XpresSpa Group(XWEL) - 2025 Q3 - Quarterly Report

Financial Performance - Total revenue for the three months ended September 30, 2025, was $7,345, a decrease of $1,077 or 13% compared to $8,422 in the same period of 2024, primarily due to reduced CDC revenue for XpresTest[136] - Total revenue for the nine months ended September 30, 2025, was $22,056 million, a decrease of $4,374 million or 17% compared to $26,430 million in 2024[145] - Total cost of sales for the three months ended September 30, 2025, was $5,852, a decrease of $517 or 8% from $6,369 in 2024, driven by lower product costs and reduced labor due to store closures[137] - Total cost of sales for the nine months ended September 30, 2025, was $17,470 million, a decrease of $1,163 million or 6% compared to $18,633 million in 2024[146] - General and administrative expenses for the nine months ended September 30, 2025, were $10,144 million, a decrease of $5,165 million or 34% compared to $15,309 million in 2024[149] - Interest income for the nine months ended September 30, 2025, increased by $387 million to $695 million, primarily due to interest paid towards employee retention credits[153] - Foreign exchange loss for the nine months ended September 30, 2025, was $1,127 million, an increase of $917 million compared to $210 million in 2024[150] Asset and Impairment - Depreciation and amortization for the three months ended September 30, 2025, was $221, a decrease of approximately $31 or 12% compared to $252 in 2024, due to fewer long-lived assets available for depreciation[138] - The impairment of long-lived assets for the nine months ended September 30, 2025, was $122, primarily due to impairments recognized in the current period[139] Strategic Initiatives - XWELL acquired Naples Wax Center on September 12, 2023, for a purchase price of $1,624, aiming to expand its wellness platform beyond airport services[126] - XpresTest's revenue from a renewed program with the CDC is estimated to reach $15,100, following a three-year contract valued at $22.2 million[125] - As of September 30, 2025, XWELL operated 17 domestic and 11 international XpresSpa locations, enhancing its global presence[120] - The company plans to expand its retail strategy by adding more products and aligning them with service offerings, such as muscle relaxation patches[127] - XWELL aims to build capabilities for delivering health and wellness services outside of airports, which is seen as a key growth strategy[128] Financial Position and Concerns - The company reported a working capital surplus of $758 million as of September 30, 2025, down from $6,113 million as of December 31, 2024[154] - The company has expressed substantial doubt about its ability to continue as a going concern due to recurring losses and insufficient liquidity[154] - The company is pursuing strategic partnerships to strengthen long-term profitability and improve its cash position[155] - The company must raise additional equity or debt capital to fund future operations, with no assurance of success in doing so[157] Debt and Financial Instruments - An Exchange Agreement was entered into on November 3, 2025, involving the exchange of approximately $1.6 million in Series G Preferred Stock for $3.4 million in senior secured convertible notes[129] - The company issued Senior Secured Convertible Notes on November 5, 2025, with an interest rate of 8.0% per annum, maturing in three years and four months[161] - The Company is required to maintain unencumbered cash and cash equivalents of at least $1,000,000 and deposit $1,350,000 into a segregated account[166] - The fair value of the bifurcated embedded derivative related to convertible preferred stock was estimated using a Monte Carlo simulation model[170] - The Company does not use derivative financial instruments to hedge exposures to cash-flow, market, or foreign-currency risks[169] - The Company accounts for warrants as either equity-classified or liability-classified instruments based on specific terms[171] - The fair value of the warrant liability was estimated using the Black Scholes Model, considering various weighted average assumptions[171] - There have been no material changes to the Company's critical accounting estimates from the previous report[169] Market and Economic Conditions - Ongoing geopolitical conflicts may adversely impact macroeconomic conditions and contribute to increased market volatility[172] - The number of airline travelers is volatile and subject to change based on various conditions, including travel fare prices and oil prices[172] - The Company has not identified any trends, events, or uncertainties likely to materially affect its financial condition, other than those discussed[173] - Changes in U.S. policy and government actions may impact the U.S. and global economy, tariffs, and international trade[173]