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 March 31, 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) | (State or other jurisdiction ...

XWELL, Inc. (NASDAQ:XWEL) Q4 2022 Results Conference Call April 17, 2023 5:00 PM ET Company Participants Omar Haynes - Interim CFO Scott Milford - CEO Operator Greetings. Welcome to XWELL, Inc.'s Fiscal Year 2022 Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded on April 17, 2023. I would now like to turn the conference over to Omar Haynes, Interim Chief Financial Officer for XWELL. Please go ahead, sir. Omar Haynes Good day, everyone. Welcome to our conf ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR ☐ 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 othe ...

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) (State or other jurisdictio ...

Financial Data and Key Metrics Changes - In Q3 2022, total revenue was $10.7 million, a decline from $26.8 million in the prior year, primarily due to reduced demand at Express Check testing facilities [27] - The operating loss for the quarter was $7.6 million, compared to an operating profit of $7.1 million in the prior year [29] - Net loss attributable to common shareholders was $7.2 million, down from a net income of $5.6 million in the prior year [29] - Adjusted EBITDA was minus $4.5 million, compared to $8.7 million in the prior year [32] Business Line Data and Key Metrics Changes - Revenue from reopened Express spa locations was $4 million, with an additional $1.8 million from the biosurveillance partnership and $4.3 million from XpressCheck locations [27] - Retail sales historically accounted for approximately 17% of total revenue, with expectations of a sequential growth of 15% to 25% in Q1 2023 [13][14] Market Data and Key Metrics Changes - The company is expanding its international presence, with plans to open a 12th international location at Abu Dhabi International Airport in Q1 2023 [9] - The company has opened new locations in Istanbul, with plans for further expansion in the region [40][42] Company Strategy and Development Direction - The company is focused on a leaner business model with a path to profitability, emphasizing retail strategy and international expansion [5][19] - A new corporate identity was unveiled, and the company began trading under the new NASDAQ ticker symbol XWEL [6] - The company is exploring acquisition opportunities to diversify and grow its revenue base [17][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in emerging as a leaner and profitable company, with ongoing efforts to remove costs and optimize operations [25][54] - The company is optimistic about growth opportunities in both retail and international markets, with a focus on enhancing customer experience [52][54] Other Important Information - The company has successfully removed approximately $1 million in costs from its system and plans to close additional unprofitable locations [30][21] - Liquidity remains strong with cash and cash equivalents totaling $49.4 million and no long-term debt [31] Q&A Session Summary Question: Insight on XWELL's brands expanding into local communities - Management confirmed that expanding outside the airport is part of the overall strategy, with plans for strategic acquisitions in off-airport health and wellness businesses [35][36] Question: Update on M&A agreement with Benchmark - Management is actively looking at 3 to 4 potential acquisition opportunities but has no definitive agreements in place yet [38] Question: Plans to increase XWELL's global reach - Management highlighted ongoing international expansion efforts, including new locations in Istanbul and plans for Abu Dhabi [40][42] Question: Staffing trends and hiring challenges - Management acknowledged challenges in the labor market but noted improvements in recruiting tactics and staffing efforts [44][45] Question: Reduction of expenses and path to profitability - Management discussed the plan to reduce costs by over $1 million a month, which is expected to accelerate the path to profitability [46][48] Question: Future of XpressCheck footprint - Management confirmed the closure of unprofitable XpressCheck locations, entering 2023 with a streamlined operation [49][50] Question: Growth outlook for next year - Management expressed optimism about growth opportunities through core business improvements, international expansion, and potential acquisitions [52][54]

Financial Data and Key Metrics Changes - Revenue increased to $13.6 million in Q2 2022 from $9.1 million in Q2 2021, primarily driven by $7.4 million from Express Check locations and $3.7 million from reopened spas and Treat locations [47] - Operating loss was $7.8 million compared to a loss of $4.2 million in the prior year [50] - Net loss attributable to common shareholders was $7.9 million, up from $4.5 million in the previous year [50] - Cash and cash equivalents totaled $71.1 million, with working capital of $61.8 million and no long-term debt [52] Business Line Data and Key Metrics Changes - The company currently operates 26 spas globally, with plans to open five more in Q3, including the first location in Istanbul Airport [11][21] - Two Treat locations are currently open, with a third expected to open in Salt Lake City in late Q3 [26] - Revenue from Express Check locations was $7.4 million, while reopened spas and Treat locations generated $3.7 million [47] Market Data and Key Metrics Changes - The company is expanding its international presence, with plans to open a new spa location at Abu Dhabi Airport in Q1 2023 and five new locations at Istanbul Airport by the end of 2022 [24][22] - Istanbul Airport serves approximately 250 international destinations and over 20 million passengers annually, making it a strategic location for expansion [22] Company Strategy and Development Direction - The company aims to transform into a leading health and wellness provider for travelers, focusing on four core transformational imperatives: refreshing airport business, creating a new retail strategy, adding customers through acquisitions, and reducing infrastructure costs [7][8] - A strategic rebranding campaign is set to launch in Q4 2022, including a new name and visual identity [7][74] - The company is pursuing a B2B wellness product strategy and exploring partnerships for promotional packages and pop-up locations [73] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges posed by the decline in testing demand but remains optimistic about the long-term growth potential through strategic initiatives [36][38] - The company is committed to optimizing capital and managing sustainable growth while focusing on shareholder value [33][70] - Management believes the underlying fundamentals are solid and that the company is well-positioned to achieve long-term objectives [45][58] Other Important Information - The company has successfully eliminated approximately $1 million a month in costs, which is expected to yield benefits starting in Q3 [51][33] - A new two-year contract with the CDC for biosurveillance efforts is valued at approximately $16 million, with a potential total value of $61 million [42][60] Q&A Session Summary Question: Can you provide guidance on the CDC contract? - The contract is worth up to $61 million over two years, with operations expanding to four major international airports and new locations for wastewater surveillance [60][62] Question: What is the expected number of locations by the end of Q3? - By the end of Q3, the company expects to have three Treat locations and 31 XpresSpa locations open globally [64] Question: What is the status of airport acquisition plans? - The company is actively pursuing acquisitions outside the airport to accelerate growth but has paused specific discussions due to valuation disagreements [68] Question: What is the company's capital allocation strategy? - The company aims to balance organic growth and external opportunities while returning excess capital to shareholders through share repurchases [69] Question: Can you elaborate on the B2B strategy? - The company has hired a leader to build a targeted B2B strategy, focusing on promotional packages and airport lounge services [73] Question: What is the timeline for the new brand launch? - The new brand is expected to launch in Q4 2022, pending the resolution of trademark and registration hurdles [74] Question: Is there potential for Monkeypox testing in the future? - The company is working with Ginkgo and the CDC to explore incorporating Monkeypox testing into their protocols [76] Question: How does the CEO view the company's direction? - The CEO believes the company is headed in the right direction, emphasizing the importance of agility and the integration of services to meet traveler needs [79]

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 June 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 XpresSpa Group, Inc. (Exact Name of Registrant as Specified in its Charter) | Delaware | 20-4988129 ...

XpresSpa Group, Inc. (XSPA) Q1 2022 Earnings Conference Call May 16, 2022 4:30 PM ET Company Participants James Berry - Chief Financial Officer Scott Milford - Chief Executive Officer Raphael Gross - Investor Relations Conference Call Participants Operator Greetings, and welcome to XpresSpa Group's First Quarter 2022 Earnings Conference Call. During the presentation, all participants will be in listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded Monday, May 16, 2022. I ...

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 March 31, 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 XpresSpa Group, Inc. (Exact Name of Registrant as Specified in its Charter) | (State or other juri ...

Part I [Item 1. Business](index=5&type=section&id=Item%201.%20Business) XpresSpa Group operates as a global travel health and wellness company with three main segments: XpresSpa, XpresTest, and Treat - The company operates through three main segments: XpresSpa (premium spa services), XpresTest (medical diagnostic testing), and Treat (a new travel, health, and wellness brand)[18](index=18&type=chunk)[19](index=19&type=chunk)[22](index=22&type=chunk) - In response to the pandemic, the company launched XpresCheck® Wellness Centers via its XpresTest subsidiary, with **15 operating locations** in 12 airports as of the report date[21](index=21&type=chunk)[29](index=29&type=chunk) - The company initiated a biosurveillance monitoring program with the CDC at four major U.S. airports, with the contract totaling **$5.6 million** after an extension[30](index=30&type=chunk) - In January 2022, the company acquired HyperPointe, a digital healthcare and data analytics agency, for **$5.6 million in cash and $1 million in stock**[38](index=38&type=chunk)[39](index=39&type=chunk) - The company's go-forward strategy includes integrating products across its three brands, expanding health and wellness services outside of airports, and pursuing international expansion[42](index=42&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk) - During 2021, the company repurchased **4.7 million shares for $7.8 million** and in March 2022, it repurchased an additional **7.1 million shares for $11.1 million**[37](index=37&type=chunk) Asset Impairment Charges (2020 vs. 2021) | Asset Type | 2021 Impairment | 2020 Impairment | | :--- | :--- | :--- | | Property and equipment | $90,130 | ~$5.0 million | | Operating lease right of use assets | $747,497 | ~$6.3 million | | Intangible assets (XpresSpa trademarks) | $0 | ~$3.9 million | [Item 1A. Risk Factors](index=12&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks related to its financial condition, business operations, and capital stock [Risks Related to Financial Condition and Capital Requirements](index=15&type=section&id=Risks%20Related%20to%20our%20Financial%20Condition%20and%20Capital%20Requirements) Financial stability is threatened by COVID-19's impact, an unremediated material weakness, significant capital needs, and potential limitations on NOL usage - The COVID-19 outbreak has **materially and adversely impacted** the business, particularly the spa segment, due to travel restrictions and temporary closures[83](index=83&type=chunk)[84](index=84&type=chunk) - A **material weakness** in internal control over financial reporting, identified in 2020, was not fully remediated as of December 31, 2021[85](index=85&type=chunk)[87](index=87&type=chunk) - The company has significant Net Operating Loss (NOL) carryforwards of approximately **$207.2 million** whose usability may be limited by Section 382 ownership change rules[88](index=88&type=chunk) - The business is capital-intensive, requiring substantial expenditures for new brand concepts and expanding operations, and may need to raise additional capital[92](index=92&type=chunk)[93](index=93&type=chunk) [Risks Related to Business Operations](index=19&type=section&id=Risks%20Related%20to%20our%20Business%20Operations) Operational risks stem from a limited history in diagnostic testing, reliance on third parties, extensive healthcare regulations, and dependence on air travel - The company has a **limited operating history** in the diagnostic testing and vaccination industry, which presents substantial risks and uncertainties[98](index=98&type=chunk) - The XpresCheck and Treat businesses rely on long-term contracts with professional medical practices and a **limited number of suppliers** for test kits and lab materials[99](index=99&type=chunk)[101](index=101&type=chunk) - The business is subject to extensive and complex healthcare regulations, including **CLIA, FDA oversight, and HIPAA**, where non-compliance could result in severe penalties[111](index=111&type=chunk)[114](index=114&type=chunk)[115](index=115&type=chunk) - The legacy XpresSpa business is **highly dependent on the volume of air travel** and time passengers spend in airports, which have been negatively impacted by COVID-19[133](index=133&type=chunk)[134](index=134&type=chunk) - Laws regulating the corporate practice of medicine could restrict how the XpresCheck and Treat businesses are conducted, potentially requiring restructuring[196](index=196&type=chunk)[197](index=197&type=chunk) [Risks Related to Capital Stock](index=39&type=section&id=Risks%20Related%20to%20our%20Capital%20Stock) The company's common stock is subject to high price volatility, potential delisting from Nasdaq, and anti-takeover provisions - The market price of the company's common stock has been and is expected to continue to be **highly volatile**[200](index=200&type=chunk)[206](index=206&type=chunk) - The company's ability to raise additional equity capital is constrained by a **limited number of authorized but unissued shares**[202](index=202&type=chunk) - The company has **no current plans to pay dividends** on its common stock[204](index=204&type=chunk) - Failure to meet Nasdaq's continued listing requirements, such as the **minimum $1.00 bid price**, could result in the delisting of the common stock[209](index=209&type=chunk) [Item 1B. Unresolved Staff Comments](index=43&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - Not applicable[221](index=221&type=chunk) [Item 2. Properties](index=43&type=section&id=Item%202.%20Properties) The company leases 52 spa and clinic locations across 24 airports in the U.S, Netherlands, and UAE, plus its corporate headquarters - As of December 31, 2021, the company had **52 leased spa and clinic locations** in 24 airports across the U.S., Netherlands, and UAE[222](index=222&type=chunk) - Lease terms are typically **5-8 years**, with some stores operating on a month-to-month basis[222](index=222&type=chunk) [Item 3. Legal Proceedings](index=43&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal proceedings, with a recorded liability of approximately $0.8 million for outstanding matters - As of December 31, 2021, the company has recorded a liability of approximately **$0.8 million** for all outstanding legal matters[224](index=224&type=chunk) - The *In re Chen et al.* class action lawsuit received final court approval for its settlement on October 1, 2021, and the **case was marked as closed**[225](index=225&type=chunk)[229](index=229&type=chunk) - The *Kyle Collins v. Spa Products* class action was settled in mediation, with a motion for preliminary approval of the settlement pending[230](index=230&type=chunk) [Item 4. Mine Safety Disclosures](index=45&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[233](index=233&type=chunk) Part II [Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=46&type=section&id=Item%205.%20Market%20for%20Registrant%E2%80%99s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq as "XSPA" and a share repurchase program was active in 2021 and early 2022 - The company's common stock is listed on Nasdaq under the symbol "XSPA" and a **1-for-3 reverse stock split** was effected on June 11, 2020[235](index=235&type=chunk)[236](index=236&type=chunk) - As of March 28, 2022, there were **95,071,210 shares** of common stock outstanding[237](index=237&type=chunk) - The company has **never paid cash dividends** and does not intend to in the foreseeable future[238](index=238&type=chunk) Share Repurchase Activity | Period | Shares Repurchased | Average Cost/Share | Total Cost | | :--- | :--- | :--- | :--- | | During 2021 | 4.7 million | $1.66 | $7.8 million | | March 2022 | 7.1 million | $1.55 | $11.1 million | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=47&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenue increased 779% to $73.7 million in 2021, driving a shift from a net loss to net income of $2.9 million [Results of Operations](index=54&type=section&id=Results%20of%20Operations) Total revenue surged 779% to $73.7 million in 2021, leading to operating income of $4.1 million and net income of $3.3 million - The **779% increase in total revenue** was primarily due to patient service revenue of $50.7 million and managed services fees of $16.8 million from XpresCheck[300](index=300&type=chunk) - General and administrative expenses increased by **51.8% to $24.2 million** in 2021, mainly due to start-up costs for new brands and legal fees[306](index=306&type=chunk) Consolidated Results of Operations (2021 vs. 2020) | Metric (in thousands) | 2021 | 2020 | | :--- | :--- | :--- | | **Total Revenue** | **$73,729** | **$8,385** | | Total Cost of Sales | $41,385 | $11,983 | | General & Administrative | $24,199 | $15,940 | | Impairment/disposal of assets | $837 | $15,356 | | **Operating Income (Loss)** | **$4,107** | **($40,104)** | | Loss on revaluation of warrants | $0 | ($51,147) | | **Net Income (Loss)** | **$2,893** | **($92,232)** | | Net Income (Loss) to Shareholders | $3,349 | ($90,488) | Reconciliation to Adjusted EBITDA (Non-GAAP) | Metric (in thousands) | 2021 | 2020 | | :--- | :--- | :--- | | Income (Loss) from Operations | $4,107 | ($40,104) | | Depreciation and amortization | $3,201 | $5,210 | | Impairment/disposal of assets | $837 | $15,356 | | Stock-based compensation expense | $2,856 | $1,328 | | **Adjusted EBITDA (Loss)** | **$11,001** | **($18,210)** | [Liquidity and Capital Resources](index=58&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity improved significantly, ending 2021 with $105.5 million in cash and positive operating cash flow of $14.6 million - As of December 31, 2021, the company had **$105.5 million in cash and cash equivalents** and a working capital surplus of $89.2 million[315](index=315&type=chunk) - During 2021, the exercise of various warrants provided gross proceeds of approximately **$19.2 million**[316](index=316&type=chunk) Cash Flow Summary (2021 vs. 2020) | Cash Flow Activity (in thousands) | 2021 | 2020 | | :--- | :--- | :--- | | Net cash from Operating Activities | $14,561 | ($25,012) | | Net cash used in Investing Activities | ($5,156) | ($4,349) | | Net cash from Financing Activities | $6,350 | $117,225 | [Critical Accounting Estimates](index=60&type=section&id=Critical%20Accounting%20Estimates) Critical accounting estimates include the evaluation of VIEs, impairment testing of long-lived assets, and fair value measurements - The company's evaluation of its relationship with professional medical service companies (PLLCs) led to their classification as **Variable Interest Entities (VIEs)** and subsequent consolidation[326](index=326&type=chunk) - **Impairment testing** of long-lived assets and intangible assets is a critical estimate, requiring management to make assumptions about future cash flows[327](index=327&type=chunk)[330](index=330&type=chunk) - **Fair value measurements**, particularly for equity investments and derivative liabilities, are critical and are categorized using a three-tier hierarchy[331](index=331&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=63&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This disclosure is not required as the company qualifies as a smaller reporting company - Not required as the company is a smaller reporting company[338](index=338&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=63&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section refers to the consolidated financial statements included in Item 15 of the report - This item directs the reader to the consolidated financial statements located in Item 15 of the Annual Report[339](index=339&type=chunk) [Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=63&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants - None[340](index=340&type=chunk) [Item 9A. Controls and Procedures](index=63&type=section&id=Item%209A.%20Controls%20and%20Procedures) Disclosure controls were deemed not effective due to an unmitigated material weakness in internal control over financial reporting - Management concluded that disclosure controls and procedures were **not effective** as of December 31, 2021[342](index=342&type=chunk) - A **material weakness** in internal controls over the financial close and reporting process, first identified in 2019, remained unmitigated as of December 31, 2021[347](index=347&type=chunk)[353](index=353&type=chunk) - Remediation efforts include appointing a permanent CFO and Corporate Controller, restructuring processes, and using outside service providers[348](index=348&type=chunk)[350](index=350&type=chunk) [Item 9B. Other Information](index=66&type=section&id=Item%209B.%20Other%20Information) This section details the Executive Employment Agreement for CEO Scott R. Milford, appointed effective January 19, 2022 - On March 28, 2022, the company entered into an Executive Employment Agreement with CEO Scott R. Milford, effective January 19, 2022[356](index=356&type=chunk) - The agreement includes an annual base salary of **$425,000** and an annual bonus target of up to **100% of base salary**[358](index=358&type=chunk) Part III [Items 10-14 (Directors, Executive Compensation, Security Ownership, etc.)](index=68&type=section&id=Items%2010-14) Information for these items will be included in an amendment to the Annual Report and is incorporated by reference - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference and will be filed in an amendment to the Form 10-K[363](index=363&type=chunk)[364](index=364&type=chunk)[365](index=365&type=chunk) Part IV [Item 15. Exhibits and Financial Statement Schedules](index=69&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the exhibits filed with the report and references the consolidated financial statements beginning on page F-1 - This item provides an index of all exhibits filed with or incorporated by reference into the Form 10-K[370](index=370&type=chunk)[371](index=371&type=chunk) - The consolidated financial statements are referenced under this item, beginning on page F-1[369](index=369&type=chunk) [Item 16. Form 10-K Summary](index=74&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company indicates there is no Form 10-K summary - None[380](index=380&type=chunk) Consolidated Financial Statements and Notes [Report of Independent Registered Public Accounting Firm](index=76&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The auditor issued an unqualified opinion, highlighting Critical Audit Matters related to asset valuation and accounting for VIEs - The auditor issued an **unqualified opinion** on the financial statements[386](index=386&type=chunk) - A critical audit matter was the **valuation of long-lived assets** due to significant management assumptions in estimating fair value[391](index=391&type=chunk)[392](index=392&type=chunk) - A second critical audit matter was the **accounting for Variable Interest Entities (VIEs)**, which required significant auditor judgment[394](index=394&type=chunk)[396](index=396&type=chunk) [Consolidated Financial Statements](index=78&type=section&id=Consolidated%20Financial%20Statements) The financial statements show total assets grew to $127.3 million and the company shifted to a net income of $2.9 million in 2021 Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $105,506 | $89,801 | | Total Current Assets | $108,979 | $91,779 | | **Total Assets** | **$127,266** | **$103,133** | | Total Current Liabilities | $19,827 | $13,477 | | **Total Liabilities** | **$27,331** | **$22,762** | | **Total Equity** | **$99,935** | **$80,371** | Consolidated Statement of Operations Data (in thousands) | | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Total Revenue, net | $73,729 | $8,385 | | Operating Income (Loss) | $4,107 | ($40,104) | | **Net Income (Loss)** | **$2,893** | **($92,232)** | | Basic and Diluted EPS | $0.03 | ($2.05) | [Notes to the Consolidated Financial Statements](index=84&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) Key notes detail the consolidation of VIEs, segment performance, warrant activity, and the elimination of convertible debt - Effective July 1, 2021, the company began consolidating its affiliated medical groups as **Variable Interest Entities (VIEs)**, recognizing $50.7 million in patient services revenue[414](index=414&type=chunk)[452](index=452&type=chunk)[482](index=482&type=chunk) - All outstanding convertible notes were **fully converted into common stock** during 2020, eliminating that source of debt[510](index=510&type=chunk)[516](index=516&type=chunk) - In 2021, **11.3 million warrants were exercised**, generating gross proceeds of $19.2 million, with 37.8 million warrants remaining outstanding[519](index=519&type=chunk)[521](index=521&type=chunk) - The company acquired HyperPointe in January 2022 for an initial price of **$6.6 million** plus a potential earnout of up to $7.5 million[589](index=589&type=chunk)[590](index=590&type=chunk) Segment Operating Income (Loss) (in thousands) | Segment | 2021 | 2020 | | :--- | :--- | :--- | | XpresSpa | ($9,617) | ($29,966) | | XpresTest | $25,452 | ($3,494) | | Treat | ($5,735) | — | | Corporate and other | ($5,993) | ($6,644) | | **Total** | **$4,107** | **($40,104)** |