | ( | | ||||||||||||||||||||
Net loss for the period | — | — | — | — | — | ( | — | ( | | ( | ||||||||||||||||||||
March 31, 2025 | | $ | | | $ | | $ | | $ | ( | $ | ( | $ | ( | $ | | $ | | ||||||||||||
The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.
5
XWELL, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY (DEFICIT) (Continued)
(Unaudited)
(In thousands, except share and per share data)
| Accumulated |
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Additional | other | Total | Non- | |||||||||||||||||||||||||||
Common stock | paid- | Accumulated | comprehensive | Company | controlling | Total | ||||||||||||||||||||||||
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| Shares |
| Amount |
| in capital |
| deficit | loss |
| equity |
| interests |
| equity |
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January 1, 2024 | | $ | | $ | | $ | ( | $ | ( | $ | | $ | | $ | | |||||||||||||||
Issuance of restricted stock units | | — | — | — | — | — | — | — | ||||||||||||||||||||||
Stock-based compensation | — | — | | — | — | | | | ||||||||||||||||||||||
Foreign currency translation | — | — | — | — | ( | ( | | ( | ||||||||||||||||||||||
Net loss for the period | — | — | — | ( | — | ( | | ( | ||||||||||||||||||||||
March 31, 2024 | | $ | | $ | | $ | ( | $ | ( | $ | | $ | | $ | | |||||||||||||||
The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.
6
XWELL, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three months ended March 31, | ||||||
| 2025 | 2024 | ||||
Cash flows from operating activities |
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Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Impairment of long - lived assets | — | | ||||
Impairment of operating lease right-of-use assets | — | | ||||
Unrealized gain on marketable securities | ( | ( | ||||
Foreign currency remeasurement loss | | | ||||
Gain on lease termination | ( | — | ||||
Amortization of operating lease right of use asset | | | ||||
Provision for credit losses | | — | ||||
Stock-based compensation |
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Loss (gain) on equity investment | | ( | ||||
Change in fair value of derivative liability |
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| — | ||
Change in fair value of warrant liability | ( | — | ||||
Loss on issuance of Series G Preferred Stock | | — | ||||
Changes in assets and liabilities: |
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Decrease (increase) in inventory | ( |
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(Increase) decrease in accounts receivable | | ( | ||||
Increase (decrease) in deferred revenue | ( | | ||||
(Increase) in other assets, current and non-current | ( |
| ( | |||
(Decrease) in other liabilities, current and non-current | ( | ( | ||||
Increase in accounts payable | |
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Net cash used in operating activities |
| ( |
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Cash flows from investing activities |
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Acquisition of property and equipment |
| ( |
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Investment in marketable securities | ( | ( | ||||
Net cash used in investing activities |
| ( |
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Cash flows from financing activities |
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Proceeds from registered offering, net of fees | | — | ||||
Net cash provided by financing activities |
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| — | ||
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
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| ( | ||
Decrease in cash, cash equivalents and restricted cash |
| ( |
| ( | ||
Cash, cash equivalents, and restricted cash at beginning of the period | | | ||||
Cash, cash equivalents, and restricted cash at end of the period | $ | | $ | | ||
Cash paid for |
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Income taxes | $ | — | $ | — | ||
Non-cash investing and financing transactions |
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Capital expenditures included in Accounts payable, accrued expenses and other current liabilities | $ | | $ | | ||
Accrual of Series convertible preferred stock dividends | | — | ||||
Accretion of Series G convertible preferred stock to redemption value | | — | ||||
Initial fair value of warrant liability | | — | ||||
Initial fair value of derivative liability | | — | ||||
The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.
7
XWELL, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except for share and per share data)
Note 1. Business Overview and Going Concern
Overview
XWELL (“XWELL” or the “Company”) is a global wellness organization dedicated to delivering restorative and health-focused services to travelers through its
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered recurring losses and negative cash flows from operations has insufficient liquidity to fund future operations.
As a result, management has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for at least one year from the date of issuance of these unaudited condensed consolidated financial statements. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The Company has significantly reduced operating and overhead expenses, while it continues to focus on returning to overall profitability. Management is implementing various strategic initiatives to reduce operating expenses, improve working capital and enhance cash flow. These include cost reduction efforts, capital spending controls, and exploration of additional financing options. The Company has concluded that they do not have sufficient available liquidity to fund its operations for at least one year for the issuance of these unaudited condensed consolidated financial statements.
8
Note 2. Accounting and Reporting Policies
Basis of Presentation and Principles of Consolidation
The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Article 8-03 of Regulation S-X and should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as amended. The consolidated balance sheet as of December 31, 2024 was derived from the audited annual financial statements but does not include all information required by GAAP for annual financial statements. The financial statements include the accounts of the Company, all entities that are wholly owned by the Company, and all entities in which the Company has a controlling financial interest. All adjustments that, in the opinion of management, are necessary for a fair presentation for the periods presented have been reflected by the Company. Such adjustments are of a normal, recurring nature. The results of operations for the three months ended March 31, 2025, are not necessarily indicative of the results that may be expected for the entire fiscal year or for any other interim period. All significant intercompany balances and transactions have been eliminated in consolidation.
Use of estimates
The preparation of the accompanying condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses for the periods presented. Actual results may differ from such estimates. Significant items subject to such estimates and assumptions include the Company’s long-lived assets, intangibles assets, the useful lives of the Company’s intangible assets, the valuation of stock-based compensation, warrant liabilities, derivative liability, deferred tax assets and liabilities, income tax uncertainties, and other contingencies.
Preferred Stock
The Company records shares of convertible preferred stock at their respective fair values on the dates of issuance, net of issuance costs. The Company concluded that the Company’s Series G Convertible Preferred Stock, par value $
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC 815, Derivatives and Hedging (“ASC 815”). For derivative financial instruments that are accounted for as assets or liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the unaudited condensed consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as assets, liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the condensed consolidated balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the unaudited condensed consolidated balance sheet date.
Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity
9
(“ASC 480”) and ASC 815. The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own Common Stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be liability classified and recorded at their initial fair value on the date of issuance and remeasured at fair value and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the consolidated statements of operations and comprehensive loss. The warrants are classified as liabilities in accordance with ASC 815 as they do not meet the requirements to be considered indexed to the Company’s own stock. The fair value of the warrant liability was estimated using a Black-Scholes approach (see Note 10).
Basic and Diluted Net Loss per Common Share
The Company computes basic and diluted net loss per share under the two-class method required for participating securities. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for common stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. Basic and diluted net loss for common stock equivalents is computed by dividing the dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted net loss per share includes potentially dilutive securities outstanding for the period. Because the impact of these items is anti-dilutive during periods of net loss, there was no difference between the Company’s basic and diluted net loss per stock of Common Stock for the three months ended March 31, 2025 and 2024. See Note 3 Potentially Dilutive Securities.
Distinguishing Liabilities from Equity
The Company relies on the guidance provided by FASB ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”), to classify certain redeemable and/or convertible instruments. The Company first determines whether a financial instrument should be classified as a liability. The Company will determine the liability classification if the financial instrument is mandatorily redeemable, or if the financial instrument, other than outstanding shares, embodies a conditional obligation that the Company must or may settle by issuing a variable number of its equity shares.
Once the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability section and the equity section of the consolidated balance sheet. The Company will determine temporary equity classification if the redemption of the financial instrument is outside the control of the Company (i.e. at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity.
Reclassification
Certain balances in the unaudited condensed consolidated financial statements for the three months ended March 31, 2024 have been reclassified to conform to the presentation in the unaudited condensed consolidated financial statements for the three months ended March 31, 2025. In the prior year, the Company separately disclosed salaries and benefits and in the current year the Company has reclassified these costs on the unaudited condensed consolidated statement of operations within general and administrative expenses. These reclassifications had no effect on the Company’s previously reported results of operations, changes in temporary and stockholders’ equity, or cash flows.
10
Note 3. Potentially Dilutive Securities
The table below presents the computation of basic and diluted net loss per share of Common Stock:
Three months ended | ||||||
March 31, | ||||||
| 2025 |
| 2024 | |||
Basic numerator: |
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Net loss attributable to XWELL, Inc. | $ | ( | $ | ( | ||
Less: preferred stock dividends |
| ( |
| — | ||
Less: preferred stock accretion | ( | — | ||||
Net loss attributable to common shareholders | $ | ( | $ | ( | ||
Basic denominator: |
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Basic weighted average shares outstanding |
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Basic loss per share | $ | ( | $ | ( | ||
Net loss per share data presented above excludes from the calculation of diluted net loss, the following potentially dilutive securities, having an anti-dilutive impact, in case of net loss |
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Both vested and unvested options to purchase an equal number of shares of Common Stock |
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Unvested RSUs to issue an equal number of shares of Common Stock |
| — |
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Series A and Series B warrants to purchase shares of Common Stock |
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| — | ||
Series G Convertible Preferred Stock on an as converted basis |
| |
| — | ||
Total number of potentially dilutive securities excluded from the calculation of loss per share attributable to common shareholders |
| |
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Note 4. Cash, Cash Equivalents, and Restricted Cash
A reconciliation of the Company’s cash and cash equivalents in the Unaudited Condensed Consolidated Balance Sheets to cash, cash equivalents and restricted cash in the Unaudited Condensed Consolidated Statements of Cash Flows as of March 31, 2025, and December 31, 2024 is as follows:
| March 31, 2025 |
| December 31, 2024 | |||
Cash denominated in United States dollars | $ | | $ | | ||
Cash denominated in currency other than United States dollars |
| |
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Restricted cash | | | ||||
Credit and debit card receivables |
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Total cash, cash equivalents and restricted cash | $ | | $ | | ||
The Company places its cash and temporary cash investments with credit quality institutions. At times, such cash denominated in United States dollars may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limit. If the Company were to distribute the amounts held overseas, the Company would need to follow an approval and distribution process as defined in its operating and partnership agreements, which may delay and/or reduce the availability of that cash to the Company.
11
Note 5. Other current assets
As of March 31, 2025, and December 31, 2024, other current assets consisted of the following:
| March 31, 2025 |
| December 31, 2024 | |||
Prepaid expenses | $ | | $ | | ||
Other |
| |
| | ||
Total other current assets | $ | | $ | | ||
Note 6. Intangible Assets
The following tables provides information regarding the Company’s intangible assets subject to amortization, which consist of the following:
March 31, 2025 | December 31, 2024 | |||||||||||||||||
Gross | Net | Gross | Net | |||||||||||||||
Carrying | Accumulated | Carrying | Carrying | Accumulated | Carrying | |||||||||||||
| Amount |
| Amortization |
| Amount |
| Amount |
| Amortization |
| Amount | |||||||
Trade names | $ | | $ | ( | $ | | $ | | $ | ( | $ | | ||||||
Customer relationships | | ( | | | ( | | ||||||||||||
Software |
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| ( |
| |
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| ( |
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Total intangible assets | $ | | $ | ( | $ | | $ | | $ | ( | $ | | ||||||
The Company’s intangible assets are amortized over their expected useful lives. The Company recorded amortization expense of $
Based on the intangible assets balance as of March 31, 2025, the estimated amortization expense for the remainder of the calendar year and each of the succeeding calendar years is as follows:
Calendar Years ending December 31, |
| Amount | |
Remaining 2025 | $ | | |
2026 |
| | |
2027 |
| | |
2028 |
| | |
2029 | | ||
Thereafter | | ||
Total | $ | | |
Note 7. Accrued expenses and other current liabilities
As of March 31, 2025, and December 31, 2024, accrued expenses and other current liabilities consisted of the following:
| March 31, 2025 |
| December 31, 2024 | |||
Accrued compensation | $ | | $ | | ||
Tax-related liabilities |
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Common area maintenance accruals | | | ||||
AP Accruals | | | ||||
Gift certificates |
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Credit card processing fees | | | ||||
Other miscellaneous accruals |
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Total accrued expenses and other current liabilities | $ | | $ | | ||
12
Note 8. Leases
XWELL is contingently liable to a surety company under certain general indemnity agreements required by various airports relating to its lease agreements. XWELL agrees to indemnify the surety for any payments made on contracts of suretyship, guaranty, or indemnity. The Company believes that all contingent liabilities will be satisfied by its performance under the specified lease agreements.
During the three months ended March 31, 2025, the Company’s XpresSpa Austin - Bergstrom International Airport (“AUS”) lease was terminated. When a termination occurs, the Company remeasures the related operating lease right of use asset and lease liability and recognizes those adjustments in the condensed consolidated statements of operations and comprehensive loss. Since the related operating right of use asset was fully impaired for the XpresSpa AUS location at the time of the termination, the Company recognized a gain from lease termination of approximately $
The following is a summary of the activity in the Company’s current and long-term operating lease liabilities for the three months ended March 31, 2025 and 2024:
Three months ended March 31, | ||||||
| 2025 |
| 2024 | |||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||
Operating cash flows from operating leases | $ | ( | $ | ( | ||
As of March 31, 2025, operating leases contain the following future minimum commitments:
Calendar Years ending December 31, |
| Amount | |
Remaining 2025 | $ | | |
2026 | | ||
2027 |
| | |
2028 |
| | |
2029 |
| | |
Thereafter |
| | |
Total future lease payments |
| | |
Less: interest expense at incremental borrowing rate |
| ( | |
Net present value of lease liabilities | $ | | |
Other assumptions and pertinent information related to the Company’s accounting for operating leases are:
Weighted average remaining lease term: | years | |||
Weighted average discount rate used to determine present value of operating lease liability: |
| | % |
Cash paid for minimum annual rental obligations for the three months ended March 31, 2025 and 2024, was $
Variable lease payments calculated monthly as a percentage of product and services revenue were $
13
Note 9. Other Assets
As of March 31, 2025 and December 31, 2024, assets consisted of the following:
| March 31, 2025 |
| December 31, 2024 | |||
Equity investments | $ | | $ | | ||
Lease deposits |
| |
| | ||
Other | | | ||||
Other assets | $ | | $ | | ||
Note 10. Private Placement
Private Placement
On January 14, 2025, XWELL, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain accredited investors (the “Investors”), pursuant to which it agreed to sell to the Investors (i) an aggregate of
The closing of the Private Placement occurred on January 14, 2025 (the “Closing Date”). The Private Placement unit described above had a purchase price of $
The Company engaged GP Nurmenkari Inc. (the “Placement Agent”) to act as the placement agent in connection with the Private Placement. Pursuant to an Engagement Letter with the Placement Agent, the Company paid to the Placement Agent a cash fee equal to
Transaction costs totaling approximately $
January 2025 Private Placement of Preferred Shares and Warrants
In connection with the private placement consummated on January 14, 2025, the Company and the investors entered into a Registration Rights Agreement (the “Registration Rights Agreement”), pursuant to which the Company is required to file a resale registration statement (the “Registration Statement”) with the SEC and to have such Registration Statement declared effective by the Effectiveness Deadline (as defined in the Registration Rights Agreement). The Company is obligated to pay certain liquidated damages to the investors if the Company fails to file the Registration Statement when required, fails to cause the Registration Statement to be declared effective by the SEC when required, or fails to maintain the effectiveness of the Registration Statement pursuant to the terms of the Registration Rights Agreement. The Registration Statement was filed on February 7, 2025, but as of the date of this Quarterly Report on Form 10-Q, has not been declared effective by the SEC. On April 14, 2025, the Effectiveness Deadline was extended to May 1, 2025.
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Pursuant to the Registration Rights Agreement, the Company shall pay to each holder of Registrable Securities (as defined in the Registration Rights Agreement) relating to such Registration Statement an amount in cash equal to
Series G Convertible Preferred Stock
The terms of the Preferred Stock are as set forth in the form of Certificate of Designations (the “Certificate of Designations”). The Preferred Stock are convertible into shares of Common Stock (the “Conversion Shares”) at the election of the holder at any time at an initial conversion price of $
The holders of the Preferred Stock are entitled to dividends of
Notwithstanding the foregoing, the Company’s ability to settle conversions and make amortization and dividend make-whole payments using shares of Common Stock is subject to certain limitations set forth in the Certificate of Designations, including a limit on the number of shares that may be issued until the time, if any, that the Company has obtained the Stockholder Approval. Further, the Certificate of Designations contains a certain beneficial ownership limitation after giving effect to the issuance of shares of Common Stock issuable upon conversion of the Preferred Stock or as part of any amortization payment or dividend make-whole payment under the Certificate of Designations.
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The Certificate of Designations includes certain Triggering Events, including, among other things, the Company’s failure to pay any amounts due to the holders of the Preferred Stock when due. In connection with a Triggering Event, each holder of Preferred Stock will be able to require the Company to redeem in cash any or all of the holder’s Preferred Stock at a premium set forth in the Certificate of Designations.
The Preferred Shares were determined to be more akin to a debt-like host than an equity-like host. The Company identified the following embedded features that are not clearly and closely related to the debt host instrument: 1) certain contingent redemption options and 2) variable share-settled conversions, and 3) certain contingent penalty features. These features were bundled together, assigned probabilities of being affected and measured at fair value. Subsequent changes in fair value of these features are recognized in the Consolidated Statement of Operations. The Company estimated the $
The discount to the fair value is included as a reduction to the carrying value of the Series G Preferred Shares. During three months ended March 31, 2025, the Company recorded a total discount of $
During the three months ended March 31, 2025, the Company recorded a loss of $
Warrants
Pursuant to the Private Placement, the Company issued (i) Series A warrants to acquire up to an aggregate of
The Company assessed the Warrants under ASC 815 and determined that the Warrants will be classified as liabilities as they do not meet the requirements to be considered indexed to the Company’s own stock, due to the presence of certain Stockholder Approval-related provisions in the Warrants which potentially adjust the settlement value in conjunction with the Stockholder Approval event. Additionally, the Warrants include a provision related to certain tender or exchange offers which further preclude the Warrants from being accounted for as equity. As such, the Company recorded the Warrants as a liability at fair value with subsequent changes in fair value recognized in earnings. The Company utilized the Black Scholes Model to calculate the value of the Warrants issued on issuance. The fair value of the Warrants of approximately $
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assumptions: the fair value of the Company’s common stock per share of $
During the three months ended March 31, 2025, the Company recorded a gain of approximately $
The following table represents the activity related to the Company’s warrants during the three months ended March 31, 2025:
|
| Weighted average |
| Remaining | ||||
No. of Warrants | exercise price* | contractual term (years) | ||||||
December 31, 2024 | — | $ | — | $ | — | |||
Granted |
| | $ | | $ | |||
March 31, 2025 |
| | $ | | $ | |||
All outstanding warrants were exercisable as of March 31, 2025 with an intrinsic value of $
Note 11. Commitments and Contingencies
Certain of the Company’s outstanding legal matters include speculative claims for substantial or indeterminate amounts of damages. The Company regularly evaluates developments in its legal matters that could affect the amount of any potential liability and adjusts as appropriate. A significant judgment is required to determine both the likelihood of there being any potential liability and the estimated amount of a loss related to the Company’s legal matters.
With respect to the Company’s outstanding legal matters, based on its current knowledge, the Company’s management believes that the amount or range of a potential loss will not, either individually or in the aggregate, have a material adverse effect on its business, consolidated financial position, results of operations or cash flows. However, the outcome of such legal matters is inherently unpredictable and subject to significant uncertainties. The Company evaluated the outstanding legal matters and assessed the probability and likelihood of the occurrence of liability.
The Company expenses legal fees in the period in which they are incurred.
XpresSpa Holdings, LLC (“XpresSpa”) v. Cordial Endeavor Concessions of Atlanta, LLC (“Cordial”), et al., Arbitration Case No. 2126399.
The Company’s subsidiary, XpressSpa Holdings, LLC, is party to an arbitration proceeding (the “Arbitration”) which was requested by the City of Atlanta, Georgia related agreements by and between Cordial and XpresSpa for the operation of the XpresSpa locations in Hartsfield - Jackson Atlanta International Airport (“ATL”) in ATL Terminal A and ATL Terminal C. The City of Atlanta filed an application to compel arbitration in the Superior Court of Fulton County, and on November 5, 2024, the court granted that application and ordered the parties to arbitrate their disagreements.
This dispute arises out of the alleged breaches of contract between the parties as well as other improper conduct relating to the agreements. The Arbitration has recently commenced, a scheduling order was issued by the Arbitrator on May 12, 2025. No substantive proceedings have taken place and there have been no substantive rulings.
In addition to those matters specifically set forth herein, the Company and its subsidiaries are involved in various other claims and legal actions that arise in the ordinary course of business. The Company does not believe that the ultimate resolution of these actions will have a material adverse effect on the Company’s financial position, results of operations, liquidity, or capital resources. However, a significant increase in the number of these claims, or one or more successful
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claims under which the Company incurs greater liabilities than the Company currently anticipates, could materially adversely affect the Company’s business, financial condition, results of operations and cash flows.
In the event that an action is brought against the Company or one of its subsidiaries, the Company will investigate the allegation and vigorously defend itself.
Note 12. Segment Information
In the first quarter of 2025, the decision was made to convert the final remaining Treat location at JFK International Airport in New York City to an XWELL location. Treat has been aggregated with XpresSpa in the segment tables below and the presentation has been restated for 2024.
The CODM evaluates performance and allocates resources for all of its reportable segments based on segment revenues and operating income.
The CODM uses segment revenues and segment operating income, to allocate resources (including employees, property, and financial or capital resources) for each segment predominantly in the annual budget and forecasting process. The CODM considers budget-to-actual variances on a monthly basis using the segment revenues and segment operating income when making decisions about allocating capital and personnel to the segments. The CODM also uses the segment revenues and operating income to assess the performance for each segment by comparing the results and return on assets of each segment with one another and in the compensation of certain employees. Expenses that can be specifically identified with a segment have been included as deductions in determining operating income. The Company separately presents the costs associated with certain corporate functions as Corporate and Other, primarily consisting of unallocated operating expenses including costs that were not specific to a particular segment but are general to the group, expenses incurred for insurance, legal fees, public company administrative costs, and other similar corporate expenses.
The table below presents information about reported segments for the period ended March 31, 2025 and 2024:
Three months ended March 31, 2025 | |||||||||||||||
| XpresSpa |
| XpresTest |
| Naples Wax |
| Corporate and other |
| Total | ||||||
Revenue | $ | | $ | |
| $ | | $ | — | $ | | ||||
Operating (loss)/income | $ | | $ | | $ | ( | $ | ( | $ | ( | |||||
Three months ended March 31, 2024 | |||||||||||||||
| XpresSpa |
| XpresTest |
| Naples Wax |
| Corporate and other |
| Total | ||||||
Revenue | $ | | $ | |
| $ | | $ | — | $ | | ||||
Operating (loss)/income | $ | ( | $ | | $ | ( | $ | ( | $ | ( | |||||
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A reconciliation of total segment revenues to total unaudited condensed consolidated revenue and of total segment operating (loss) income to total consolidated (loss) income, for the three months ended March 31, 2025 and 2024, is as follows:
Three months ended March 31, 2025 | |||||||||||||||
| XpresSpa |
| XpresTest |
| Naples Wax |
| Corporate and other |
| Total | ||||||
Revenue from external customers | $ | | $ | | $ | | $ | — | $ | | |||||
Less: Significant Expenses (1): | |||||||||||||||
Cost of Goods Sold - Labor | | | | — | | ||||||||||
Cost of Goods Sold - Products & Services | | — | | — | | ||||||||||
Occupancy Cost | | | | — | | ||||||||||
Other Cost of Revenue | | | | — | | ||||||||||
Depreciation and amortization | | | | | | ||||||||||
Less: Other Segment Expenses (2): | |||||||||||||||
Other segment operating expenses | ( | | | | | ||||||||||
Segment operating (loss) income | $ | | $ | | $ | ( | $ | ( | $ | ( | |||||
Three months ended March 31, 2024 | |||||||||||||||
| XpresSpa |
| XpresTest |
| Naples Wax |
| Corporate and other |
| Total | ||||||
Revenue from external customers | $ | | $ | | $ | | $ | — | $ | | |||||
Less: Significant Expenses (1): | |||||||||||||||
Cost of Goods Sold - Labor | | | | — | | ||||||||||
Cost of Goods Sold - Products & Services | | | | — | | ||||||||||
Occupancy Cost | | | | — | | ||||||||||
Other Cost of Revenue | | | | — | | ||||||||||
Depreciation and amortization | | | | | | ||||||||||
Less: Other Segment Expenses (2): | |||||||||||||||
Other segment operating expenses | | | | | | ||||||||||
Segment operating (loss) income | $ | ( | $ | | $ | ( | $ | ( | $ | ( | |||||
(1) | The significant expense amounts align with the expenses that the CODM is regularly provided with to assess performance and allocate resources. |
(2) | For all segments, SGA consists of the following: |
Salaries & Benefits, Rent & Utilities, Office Supplies & Shipping, Travel & Entertainment, IT & Telecom, Repairs & Maintenance, Accounting, Legal, Franchise/Property Tax, Management/DBE Fees, Advertising & Marketing, Insurance
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Other Significant Items
Three months ended March 31, 2025 | |||||||||||||||
| XpresSpa |
| XpresTest |
| Naples Wax |
| Corporate and other |
| Total | ||||||
Stock based compensation | $ | | $ | | $ | — | $ | | $ | | |||||
Three months ended March 31, 2024 | |||||||||||||||
| XpresSpa |
| XpresTest |
| Naples Wax |
| Corporate and other |
| Total | ||||||
Stock based compensation | $ | | $ | | $ | — | $ | — | $ | | |||||
Impairment | $ | | $ | — | $ | — | $ | — | $ | | |||||
March 31, 2025 | |||||||||||||||
| XpresSpa |
| XpresTest |
| Naples Wax |
| Corporate and other |
| Total | ||||||
Capital expenditures | $ | | $ | — |
| $ | | $ | | $ | | ||||
Assets | $ | | $ | | $ | | $ | | $ | | |||||
December 31, 2024 | |||||||||||||||
| XpresSpa |
| XpresTest |
| Naples Wax |
| Corporate and other |
| Total | ||||||
Capital expenditures | $ | | $ | |
| $ | | $ | | $ | | ||||
Assets | $ | | $ | | $ | | $ | | $ | | |||||
The Company currently operates in
Three months ended | ||||||
March 31, | ||||||
| 2025 |
| 2024 | |||
Revenue |
|
|
|
| ||
United States | $ | | $ | | ||
All other countries |
| |
| | ||
Total revenue | $ | | $ | | ||
Long-lived assets | March 31, 2025 | December 31, 2024 | ||||
United States | $ | | $ | | ||
All other countries |
| |
| | ||
Total long-lived assets | $ | | $ | | ||
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Note 13. Revenue
Disaggregation of Revenue
The following table provides information about disaggregated revenue from contracts with customers by the nature of products and services provided (in thousands):
| March 31, 2025 |
| March 31, 2024 | |||
Revenue, point in time | $ | | $ | | ||
Revenue, over time | | | ||||
Total Revenue | $ | | $ | | ||
As of March 31, 2025, the unrecognized committed amount of the Ginkgo/BioWorks contract is $
Contract Costs
The Company has
Contract Liabilities
Contract liabilities are classified as deferred revenue in the condensed consolidated balance sheets. The activity in deferred revenue for the three months ended March 31, 2025, and for the year ended December 31, 2024, was as follows:
| March 31, 2025 |
| December 31, 2024 | |||
Beginning of the period contract liability | $ | | $ | | ||
Revenue recognized from the contract liabilities included in the beginning balance | ( | ( | ||||
Increases due cash received net of amounts recognized revenue during the period | | | ||||
End of period contract liability | $ | | $ | | ||
The Company has elected not to include in unfulfilled performance obligations for contracts in which the amount of revenue it recognizes is equal to the amount which the Company has a right to invoice.
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Note 14. Property and Equipment, net
Property and equipment are comprised of the following (in thousands):
March 31, | December 31, |
| ||||||
| 2025 |
| 2024 |
| Useful Life | |||
Leasehold improvements | $ | | $ | |
| Average | ||
Furniture and fixtures | | |
| | ||||
Other operating equipment |
| |
| |
| Maximum | ||
| |
| | |||||
Accumulated depreciation |
| ( |
| ( |
|
| ||
Total property and equipment, net | $ | | $ | |
|
| ||
Depreciation and amortization expense was $
Note 15. Fair Value Measurements
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A fair value hierarchy exists, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are:
Level 1: Inputs are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2: Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reported date.
Level 3: Unobservable inputs, that are supported by little or no market activity and are developed based on the best information available in the circumstances. For example, inputs derived through extrapolation or interpolation that cannot be corroborated by observable market data.
The following table presents the placement in the fair value hierarchy of the Company’s assets and liabilities measured at fair value on a recurring and nonrecurring basis as of March 31, 2025 and December 31, 2024. Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to tangible property and equipment, right-of-use assets, and other intangible assets, which are remeasured when the derived fair value is below carrying value in the consolidated balance sheets. Recoverability is based on estimated undiscounted cash flows or other relevant observable/unobservable measures. For these assets, the Company does not periodically adjust carrying value to fair value except in the event of impairment. If it is determined that impairment has occurred, the carrying value of the asset is reduced to fair value and the difference is included in Impairment of long-lived assets and Impairment of operating lease right-of-use assets on the condensed consolidated statements of operations and comprehensive loss.
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Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the three months ended March 31, 2025. The carrying amounts of cash equivalents, accounts receivable, and accounts payable approximated their fair values as of March 31, 2025 due to their short-term nature. The fair value of the bifurcated embedded derivative related to the convertible preferred stock was estimated using a Monte Carlo simulation model, which uses as inputs the fair value of our common stock and estimates for the equity volatility of our common stock, the time to maturity of the convertible preferred stock, the risk-free interest rate for a period that approximates the time to maturity, dividend rate, a penalty dividend rate, and our probability of default. The fair value of the warrant liability was estimated using the Black Scholes Model which uses as inputs the following weighted average assumptions: dividend yield, expected term in years; equity volatility; and risk-free interest rate.
Fair value measurement at reporting date using | ||||||||||||
|
| Quoted prices in |
|
| ||||||||
active markets | Significant other | Significant | ||||||||||
for identical | observable | unobservable | ||||||||||
Balance | assets (Level 1) | inputs (Level 2) | inputs (Level 3) | |||||||||
As of March 31, 2025: |
|
|
|
|
|
|
|
| ||||
Recurring fair value measurements | ||||||||||||
Equity and debt securities: | ||||||||||||
Route1, Inc. | $ | | $ | — | $ | | $ | — | ||||
Marketable securities | | | — | — | ||||||||
Total equity and debt securities | | | | — | ||||||||
Derivatives: | ||||||||||||
Warrant liabilities | | — | — | | ||||||||
Derivative liability | | — | — | | ||||||||
Total derivatives | | — | — | | ||||||||
Total recurring fair value measurements | $ | | $ | | $ | | $ | | ||||
Nonrecurring fair value measurements | ||||||||||||
Property, plant and equipment | $ | | $ | — | $ | — | $ | | ||||
Operating lease right-of-use asset | | — | — | | ||||||||
Total nonrecurring fair value measurements | $ | | $ | — | $ | — | $ | | ||||
As of December 31, 2024 |
|
|
|
|
|
|
|
| ||||
Recurring fair value measurements | ||||||||||||
Equity and debt securities: | ||||||||||||
Route1 | $ | | $ | — | $ | | $ | — | ||||
Marketable securities | | | — | — | ||||||||
Total equity and debt securities | | | | — | ||||||||
Derivatives: | ||||||||||||
Warrant liabilities | $ | — | $ | — | $ | — | $ | — | ||||
Derivative liability | — | — | — | — | ||||||||
Total derivatives | — | — | — | — | ||||||||
Total recurring fair value measurements | $ | | $ | | $ | | $ | — | ||||
Nonrecurring fair value measurements | ||||||||||||
Property, plant and equipment | $ | | $ | — | $ | — | $ | | ||||
Operating lease right-of-use asset | | — | — | | ||||||||
Total nonrecurring fair value measurements | $ | | $ | — | $ | — | $ | | ||||
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The following table sets forth a summary of the change in the fair value of the warrant liability that is measured at fair value on a recurring basis:
Balance on January 1, 2025 |
| $ | — |
Issuance of warrants reported at fair value |
| ||
| ( | ||
Balance on March 31, 2025 | $ |
The following table sets forth a summary of the change in the fair value of the bifurcated embedded derivative liability that is measured at fair value on a recurring basis:
Balance on January 1, 2025 |
| $ | — |
Issuance of convertible preferred stock with bifurcated embedded derivative |
| ||
| |||
Balance on March 31, 2025 | $ |
Note 16. Related Party
On January 30, 2025, the Company entered into a consulting agreement (“Consulting Agreement”) with XWEL INV I, LLC (“XWEL INV I”) and Jason Aintabi (the “Consultant”) for the Consultant to provide advisory services to the Company. Mr. Aintabi serves as the Manager of XWEL INV I. The Consulting Agreement is deemed to be related party transaction as Mr. Aintabi is a greater than 5% beneficial owner of the Company’s securities. The Consulting Agreement was further extended on May 12, 2025 for a total period of (12) months from the effective date of the agreement in exchange for a total amount for both the original and amended agreements of $
Note 17. Subsequent Events
On May 16, 2025, the Company entered into an omnibus amendment (the “Warrant Amendment”) with each of the holders of the Series A Warrants and Series B Warrants. The Warrant Amendment makes certain adjustments to the definition of a “Fundamental Transaction” in each of the Warrants, as described in the Warrant Amendment, including changing the scope of the definition applicable to tender or exchange offers that the Company makes, allows one or more Subject Entities (as defined in the Warrant Agreement) to make, or allows the Company to be subject to, to require such a tender or exchange offer to represent more than
The Warrant Amendment resulted in the reclassification of the Warrants as equity, rather than liability, as upon reassessment, the Company concluded that the Warrants now met the requirements to be considered indexed to the Company’s own stock and eligible for equity classification under ASC 815-40.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Quarterly Report on Form 10-Q contains “forward-looking statements” that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained herein that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipates,” “believes,” “can,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “will be,” “plans,” “projects,” “seeks,” “should,” “targets,” “will,” “would,” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (the “SEC”) on April 15, 2025, as subsequently amended on April 28, 2024 (the “Annual Report”) and this Quarterly Report on Form 10-Q and any future reports we file with the SEC. The forward-looking statements set forth herein speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
All references in this Quarterly Report on Form 10-Q to “we,” “us” and “our” refer to XWELL, Inc., a Delaware corporation, and its consolidated subsidiaries.
Overview
XWELL is a global wellness company operating multiple brands and focused on bringing restorative, regenerative and reinvigorating products and services to travelers. As of the date of this Quarterly Report on Form 10-Q, XWELL currently has three reportable operating segments: XpresSpa®, XpresTest®, and Naples Wax Center®
On October 25, 2022, the Company changed its name to XWELL, Inc. (“XWELL” or the “Company”) from XpresSpa Group, Inc. The Company’s common stock, par value $0.01 per share, which had previously been listed under the trading symbol “XSPA” on Nasdaq, now trades under the trading symbol “XWEL”. The Company filed an amended and restated certificate of incorporation with the Delaware Secretary of State on October 24, 2022 (as amended, the “Amended and Restated Certificate”) reflecting the name change. Rebranding to XWELL aligned the Company’s corporate strategy to build a pure-play wellness services company, in both the airport and off-airport marketplaces.
All amounts are in thousands, except share, per share, or as otherwise specifically noted.
XpresSpa
XWELL’s subsidiary, XpresSpa Holdings, LLC (“XpresSpa”) has been a global airport retailer of spa services through its XpresSpa spa locations, offering travelers premium spa services, including massage, nail and skin care, as well as spa and travel products.
As of March 31, 2025, there were 17 domestic XpresSpa locations in total comprised of 16 Company-owned locations and one franchise. The Company also had 11 international locations operating as of March 31, 2025, including two XpresSpa locations in the Dubai International Airport in the United Arab Emirates, one XpresSpa location in the Zayad International Airport in Abu Dhabi, United Arab Emirates, four XpresSpa locations in the Schiphol Amsterdam Airport in the Netherlands and four XpresSpa locations in the Istanbul Airport in Turkey.
Treat, which is operating through XWELL’s subsidiary Treat, Inc. (“Treat”) is a wellness brand that provides access to wellness services for travelers at on-site centers. In April 2024, the decision was made to close the location in the Salt Lake City International Airport. In the first quarter of 2025, the decision was made to convert the final remaining Treat
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location at JFK International Airport in New York City to an XWELL location. Following the conversion of the JFK Treat location, in mid-2025, we will no longer have any Treat locations.
XpresTest
The Company, in partnership with certain COVID-19 testing partners, successfully launched its XpresCheck Wellness Centers, in June of 2020, through its XpresTest, Inc. subsidiary (“XpresTest”), which offered COVID-19 and other medical to the traveling public, as well as airline, airport and concessionaire employees, and TSA and U.S. Customs and Border Protection agents during the pandemic. As of December 31, 2023, the Company closed all XpresCheck locations and XpresTest no longer provides diagnostic testing services XpresTest began conducting bio surveillance monitoring with the Centers for Disease Control and Prevention (CDC) in collaboration with Concentric by Ginkgo Bioworks Holdings, Inc. (“Ginkgo Bioworks”) in 2021.
The program was renewed through August 2024. The revenue to XpresTest from such one-year extension totaled approximately $7,044. In January 2024, the program funding and scope were expanded, a revenue increase of $4,000, to an estimated $11,044 in revenue for XpresTest with new collection locations at U.S. international airports and the roll out of multi-pathogen testing across the program. In July 2024, the contract was further amended to extend the time period for services by two weeks (extension period August 12, 2024 to August 25, 2024). An increase of $293 in revenue for the two week extension brought total revenue to $11,337. The program was again extended in August 2024 through February 25, 2025. The funding was expanded with a revenue increase of $3,763, to an estimated $15,100 in revenue for XpresTest. In February 2025, the program was extended through a three-year contract with a total base value of $22.2 million over three years, and a maximum ceiling value of $24.8 million within the same timeframe.
Naples Wax Center
XWELL’s subsidiary Naples Wax, LLC, d/b/a Naples Wax Centers (“Naples Wax Center” or “Naples Wax”) which was acquired on September 12, 2023, for a purchase price of $1,624, operates a group of upscale hair removal locations with core products and service offerings from face and body waxing to a range of skincare and cosmetic products. The acquisition of Naples Wax Center is intended to enable us to move beyond our airport client base with a business that can be adapted to a larger wellness platform while also growing our retail footprint to serve our long-term financial goals.
Although we recognize four segments of business, we believe there is opportunity to leverage a segment of our products and services across our platform of brands. Additionally, we are expanding our retail strategy, not only adding more products for sale but aligning those products more efficiently to our service offerings. This product strategy includes, for example, adding muscle relaxation patches to a neck or back massage to continue treatment after the delivery of the service.
We also plan to build our capability for delivering health and wellness services outside of the airport. We believe operating outside of the airport complements our offering and represents the fastest way to scale the XWELL family of brands.
We will be looking to further expand internationally. We believe a strategy for international expansion further advances our ability to expand our other brands including bio surveillance outside of the US.
Recent Developments
Nasdaq Minimum Bid Price Requirement
On May 13, 2025, we received a letter from the Listing Qualifications Department of the Nasdaq Stock Market indicating that, based upon the closing bid price of our common stock for the 30 consecutive business days between March 31, 2025, to May 12, 2025, we did not meet the minimum bid price of $1.00 per share required for continued listing on the Nasdaq Capital Market (“Nasdaq”) pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Rule”). The letter also indicated that we will be provided with a compliance period of 180 calendar days, or until November 10, 2025 (the “Compliance Period”), in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A).
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In order to regain compliance with Nasdaq’s Minimum Bid Price Rule, our common stock must maintain a minimum closing bid price of $1.00 for at least ten consecutive business days during the Compliance Period. In the event we do not regain compliance by the end of the Compliance Period, we may be eligible for additional time to regain compliance. To qualify, we will be required to meet the continued listing requirement for the market value of its publicly held shares and all other initial listing standards for Nasdaq, with the exception of the bid price requirement, and will need to provide written notice of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split if necessary. If we meet these requirements, we may be granted an additional 180 calendar days to regain compliance. However, if it appears to Nasdaq that we will be unable to cure the deficiency, or if we are not otherwise eligible for the additional cure period, Nasdaq will provide notice that our common stock will be subject to delisting. There can be no assurance that we will be eligible for the additional 180 calendar day compliance period, if applicable, or that the Nasdaq staff would grant our request for continued listing subsequent to any delisting notification. In the event of such a notification, we may appeal the Nasdaq staff’s determination to delist our securities. As of the date of this Quarterly Report on Form 10-Q, we have not regained compliance with the Minimum Bid Price Rule.
January 2025 Private Placement
On January 14, 2025, we entered into a securities purchase agreement (the “January 2025 Purchase Agreement”) with certain accredited investors thereto, pursuant to which it agreed to sell to such investors (i) an aggregate of 4,000 shares of our newly-designated Series G Convertible Preferred Stock, par value of $0.01 per share and a stated value of $1,000 per share (the “Series G Preferred Stock”),, initially convertible into up to 2,673,797 shares of our common stock at a conversion price of $1.496 per share, (ii) Series A Warrants to acquire up to an aggregate of 2,673,797 shares of common stock at an exercise price of $1.496 per share (the “Series A Warrants”), and (iii) Series B Warrants to acquire up to an aggregate of 2,673,797 shares of common stock at an exercise price of $1.7952 per share (the “Series B Warrants”), each for a term of five years following the date of issuance (the “January 2025 Private Placement”). In connection with the January 2025 Private Placement, we also entered into that certain registration rights agreement, dated as of January 14, 2025, with the investors in the January 2025 Private Placement. The January 2025 Private Placement closed on January 14, 2025.
Results of Operations
Revenue
We recognize revenue from the sale of XpresSpa, Treat and Naples Wax services when they are rendered at our stores and from the sale of products at the time goods are purchased at our stores or online (usually by credit card), net of discounts and applicable sales taxes.
During the third quarter of 2022, XpresTest, in partnership with Ginkgo BioWorks in continuation of their support to the CDC’s traveler-based SARS-CoV-2 genomic surveillance program was awarded a new contract. We recognize revenue over time for both sample collection performance obligations, using the input method based on time elapsed to measure progress towards satisfying each of the performance obligations. The Company recognizes revenue ratably (straight line basis) over the term of the contract (one year).
Cost of sales
Cost of sales for our XpresSpa, XpresTest, and Naples Wax segments consist of location and segment level costs. Location and segment level costs include all costs that are directly attributable to operations, primarily payroll and related benefit costs for personnel, occupancy costs and cost of products sold.
General and administrative expenses
General and administrative expenses include management and administrative personnel, overhead and occupancy costs, insurance, salaries, and various professional fees, as well as stock-based compensation for directors, management and administrative personnel.
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Three months ended March 31, 2025, compared to the three months ended March 31, 2024
Revenue
Three months ended March 31, | |||||||||
|
| 2025 |
| 2024 |
| Inc/(Dec) | |||
Total revenue, net | $ | 7,023 | $ | 8,726 | $ | (1,703) | |||
The decrease in revenue of $1,703 or 20%, was primarily driven by lower CDC XpresTest revenue and XpresSpa revenue offset by Priority Pass revenue, which is a new revenue stream for the three months ended March 31, 2025 as compared to three months ended March 31, 2024.
Cost of sales
Three months ended March 31, | |||||||||
| 2025 |
| 2024 |
| Inc/(Dec) | ||||
Total cost of sales | $ | 5,704 | $ | 6,055 | $ | (351) | |||
The decrease in cost of sales of $351 or 6%, was primarily driven by decrease in operating costs in outside labor, service supplies and product costs for the three months ended March 31, 2025 as compared to three months ended March 31, 2024.
Depreciation and amortization
Three months ended March 31, | |||||||||
| 2025 |
| 2024 |
| Inc/(Dec) | ||||
Depreciation and amortization | $ | 166 | $ | 225 | $ | (59) | |||
The decrease in depreciation and amortization of approximately 26% was primarily due to fewer long-lived assets available for depreciation and amortization in the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 due the impairment of long-lived assets which occurred at the end of fiscal year 2024.
Impairment of long-lived assets
Three months ended March 31, | |||||||||
| 2025 |
| 2024 |
| Inc/(Dec) | ||||
Impairment of long-lived assets | $ | — | $ | 652 | $ | (652) | |||
The decrease of approximately $652 was primarily due to the impairment of long-lived assets that occurred in the three months ended March 31, 2024. There was no similar impairment taken as of March 31, 2025.
General and administrative expenses
Three months ended March 31, | |||||||||
| 2025 |
| 2024 |
| Inc/(Dec) | ||||
General and administrative | $ | 4,311 | $ | 4,173 | $ | 138 | |||
The increase of approximately 3% was primarily due to the increase in accounting, legal and public company costs for the three months ended March 31, 2025 as compared to three months ended March 31, 2024.
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Other non-operating expense, net
Three months ended March 31, | |||||||||
| 2025 |
| 2024 |
| Inc/(Dec) | ||||
Other non-operating expense, net | $ | (33) | $ | (58) | $ | 25 | |||
The following is a summary of the transactions included in other non-operating expense, net for the three months ended March 31, 2025 and 2024:
Three months ended March 31, | ||||||
|
| 2025 |
| 2024 | ||
Bank fees and financing charges | $ | (30) | $ | (48) | ||
Other |
| (3) |
| (10) | ||
Total | $ | (33) | $ | (58) | ||
Change in fair value of warrants, derivatives, and loss on issuance of preferred stock
Three months ended March 31, | ||||||
|
| 2025 |
| 2024 | ||
Change in fair value of derivative liability | $ | (142) | $ | — | ||
Change in fair value of warrant liability | 2,590 | — | ||||
Loss on issuance of Series G Preferred Stock |
| (3,443) |
| — | ||
The change in fair value of warrants and derivatives is due to a decrease in the Company’s stock price after entering into the January 2025 Purchase Agreement. The loss on issuance is due to the initial fair value of the Series G Preferred Shares exceeding the fair value of the proceeds received.
Interest income, net
Three months ended March 31, | |||||||||
| 2025 |
| 2024 |
| Inc/(Dec) | ||||
Interest income, net | $ | 58 | $ | 110 | $ | (52) | |||
The decrease of $52 was primarily due to having less cash in interest bearing accounts.
Going Concern and Liquidity
Substantial doubt has been expressed about our ability to continue as a going concern as we have suffered recurring losses from operations and have insufficient liquidity to fund our future operations. If we are unable to improve our liquidity position, we may not be able to continue as a going concern. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might result if we are unable to continue as a going concern and, therefore, be required to realize our assets and discharge our liabilities other than in the normal course of business which could cause investors to suffer the loss of all or a substantial portion of their investment. As of March 31, 2025, we had cash and cash equivalents of $3,650 (excluding restricted cash), $7,318 in marketable securities, and total current assets of $14,841. Our total current liabilities balance, which includes accounts payable, deferred revenue, accrued expenses, and operating lease liabilities was $8,860 as of March 31, 2025, and $9,224 as of December 31, 2024. The working capital surplus was $5,981 as of March 31, 2025, compared to a working capital surplus of $6,113 as of December 31, 2024.
The Company has taken actions to improve its overall cash position, right sizing its corporate structure and streamlining its operations, while at the same time the Company is aggressively trying to get the company to profitability which the Company believes will strengthen the Company’s stock price and put the Company in a stronger position to be able to raise capital in 2025 and beyond. The Company is aggressively pursuing strategic partnerships that the Company expects
29
will further strengthen the long-term profitability of the business, which puts the Company in a position of strength as the Company raises more capital.
Our primary liquidity and capital requirements are for the maintenance of our current XpresSpa locations and brand, as well as the expansion outside the airports. During the three months ended March 31, 2025, we used net cash of $4,178 to fund our operating activities.
In order to have sufficient cash to fund our operations in the future, we will need to raise additional equity or debt capital and cannot provide any assurance that we will be successful in doing so. If we are unable to raise sufficient capital to fund our operations, we may need to delay, reduce or eliminate certain of our operations, sell some or all of our assets or merge with another entity.
As of the date of this Quarterly Report on Form 10-Q, we do not currently have sufficient available liquidity to fund its operations for at least the next 12 months. These conditions and events raise substantial doubt about our ability to continue as a going concern within one year after the date that these unaudited condensed consolidated financial statements are issued.
Nasdaq Minimum Bid Price Requirement
On May 13, 2025, we received a letter from the Listing Qualifications Department of the Nasdaq Stock Market indicating that, based upon the closing bid price of our common stock for the 30 consecutive business days between March 31, 2025, to May 12, 2025, we did not meet the minimum bid price of $1.00 per share required for continued listing on Nasdaq pursuant to the Minimum Bid Price Rule. The letter also indicated that we will be provided with a the Compliance Period (until November 10, 2025), in which to regain compliance.
In order to regain compliance with Nasdaq’s Minimum Bid Price Rule, our common stock must maintain a minimum closing bid price of $1.00 for at least ten consecutive business days during the Compliance Period. In the event we do not regain compliance by the end of the Compliance Period, we may be eligible for additional time to regain compliance. To qualify, we will be required to meet the continued listing requirement for the market value of its publicly held shares and all other initial listing standards for Nasdaq, with the exception of the bid price requirement, and will need to provide written notice of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split if necessary. If we meet these requirements, we may be granted an additional 180 calendar days to regain compliance. However, if it appears to Nasdaq that we will be unable to cure the deficiency, or if we are not otherwise eligible for the additional cure period, Nasdaq will provide notice that our common stock will be subject to delisting. There can be no assurance that we will be eligible for the additional 180 calendar day compliance period, if applicable, or that the Nasdaq staff would grant our request for continued listing subsequent to any delisting notification. In the event of such a notification, we may appeal the Nasdaq staff’s determination to delist our securities. As of the date of this Quarterly Report on Form 10-Q, we have not regained compliance with the Minimum Bid Price Rule.
Critical Accounting Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of our unaudited condensed consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses and related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends, and other factors that management believes to be relevant at the time our unaudited condensed consolidated financial statements are prepared. Accordingly, we evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions.
We consider an accounting estimate to be critical if: (1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.
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There have been no material changes to our critical accounting estimates from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our 2024 Annual Report except as covered below:
Derivative Financial Instruments
The Company measures the fair value of financial assets and liabilities in accordance with GAAP, which defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements. The Company does not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks. However, the Company has entered into certain financial instruments and contracts, such as debt financing arrangements and the issuance of preferred stock with detachable common stock warrants features that are either i) not afforded equity classification, ii) embody risks not clearly and closely related to host contracts, or iii) may be net-cash settled by the counterparty. These instruments are required to be recognized as derivative liabilities, at fair value.
The fair value of the bifurcated embedded derivative related to the convertible preferred stock was estimated using a Monte Carlo simulation model, which uses as inputs the fair value of the Company’s common stock and estimates for the equity volatility of the Company’s common stock, the time to maturity of the convertible preferred stock, the risk-free interest rate for a period that approximates the time to maturity, dividend rate, a penalty dividend rate, and our probability of default.
Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815. The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own Common Stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be liability classified and recorded at their initial fair value on the date of issuance and remeasured at fair value and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the consolidated statements of operations and comprehensive loss. The warrants are classified as liabilities in accordance with ASC 815 as as they do not meet the requirements to be considered indexed to the Company’s own stock. The fair value of the warrant liability was estimated using the Black Scholes Model which uses as inputs the following weighted average assumptions: dividend yield, expected term in years; equity volatility; and risk-free interest rate. (see Note 10).
Known Trends, Events and Uncertainties
Ongoing conflicts in Russia and Ukraine, and Israel and Palestine, including related sanctions and countermeasures, are difficult to predict, and could adversely impact geopolitical and macroeconomic conditions, the global economy, and contribute to increased market volatility, which may in turn adversely affect our business and operations. We may not be able to raise sufficient additional capital and may tailor our business and operations based on the amount of funding we are able to raise in the future. Nevertheless, there is no assurance that these initiatives will be successful. Our ability to operate depends upon a large number of airplane travelers with the propensity for health and wellness, and in particular spa treatments and products, spending significant time post-security clearance check points at airports. The number of airline travelers at any given time is volatile and subject to change based on various conditions, including but not limited to market and other conditions, prices of travel fare, and oil and gas prices. Additionally, recent changes to U.S. policy implemented by the U.S. Congress, the Trump administration or any new administration have impacted and may in the future impact, among other things, the U.S. and global economy, tariffs, international trade relations, unemployment,
31
immigration, healthcare, taxation, the U.S. regulatory environment, inflation and other areas. Although we cannot predict the impact, if any, of these changes to our business, they could adversely affect our business.
Other than as discussed above and elsewhere in this report, we are not aware of any trends, events or uncertainties that are likely to have a material effect on our financial condition.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) promulgated under the Exchange Act) that are designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer (Principal Financial and Accounting Officer), as appropriate, to allow timely decisions regarding required disclosure.
As of March 31, 2025, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. Based upon that evaluation, our management concluded that our disclosure controls and procedures were not effective as of March 31, 2025, due to the following material weaknesses:
1) | The Company did not properly design, implement, and consistently operate effective controls over the completeness and accuracy of its accounting for leases under ASC 842. |
2) | The Company did not properly design or maintain effective entity level monitoring controls over the financial close and reporting process. |
3) | The Company did not design or maintain effective controls over its service organizations and IT vendors. More specifically, the Company did not have controls in place to review the applicable complementary user entity controls described in the service organizations’ reports for their potential impact on the Company’s financial reporting. |
4) | The Company did not design, implement, and consistently operate effective controls over the revenue process. The Company’s controls surrounding the revenue reports and reconciliations were not designed and did not operate at a level of precision that would prevent or detect a material misstatement. |
5)The Company did not design, implement, and consistently operate effective controls over its’ foreign subsidiaries.
This type of evaluation is performed on a quarterly basis so that conclusions of management, including our Chief Executive Officer and the Chief Financial Officer, concerning the effectiveness of the disclosure controls can be reported in our periodic reports on Form 10-Q and Form 10-K. The overall goals of these evaluation activities are to monitor our disclosure controls and to modify them as necessary. We intend to maintain the disclosure controls as dynamic systems that we adjust as circumstances merit. Based on the foregoing, our Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of March 31, 2025.
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Remediation Plan for Material Weakness in Internal Control over Financial Reporting
Management is committed to the remediation of the Company’s material weaknesses, as well as the continued improvement of the Company’s internal control over financial reporting. Management has implemented, and continues to implement, the actions described below to remediate the underlying causes of the control deficiencies that gave rise to the material weaknesses. Until the remediation efforts described below, including any additional measures management identifies as necessary, are completed, the material weaknesses described above will continue to exist. We cannot provide any assurance that the below remediation efforts will be successful or that our internal control over financial reporting will be effective as a result of these efforts. Management has commenced the following actions and will continue to assess additional opportunities for remediation on an ongoing basis:
| 1) | The Company has turned on the multi-currency features related to its cloud-based accounting systems. |
| 2) | The Company has engaged outside service providers to assist with the valuation, accounting, and recording of key reporting areas such as leases, revenue recognition and stock compensation expense. |
| 3) | The Company has contracted an independent consulting firm to assist with the preparation of the Financial Statements and U.S. GAAP accounting research. |
| 4) | The Company has engaged outside service providers to review the applicable complementary user entity controls described in the service organizations’ reports for their potential impact on the Company’s financial reporting. |
Changes in Internal Control over Financial Reporting
Other than as set forth in the foregoing paragraph, there have been no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended March 31, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may be involved in certain claims and litigation arising out of the ordinary course and conduct of business. Management assesses such claims and, if it considers that it is probable that an asset had been impaired or a liability had been incurred and the amount of loss can be reasonably estimated, provisions for loss are made based on management’s assessment of the most likely outcome.
The information set forth in Note 11 Commitments and Contingencies of the Notes to unaudited condensed consolidated financial statements of this Quarterly Report on Form 10-Q is incorporated by reference herein.
There are no other material proceedings in which any of our directors, officers, affiliates, any registered or beneficial stockholder of more than 5% of our common stock, or any associate of any of the foregoing is an adverse party or has a material interest adverse to our interest.
Item 1A. Risk Factors.
The following description of risk factors includes any material changes to risk factors associated with our business, financial condition and results of operations previously disclosed in “Item 1A. Risk Factors” of our Annual Report. Our business, financial condition and operating results can be affected by a number of factors, whether currently known or unknown, including but not limited to those described below, any one or more of which could, directly or indirectly, cause our actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, operating results, and stock price.
The following discussion of risk factors contains forward-looking statements. These risk factors may be important to understanding other statements in this Quarterly Report on Form 10-Q. The following information should be read in conjunction with the condensed consolidated financial statements and related notes in Part I, Item 1, “Financial Statements” and Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q.
Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our common stock.
The continued listing standards of Nasdaq provide, among other things, that a company may be delisted if the bid price of its stock drops below $1.00 for a period of 30 consecutive business days or if stockholders’ equity is less than $2,500,000. On May 13, 2025, we received a letter from the Listing Qualifications Department of the Nasdaq Stock Market indicating that, based upon the closing bid price of our common stock for the 30 consecutive business days between March 31, 2025, to May 12, 2025, we did not meet the minimum bid price of $1.00 per share required for continued listing on the Nasdaq pursuant to the Minimum Bid Price Rule. The letter also indicated that we will be provided with the Compliance Period (until November 10, 2025), in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A).
In order to regain compliance with Nasdaq’s Minimum Bid Price Rule, our common stock must maintain a minimum closing bid price of $1.00 for at least ten consecutive business days during the Compliance Period. In the event we do not regain compliance by the end of the Compliance Period, we may be eligible for additional time to regain compliance. To qualify, we will be required to meet the continued listing requirement for the market value of its publicly held shares and all other initial listing standards for Nasdaq, with the exception of the bid price requirement, and will need to provide written notice of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split if necessary. If we meet these requirements, we may be granted an additional 180 calendar days to regain compliance. However, if it appears to Nasdaq that we will be unable to cure the deficiency, or if we are not otherwise eligible for the additional cure period, Nasdaq will provide notice that our common stock will be subject to delisting. There can be no assurance that we will be eligible for the additional 180 calendar day compliance period, if applicable, or that the Nasdaq staff would grant our request for continued listing subsequent to any delisting notification. In the event of such a
34
notification, we may appeal the Nasdaq staff’s determination to delist our securities. As of the date of this Quarterly Report on Form 10-Q, we have not regained compliance with the Minimum Bid Price Rule.
If in the future we seek to implement a reverse stock split to remain listed on Nasdaq, the announcement and/or implementation of a reverse stock split could significantly negatively affect the price of our common stock. We may be unable to regain compliance in the future if our stock price again falls below the minimum bid price. Additionally, if we fail to comply with any other continued listing standards of Nasdaq, our common stock would also be subject to delisting. If that were to occur, our common stock would be subject to rules that impose additional sales practice requirements on broker-dealers who sell our securities. The additional burdens imposed upon broker-dealers by these requirements could discourage broker-dealers from effecting transactions in our common stock. This would significantly and negatively affect the ability of investors to trade our securities and would significantly and negatively affect the value and liquidity of our common stock. These factors could contribute to lower prices and larger spreads in the bid and ask prices for our common stock. The delisting of our common stock also would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. Further, if we were to be delisted from Nasdaq, our common stock would cease to be recognized as covered securities, and we would be subject to regulation in each state in which we offer our securities.
Although we expect to take actions intended to restore our compliance with the listing requirements, we can provide no assurance that any action taken by us would be successful, that we would successfully maintain compliance with the minimum bid price requirement or any of Nasdaq’s other listing requirements or that any such action would stabilize the market price or improve the liquidity of our common stock. Should a delisting occur, an investor would likely find it significantly more difficult to dispose of, or to obtain accurate quotations as to the value of our shares, and our ability to raise future capital through the sale of our common stock could be severely limited. Delisting from Nasdaq could adversely affect our ability to raise additional financing through the public or private sale of equity securities, would significantly affect the ability of investors to trade our securities and would negatively affect the value and liquidity of our common stock. Delisting could also have other negative results, including the potential loss of confidence by employees, the loss of institutional investor interest and fewer business development opportunities.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
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Item 5. Other Information.
These unaudited pro forma condensed consolidated financial statements have been prepared in accordance with Article 11 of Regulation S-X and do not include all of the information and note disclosures required by generally accepted accounting principles of the United States.
The unaudited pro forma condensed consolidated financial information is subject to the assumptions and adjustments described in the accompanying notes. These assumptions and adjustments are based on information presently available. Actual adjustments may differ materially from the information presented. The unaudited pro forma consolidated financial statements are based on the historical financial statements of the Company for each period presented and in the opinion of the Company’s management, all adjustments and disclosures necessary for a fair presentation of the pro forma data have been made. These unaudited pro forma consolidated financial statements are presented for illustrative purposes only and are not necessarily indicative of the results of operations or financial condition that would have been achieved had events reflected been completed as of the dates indicated and may not be useful in predicting the impact of the disposal on the future financial condition and results of operations of the Company due to a variety of factors.
The following pro forma financial information gives effect to the Warrant Amendment as if it had occurred on March 31, 2025. See Notes 10 and 17 in the notes to the unaudited condensed consolidated financial statements for further information.
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XWELL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2025
|
| Pro Forma | |||||||
Historical | Adjustments | Pro Forma | |||||||
Current assets |
|
|
|
| |||||
Cash and cash equivalents | $ | 3,650 | $ | - | $ | 3,650 | |||
Marketable Securities | 7,318 | - | 7,318 | ||||||
Accounts receivable | 1,498 | - | 1,498 | ||||||
Inventory |
| 532 | - |
| 532 | ||||
Other current assets |
| 1,843 | - |
| 1,843 | ||||
Total current assets |
| 14,841 | - |
| 14,841 | ||||
Restricted cash |
| 751 | - |
| 751 | ||||
Property and equipment, net |
| 2,148 | - |
| 2,148 | ||||
Intangible assets, net |
| 947 | - |
| 947 | ||||
Operating lease right of use assets, net |
| 3,163 | - |
| 3,163 | ||||
Goodwill | 1,389 | - | 1,389 | ||||||
Other assets |
| 1,588 | - |
| 1,588 | ||||
Total assets | $ | 24,827 | - | $ | 24,827 | ||||
Current liabilities |
|
|
|
| |||||
Accounts payable | $ | 2,208 | - | $ | 2,208 | ||||
Accrued expenses and other current liabilities | 3,342 | - | 3,342 | ||||||
Current portion of operating lease liabilities | 2,225 | - | 2,225 | ||||||
Deferred revenue | 1,085 | - | 1,085 | ||||||
Total current liabilities |
| 8,860 | - |
| 8,860 | ||||
Long-term liabilities |
|
| |||||||
Derivative liability |
| 1,457 | - |
| 1,457 | ||||
Warrant liabilities | 3,283 | (3,283) |
| - | |||||
Operating lease liabilities |
| 7,801 | - |
| 7,801 | ||||
Total liabilities | 21,401 | (3,283) | 18,118 | ||||||
Commitments and contingencies (see Note 11) |
|
|
|
| |||||
Temporary equity |
|
|
|
| |||||
Series G Convertible Preferred Stock, $0.01 par value per share and $1,000 stated value, 4,000 shares authorized; 4,000 shares issued and outstanding as of March 31, 2025; Liquidation preference of $4,388,444 as of March 31, 2025 |
| 567 | - |
| 567 | ||||
Equity | - | ||||||||
Common Stock, $0.01 par value per share, 150,000,000 shares authorized; 5,261,024 shares issued and outstanding as of March 31, 2025 | 53 | - | 53 | ||||||
Additional paid-in capital |
| 473,337 | 3,283 |
| 476,620 | ||||
Accumulated deficit |
| (477,425) | - |
| (477,425) | ||||
Accumulated other comprehensive loss |
| (1,760) | - |
| (1,760) | ||||
Total deficit attributable to XWELL, Inc. |
| (5,795) | 3,283 |
| (2,512) | ||||
Noncontrolling interests |
| 8,654 | - |
| 8,654 | ||||
Total equity |
| 2,859 | 3,283 |
| 6,142 | ||||
Total liabilities, temporary equity and equity | $ | 24,827 | - | $ | 24,827 | ||||
37
Item 6. Exhibits.
Exhibit |
| Description |
3.1 | ||
4.1 | ||
4.2 | ||
10.1 | ||
10.2 | ||
10.3† | ||
10.4* | ||
31.1* |
| |
| ||
31.2* | ||
|
|
|
32** |
| |
|
|
|
101.INS* |
| Inline XBRL Instance Document |
|
|
|
101.SCH* |
| Inline XBRL Taxonomy Extension Schema Document |
|
|
|
101.CAL* |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
101.DEF* |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
101.LAB* |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
101.PRE* |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| ||
104* | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
** | Furnished herein. | |
† | Management contract or compensatory plan or arrangement. |
38
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| XWELL, Inc. | |||
Date: | May 20, 2025 | By: | /s/ Ezra T. Ernst | |
Ezra T. Ernst | ||||
Chief Executive Officer | ||||
(Principal Executive Officer) | ||||
Date: | May 20, 2025 | By: | /s/ Ian Brown | |
Ian Brown | ||||
Chief Financial Officer | ||||
(Principal Financial and Accounting Officer) | ||||
39