SEC Filing - XWELL

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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, 2023

☐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

XWELL, 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) 750-9595

XpresSpa Group, Inc.

(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	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	XWEL	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 9, 2023, 4,179,631 shares of the registrant’s common stock were outstanding.

Table of Contents

XWELL, 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	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31

PART II. OTHER INFORMATION		32

Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	33

Table of Contents

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)


	September 30,		December 31,
	2023		2022
Current assets
Cash and cash equivalents	$	4,827	$	19,038
Marketable Securities		21,311		23,153
Accounts receivable		1,193		2,858
Inventory		968		1,161
Other current assets		1,663		1,122
Total current assets		29,962		47,332

Restricted cash		751		751
Property and equipment, net		3,801		3,666
Intangible assets, net		2,174		4,008
Operating lease right of use assets, net		6,075		8,276
Goodwill		-		4,024
Other assets		1,787		2,369
Total assets	$	44,550	$	70,426

Current liabilities
Accounts payable	$	1,511	$	2,312
Accrued expenses and other current liabilities		4,198		5,719
Current portion of operating lease liabilities		2,375		2,586
Deferred revenue		73		339
Total current liabilities		8,157		10,956

Long-term liabilities
Operating lease liabilities		9,123		11,521
Total liabilities		17,280		22,477
Commitments and contingencies (see Note 13)

Equity
Common Stock, $0.01 par value per share, 150,000,000 shares authorized; 4,174,381 and 4,161,613 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively*		42		42
Additional paid-in capital		470,270		468,530
Accumulated deficit		(449,269)		(428,112)
Accumulated other comprehensive loss		(1,642)		(534)
Total equity attributable to XWELL, Inc.		19,401		39,926
Noncontrolling interests		7,869		8,023
Total equity		27,270		47,949
Total liabilities and equity	$	44,550	$	70,426

*Adjusted, where applicable, to reflect the impact of the 1:20 reverse stock split that became effective September 28, 2023.

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

Table of Contents

XWELL, 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,
	2023		2022		2023		2022

Revenue, net
Patient services revenue	$	—	$	4,607	$	148	$	31,728
Services		6,709		5,583		20,485		15,341
Products		747		542		2,044		1,308
Other		12		4		29		4
Total revenue, net		7,468		10,736		22,706		48,381
Cost of sales
Labor		4,462		5,222		13,609		16,161
Occupancy		1,063		1,082		3,237		3,412
Products and other operating costs		852		3,035		3,057		17,170
Total cost of sales		6,377		9,339		19,903		36,743

Gross Profit		1,091		1,397		2,803		11,638

Depreciation and amortization		590		1,564		1,770		4,329
Impairment of long-lived assets		6,782		677		6,782		677
Impairment of operating lease right-of-use assets		—		38		—		38
Loss on disposal of assets		16		325		34		273
Advertising and promotion expense		313		863		628		3,696
IT/Hosting services		273		741		1,186		2,247
Other general and administrative expenses		3,593		4,843		13,891		18,250
Total operating expenses		11,567		9,051		24,291		29,510
Operating loss		(10,476)		(7,654)		(21,488)		(17,872)
Interest income, net		105		114		334		159
Foreign exchange remeasurement gain/(loss)		366		(2)		(690)		(7)
Gain on Securities, realized and unrealized		225		—		703		—
Other non-operating expense, net		(198)		(134)		(345)		(643)
Loss before income taxes		(9,978)		(7,676)		(21,486)		(18,363)
Income tax expense		—		(3)		—		(5)
Net loss		(9,978)		(7,679)		(21,486)		(18,368)
Net (income) loss attributable to noncontrolling interests		60		500		329		(1,012)
Net loss attributable to XWELL, Inc.	$	(9,918)	$	(7,179)	$	(21,157)	$	(19,380)

Net loss	$	(9,978)	$	(7,679)	$	(21,486)	$	(18,368)
Other comprehensive loss		(514)		(102)		(1,108)		(248)
Comprehensive loss	$	(10,492)	$	(7,781)	$	(22,594)	$	(18,616)
Loss per share
Basic and diluted loss per share*	$	(2.38)	$	(1.52)	$	(5.07)	$	(3.99)
Weighted-average number of shares outstanding during the period
Basic and diluted*		4,173,894		4,731,066		4,170,629		4,858,393

*Adjusted to reflect the impact of the 1:20 reverse stock split that became effective on September 28, 2023.

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

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XWELL, Inc. and Subsidiaries

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

(Unaudited)

(In thousands, except share and per share data)


											Accumulated
							Additional				other		Total		Non-
	Common stock			Treasury Stock			paid-		Accumulated		comprehensive		Company		controlling		Total
	Shares*	Amount		Shares*	Amount		in capital		deficit		loss		equity		interests		equity
December 31, 2022	4,161,613	$	42	—		—	$	468,530	$	(428,112)	$	(534)	$	39,926	$	8,023	$	47,949
Issuance of restricted stock units	6,015		—	—		—		—		—		—		—		—		—
Value of shares withheld to fund payroll taxes	—		—	—		—		(22)		—		—		(22)		—		(22)
Stock-based compensation	—		—	—		—		589		—		—		589		23		612
Net loss for the period	—		—	—		—		—		(5,509)		—		(5,509)		(320)		(5,829)
Foreign currency translation	—		—	—		—		—		—		(130)		(130)		11		(119)
March 31, 2023	4,167,628	$	42	—	$	—	$	469,097	$	(433,621)	$	(664)	$	34,854	$	7,737	$	42,591
Issuance of restricted stock units	3,297		—	—		—		—		—		—		—		—		—
Stock-based compensation	—		—	—		—		603		—		—		603		23		626
Distributions to noncontrolling interests	—		—	—		—		—		—		—		—		(120)		(120)
Foreign currency translation	—		—	—		—		—		—		(464)		(464)		46		(418)
Net loss for the period	—		—	—		—		—		(5,730)		—		(5,730)		51		(5,679)
June 30, 2023	4,170,925	$	42	—	$	—	$	469,700	$	(439,351)	$	(1,128)	$	29,263	$	7,737	$	37,000
Issuance of restricted stock units	3,456		—	—		—		—		—		—		—		—		—
Stock-based compensation	—		—	—		—		567		—		—		567		24		591
Grant of stock for services	—		—	—		—		3		—		—		3		—		3
Contributions from noncontrolling interests	—		—	—		—		—		—		—		—		150		150
Foreign currency translation	—		—	—		—		—		—		(514)		(514)		18		(496)
Net loss for the period	—		—	—		—		—		(9,918)		—		(9,918)		(60)		(9,978)
September 30, 2023	4,174,381	$	42	—	$	—	$	470,270	$	(449,269)	$	(1,642)	$	19,401	$	7,869	$	27,270

*Adjusted to reflect the impact of the 1:20 reverse stock split that became effective on September 28, 2023.

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

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XWELL, Inc. and Subsidiaries

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

(Unaudited)

(In thousands, except share and per share data)



											Accumulated
							Additional				other		Total		Non-
	Common stock			Treasury Stock			paid-		Accumulated		comprehensive		Company		controlling		Total
	Shares*	Amount		Shares*	Amount		in capital		deficit		loss		equity		interests		equity
December 31, 2021	5,063,467	$	51	—		—	$	488,268	$	(395,275)	$	(312)	$	92,732	$	7,203	$	99,935
Issuance of Common Stock for acquisition	27,624		—	—		—		906		—		—		906		—		906
Vesting of restricted stock units	19,591		—	—		—		—		—		—		—		—		—
Value of Shares Withheld to fund payroll taxes	—		—	—		—		(73)		—		—		(73)		—		(73)
Stock-based compensation	—		—	—		—		1,543		—		—		1,543		—		1,543
Net loss for the period	—		—	—		—		—		(4,283)		—		(4,283)		1,521		(2,762)
Repurchase and retirement of common stock	(357,122)		(3)	—		—		(11,092)		—		—		(11,095)		—		(11,095)
Foreign currency translation	—		—	—		—		—		—		(41)		(41)		—		(41)
Distributions to noncontrolling interests	—		—	—		—		—		—		—		—		(824)		(824)
Contributions from noncontrolling interests	—		—	—		—		—		—		—		—		200		200
March 31, 2022	4,753,560	$	48	—	$	—	$	479,552	$	(399,558)	$	(353)	$	79,689	$	8,100	$	87,789
Vesting of restricted stock units	14,453		—	—		—		—		—		—		—		—		—
Grant of stock options for services	—		—	—		—		15		—		—		15		—		15
Stock-based compensation	—		—	—		—		771		—		—		771		549		1,320
Net loss for the period	—		—	—		—		—		(7,918)		—		(7,918)		(9)		(7,927)
Repurchase of common stock	—		—	(66,920)		(1,021)		—		—		—		(1,021)		—		(1,021)
Foreign currency translation	—		—	—		—		—		—		(105)		(105)		—		(105)
Distributions to noncontrolling interests	—		—	—		—		—		—		—		—		(132)		(132)
June 30, 2022	4,768,013	$	48	(66,920)	$	(1,021)	$	480,338	$	(407,476)	$	(458)	$	71,431	$	8,508	$	79,939
Vesting of restricted stock units	12,812		—	—		—		—		—		—		—		—		—
Grant of stock options for services	—		—	—		—		16		—		—		16		—		16
Contributions from noncontrolling interests	—		—	—		—		—		—		—		—		546		546
Stock-based compensation	—		—	—		—		392		—		—		392		91		483
Net loss for the period	—		—	—		—		—		(7,179)		—		(7,179)		(500)		(7,679)
Repurchase and retirement of common stock	(619,212)		(6)	66,920		1,021		(12,688)		—		—		(11,673)		—		(11,673)
Foreign currency translation	—		—	—		—		—		—		(102)		(102)		(3)		(105)
Distributions to noncontrolling interests	—		—	—		—		—		—		—		—		—		—
September 30, 2022	4,161,613	$	42	—	$	—	$	468,058	$	(414,655)	$	(560)	$	52,885	$	8,642	$	61,527

*Adjusted to reflect the impact of the 1:20 reverse stock split that became effective on September 28, 2023.

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

Table of Contents

XWELL, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Nine months ended September 30,
	2023		2022
Cash flows from operating activities
Net loss	$	(21,486)	$	(18,368)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,770		4,329
Impairment of long lived assets		6,782		715
Foreign currency remeasurement loss		690		—
Loss on disposal of assets		34		273
Gain on lease termination		(821)		—
Unrealized gain on marketable securities		(668)		—
Amortization of operating lease right of use asset		1,163		1,357
Stock-based compensation		1,832		3,346
Loss on equity investment		53		528
Changes in assets and liabilities:
Decrease in inventory		192		794
Decrease (increase) in accounts receivable		1,665		(352)
Increase in other assets, current and non-current		(336)		(2,265)
Increase in deferred revenue		(266)		(1,015)
Increase in other liabilities, current and non-current		(3,226)