SEC Filing - XWELL

View:

Download DOC

Download PDF

Download XLS

Download XBRL

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, 2022

☐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 10, 2022, 83,232,262 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	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
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	42
Item 6.	Exhibits	43

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1.Condensed Consolidated Financial Statements (Unaudited)

XWELL, Inc. (Formerly known as XpresSpa Group, Inc.) and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share data)


	September 30,		December 31,
	2022		2021
Current assets
Cash and cash equivalents	$	49,429	$	105,506
Accounts receivable		1,309		615
Contract Assets		1,128		-
Inventory		940		1,763
Other current assets		2,375		1,095
Total current assets		55,181		108,979

Restricted cash		751		751
Property and equipment, net		8,102		6,658
Intangible assets, net		4,414		3,732
Operating lease right of use assets, net		10,299		4,336
Goodwill		4,024		-
Other assets		2,205		2,810
Total assets	$	84,976	$	127,266

Current liabilities
Accounts payable, accrued expenses and other	$	7,981	$	12,958
Current portion of operating lease liabilities		2,746		2,736
Deferred revenue		257		549
Current portion of promissory note, unsecured		-		3,584
Total current liabilities		10,984		19,827

Long-term liabilities
Operating lease liabilities		12,465		7,504
Total liabilities		23,449		27,331
Commitments and contingencies (see Note 15)

Equity
Common Stock, $0.01 par value per share, 150,000,000 shares authorized; 83,232,262 and 101,269,349 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		832		1,013
Additional paid-in capital		467,268		487,306
Accumulated deficit		(414,655)		(395,275)
Accumulated other comprehensive loss		(560)		(312)
Total equity attributable to XWELL, Inc.		52,885		92,732
Noncontrolling interests		8,642		7,203
Total equity		61,527		99,935
Total liabilities and equity	$	84,976	$	127,266

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

Table of Contents

XWELL, Inc. (Formerly known as 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,
	2022		2021		2022		2021

Revenue, net
Managed services fees	$	-	$	-	$	-	$	16,843
Patient services revenue		4,607		25,351		31,728		25,351
Services		4,924		1,158		13,488		1,761
Products		542		258		1,308		402
Hyperpointe Services		659		-		1,853		-
Other		4		-		4		14
Total revenue, net		10,736		26,767		48,381		44,371

Cost of sales
Labor		5,222		4,277		16,161		7,419
Occupancy		1,082		587		3,412		1,511
Products and other operating costs		3,035		8,798		17,170		16,592
Total cost of sales		9,339		13,662		36,743		25,522
Depreciation and amortization		1,564		852		4,329		2,542
Impairment of long-lived assets		677		-		677		-
Loss on disposal of assets, net		325		-		273		22
Impairment of operating lease right-of-use assets		38		-		38		-
General and administrative		6,447		5,196		24,193		14,350
Total operating expenses		18,390		19,710		66,253		42,436
Operating (loss) income		(7,654)		7,057		(17,872)		1,935
Interest income, net		114		6		159		31
Other non-operating expense, net		(136)		(381)		(650)		(830)
(Loss) income before income taxes		(7,676)		6,682		(18,363)		1,136
Income tax expense		(3)		(87)		(5)		(79)
Net (loss) income		(7,679)		6,595		(18,368)		1,057
Net loss (income) attributable to noncontrolling interests		500		(998)		(1,012)		(983)
Net (loss) income attributable to XWELL, Inc.	$	(7,179)	$	5,597	$	(19,380)	$	74

Net (loss) income	$	(7,679)	$	6,595	$	(18,368)	$	1,057
Other comprehensive loss from operations		(102)		(52)		(248)		(63)
Comprehensive (loss) income	$	(7,781)	$	6,543	$	(18,616)	$	994
Loss per share
Basic and diluted loss per share	$	(0.08)	$	0.05	$	(0.20)	$	-
Weighted-average number of shares outstanding during the period
Basic		94,621,339		105,531,418		97,167,867		103,950,731
Diluted		94,621,339		105,957,317		97,167,867		104,301,344

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

Table of Contents

XWELL, Inc. (Formerly known as XpresSpa Group, 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, 2021	101,269,349	$	1,013	—		—	$	487,306	$	(395,275)	$	(312)	$	92,732	$	7,203	$	99,935
Issuance of Common Stock for acquisition	552,487		5	—		—		901		—		—		906		—		906
Vesting of restricted stock units	391,820		4	—		—		(4)		—		—		—		—		—
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	(7,142,446)		(71)	—		—		(11,024)		—		—		(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	95,071,210	$	951	—	$	—	$	478,649	$	(399,558)	$	(353)	$	79,689	$	8,100	$	87,789
Vesting of restricted stock units	289,061		3	—		—		(3)		—		—		—		—		—
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	—		—	(1,338,404)		(1,021)		—		—		—		(1,021)		—		(1,021)
Foreign currency translation	—		—	—		—		—		—		(105)		(105)		—		(105)
Distributions to noncontrolling interests	—		—	—		—		—		—		—		—		(132)		(132)
June 30, 2022	95,360,271	$	954	(1,338,404)	$	(1,021)	$	479,432	$	(407,476)	$	(458)	$	71,431	$	8,508	$	79,939
Vesting of restricted stock units	256,251		2	—		—		(2)		—		—		—		—		—
Grant of stock options for services	—		—	—		—		16		—		—		16		—		16
Contributions from noncontrolling interests	—		—	—		—		—		—		—		—		546		546
Stock-based compensation	—		—	—		—		392		—		—		392		91		483
Foreign currency translation	—		—	—		—		—		—		(102)		(102)		(3)		(105)
Net loss for the period	—		—	—		—		—		(7,179)		—		(7,179)		(500)		(7,679)
Repurchase and retirement of common stock	(12,384,260)		(124)	1,338,404		1,021		(12,570)		—		—		(11,673)		—		(11,673)
September 30, 2022	83,232,262	$	832	—		—	$	467,268	$	(414,655)	$	(560)	$	52,885	$	8,642	$	61,527

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 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, 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		—	—		—		—		—		—		—		—		—
Foreign currency translation	—		—	—		—		—		—		5		5		—		5
Net loss for the period	—		—	—		—		—		(4,467)		—		(4,467)		(263)		(4,730)
Stock-based compensation	—		—	—		—		267		—		—		267		61		328
Redemption 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 grant for services	—		—	—		—		29		—		—		29		—		29
Stock-based compensation	—		—	—		—		767		—		—		767		23		790
Stock option exercises	8,334		—	—		—		13		—		—		13		—		13
Consolidation of Variable Interest Entities	—		—	—		—		—		—		—		—		4,307		4,307
Repurchase and retirement of common stock	(250,000)		(2)	—		—		(448)		—		—		(450)		—		(450)
Issuance of restricted stock	35,043		—	—		—		—		—		—		—		—		—
Foreign currency translation	—		—	—		—		—		—		(52)		(52)		—		(52)
Distributions to noncontrolling interests	—		—	—		—		—		—		—		—		(991)		(991)
Net income for the period	—		—	—		—		—		5,597		—		5,597		998		6,595
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

XWELL, Inc. (Formerly known as XpresSpa Group, Inc.) and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Nine months ended September 30,
	2022		2021
Cash flows from operating activities
Net (loss) income	$	(18,368)	$	1,057
Adjustments to reconcile net loss to net cash used in operating activities:
Items included in net loss not affecting operating cash flows:
Depreciation and amortization		4,329		2,542
Impairment of long-lived assets		715		—
Loss on disposal of assets, net		273		22
Amortization of operating lease right of use asset		1,357		1,162
Issuance of shares of Common Stock for services		31		349