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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to ___

Commission file number: 001-34785

XpresSpa Group, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware		20-4988129
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

254 West 31^st Street, 11th Floor, New York, NY		10001
(Address of principal executive offices)		(Zip Code)

(Registrant’s Telephone Number, Including Area Code): (212) 309-7549

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	XSPA	The Nasdaq Stock Market LLC

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. Yes ⌧ No ◻

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). Yes ⌧ No ◻

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	◻
Non-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 ☐ No ⌧

As of November 5, 2021, 105,662,421 shares of the registrant’s common stock were outstanding.

Table of Contents

XpresSpa Group, Inc. and Subsidiaries

Table of Contents

		Page
PART I. FINANCIAL INFORMATION		3

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	40

PART II. OTHER INFORMATION		42

Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3.	Defaults Upon Senior Securities	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	43
Item 6.	Exhibits	44

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1.Condensed Consolidated Financial Statements (Unaudited)

XpresSpa Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share data)


	September 30,		December 31,
	2021		2020
Current assets
Cash and cash equivalents (including $1,080 of variable interest entities (see note 3) as of September 30, 2021)	$	109,161	$	89,801
Accounts receivable, net		64		-
Inventory		2,040		657
Other current assets		1,835		1,321
Total current assets		113,100		91,779

Restricted cash		751		701
Property and equipment, net		4,532		4,161
Intangible assets, net		2,725		870
Operating lease right of use assets		5,667		3,034
Other assets		2,502		2,588
Total assets	$	129,277	$	103,133

Current liabilities
Accounts payable, accrued expenses and other	$	8,724	$	6,468
Current portion of operating lease liabilities		2,797		2,797
Deferred revenue		24		914
Current portion of promissory note, unsecured		5,653		3,298
Total current liabilities		17,198		13,477

Long-term liabilities
Promissory note, unsecured		-		2,355
Operating lease liabilities		8,156		6,930
Total liabilities		25,354		22,762
Commitments and contingencies (see Note 14)

Equity
Series A Convertible Preferred Stock, $0.01 par value per share; 6,968 shares authorized; none issued and outstanding		-		-
Series C Junior Preferred Stock, $0.01 par value per share; 300,000 shares authorized; none issued and outstanding		-		-
Series D Convertible Preferred Stock, $0.01 par value per share; 500,000 shares authorized; none issued and outstanding		-		-
Series E Convertible Preferred Stock, $0.01 par value per share, 2,397,060 shares authorized; none issued and outstanding		-		-
Series F Convertible Preferred Stock, $0.01 par value per share, 9,000 shares authorized; none issued and outstanding		-		-
Common Stock, $0.01 par value per share, 150,000,000 shares authorized; 105,327,379 and 94,058,853 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		1,053		941
Additional paid-in capital		493,814		475,709
Accumulated deficit		(398,550)		(398,624)
Accumulated other comprehensive loss		(283)		(220)
Total equity attributable to XpresSpa Group, Inc.		96,034		77,806
Noncontrolling interests		7,889		2,565
Total equity		103,923		80,371
Total liabilities and equity	$	129,277	$	103,133

The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

XpresSpa Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per share data)


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020

Revenue, net
Managed services fees	$	-	$	-	$	16,843	$	-
Patient services revenue		25,351		-		25,351		-
Services		1,158		93		1,761		6,779
Products		258		45		402		936
Other		-		63		14		347
Total revenue, net		26,767		201		44,371		8,062

Cost of sales
Labor		4,277		514		7,419		5,480
Occupancy		587		468		1,511		2,334
Products and other operating costs		8,798		423		16,592		1,737
Total cost of sales		13,662		1,405		25,522		9,551
Depreciation and amortization		852		1,424		2,542		3,875
Impairment/disposal of assets		-		2,227		22		6,319
General and administrative		5,196		4,368		14,350		10,972
Total operating expenses		19,710		9,424		42,436		30,717
Operating income (loss)		7,057		(9,223)		1,935		(22,655)
Interest income (expense), net		6		(120)		31		(1,856)
Gain (loss) on revaluation of warrants and conversion options		-		2,750		-		(50,917)
Other non-operating expense, net		(381)		(47)		(830)		(389)
Income (loss) before income taxes		6,682		(6,640)		1,136		(75,817)
Income tax expense		(87)		(3)		(79)		(22)
Net income (loss)		6,595		(6,643)		1,057		(75,839)
Net (income) loss attributable to noncontrolling interests		(998)		533		(983)		1,034
Net income (loss) attributable to XpresSpa Group, Inc.	$	5,597	$	(6,110)	$	74	$	(74,805)

Net income (loss)	$	6,595	$	(6,643)	$	1,057	$	(75,839)
Other comprehensive (loss) income from operations		(52)		18		(63)		33
Comprehensive income (loss)	$	6,543	$	(6,625)	$	994	$	(75,806)

Earnings / Loss per share
Basic and diluted net earnings / loss per share	$	0.05	$	(0.10)	$	-	$	(2.15)
Weighted-average number of shares outstanding during the period
Basic		105,531,418		61,106,894		103,950,731		35,309,004
Diluted		105,957,317		61,106,894		104,301,344		35,309,004

The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

XpresSpa Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

(In thousands, except share and per share data)


														Accumulated
	Series E			Series F						Additional				other		Total		Non-
	Preferred stock			Preferred stock			Common stock			paid-		Accumulated		comprehensive		Company		controlling		Total
	Shares	Amount		Shares	Amount		Shares	Amount		in capital		deficit		loss		equity		interests		equity
December 31, 2020	—	$	—	—	$	—	94,058,853	$	941	$	475,709	$	(398,624)	$	(220)	$	77,806	$	2,565	$	80,371
Warrant exercises, net of costs	—		—	—		—	11,223,529		112		16,895		—		—		17,007		—		17,007
Stock-based compensation	—		—	—		—	—		—		264		—		—		264		741		1,005
Net loss for the period	—		—	—		—	—		—		—		(1,056)		—		(1,056)		248		(808)
Foreign currency translation	—		—	—		—	—		—		—		—		(16)		(16)		—		(16)
Contributions from noncontrolling interests	—		—	—		—	—		—		—		—		—		—		333		333
March 31, 2021	—	$	—	—	$	—	105,282,382	$	1,053	$	492,868	$	(399,680)	$	(236)	$	94,005	$	3,887	$	97,892
Issuance of Common Stock for services	—		—	—		—	223,637		2		318		—		—		320		—		320
Issuance of restricted stock	—		—	—		—	27,983		—		—		—		—	`	—		—		—
Stock-based compensation	—		—	—		—	—		—		267		—		—		267		61		328
Net loss for the period	—		—	—		—	—		—		—		(4,467)		—		(4,467)		(263)		(4,730)
Foreign currency translation	—		—	—		—	—		—		—		—		5		5		—		5
Redemptions of certain noncontrolling interests	—		—	—		—	—		—		—		—		—		—		(133)		(133)
June 30, 2021	—	$	—	—	$	—	105,534,002	$	1,055	$	493,453	$	(404,147)	$	(231)	$	90,130	$	3,552	$	93,682
Stock-based compensation	—		—	—		—	—		—		767		—		—		767		23		790
Stock Grant for services	—		—	—		—	—		—		29		—		—		29		—		29
Consolidation of Variable Interest Entities	—		—	—		—	—		—		—		—		—		—		4,307		4,307
Issuance of restricted stock	—		—	—		—	35,043		—		—		—		—		—		—		—
Net income for the period	—		—	—		—	—		—		—		5,597		—		5,597		998		6,595
Foreign currency translation	—		—	—		—	—		—		—		—		(52)		(52)		—		(52)
Repurchase and retirement of common stock	—		—	—		—	(250,000)		(2)		(448)		—		—		(450)		—		(450)
Distributions to noncontrolling interests	—		—	—		—	—		—		—		—		—		—		(991)		(991)
Stock option exercises	—		—	—		—	8,334		—		13		—		—		13		—		13
September 30, 2021	—	$	—	—	$	—	105,327,379	$	1,053	$	493,814	$	(398,550)	$	(283)	$	96,034	$	7,889	$	103,923

The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

XpresSpa Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (Continued)

(Unaudited)

(In thousands, except share and per share data)


														Accumulated
	Series E			Series F						Additional				other		Total		Non-
	Preferred stock			Preferred stock			Common stock			paid-		Accumulated		comprehensive		Company		controlling		Total
	Shares	Amount		Shares	Amount		Shares *	Amount *		in capital *		deficit		loss		equity (deficit)		interests		equity (deficit)
December 31, 2019	977,865	$	10	8,996	$	—	5,157,390	$	52	$	302,118	$	(308,136)	$	(283)	$	(6,239)	$	3,703	$	(2,536)
Issuances of Common Stock for payment of interest on B3D Note	—		—	—		—	236,077		2		418		—		—		420		—		420
Issuance of Series E Preferred Stock for payment of interest on Calm Note	10,123		—	—		—	—		—		63		—		—		63		—		63
Conversion of Series F Preferred Stock into Common Stock	—		—	(7,465)		—	930,326		9		(9)		—		—		0		—		0
Direct offerings of Common Stock and pre-funded warrants, net of costs	—		—	-		—	8,210,239		82		4,176		—		—		4,258		—		4,258
Exercise of May 2018 Class A Warrants into Common Stock	—		—	—		—	2,578,455		26		3,096		—		—		3,122		—		3,122
Conversion of B3D Note to Common Stock	—		—	—		—	1,430,647		14		1,321		—		—		1,335		—		1,335
Issuance of Common Stock for services	—		—	—		—	58,333		1		134		—		—		135		—		135
Stock-based compensation	—		—	—		—	—		—		72		—		—		72		—		72
Net loss for the period	—		—	—		—	—		—		—		(10,617)		—		(10,617)		(108)		(10,725)
Foreign currency translation	—		—	—		—	—		—		—		—		—		—		—		—
Contributions from noncontrolling interests	—		—	—		—	—		—		—		—		—		—		117		117
March 31, 2020	987,988	$	10	1,531	$	—	18,601,467	$	186	$	311,389	$	(318,753)	$	(283)	$	(7,451)	$	3,712	$	(3,739)
Issuance of Common Stock for payment of interest on B3D Note	—		—	—		—	88,508		1		41		—		—		42		—		42
Conversion of Series E Preferred Stock into Common Stock	(987,988)		(10)	—		—	510,460		5		5		—		—		—		—		—
Conversion of Series F Preferred Stock into Common Stock	—		—	(1,531)		—	291,619		3		(3)		—		—